TITLE I *Decide where your case will fall under.

Qualify if it is power to…

ORGANIZATION AND FUNCTION OF THE BUREAU OF *If you wrongly filed, you may lose your period. So the court you
INTERNAL REVENUE will file must be the correct one.
(As Last Amended by RA 10963) [1]
SEC. 5. Power of the Commissioner to Obtain Information,
SEC. 1. Title of the Code. - This Code shall be known as the and to Summon, Examine, and Take Testimony of
National Internal Revenue Code of 1997. [2] Persons. - In ascertaining the correctness of any return, or in
making a return when none has been made, or in determining
SEC. 2. Powers and Duties of the Bureau of Internal the liability of any person for any internal revenue tax, or in
Revenue. - The Bureau of Internal Revenue shall be under the collecting any such liability, or in evaluating tax compliance, the
supervision and control of the Department of Finance and its Commissioner is authorized:
powers and duties shall comprehend the assessment and
collection of all national internal revenue taxes, fees, and (A) To examine any book, paper, record, or other data which
charges, and the enforcement of all forfeitures, penalties, and may be relevant or material to such inquiry; (Any person can be
fines connected therewith, including the execution of judgments secured by the BIR; they can summon/issue a subpoena to
in all cases decided in its favor by the Court of Tax Appeals and require the production of the records in order to determine the
the ordinary courts. The Bureau shall give effect to and correct tax liability)
administer the supervisory and police powers conferred to it by
this Code or other laws. (B) To obtain on a regular basis from any person other than the
person whose internal revenue tax liability is subject to audit or
SEC. 3. Chief Officials of the Bureau of Internal Revenue. - investigation, or from any office or officer of the national and
The Bureau of Internal Revenue shall have a chief to be known local governments, government agencies and instrumentalities,
as Commissioner of Internal Revenue, hereinafter referred to as including the Bangko Sentral ng Pilipinas and government-
the Commissioner, and four (4) assistant chiefs to be known as owned or -controlled corporations, any information such as, but
Deputy Commissioners. not limited to, costs and volume of production, receipts or sales
and gross incomes of taxpayers, and the names, addresses,
SEC. 4. Power of the Commissioner to Interpret Tax Laws and financial statements of corporations, mutual fund
and to Decide Tax Cases. - The power to interpret the companies, insurance companies, regional operating
provisions of this Code and other tax laws shall be under the headquarters of multinational companies, joint accounts,
exclusive and original jurisdiction of the Commissioner, subject associations, joint ventures of consortia and registered
to review by the Secretary of Finance. partnerships, and their members; Provided, That the
Cooperative Development Authority shall submit to the Bureau a
The power to decide disputed assessments, refunds of internal tax incentive report, which shall include information on the
revenue taxes, fees or other charges, penalties imposed in income tax, value added tax, and other tax incentives availed of
relation thereto, or other matters arising under this Code or by cooperatives registered and enjoying incentives under
other laws or portions thereof administered by the Bureau of Republic Act No. 6938, as amended: Provided, further, That
Internal Revenue is vested in the Commissioner, subject to the the information submitted by the Cooperative Development
exclusive appellate jurisdiction of the Court of Tax Appeals. [3] Authority to the Bureau shall be submitted to the
Department of Finance and shall be included in the representative may authorize the examination of any taxpayer
database created under Republic Act No. 10708, otherwise and the assessment of the correct amount of
known as “The Tax Incentives Management and tax, notwithstanding any law requiring the prior
Transparency Act (TIMTA).” [59] authorization of any government agency or
instrumentality [5]: Provided, however, That failure to file a
(C) To summon the person liable for tax or required to file a return shall not prevent the Commissioner from authorizing the
return, or any officer or employee of such person, or any person examination of any taxpayer.
having possession, custody, or care of the books of accounts
and other accounting records containing entries relating to the The tax or any deficiency tax so assessed shall be paid upon
business of the person liable for tax, or any other person, to notice and demand from the Commissioner or from his duly
appear before the Commissioner or his duly authorized authorized representative.
representative at a time and place specified in the summons
and to produce such books, papers, records, or other data, and Any return, statement of declaration filed in any office authorized
to give testimony; to receive the same shall not be withdrawn: Provided, That
within three (3) years from the date of such filing, the same may
(D) To take such testimony of the person concerned, under be modified, changed, or amended: Provided, further, That no
oath, as may be relevant or material to such inquiry; and notice for audit or investigation of such return, statement or
declaration has in the meantime been actually served upon the
(E) To cause revenue officers and employees to make a taxpayer.
canvass from time to time of any revenue district or region and
inquire after and concerning all persons therein who may be *Relate with Sec 203 – where prescription is reckoned by
liable to pay any internal revenue tax, and all persons owning or
having the care, management or possession of any object with Pwede pa magamend, assuming that there is no notice issued
respect to which a tax is imposed. after three years. Downside, mamomove ang period for
prescription.
The provisions of the foregoing paragraphs notwithstanding,
nothing in this Section shall be construed as granting the (B) Failure to Submit Required Returns, Statements,
Commissioner the authority to inquire into bank deposits other Reports and other Documents. - When a report required by
than as provided for in Section 6(F) of this Code. law as a basis for the assessment of any national internal
revenue tax shall not be forthcoming within the time fixed by
SEC. 6. Power of the Commissioner to Make Assessments laws or rules and regulations or when there is reason to believe
and Prescribe Additional Requirements for Tax that any such report is false, incomplete or erroneous, the
Administration and Enforcement. – Commissioner shall assess the proper tax on the best evidence
obtainable.
The BIR can
In case a person fails to file a required return or other document
(A) Examination of Return and Determination of Tax at the time prescribed by law, or willfully or otherwise files a
Due. After a return has been filed as required under the false or fraudulent return or other document, the Commissioner
provisions of this Code, the Commissioner or his duly authorized shall make or amend the return from his own knowledge and
from such information as he can obtain through testimony or *Whatever minimum prescribed by the Commissioner is not
otherwise, which shall be prima facie correct and sufficient for all conclusive, it is subject to submission of supporting documents.
legal purposes.
(D) Authority to Terminate Taxable Period. - When it shall
Marcos II vs CA (1997) case – The Commissioner filed the come to the knowledge of the Commissioner that a taxpayer is
estate tax return (based on his own knowledge from the retiring from business subject to tax, or is intending to leave the
information which he obtained...) Philippines or to remove his property therefrom or to hide or
conceal his property, or is performing any act tending to obstruct
If there is an information of… the proceedings for the collection of the tax for the past or
current quarter or year or to render the same totally or partly
(C) Authority to Conduct Inventory-taking, Surveillance and ineffective unless such proceedings are begun immediately, the
to Prescribe Presumptive Gross Sales and Receipts. - The Commissioner shall declare the tax period of such taxpayer
Commissioner may, at any time during the taxable year, order terminated at any time and shall send the taxpayer a notice of
inventory-taking of goods of any taxpayer as a basis for such decision, together with a request for the immediate
determining his internal revenue tax liabilities, or may place the payment of the tax for the period so declared terminated and the
business operations of any person, natural or juridical, under tax for the preceding year or quarter, or such portion thereof as
observation or surveillance if there is reason to believe that such may be unpaid, and said taxes shall be due and payable
person is not declaring his correct income, sales or receipts for immediately and shall be subject to all the penalties hereafter
internal revenue tax purposes. The findings may be used as the prescribed, unless paid within the time fixed in the demand
basis for assessing the taxes for the other months or quarters of made by the Commissioner.
the same or different taxable years and such assessment shall
be deemed prima facie correct. *pertains to retiring businesses

When it is found that a person has failed to issue receipts and *pwede maginitiate si Commissioner a letter of authority to audit
invoices in violation of the requirements of Sections 113 and before the assets of the corporation will be lost
237 of this Code, or when there is reason to believe that the
books of accounts or other records do not correctly reflect the (E) Authority of the Commissioner to Prescribe Real
declarations made or to be made in a return required to be filed Property Values. –The Commissioner is hereby authorized to
under the provisions of this Code, the Commissioner, after divide the Philippines into different zones or areas and shall,
taking into account the sales, receipts, income or other taxable upon mandatory [5] consultation with competent appraisers both
base of other persons engaged in similar businesses under from the private and public sectors, and with prior notice to
similar situations or circumstances or after considering other affected taxpayers [5], determine the fair market value of real
relevant information may prescribe a minimum amount of such properties located in each zone or area, subject to automatic
gross receipts, sales and taxable base, and such amount so adjustment once every three (3) years through rules and
prescribed shall be prima facie correct for purposes of regulations issued by the Secretary of Finance based on the
determining the internal revenue tax liabilities of such person. current Philippine valuation standards: Provided, That no
adjustment in zonal valuation shall be valid unless published in
*Benchmarking a newspaper of general circulation in the province, city or
municipality concerned, or in the absence thereof, shall be
posted in the provincial capitol, city or municipal hall and in two his application shall not be considered unless and until he
(2) other conspicuous public places therein: Provided, further, waives in writing his privilege under Republic Act No. 1405,
That the basis of any valuation, including the records of Republic Act No. 6426, otherwise known as the Foreign
consultations done, shall be public records open to the inquiry of Currency Deposit Act of the Philippines, or under other general
any taxpayer. [5] For purposes of computing any internal revenue or special laws, and such waiver shall constitute the authority of
tax, the value of the property shall be, whichever is the higher the Commissioner to inquire into the bank deposits of the
of: taxpayer.

(1) The fair market value as determined by the Commissioner; (3) A specific taxpayer or taxpayers subject of a request for the
or supply of tax information from a foreign tax authority pursuant to
an international convention or agreement on tax matters to
(2) The fair market value as shown in the schedule of values of which the Philippines is a signatory or a party of: Provided, That
the Provincial and City Assessors. the information obtained from the banks and other financial
institutions may be used by the Bureau of Internal Revenue for
1) public hearing (both public and private sectors appearance tax assessment, verification, audit and enforcement purposes.
are mandatory)
In case of a request from a foreign tax authority for tax
*mas prefer mababa value para mababa tax base/amelyar (pero information held by banks and financial institutions, the
if govt, mas gusto mas mataas) exchange of information shall be done in a secure manner to
ensure confidentiality thereof under such rules and regulations
(F) Authority of the Commissioner to Inquire into Bank as may be promulgated by the Secretary of Finance, upon
Deposit Accounts and Other Related information held by recommendation of the Commissioner.
Financial Institutions. [6] - Notwithstanding any contrary
provision of Republic Act No. 1405, Republic Act No. 6426, The Commissioner shall provide the tax information obtained
otherwise known as the Foreign Currency Deposit Act of the from banks and financial institutions pursuant to a convention or
Philippines, and other general or special laws, the agreement upon request of the foreign tax authority when such
Commissioner is hereby authorized to inquire into the bank requesting foreign tax authority has provided the following
deposits and other related information held by financial information to demonstrate the foreseeable relevance of the
institutions of: information to the request:

(1) A decedent to determine his gross estate; and (a) The identity of the person under examination or
investigation;
(2) Any taxpayer who has filed an application for compromise of
his tax liability under Section 204(A)(2) of this Code by reason of (b) A statement of the information being sought, including
financial incapacity to pay his tax liability. its nature and the form in which the said foreign tax
authority prefers to receive the information from the
In case a taxpayer files an application to compromise the Commissioner;
payment of his tax liabilities on his claim that his financial
position demonstrates a clear inability to pay the tax assessed,
 (c) The tax purpose for which the information is being The term “foreign tax authority,” as used herein, shall refer to
sought; the tax authority or tax administration of the requesting State
under the tax treaty or convention to which the Philippines is a
(d) Grounds for believing that the information requested signatory or a party of.
is held in the Philippines or is in the possession or control
of a person within the jurisdiction of the Philippines; GENERAL RULE: Commissioner cannot look into (bank
deposits for the ff. purposes)
(e) To the extent known, the name and address of any
person believed to be in possession of the requested - the depositor is not prohibited to disclose on his own
information;
*Bank Secrecy Law
(f) A statement that the request is in conformity with the
law and administrative practices of the said foreign tax Here, the Commissioner is allowed (kase na-waive)
authority, such that if the requested information was
within the jurisdiction of the said foreign tax authority then (G) Authority to Accredit and Register Tax Agents. - The
it would be able to obtain the information under its laws or Commissioner shall accredit and register, based on their
in the normal course of administrative practice and that it professional competence, integrity and moral fitness, individuals
is in conformity with a convention or international and general professional partnerships and their representatives
agreement; and who prepare and file tax returns, statements, reports, protests,
and other papers with or who appear before, the Bureau for
(g) A statement that the requesting foreign tax authority taxpayers. Within one hundred twenty (120) days from January
has exhausted all means available in its own territory to 1, 1998, the Commissioner shall create national and regional
obtain the information, except those that would give rise accreditation boards, the members of which shall serve for three
to disproportionate difficulties. (3) years, and shall designate from among the senior officials of
the Bureau, one (1) chairman and two (2) members for each
The Commissioner shall forward the information as promptly as board, subject to such rules and regulations as the Secretary of
possible to the requesting foreign tax authority. To ensure a Finance shall promulgate upon the recommendation of the
prompt response, the Commissioner shall confirm receipt of a Commissioner.
request in writing to the requesting tax authority and shall notify
the latter of deficiencies in the request, if any, within sixty (60) Individuals and general professional partnerships and their
days from receipt of the request. representatives who are denied accreditation by the
Commissioner and/or the national and regional accreditation
If the Commissioner is unable to obtain and provide the boards may appeal such denial to the Secretary of Finance, who
information within ninety (90) days from receipt of the request, shall rule on the appeal within sixty (60) days from receipt of
due to obstacles encountered in furnishing the information or such appeal. Failure of the Secretary of Finance to rule on the
when the bank or financial institution refuses to furnish the Appeal within the prescribed period shall be deemed as
information, he shall immediately inform the requesting tax approval of the application for accreditation of the appellant.
authority of the same, explaining the nature of the obstacles
encountered or the reasons for refusal. *If not accredited by BIR, you have no personality…
(H) Authority of the Commissioner to Prescribe Additional (d) The power to assign or reassign internal revenue
Procedural or Documentary Requirements. - The officers to establishments where articles subject to excise
Commissioner may prescribe the manner of compliance with tax are produced or kept.
any documentary or procedural requirement in connection with
the submission or preparation of financial statements Abatement – sa Commissioner
accompanying the tax returns.
What if more than 1M? – The Commissioner alone
*SEC. 7. Authority of the Commissioner to Delegate
Power. - The Commissioner may delegate the powers vested in SEC. 8. Duty of the Commissioner to Ensure the Provision
him under the pertinent provisions of this Code to any or such and Distribution of Forms, Receipts, Certificates, and
subordinate officials with the rank equivalent to a division chief Appliances, and the Acknowledgment of Payment of
or higher, subject to such limitations and restrictions as may be Taxes. [7]
imposed under rules and regulations to be promulgated by the
Secretary of Finance, upon recommendation of the (A) Provision and Distribution to Proper-Officials. – Any law
Commissioner: Provided, however, That the following powers of to the contrary notwithstanding, it shall be the duty of the
the Commissioner shall not be delegated: Commissioner, among other things, to prescribe, provide, and
distribute to the proper officials the requisite licenses; internal
(a) The power to recommend the promulgation of rules revenue stamps; unique, secure and non-removable
and regulations by the Secretary of Finance; identification markings (hereafter called unique identification
markings), such as codes or stamps, be affixed to or form part
(b) The power to issue rulings of first impression or to of all unit packets and packages and any outside packaging of
reverse, revoke or modify any existing ruling of the cigarettes and bottles of distilled spirits; labels and other forms;
Bureau; certificates; bonds; records; invoices; books; receipts;
instruments; appliances and apparatus used in administering
(c) The power to compromise or abate, under Sec. 204 the laws falling within the jurisdiction of the Bureau. For this
(A) and (B) of this Code, any tax liability: Provided, purpose, internal revenue stamps, or other markings and labels
however, That assessments issued by the regional shall be caused by the Commissioner to be printed with
offices involving basic deficiency taxes of Five hundred adequate security features.
thousand pesos (P500,000) or less, and minor criminal
violations, as may be determined by rules and regulations Internal revenue stamps, whether of a bar code or fuson design,
to be promulgated by the Secretary of finance, upon or other markings shall be firmly and conspicuously affixed or
recommendation of the Commissioner, discovered by printed on each pack of cigars and cigarettes and bottles of
regional and district officials, may be compromised by a distilled spirits subject to excise tax in the manner and form as
regional evaluation board which shall be composed of the prescribed by the Commissioner, upon approval of the
Regional Director as Chairman, the Assistant Regional Secretary of Finance.
Director, the heads of the Legal, Assessment and
Collection Divisions and the Revenue District Officer To further improve tax administration, cigarette and alcohol
having jurisdiction over the taxpayer, as members; and manufacturers shall be required to install automated volume-
counters of packs and bottles to deter over-removals and (e) Coordinate with regional offices or other departments,
misdeclaration of removals. bureaus and agencies in the area;

(B) Receipts for Payment Mode. – It shall be the duty of the (f) Coordinate with local government units in the area;
Commissioner or his duly authorized representative or an
authorized agent bank to whom any payment of any tax is made (g) Exercise control and supervision over the officers and
under the provisions of this Code to acknowledge the payment employees within the region; and
of such tax, expressing the amount paid and the particular
account for which such payment was made in a form and (h) Perform such other functions as may be provided by
manner prescribed therefor by the Commissioner. law and as may be delegated by the Commissioner.

SEC. 9. Internal Revenue Districts. - With the approval of the SEC. 11. Duties of Revenue District Officers and Other
Secretary of Finance, the Commissioner shall divide the Internal Revenue Officers. - It shall be the duty of every
Philippines into such number of revenue districts as may from Revenue District Officer or other internal revenue officers and
time to time be required for administrative purposes. Each of employees to ensure that all laws, and rules and regulations
these districts shall be under the supervision of a Revenue affecting national internal revenue are faithfully executed and
District Officer. complied with, and to aid in the prevention, detection and
punishment of frauds of delinquencies in connection therewith.
SEC. 10. Revenue Regional Director. - Under rules and
regulations, policies and standards formulated by the It shall be the duty of every Revenue District Officer to examine
Commissioner, with the approval of the Secretary of Finance, the efficiency of all officers and employees of the Bureau of
the Revenue Regional director shall, within the region and Internal Revenue under his supervision, and to report in writing
district offices under his jurisdiction, among others: to the Commissioner, through the Regional Director, any neglect
of duty, incompetency, delinquency, or malfeasance in office of
(a) Implement laws, policies, plans, programs, rules and any internal revenue officer of which he may obtain knowledge,
regulations of the department or agencies in the regional with a statement of all the facts and any evidence sustaining
area; each case.

(b) Administer and enforce internal revenue laws, and SEC. 12. Agents and Deputies for Collection of National
rules and regulations, including the assessment and Internal Revenue Taxes. - The following are hereby constituted
collection of all internal revenue taxes, charges and fees; agents of the Commissioner:

(c) Issue Letters of authority for the examination of a) The Commissioner of Customs and his subordinates with
taxpayers within the region; respect to the collection of national internal revenue taxes on
imported goods;
(d) Provide economical, efficient and effective service to
the people in the area; b) The head of the appropriate government office and his
subordinates with respect to the collection of energy tax; and
c) Banks duly accredited by the Commissioner with respect to Internal Revenue. Any person so arrested shall be forthwith
receipt of payments internal revenue taxes authorized to be brought before a court, there to be dealt with according to law.
made thru banks.
SEC. 16. Assignment of Internal Revenue Officers Involved
Any officer or employee of an authorized agent bank assigned in Excise Tax Functions to Establishments Where Articles
to receive internal revenue tax payments and transmit tax subject to Excise Tax are Produced or Kept. - The
returns or documents to the Bureau of Internal Revenue shall be Commissioner shall employ, assign, or reassign internal
subject to the same sanctions and penalties prescribed in revenue officers involved in excise tax functions, as often as the
Sections 269 and 270 of this Code. exigencies of the revenue service may require, to
establishments or places where articles subject to excise tax are
SEC. 13. Authority of a Revenue Officer. - Subject to the rules produced or kept: Provided, That an internal revenue officer
and regulations to be prescribed by the Secretary of Finance, assigned to any such establishment shall in no case stay in his
upon recommendation of the Commissioner, a Revenue Officer assignment for more than two (2) years, subject to rules and
assigned to perform assessment functions in any district may, regulations to be prescribed by the Secretary of Finance, upon
pursuant to a Letter of Authority issued by the Revenue recommendation of the Commissioner.
Regional Director, examine taxpayers within the jurisdiction of
the district in order to collect the correct amount of tax, or to SEC. 17. Assignment of Internal Revenue Officers and
recommend the assessment of any deficiency tax due in the Other Employees to Other Duties. - The Commissioner may,
same manner that the said acts could have been performed by subject to the provisions of Section 16 and the laws on civil
the Revenue Regional Director himself. service, as well as the rules and regulations to be prescribed by
the Secretary of Finance upon the recommendation of the
SEC. 14. Authority of Officers to Administer Oaths and Commissioner, assign or reassign internal revenue officers and
Take Testimony. - The Commissioner, Deputy Commissioners, employees of the Bureau of Internal Revenue, without change in
Service Chiefs, Assistant Service Chiefs, Revenue Regional their official rank and salary, to other or special duties connected
Directors, Assistant Revenue Regional Directors, Chiefs and with the enforcement or administration of the revenue laws as
Assistant Chiefs of Divisions, Revenue District Officers, special the exigencies of the service may require: Provided, That
deputies of the Commissioner, internal revenue officers and any internal revenue officers assigned to perform assessment or
other employee of the Bureau thereunto especially deputized by collection function shall not remain in the same assignment for
the Commissioner shall have the power to administer oaths and more than three (3) years; Provided, further, That assignment of
to take testimony in any official matter or investigation internal revenue officers and employees of the Bureau to special
conducted by them regarding matters within the jurisdiction of duties shall not exceed one (1) year.
the Bureau.
SEC. 18. Reports of Violation of Laws. - When an internal
SEC. 15. Authority of Internal Revenue Officers to Make revenue officer discovers evidence of a violation of this Code or
Arrests and Seizures. - The Commissioner, the Deputy of any law, rule or regulations administered by the Bureau of
Commissioners, the Revenue Regional Directors, the Revenue Internal Revenue of such character as to warrant the institution
District Officers and other internal revenue officers shall have of criminal proceedings, he shall immediately report the facts to
authority to make arrests and seizures for the violation of any the Commissioner through his immediate superior, giving the
penal law, rule or regulation administered by the Bureau of name and address of the offender and the names of the
witnesses if possible: Provided, That in urgent cases, the the grant of incentives under Title XIII, furnish the Secretary
Revenue Regional director or Revenue District Officer, as the pertinent information on the entities receiving incentives under
case may be, may send the report to the corresponding this Code: Provided, however, That the Secretary and the
prosecuting officer in the latter case, a copy of his report shall relevant officers handling such specific information shall be
be sent to the Commissioner. covered by the provisions of Section 270 unless the taxpayer
consents in writing to such disclosure. [8]
SEC. 19. Contents of Commissioner's Annual Report. - The
Annual Report of the Commissioner shall contain detailed (C) Report to Oversight Committee. - The Commissioner
statements of the collections of the Bureau with specifications of shall, with reference to Section 204 of this Code, submit to the
the sources of revenue by type of tax, by manner of payment, by Oversight Committee referred to in Section 290 hereof, through
revenue region and by industry group and its disbursements by the Chairpersons[9] of the Committee on Ways and Means of the
classes of expenditures. Senate and House of Representatives, a report on the exercise
of his powers pursuant to the said section, every six (6) months
In case the actual collection exceeds or falls short of target as of each calendar year.
set in the annual national budget by fifteen percent (15%) or
more, the Commissioner shall explain the reason for such SEC. 21. Sources of Revenue. - The following taxes, fees and
excess or shortfall. charges are deemed to be national internal revenue taxes:

SEC. 20. Submission of Report and Pertinent Information (a) Income tax;
by the Commissioner. - (b) Estate and donor's taxes;
(c) Value-added tax;
(A) Submission of Pertinent Information to Congress. - The (d) Other percentage taxes;
provision of Section 270 of this Code to the contrary (e) Excise taxes;
notwithstanding, the Commissioner shall, upon request of (f) Documentary stamp taxes; and
Congress and in aid of legislation, furnish its appropriate (g) Such other taxes as are or hereafter may be imposed
Committee pertinent information including but not limited to: and collected by the Bureau of Internal Revenue.
industry audits, collection performance data, status reports in
criminal actions initiated against persons and taxpayer's returns: POGO – franchise tax is being collected by BIR
Provided, however, That any return or return information which
can be associated with, or otherwise identify, directly or CHAPTER I
indirectly, a particular taxpayer shall be furnished the
appropriate Committee of Congress only when sitting in DEFINITIONS
Executive Session Unless such taxpayer otherwise consents in
writing to such disclosure. SEC. 22. Definitions. - When used in this Title:

(B) Submission of Tax-Related Information to the (A) The term 'person’ means an individual, a trust, estate or
Department of Finance. - The Commissioner shall, upon the corporation.
order of the Secretary of Finance specifically identifying the
needed information and justification for such order in relation to
(B) The term 'corporation' shall include one person the Philippines shall likewise be treated as a nonresident
corporations [10], partnerships, no matter how created or citizen for the taxable year in which he arrives in the
organized, joint-stock companies, joint accounts (cuentas en Philippines with respect to his income derived from
participacion), associations, or insurance companies, but does sources abroad until the date of his arrival in the
not include general professional partnerships and a joint venture Philippines. (Taxable na kase resident citizen na siya)
or consortium formed for the purpose of undertaking
construction projects or engaging in petroleum, coal, geothermal (5) The taxpayer shall submit proof to the Commissioner
and other energy operations pursuant to an operating to show his intention of leaving the Philippines to reside
consortium agreement under a service contract with the permanently abroad or to return to and reside in the
Government. 'General professional partnerships’ are Philippines as the case may be for purpose of this
partnerships formed by persons for the sole purpose of Section.
exercising their common profession, no part of the income of
which is derived from engaging in any trade or business. (F) The term 'resident alien' means an individual whose
residence is within the Philippines and who is not a citizen
(C) The term 'domestic, when applied to a corporation, means thereof.
created or organized in the Philippines or under its laws.
(G) The term 'nonresident alien' means an individual whose
(D) The term 'foreign’, when applied to a corporation, means a residence is not within the Philippines and who is not a citizen
corporation which is not domestic thereof.

(E) The term 'nonresident citizen' means; relate to Section 23 (H) The term 'resident foreign corporation' applies to a foreign
corporation engaged in trade or business within the Philippines.
(1) A citizen of the Philippines who establishes to the
satisfaction of the Commissioner the fact of his physical (I) The term 'nonresident foreign corporation' applies to a
presence abroad with a definite intention to reside foreign corporation not engaged in trade or business within the
therein. Philippines.

(2) A citizen of the Philippines who leaves the Philippines (J) The term 'fiduciary' means a guardian, trustee, executor,
during the taxable year to reside abroad, either as an administrator, receiver, conservator or any person acting in any
immigrant or for employment on a permanent basis. fiduciary capacity for any person.

(3) A citizen of the Philippines who works and derives (K) The term 'withholding agent' means any person required to
income from abroad and whose employment thereat deduct and withhold any tax under the provisions of Section 57.
requires him to be physically present abroad most of the
time during the taxable year. (L) The term 'shares of stock' shall include shares of stock of a
corporation, warrants and/or options to purchase shares of
(4) A citizen who has been previously considered as stock, as well as units of participation in a partnership (except
nonresident citizen and who arrives in the Philippines at general professional partnerships), joint stock companies, joint
any time during the taxable year to reside permanently in accounts, joint ventures taxable as corporations, associations
and recreation or amusement clubs (such as golf, polo or similar (T) The term 'securities' means shares of stock in a corporation
clubs), and mutual fund certificates. and rights to subscribe for or to receive such shares. The term
includes bonds, debentures, notes or certificates, or other
(M) The term 'shareholder' shall include holders of a share/s of evidence or indebtedness, issued by any corporation, including
stock, warrant/s and/or option/s to purchase shares of stock of a those issued by a government or political subdivision thereof,
corporation, as well as a holder of a unit of participation in a with interest coupons or in registered form.
partnership (except general professional partnerships) in a joint
stock company, a joint account, a taxable joint venture, a (U) The term 'dealer in securities' means a merchant of stocks
member of an association, recreation or amusement club (such or securities, whether an individual, partnership or corporation,
as golf, polo or similar clubs) and a holder of a mutual fund with an established place of business, regularly engaged in the
certificate, a member in an association, joint-stock company, or purchase of securities and the resale thereof to customers; that
insurance company. is, one who, as a merchant, buys securities and re-sells them to
customers with a view to the gains and profits that may be
(N) The term 'taxpayer’ means any person subject to tax derived therefrom.
imposed by this Title.
(V) The term 'bank' means every banking institution, as defined
(O) The terms 'including’ and 'includes', when used in a in Section 2 of Republic Act No. 337, [7] as amended, otherwise
definition contained in this Title, shall not be deemed to exclude known as the “General banking Act.” A bank may either be a
other things otherwise within the meaning of the term defined. commercial bank, a thrift bank, a development bank, a rural
bank or specialized government bank.
(P) The term 'taxable year' means the calendar year, or the
fiscal year ending during such calendar year, upon the basis of (W) The term 'non-bank financial intermediary' means a
which the net income is computed under this Title. 'Taxable financial intermediary, as defined in Section 2(D)(C) of Republic
year' includes, in the case of a return made for a fractional part Act No. 337, [5] as amended, otherwise known as the “General
of a year under the provisions of this Title or under rules and Banking Act,” authorized by the Bangko Sentral ng Pilipinas
regulations prescribed by the Secretary of Finance, upon (BSP) to perform quasi-banking activities.
recommendation of the commissioner, the period for which such
return is made. (X) The term 'quasi-banking activities' means borrowing funds
from twenty (20) or more personal or corporate lenders at any
(Q) The term 'fiscal year' means an accounting period of twelve one time, through the issuance, endorsement, or acceptance of
(12) months ending on the last day of any month other than debt instruments of any kind other than deposits for the
December. borrower's own account, or through the issuance of certificates
of assignment or similar instruments, with recourse, or of
(R) The terms 'paid or incurred' and 'paid or accrued' shall be repurchase agreements for purposes of relending or purchasing
construed according to the method of accounting upon the basis receivables and other similar obligations: Provided, however,
of which the net income is computed under this Title. That commercial, industrial and other non-financial companies,
which borrow funds through any of these means for the limited
(S) The term 'trade or business' includes the performance of purpose of financing their own needs or the needs of their
the functions of a public office.
agents or dealers, shall not be considered as performing quasi- position as defined under existing provisions of the Labor Code
banking functions. of the Philippines, as amended.

(Y) The term 'deposit substitutes' shall mean an alternative (BB) The term 'mutual fund company' shall mean an open-end
from of obtaining funds from the public (the term 'public' means and close-end investment company as defined under the
borrowing from twenty (20) or more individual or corporate Investment Company Act. [6]
lenders at any one time) other than deposits, through the
issuance, endorsement, or acceptance of debt instruments for (CC) The term 'trade, business or profession' shall not include
the borrowers own account, for the purpose of relending or performance of services by the taxpayer as an employee.
purchasing of receivables and other obligations, or financing
their own needs or the needs of their agent or dealer. These (DD) The term 'regional or area headquarters' shall mean a
instruments may include, but need not be limited to bankers' branch established in the Philippines by multinational
acceptances, promissory notes, repurchase agreements, companies and which headquarters do not earn or derive
including reverse repurchase agreements entered into by and income from the Philippines and which act as supervisory,
between the Bangko Sentral ng Pilipinas (BSP) and any communications and coordinating center for their affiliates,
authorized agent bank, certificates of assignment or subsidiaries, or branches in the Asia-Pacific Region and other
participation and similar instruments with recourse: Provided, foreign markets.
however, That debt instruments issued for interbank call loans
with maturity of not more than five (5) days to cover deficiency in (EE) The term 'regional operating headquarters' shall mean a
reserves against deposit liabilities, including those between or branch established in the Philippines by multinational
among banks and quasi-banks, shall not be considered as companies which are engaged in any of the following services:
deposit substitute debt instruments. general administration and planning; business planning and
coordination; sourcing and procurement of raw materials and
(Z) The term 'ordinary income' includes any gain from the sale components; corporate finance advisory services; marketing
or exchange of property which is not a capital asset or property control and sales promotion; training and personnel
described in Section 39(A)(1). Any gain from the sale or management; logistic services; research and development
exchange of property which is treated or considered, under services and product development; technical support and
other provisions of this Title, as 'ordinary income' shall be maintenance; data processing and communications; and
treated as gain from the sale or exchange of property which is business development.
not a capital asset as defined in Section 39(A)(1). The term
'ordinary loss' includes any loss from the sale or exchange of (FF) The term 'long-term deposit or investment certificate'
property which is not a capital asset. Any loss from the sale or shall refer to certificate of time deposit or investment in the form
exchange of property which is treated or considered, under of savings, common or individual trust funds, deposit
other provisions of this Title, as 'ordinary loss' shall be treated substitutes, investment management accounts and other
as loss from the sale or exchange of property which is not a investments with a maturity period of not less than five (5) years,
capital asset. the form of which shall be prescribed by the Bangko Sentral ng
Pilipinas (BSP) and issued by banks only (not by non-bank
(AA) The term 'rank and file employees' shall mean all financial intermediaries and finance companies) to individuals in
employees who are holding neither managerial nor supervisory
denominations of Ten thousand pesos (P10,000) and other Commission. The offshore gaming licensee gaming agent shall
denominations as may be prescribed by the BSP. not be involved with the business operations of the offshore
gaming licensee and shall derive no income therefrom.” [11]
(GG) The term ‘statutory minimum wage’ shall refer to the rate
fixed by the Regional Tripartite Wage and Productivity Board, as St. Wealth case
defined by the Bureau of Labor and Employment Statistics
(BLES) of the Department of Labor and Employment (DOLE). [7] CHAPTER II

(HH) The term “minimum wage earner” shall refer to a worker GENERAL PRINCIPLES
in the private sector paid the statutory minimum wage or to an
employee in the public sector with compensation income of not SEC. 23. General Principles of Income Taxation in the
more than the statutory minimum wage in the non-agricultural Philippines. - Except when otherwise provided in this Code:
sector where he/she is assigned. [5]
(A) A citizen of the Philippines residing therein is taxable on
(II) The term ‘offshore gaming licensee’ shall refer to the all income derived from sources within and without the
offshore gaming operator, whether organized abroad or in the Philippines;
Philippines, duly licensed and authorized, through a gaming
license, by the Philippine Amusement and Gaming Corporation (B) A non-resident citizen is taxable only on income derived
or any special economic zone authority or freeport authority to from sources within the Philippines;
conduct offshore gaming operations, including the acceptance
of bets from offshore customers, as provided for on their (C) An individual citizen of the Philippines who is working
respective charters. and deriving income from abroad as an overseas contract
worker is taxable only on income derived from sources within
“Notwithstanding any law to the contrary, no offshore gaming the Philippines: Provided, That a seaman who is a citizen of the
license shall hereinafter be issued by the Aurora Pacific Philippines and who receives compensation for services
Economic Zone and Freeport Authority. All offshore licensees rendered abroad as a member of the complement of a vessel
whose license was issued by the Aurora Pacific Economic Zone engaged exclusively in international trade shall be treated as an
and Freeport Authority shall be transferred, regulated and overseas contract worker; (Returning resident – income earned
monitored by the Philippine Amusement and Gaming from abroad will now be taxable; except..)
Corporation.
“For purpose of this Section, an offshore gaming licensee shall (D) An alien individual, whether a resident or not of the
be considered engaged in doing business in the Philippines.[11] Philippines, is taxable only on income derived from sources
within the Philippines;
(JJ) The term ‘offshore gaming licensee-gaming agent’ shall
refer to the representative in the Philippines of an offshore- (E) A domestic corporation is taxable on all income derived
based operator who shall act as a resident agent for the mere from sources within and without the Philippines; and
purpose of receiving summons, notices and other legal
processes for the offshore gaming licensee and to comply with
disclosure requirements of the Securities and Exchange
(F) A foreign corporation, whether engaged or not in trade (a) Tax Schedule Effective January 1, 2018 until December 31,
or business in the Philippines, is taxable only on income 2022 [4]:
derived from sources within the Philippines.
Not over P250,000……………………………………………… 0%
CHAPTER III
Over P250,000 but not over P400,000………………………..
TAX ON INDIVIDUALS 20% of the excess over P250,000

SEC. 24. Income Tax Rates. - Over P400,000 but not over P800,000………………………..
P30,000 + 25% of the excess over P400,000
(A) Rates of Income Tax on Individual Citizen and Individual
Resident Alien of the Philippines.- Over P800,000 but not over P2,000,000……………………..
P130,000 + 30% of the excess over P800,000
(1) An income tax is hereby imposed
Over P2,000,000 but not over P8,000,000…………………...
(a) On the taxable income defined in Section 31 of this Code, P490,000 + 32% of the excess over P2,000,000
other than income subject to tax under Subsections (B), (C) and
(D) of this Section, derived for each taxable year from all Over P8,000,000 ………………………………………………..
sources within and without the Philippines be every individual P2,410,000 + 35% of the excess over P8,000,000
citizen of the Philippines residing therein;
Tax Schedule Effective January 1, 2023 and onwards:
(b) On the taxable income defined in Section 31 of this Code,
other than income subject to tax under Subsections (B), (C) and Not over P250,000………………………………………………. 0%
(D) of this Section, derived for each taxable year from all
sources within the Philippines by an individual citizen of the Over P250,000 but not over P400,000………………………..
Philippines who is residing outside of the Philippines including 15% of the excess over P250,000
overseas contract workers referred to in Subsection(C) of
Section 23 hereof; and Over P400,000 but not over P800,000………………………..
P22,500 + 20% of the excess over P400,000
(c) On the taxable income defined in Section 31 of this Code,
other than income subject to tax under Subsections (B), (C) and Over P800,000 but not over P2,000,000……………………..
(D) of this Section, derived for each taxable year from all P102,500 + 25% of the excess over P800,000
sources within the Philippines by an individual alien who is a
resident of the Philippines. Over P2,000,000 but not over P8,000,000…………………...
P402,500 + 30% of the excess over P2,000,000
(2) Rates of Tax on Taxable Income of Individuals. - The tax
shall be computed in accordance with and at the rates Over P8,000,000 ………………………………………………..
established in the following schedule: [12] P2,202,500 + 35% of the excess over P8,000,000
For married individuals, the husband and wife, subject to the prescribed under Subsection (A)(2)(a) of this Section on taxable
provision of Section 51 (D) hereof, shall compute separately income, or eight percent (8%) income tax based on gross sales
their individual income tax based on their respective total or gross receipts and other non-operating income in lieu of the
taxable income: Provided, That if any income cannot be graduated income tax rates under Subsection (A)(2)(a) of this
definitely attributed to or identified as income exclusively earned Section and the percentage tax under Section 116 of this Code.
or realized by either of the spouses, the same shall be divided
equally between the spouses for the purpose of determining (b) If Total Gross Sales and/or Gross Receipts and Other Non-
their respective taxable income. operating Income Exceeds the VAT Thresholds Provided in
Section 109(BB) of this Code. – The rates prescribed under
Provided, That minimum wage earners as defined in Section Subsection (A)(2)(a) of this Section. [13]
22(HH) of this Code shall be exempt from the payment of
income tax on their taxable income: Provided, further, That the (B) Rate of Tax on Certain Passive Income: -
holiday pay, overtime pay, night shift differential pay and hazard
pay received by such minimum wage earners shall likewise be (1) Interests, Royalties, Prizes, and Other Winnings. – A final
exempt from income tax. tax at the rate of twenty percent (20%) is hereby imposed upon
the amount of interest from any currency bank deposit and yield
(b) Rate of Tax on Income of Purely Self-employed Individuals or any other monetary benefit from deposit substitutes and from
and/or Professionals Whose Gross Sales or Gross Receipts and trust funds and similar arrangements; royalties, except on
Other Non-operating Income Does Not Exceed the Value-added books, as well as other literary works and musical compositions,
Tax(VAT) Threshold as Provided in Section 109(BB). – Self- which shall be imposed a final tax of ten percent (10%); prizes
employed individuals and/or professionals shall have the option (except prizes amounting to Ten thousand pesos (P10,000) or
to avail of an eight percent (8%) tax on gross sales or gross less which shall be subject to tax under Subsection (A) of
receipts and other non-operating income in excess of Two Section 24; and other winnings (except winning amounting to
hundred fifty thousand pesos (P250,000) in lieu of the graduated Ten thousand pesos (P10,000) or less [13] from Philippine
income tax rates under Subsection (A)(2)(a) of this Section and Charity Sweepstakes and Lotto which shall be exempt [13]),
the percentage tax under Section 116 of this Code.[13] derived from sources within the Philippines: Provided, however,
That interest income received by an individual taxpayer (except
(c) Rate of Tax for Mixed Income Earners. – Taxpayers earning a nonresident individual) from a depository bank under the
both compensation income and income from business or expanded foreign currency deposit system shall be subject to a
practice of profession shall be subject to the following taxes: final income tax at the rate of fifteen percent (15%) [14] of such
interest income [4]: Provided, further, That interest income from
(1) All Income from Compensation – The rate prescribed under long-term deposit or investment in the form of savings, common
Subsection (A)(2)(a) of this Section. or individual trust funds, deposit substitutes, investment
management accounts and other investments evidenced by
(2) All Income from Business or Practice of Profession – certificates in such form prescribed by the Bangko Sentral ng
Pilipinas (BSP) shall be exempt from the tax imposed under this
(a) If Total Gross Sales and/or Gross Receipts and Other Non- Subsection: Provided, finally, That should the holder of the
Operating Income Do Not Exceed the VAT Threshold as certificate pre-terminate the deposit or investment before the
Provided in Section 109(BB) of this Code. – The rates fifth (5th) year, a final tax shall be imposed on the entire income
and shall be deducted and withheld by the depository bank from property located in the Philippines, classified as capital assets,
the proceeds of the long-term deposit or investment certificate including pacto de retro sales and other forms of conditional
based on the remaining maturity thereof: sales, by individuals, including estates and trusts: Provided,
That the tax liability, if any, on gains from sales or other
Four (4) years to less than five (5) years - 5%; dispositions of real property to the government or any of its
political subdivisions or agencies or to government-owned or
Three (3) years to less than (4) years - 12%; and controlled corporations shall be determined either under Section
24 (A) or under this Subsection, at the option of the taxpayer;
Less than three (3) years - 20%
(2) Exception. - The provisions of paragraph (1) of this
(2) Cash and/or Property Dividends. - A final tax at the rate of Subsection to the contrary notwithstanding, capital gains
ten percent (10%) [15] shall be imposed upon the cash and/or presumed to have been realized from the sale or disposition of
property dividends actually or constructively received by an their principal residence by natural persons, the proceeds of
individual from a domestic corporation or from a joint stock which is fully utilized in acquiring or constructing a new principal
company, insurance or mutual fund companies and regional residence within eighteen (18) calendar months from the date of
operating headquarters of multinational companies, or on the sale or disposition, shall be exempt from the capital gains tax
share of an individual in the distributable net income after tax of imposed under this Subsection: Provided, That the historical
a partnership (except a general professional partnership) of cost or adjusted basis of the real property sold or disposed shall
which he is a partner, or on the share of an individual in the net be carried over to the new principal residence built or acquired:
income after tax of an association, a joint account, or a joint Provided, further, That the Commissioner shall have been duly
venture or consortium taxable as a corporation of which he is a notified by the taxpayer within thirty (30) days from the date of
member or co-venturer: sale or disposition through a prescribed return of his intention to
avail of the tax exemption herein mentioned: Provided, still
(C) Capital Gains from Sale of Shares of Stock not Traded further, That the said tax exemption can only be availed of once
in the Stock Exchange. - The provisions of Section 39(B) every ten (10) years: Provided, finally, That if there is no full
notwithstanding, a final tax at the rate of fifteen percent utilization of the proceeds of sale or disposition, the portion of
(15%) [16] is hereby imposed upon the net capital gains realized the gain presumed to have been realized from the sale or
during the taxable year from the sale, barter, exchange or other disposition shall be subject to capital gains tax. For this purpose,
disposition of shares of stock in a domestic corporation, except the gross selling price or fair market value at the time of sale,
shares sold, or disposed of through the stock exchange. whichever is higher, shall be multiplied by a fraction which the
unutilized amount bears to the gross selling price in order to
(D) Capital Gains from Sale of Real Property. – determine the taxable portion and the tax prescribed under
paragraph (1) of this Subsection shall be imposed thereon.
(1) In General. - The provisions of Section 39(B)
notwithstanding, a final tax of six percent (6%) based on the SEC. 25. Tax on Nonresident Alien Individual. –
gross selling price or current fair market value as determined in
accordance with Section 6(E) of this Code, whichever is higher, (A) Nonresident Alien Engaged in trade or Business Within
is hereby imposed upon capital gains presumed to have been the Philippines. –
realized from the sale, exchange, or other disposition of real
(1) In General. - A nonresident alien individual engaged in trade 28 of this Code: Provided, furthermore, That interest income
or business in the Philippines shall be subject to an income tax from long-term deposit or investment in the form of savings,
in the same manner as an individual citizen and a resident alien common or individual trust funds, deposit substitutes,
individual, on taxable income received from all sources within investment management accounts and other investments
the Philippines. A nonresident alien individual who shall come to evidenced by certificates in such form prescribed by the Bangko
the Philippines and stay therein for an aggregate period of more Sentral ng Pilipinas (BSP) shall be exempt from the tax imposed
than one hundred eighty (180) days during any calendar year under this Subsection: Provided, finally, That should the holder
shall be deemed a 'nonresident alien doing business in the of the certificate pre-terminate the deposit or investment before
Philippines'. Section 22 (G) of this Code notwithstanding. the fifth (5th) year, a final tax shall be imposed on the entire
income and shall be deducted and withheld by the depository
(2) Cash and/or Property Dividends from a Domestic bank from the proceeds of the long-term deposit or investment
Corporation or Joint Stock Company, or Insurance or certificate based on the remaining maturity thereof: [45]
Mutual Fund Company or Regional Operating Headquarter
or Multinational Company, or Share in the Distributable Net Four (4) years to less than five (5) years - 5%;
Income of a Partnership (Except a General Professional
Partnership), Joint Account, Joint Venture Taxable as a Three (3) years to less than four (4) years - 12%; and
Corporation or Association, Interests, Royalties, Prizes,
and Other Winnings. - Cash and/or property dividends from a Less than three (3) years - 20%.
domestic corporation, or from a joint stock company, or from an
insurance or mutual fund company or from a regional operating (3) Capital Gains. - Capital gains realized from sale, barter or
headquarter of multinational company, or the share of a exchange of shares of stock in domestic corporations not traded
nonresident alien individual in the distributable net income after through the local stock exchange, and real properties shall be
tax of a partnership (except a general professional partnership) subject to the tax prescribed under Subsections (C) and (D) of
of which he is a partner, or the share of a nonresident alien Section 24.
individual in the net income after tax of an association, a joint
account, or a joint venture taxable as a corporation of which he (B) Nonresident Alien Individual Not Engaged in Trade or
is a member or a co-venturer; interests; royalties (in any form); Business Within the Philippines.- There shall be levied,
and prizes (except prizes amounting to Ten thousand pesos collected and paid for each taxable year upon the entire income
(P10,000.00) or less which shall be subject to tax under received from all sources within the Philippines by every
Subsection (B)(1) of Section 24) and other winnings (except nonresident alien individual not engaged in trade or business
winnings amounting to Ten thousand pesos (P10,000.00) or within the Philippines as interest, cash and/or property
less from [17] Philippine Charity Sweepstakes Office (PCSO) dividends, rents, salaries, wages, premiums, annuities,
games which shall be exempt [17]); shall be subject to an income compensation, remuneration, emoluments, or other fixed or
tax of twenty percent (20%) on the total amount determinable annual or periodic or casual gains, profits, and
thereof: Provided, however, That royalties on books as well as income, and capital gains, a tax equal to twenty-five percent
other literary works, and royalties on musical compositions shall (25%) of such income. Capital gains realized by a nonresident
be subject to a final tax of ten percent (10%) on the total amount alien individual not engaged in trade or business in the
thereof: Provided, further, That cinematographic films and Philippines from the sale of shares of stock in any domestic
similar works shall be subject to the tax provided under Section
corporation and real property shall be subject to the income tax operations in the Philippines shall be liable to a tax of fifteen
prescribed under Subsections (C) and (D) of Section 24. percent (15%) of the salaries, wages, annuities, compensation,
remuneration and other emoluments, such as honoraria and
(C) Alien Individual Employed by Regional or Area allowances, received from such contractor or subcontractor:
Headquarters and Regional Operating Headquarters of Provided, however, That the same tax treatment shall apply to a
Multinational Companies. - There shall be levied, collected Filipino employed and occupying the same position as an alien
and paid for each taxable year upon the gross income received employed by petroleum service contractor and subcontractor.
by every alien individual employed by regional or area
headquarters and regional operating headquarters established Any income earned from all other sources within the Philippines
in the Philippines by multinational companies as salaries, by the alien employees referred to under Subsections (C), (D)
wages, annuities, compensation, remuneration and other and (E) hereof shall be subject to the pertinent income tax, as
emoluments, such as honoraria and allowances, from such the case may be, imposed under this Code.
regional or area headquarters and regional operating
headquarters, a tax equal to fifteen percent (15%) of such gross (F) The preferential tax treatment provided in Subsections (C),
income: Provided, however, That the same tax treatment shall (D), and (E) of this Section shall not be applicable to regional
apply to Filipinos employed and occupying the same position as headquarters (RHQs), regional operating headquarters
those of aliens employed by these multinational companies. For (ROHQs), offshore banking units (OBUs) or petroleum service
purposes of this Chapter, the term 'multinational company' contractors and subcontractors registering with the Securities
means a foreign firm or entity engaged in international trade with and Exchange Commission (SEC) after January 1, 2018: [18]
VETOED by the President [19]
affiliates or subsidiaries or branch offices in the Asia-Pacific
Region and other foreign markets.
(NOTE: The amendments introduced by the TRAIN Law on
(D) Alien Individual Employed by Offshore Banking Units. - Section 6(F) was vetoed by the President. The veto message
There shall be levied, collected and paid for each taxable year reads:
upon the gross income received by every alien individual
employed by offshore banking units established in the “I am constrained to veto the provision under Section 6(F) of the
Philippines as salaries, wages, annuities, compensation, enrolled bill that effectively maintains the special tax rate of 15%
remuneration and other emoluments, such as honoraria and of gross income for the aforementioned employees, to wit:
allowances, from such off-shore banking units, a tax equal to
fifteen percent (15%) of such gross income: Provided, however, ‘Provided, However, That Existing RHQs/ROHQs, OBUs or
That the same tax treatment shall apply to Filipinos employed Petroleum Service Contractors and Subcontractors Presently
and occupying the same positions as those of aliens employed Availing of Preferential Tax Rates For Qualified Employees
by these offshore banking units. Shall Continue To Be Entitled To Avail Of The Preferential Tax
Rate For Present And Future Qualified Employees.’
(E) Alien Individual Employed by Petroleum Service
Contractor and Subcontractor. [10] - An Alien individual who is While I understand the laudable objective of the proposal, the
a permanent resident of a foreign country but who is employed provision is violative of the Equal Protection Clause under
and assigned in the Philippines by a foreign service contractor Section 1, Article III of the 1987 Constitution, as well as the rule
or by a foreign service subcontractor engaged in petroleum
of equity and uniformity in the application of the burden of may be barred from reentering the Philippines, or blacklisted as
taxation: a foreign employee by the Department of Labor and
Employment, Bureau of Immigration, and other relevant
Section 1. No person shall be deprived of life, liberty, or property agencies.
without due process of law, nor shall any person be denied the
equal protection of the laws. “For the efficient assessment, verification, and administration of
taxes imposed in this Section, the Bureau of Immigration, the
In line with this, the overriding consideration is the promotion of Department of Labor and Employment, the Bureau of Internal
fairness of the tax system for individuals performing similar Revenue, the Securities and Exchange Commission, the
work. Given the significant reduction in the personal income tax, Philippine Amusement and Gaming Corporation and any special
the employees of these forms should follow the regular tax rates economic zone authority, tourism zone authority, freeport
applicable to other individual taxpayers.) authority, as provided for in their respective charters, shall issue
joint and consolidated rules and regulations, including the
(G) Alien Individuals Employed by an Offshore Gaming issuance of a gaming employment license by the concerned
Licensee and Service Providers. – Alien individuals agency, for the implementation of free and efficient exchange of
regardless of residency and who are employed and assigned in information among the said agencies in relation to the proper
the Philippines, regardless of the term and class of working or payment of taxes by persons covered under this Section. For
employment permit or visa, by ban offshore gaming licensee or this purpose, the data sharing and reporting system as well as
its service provider as defined in Section 22(II) and Section the joint inspection team created under Joint Memorandum
27(G) of this Code, shall pay a final withholding tax of twenty- Circular No. 1, Series of 2019, entitled, ‘Rules and Procedures
five percent (25%) on their gross income as computed in the Governing Foreign Nationals Intending to Work in the
succeeding paragraph: Provided, however, That the minimum Philippines shall be institutionalized.
final withholding tax due for any taxable month from said
persons shall not be lower than Twelve thousand five hundred “All foreign employees of offshore gaming licensees and their
pesos (P12,500.00). service providers, regardless of nature of employment, shall
have a tax identification number. All offshore gaming licensees
“In computing the tax provided in this Section, gross income and service providers that employ or engage a foreign national
shall include, whether in cash or in kind, basic salary/wages , without the foregoing shall be liable for affine of Twenty
annuities, compensation, remuneration and other emoluments, thousand pesos (P20,000.00) for every foreign national without
such as honoraria and allowances, received from such service such tax identification number and, in proper instances,
provider or offshore gaming licensee: Provided, That all revocation of their primary and other licenses obtained from
offshore gaming licensees and service providers shall submit to government agencies and/or perpetual or temporary ban in
the Bureau of Internal Revenue the original copy of notarized employing or engaging foreign nationals for their
contract of employment clearly stating therein the annual salary operations: Provided, That the foreign national concerned shall
and other benefits and entitlement of the concerned alien. still pay, and the employee shall remit, any corresponding taxes,
penalties, interests and surcharges due in accordance with this
“The tax imposed herein shall be withheld and remitted in Code.
accordance with the provision of this Code and failure to do so
shall be governed by this Code. In addition, the alien concerned
“Any income earned from all other sources within the Philippines Provided, That corporations with net taxable income not
by the alien employee referred to under this Subsection shall be exceeding Five million pesos (P5,000,000.00) and with total
subject to the pertinent income tax imposed under this Code. [20] assets not exceeding One hundred million pesos
(P100,000,000.00), excluding land on which the particular
SEC. 26. Tax Liability of Members of General Professional business entity's office, plant, and equipment are situated during
Partnerships. - A general professional partnership as such the taxable year for which the tax is imposed, shall be taxed at
shall not be subject to the income tax imposed under this twenty percent (20%).[23]
Chapter. Persons engaging in business as partners in a general
professional partnership shall be liable for income tax only in In the case of corporations adopting the fiscal-year accounting
their separate and individual capacities. period, the taxable income shall be computed without regard to
the specific date when specific sales, purchases and other
For purposes of computing the distributive share of the partners, transactions occur. Their income and expenses for the fiscal
the net income of the partnership shall be computed in the same year shall be deemed to have been earned and spent equally
manner as a corporation. for each month of the period.

Each partner shall report as gross income his distributive share, The corporate income tax rate shall be applied on the amount
actually or constructively received, in the net income of the computed by multiplying the number of months covered by the
partnership. new rate within the fiscal year by the taxable income of the
corporation for the period, divided by twelve. [22]

(B) Proprietary Educational Institutions and Hospitals.–

Proprietary educational institutions and hospitals which are

CHAPTER IV nonprofit (non-stock) shall pay a tax of ten percent (10%) (if not
complied with it will be a regular rate of 25%, not 10%) on their
TAX ON CORPORATIONS taxable income except those covered by Subsection (D)
hereof: Provided, That beginning July 1, 2020 until June 30,
SEC. 27. Rates of Income tax on Domestic Corporations. – 2023, the tax rate herein imposed shall be one percent
(1%): Provided, further, That [24] if the gross income from
(A) In General. - Except as otherwise provided in this Code, an 'unrelated trade, business or other activity' exceeds fifty percent
income tax rate of twenty-five percent (25%) effective July 1, (50%) of the total gross income derived by such educational
2020 [21], is hereby imposed upon the taxable income derived institutions or hospitals from all sources, the tax prescribed in
during each taxable year from all sources within and without the Subsection (A) hereof shall be imposed on the entire taxable
Philippines by every corporation, as defined in Section 22(B) of income. For purposes of this Subsection, the term 'unrelated
this Code and taxable under this Title as a corporation, trade, business or other activity' means any trade, business or
organized in, or existing under the laws of the Philippines. [22] other activity, the conduct of which is not substantially related to
the exercise or performance by such educational institution or
hospital of its primary purpose or function. 'Proprietary' means a
private hospital [21] or any private school maintained and
administered by private individuals or groups with an issued realized during the taxable year from the sale, exchange or
permit to operate from the Department of Education other disposition of shares of stock in a domestic corporation
(DepEd), [21] or the Commission on Higher Education (CHED), or except shares sold or disposed of through the stock
the Technical Education and Skills Development Authority exchange. [4]
(TESDA), as the case may be, in accordance with existing laws
and regulations. (3) Tax on Income Derived under the Expanded Foreign
Currency Deposit System. – Income derived by a depository
(C) Government-owned or –Controlled Corporations, bank under the expanded foreign currency deposit system from
Agencies or Instrumentalities. - The provisions of existing foreign currency transactions with nonresidents, offshore
special or general laws to the contrary notwithstanding, all banking units in the Philippines, local commercial banks
corporations, agencies, or instrumentalities owned or controlled including branches of foreign banks that may be authorized by
by the Government, except the Government Service Insurance the Bangko Sentral ng Pilipinas (BSP) to transact business with
System (GSIS), the Social Security System (SSS), the Home foreign currency deposit system shall be exempt from all taxes,
Development Mutual Fund (HDMF) [25], the Philippine Health except net income from such transactions as may be specified
Insurance Corporation (PHIC), and the local water by the Secretary of Finance, upon recommendation by the
districts [26] shall pay such rate of tax upon their taxable income Monetary Board to be subject to the regular income tax payable
as are imposed by this Section upon corporations or by banks: Provided, however, That interest income from foreign
associations engaged in a similar business, industry, or activity. currency loans granted by such depository banks under said
(It may choose to tax itself on its proprietary activities; if expanded system to residents other than offshore banking units
governmental, no tax) in the Philippines or other depository banks under the expanded
system, shall be subject to a final tax at the rate of ten percent
(D) Rates of Tax on Certain Passive Incomes. – (10%). [20]

(1) Interest from Deposits and Yield or any other Monetary Any income of nonresidents (na may dollar account, exempt sa
Benefit from Deposit Substitutes and from Trust Funds and income tax), whether individuals or corporations, from
Similar Arrangements, and Royalties. - A final tax at the rate transactions with depository banks under the expanded system
of twenty percent (20%) is hereby imposed upon the amount of shall be exempt from income tax. (If resident and then may
interest on currency bank deposit and yield or any other dollar account, the tax is 15%)
monetary benefit from deposit substitutes and from trust funds
and similar arrangements received by domestic corporations, (4) Intercorporate Dividends. - Dividends received by a
and royalties, derived from sources within the Philippines: domestic corporation shall not be subject to tax under this
Provided, however, That interest income derived by a domestic Title: Provided, That for foreign-sourced dividends to be exempt,
corporation from a depository bank under the expanded foreign the funds from such dividends actually received or remitted into
currency deposit system shall be subject to a final income tax the Philippines are reinvested in the business operations of the
at the rate of fifteen percent (15%) [27] of such interest income. [4] domestic corporation in the Philippines within the next taxable
year from the time the foreign-sourced dividends were received
(2) Capital Gains from the Sale of Shares of Stock Not and shall be limited to funding the working capital requirements,
Traded in the Stock Exchange. - A final tax at the rate of capital expenditures, dividend payments, investment in domestic
fifteen percent (15%) [28] shall be imposed on net capital gains subsidiaries, and infrastructure project: Provided, further, That
the domestic corporation holds directly at least twenty percent (3) Relief from the Minimum Corporate Income Tax Under
(20%) (para maging exempt yung dividend income, other than Certain Conditions. - The Secretary of Finance is hereby
that, global income) of the outstanding shares of the foreign authorized to suspend the imposition of the minimum corporate
corporation and has held the shareholdings for a minimum of income tax on any corporation which suffers losses on account
two (2) years at the time of the dividend distribution. [29] of prolonged labor dispute, or because of force majeure, or
because of legitimate business reverses.
(5) Capital Gains Realized from the Sale, Exchange or
Disposition of Lands and/or Buildings. - A final tax of six The Secretary of Finance is hereby authorized to promulgate,
percent (6%) is hereby imposed on the gain presumed to have upon recommendation of the Commissioner, the necessary
been realized on the sale, exchange or disposition of lands rules and regulation that shall define the terms and conditions
and/or buildings which are not actually used in the business of a under which he may suspend the imposition of the minimum
corporation and are treated as capital assets, based on the corporate income tax in a meritorious case.
gross selling price of fair market value as determined in
accordance with Section 6(E) of this Code, whichever is higher, (4) Gross Income Defined. - For purposes of applying the
of such lands and/or buildings. minimum corporate income tax provided under Subsection (E)
hereof, the term 'gross income' shall mean gross sales less
(E) Minimum Corporate Income Tax on Domestic sales returns, discounts and allowances and cost of goods sold.
Corporations. – (Applies to all entities similar to a corporation) ‘Cost of goods sold' shall include all business expenses
directly incurred to produce the merchandise to bring them to
(1) Imposition of Tax. - A minimum corporate income tax of their present location and use.
two percent (2%) of the gross income as of the end of the
taxable year, as defined herein, is hereby imposed on a For a trading or merchandising concern, 'cost of goods sold'
corporation taxable under this Title, beginning on the fourth shall include the invoice cost of the goods sold, plus import
taxable year immediately following the year in which such duties, freight in transporting the goods to the place where the
corporation commenced its business operations, when the goods are actually sold including insurance while the goods are
minimum income tax is greater than the tax computed under in transit.
Subsection (A) of this Section for the taxable year: Provided,
That effective July 1, 2020 until June 30, 2023, the rate shall be For a manufacturing concern, ‘cost of goods manufactured
one percent (1%). (MCIT should be collected on the fourth year and sold' shall include all costs of production of finished goods,
– the registration of the business with BIR does not mean that it such as raw materials used, direct labor and manufacturing
is counted as the 1st year) overhead, freight cost, insurance premiums and other costs
incurred to bring the raw materials to the factory or warehouse.

In the case of taxpayers engaged in the sale of service, 'gross

(2) Carry Froward of Excess Minimum Tax. - Any excess of income' means gross receipts less sales returns, allowances,
the minimum corporate income tax over the normal income tax discounts and cost of services. 'Cost of services' shall mean all
as computed under Subsection (A) of this Section shall be direct costs and expenses necessarily incurred to provide the
carried forward and credited against the normal income tax for services required by the customers and clients including (A)
the three (3) immediately succeeding taxable years. salaries and employee benefits of personnel, consultants and
specialists directly rendering the service and (B) cost of facilities (1) In General. - Except as otherwise provided in this Code, a
directly utilized in providing the service such as depreciation or corporation organized, authorized, or existing under the laws of
rental of equipment used and cost of supplies: Provided, any foreign country, engaged in trade or business within the
however, That in the case of banks, 'cost of services' shall Philippines, shall be subject to an income tax equivalent to
include interest expense. twenty-five percent (25%) [31] of the taxable income derived in
the preceding taxable year from all sources within the
“(F) Offshore Gaming Licensees - The provisions of existing Philippines effective July 1, 2020. [31]
special or general laws to contrary notwithstanding, the non-
gaming revenues of Philippine-based offshore gaming licensees In the case of corporations adopting the fiscal-year accounting
as duly licensed by the Philippine Amusement and Gaming period, the taxable income shall be computed without regard to
Corporation or any special economic zone authority or tourism the specific date when sales, purchases and other transactions
zone authority or freeport authority shall be subject to an income occur. Their income and expenses for the fiscal year shall be
tax equivalent to twenty-five percent (25%) of the taxable deemed to have been earned and spent equally for each month
income derived during each taxable year from all sources within of the period.
and without the Philippines. [30]
The corporate income tax rate shall be applied on the amount
“(G) Accredited Service Providers to Offshore Gaming computed by multiplying the number of months covered by the
Licensees. – Unless otherwise provided in this Code, accredited new rate within the fiscal year by the taxable income of the
service providers to offshore gaming licensees shall not be corporation for the period, divided by twelve. [31]
subject to the gaming tax imposed by Section 125-A but shall
pay such rate of tax as imposed in Section 27(A) of this Code, (2) Minimum Corporate Income Tax on Resident Foreign
and shall be subject to all other applicable local and national Corporations. - A minimum corporate income tax of two
taxes. percent (2%) of gross income, as prescribed under Section
27(E) of this Code, shall be imposed, under the same
“For purposes of this Section, an accredited service provider to conditions, on a resident foreign corporation taxable under
an offshore gaming licensee (‘service provider’) shall be a paragraph (1) of this Subsection: Provided, That effective July 1,
juridical person that is duly created or organized within or 2020 until June 30, 2023, the rate shall be one percent (1%). [31]
outside the Philippines or a natural person, regardless of
citizenship or residence, which provides ancillary services to an (3) International Carrier. — An international carrier doing
offshore gaming licensee as defined by Section 22 (II) of this business in the Philippines shall pay a tax of two and one-half
Code or to any gaming licensee or operator with licenses from percent (2 1/2 %) on its ‘Gross Philippine Billings’ as defined
other jurisdictions. Such ancillary services may include, but shall hereunder:
not be limited to, customer and technical relations and support,
information technology, gaming software, data provision, (a) International Air Carrier. — ‘Gross Philippine Billings’
payment solutions and live studio streaming services. [30] refers to the amount of gross revenue derived from carriage of
persons, excess baggage, cargo, and mail originating from the
SEC. 28. Rates of Income Tax on Foreign Corporations. - Philippines in a continuous and uninterrupted flight, irrespective
of the place of sale or issue and the place of payment of the
(A) Tax on Resident Foreign Corporations. - ticket or passage document: Provided, That tickets revalidated,
exchanged and/or indorsed to another international airline form and capital gains received by a foreign corporation during each
part of the Gross Philippine Billings if the passenger boards a taxable year from all sources within the Philippines shall not be
plane in a port or point in the Philippines: Provided, further, That treated as branch profits unless the same are effectively
for a flight which originates from the Philippines, but connected with the conduct of its trade or business in the
transshipment of passenger takes place at any part outside the Philippines.
Philippines on another airline, only the aliquot portion of the cost
of the ticket corresponding to the leg flown from the Philippines (5) Regional or Area Headquarters and Regional Operating
to the point of transshipment shall form part of Gross Philippine Headquarters of Multinational Companies. –
Billings. (service provided to transporting the passenger is now
the basis, not the ticket) (Entire amount of ticket will form part of (a) Regional or area headquarters as defined in Section 22(DD)
the Gross PH Billings; only the transportation from/to the PH will shall not be subject to income tax.
form part of the Gross PH Billings)
(b) Regional operating headquarters as defined in Section
(b) International Shipping. — ‘Gross Philippine Billings’ means 22(EE) shall pay a tax of ten percent (10%) of their taxable
gross revenue whether for passenger, cargo or mail originating income: Provided, That effective January 1, 2022, regional
from the Philippines up to final destination, regardless of the operating headquarters shall be subject to the regular corporate
place of sale or payments of the passage or freight documents. income tax. (Regular corporate income tax – 25% (MCIT will
now also apply)
Provided, That international carriers doing business in the
Philippines may avail of a preferential rate or exemption from (6) Tax on Certain Incomes Received by a Resident Foreign
the tax herein imposed on their gross revenue derived from the Corporation. -
carriage of persons and their excess baggage on the basis of an
applicable tax treaty or international agreement to which the (a) Interest from Deposits and Yield or any other Monetary
Philippines is a signatory or on the basis of reciprocity such that Benefit from Deposit Substitutes, Trust Funds and Similar
an international carrier, whose home country grants income tax Arrangements and Royalties. - Interest from any currency
exemption to Philippine carriers, shall likewise be exempt from bank deposit and yield or any other monetary benefit from
the tax imposed under this provision. [32] deposit substitutes and from trust funds and similar
arrangements and royalties derived from sources within the
(4) Tax on Branch Profits Remittances. - Any profit remitted Philippines shall be subject to a final income tax at the rate of
by a branch to its head office shall be subject to a tax of fifteen twenty percent (20%) of such interest: Provided, however, That
(15%) which shall be based on the total profits applied or interest income derived by a resident foreign corporation from a
earmarked for remittance without any deduction for the tax depository bank under the expanded foreign currency deposit
component thereof (except those activities which are registered system shall be subject to a final income tax at the rate of fifteen
with the Philippine Economic Zone Authority). The tax shall be percent (15%) [34] of such interest income.
collected and paid in the same manner as provided in Sections
57 and 58 of this Code: Provided, that interests, dividends, (b) Income Derived under the Expanded Foreign Currency
rents, royalties, including remuneration for technical services, Deposit System. - Income derived by a depository bank under
salaries, wages premiums, annuities, emoluments or other fixed the expanded foreign currency deposit system from foreign
or determinable annual, periodic or casual gains, profits, income currency transactions with nonresidents, offshore banking units
in the Philippines, local commercial banks including branches of five percent (25%) of the taxable income derived during each
foreign banks that may be authorized by the Bangko Sentral ng taxable year. [20]
Pilipinas (BSP) to transact business with foreign currency
deposit system units, and other depository banks under the (B) Tax on Nonresident Foreign Corporation. -
expanded foreign currency deposit system shall be exempt from
all taxes, except net income from such transactions as may be (1) In General. - Except as otherwise provided in this Code, a
specified by the Secretary of Finance, upon recommendation by foreign corporation not engaged in trade or business in the
the Monetary Board to be subject to the regular income tax Philippines, effective January 1, 2021, shall pay a tax equal to
payable by banks: Provided, however, That interest income from twenty-five percent (25%) [37] of the gross income received
foreign currency loans granted by such depository banks under during each taxable year from all sources within the Philippines,
said expanded system to residents other than offshore banking such as interests, dividends, rents, royalties, salaries, premiums
units in the Philippines or other depository banks under the (except reinsurance premiums), annuities, emoluments or other
expanded system shall be subject to a final tax at the rate of ten fixed or determinable annual, periodic or casual gains, profits
percent (10%). and income, and capital gains, except capital gains subject to
tax under subparagraph 5(c). [37]
Any income of nonresidents, whether individuals or
corporations, from transactions with depository banks under the (2) Nonresident Cinematographic Film Owner, Lessor or
expanded system shall be exempt from income tax. Distributor. - A cinematographic film owner, lessor, or
distributor shall pay a tax of twenty-five percent (25%) of its
(c) Capital Gains from Sale of Shares of Stock Not Traded gross income from all sources within the Philippines.
in the Stock Exchange. - A final tax at the rate of fifteen
percent (15%) [35] is hereby imposed upon the net capital gains (3) Nonresident Owner or Lessor of Vessels Chartered by
realized during the taxable year from the sale, barter, exchange Philippine Nationals. – A nonresident owner or lessor of
or other disposition of shares of stock in a domestic corporation vessels shall be subject to a tax of four and one-half percent (4
except shares sold or disposed of through the stock exchange. 1/2%) of gross rentals, lease or charter fees from leases or
charters to Filipino citizens or corporations, as approved by the
(d) Intercorporate Dividends. - Dividends received by a Maritime Industry Authority.
resident foreign corporation from a domestic corporation liable
to tax under this Code shall not be subject to tax under this Title. (4) Nonresident Owner or Lessor of Aircraft, Machineries
(If wala sa Code, taxable yan, global income rate) and Other Equipment. - Rentals, charters and other fees
derived by a nonresident lessor of aircraft, machineries and
(7) Offshore Gaming Licensees. – The provisions of existing other equipment shall be subject to a tax of seven and one-half
special or general laws to the contrary notwithstanding, the non- percent (7 1/2%) of gross rentals or fees.
gaming revenues derived within the Philippines of foreign-based
offshore gaming licensees as defined and duly licensed by the (5) Tax on Certain Incomes Received by a Nonresident
Philippine Amusement and Gaming Corporation or any special Foreign Corporation. -
economic zone authority or tourism zone authority or freeport
authority shall be subject to an income tax equivalent to twenty- (a) Interest on Foreign Loans. - A final withholding tax at the
rate of twenty percent (20%) is hereby imposed on the amount
of interest on foreign loans contracted on or after August 1, (B) Mutual savings bank not having a capital stock represented
1986; by shares, and cooperative bank without capital stock organized
and operated for mutual purposes and without profit;
(b) Intercorporate Dividends. - A final withholding tax at the
rate of fifteen percent (15%) is hereby imposed on the amount (C) A beneficiary society, order or association, operating for the
of cash and/or property dividends received by a non-resident exclusive benefit of the members such as a fraternal
foreign corporation from a domestic corporation, which shall be organization operating under the lodge system, or mutual aid
collected and paid as provided in Section 57(A) of this Code, association or a nonstock corporation organized by employees
subject to the condition that the country in which the nonresident providing for the payment of life, sickness, accident, or other
foreign corporation is domiciled, shall allow a credit against the benefits exclusively to the members of such society, order, or
tax due from the nonresident foreign corporation taxes deemed association, or nonstock corporation or their dependents;
to have been paid in the Philippines equivalent to fifteen percent
(15%), [38] which represents the difference between the regular (D) Cemetery company owned and operated exclusively for the
income tax and the fifteen percent (15%) tax on dividends as benefit of its members;
provided in this subparagraph: Provided, That effective July 1,
2020,[38] the credit against the tax due shall be equivalent to the (E) Nonstock corporation or association organized and operated
difference between the regular income tax rate provided in exclusively for religious, charitable, scientific, athletic, or cultural
Section 28(B)(1) of this Code [38] and the fifteen percent (15%) purposes, or for the rehabilitation of veterans, no part of its net
tax on dividends; (Credit is 10%) income or asset shall belong to or inure to the benefit of any
member, organizer, officer or any specific person; (PH Arena
Non-resident individual has capital gains tax. was not purely religious, therefore the last paragraph will apply;
not anymore exempt)
(c) Capital Gains from Sale of Shares of Stock not Traded in
the Stock Exchange. - A final tax at the rate of fifteen percent (F) Business league chamber of commerce, or board of trade,
(15%) [35] is hereby imposed upon the net capital gains realized not organized for profit and no part of the net income of which
during the taxable year from the sale, barter, exchange or other inures to the benefit of any private stock-holder, or individual;
disposition of shares of stock in a domestic corporation, except
shares sold, or disposed of through the stock exchange. (G) Civic league or organization not organized for profit but
operated exclusively for the promotion of social welfare;
[39]
SEC. 29. REPEALED
(H) A nonstock and nonprofit educational institution;
SEC. 30. Exemptions from Tax on Corporations. - The
following organizations shall not be taxed under this Title in (I) Government educational institution;
respect to income received by them as such: (not for profit)
(J) Farmers' or other mutual typhoon or fire insurance company,
(A) Labor, agricultural or horticultural organization not organized mutual ditch or irrigation company, mutual or cooperative
principally for profit; telephone company, or like organization of a purely local
character, the income of which consists solely of assessments,
dues, and fees collected from members for the sole purpose of CHAPTER VI
meeting its expenses; and
COMPUTATION OF GROSS INCOME
(K) Farmers', fruit growers', or like association organized and
operated as a sales agent for the purpose of marketing the SEC. 32. Gross Income. -
products of its members and turning back to them the proceeds
of sales, less the necessary selling expenses on the basis of the (A) General Definition. - Except when otherwise provided in
quantity of produce finished by them; this Title, gross income means all income derived from whatever
source, including (but not limited to) the following items:
Notwithstanding the provisions in the preceding paragraphs, the
income of whatever kind and character of the foregoing (1) Compensation for services in whatever form paid,
organizations from any of their properties, real or personal, or including, but not limited to fees, salaries, wages,
from any of their activities conducted for profit regardless of the commissions, and similar items;
disposition made of such income, shall be subject to tax
imposed under this Code. (La Salle was assessed here and was (2) Gross income derived from the conduct of trade or
taxed; however the Constitution specifically granted exemption business or the exercise of a profession;
to all non-stock and non-profit educational institutions – the
Constitution was given more weight than a statute) (3) Gains derived from dealings in property;

- Applies to all In this section, except the non-profit/non- (4) Interests;

stock of educational institutions (because of the explicit
Constitutional provision) (5) Rents;

(6) Royalties;

CHAPTER V (7) Dividends;

COMPUTATION OF TAXABLE INCOME (8) Annuities;

(9) Prizes and winnings;

SEC. 31. Taxable Income Defined. -The term ‘taxable (10) Pensions; and
income’ means the pertinent items of gross income specified in
this Code, less the deductions, if any, authorized for such types (11) Partner's distributive share from the net income of
of income by this Code or other special laws. (General and the general professional partnership. (In their individual
expenses) capacities)
Income is taxable – when it is recognized (not identified as any (6) Retirement Benefits, Pensions, Gratuities, etc.-
of the income exempt from income tax) and realized (already
earned) (a) Retirement benefits received under Republic Act No. 7641
and those received by officials and employees of private firms,
(B) Exclusions from Gross Income. - The following items shall whether individual or corporate, in accordance with a
not be included in gross income and shall be exempt from reasonable private benefit plan maintained by the employer:
taxation under this Title: Provided, That the retiring official or employee has been in the
service of the same employer for at least ten (10) years and is
(1) Life Insurance. - The proceeds of life insurance not less than fifty (50) years of age at the time of his retirement:
policies paid to the heirs or beneficiaries upon the death Provided, further, That the benefits granted under this
of the insured, whether in a single sum or otherwise, but subparagraph shall be availed of by an official or employee only
if such amounts are held by the insurer under an once. For purposes of this Subsection, the term 'reasonable
agreement to pay interest thereon, the interest payments private benefit plan' means a pension, gratuity, stock bonus or
shall be included in gross income. profit-sharing plan maintained by an employer for the benefit of
some or all of his officials or employees, wherein contributions
(2) Amount Received by Insured as Return of are made by such employer for the officials or employees, or
Premium. - The amount received by the insured, as a both, for the purpose of distributing to such officials and
return of premiums paid by him under life insurance, employees the earnings and principal of the fund thus
endowment, or annuity contracts, either during the term accumulated, and wherein its is provided in said plan that at no
or at the maturity of the term mentioned in the contract or time shall any part of the corpus or income of the fund be used
upon surrender of the contract. for, or be diverted to, any purpose other than for the exclusive
benefit of the said officials and employees.
(3) Gifts, Bequests, and Devises. - The value of
property acquired by gift, bequest, devise, or descent: (b) Any amount received by an official or employee or by his
Provided, however, That income from such property, as heirs from the employer as a consequence of separation of such
well as gift, bequest, devise or descent of income from official or employee from the service of the employer because of
any property, in cases of transfers of divided interest, death sickness or other physical disability or for any cause
shall be included in gross income. beyond the control of the said official or employee.

(4) Compensation for Injuries or Sickness. - amounts (c) The provisions of any existing law to the contrary
received, through Accident or Health Insurance or under notwithstanding, social security benefits, retirement gratuities,
Workmen's Compensation Acts, as compensation for pensions and other similar benefits received by resident or
personal injuries or sickness, plus the amounts of any nonresident citizens of the Philippines or aliens who come to
damages received, whether by suit or agreement, on reside permanently in the Philippines from foreign government
account of such injuries or sickness. agencies and other institutions, private or public.

(5) Income Exempt under Treaty. - Income of any kind, (d) Payments of benefits due or to become due to any person
to the extent required by any treaty obligation binding residing in the Philippines under the laws of the United States
upon the Government of the Philippines. administered by the United States Veterans Administration.
(e) Benefits received from or enjoyed under the Social Security (e) 13th Month Pay and Other Benefits. - Gross benefits
System in accordance with the provisions of Republic Act No. received by officials and employees of public and private
8282. entities: Provided, however, That the total exclusion under this
subparagraph shall not exceed Ninety thousand pesos
(f) Benefits received from the GSIS under Republic Act No. (P90,000) which shall cover:
8291, including retirement gratuity received by government
officials and employees. (i) Benefits received by officials and employees of the
national and local government pursuant to Republic Act
(7) Miscellaneous Items. – No. 6686;

(a) Income Derived by Foreign Government. - Income derived (ii) Benefits received by employees pursuant to
from investments in the Philippines in loans, stocks, bonds or Presidential Decree No. 851, as amended by
other domestic securities, or from interest on deposits in banks Memorandum Order No. 28, dated August 13, 1986;
in the Philippines by (i) foreign governments, (ii) financing
institutions owned, controlled, or enjoying refinancing from (iii) Benefits received by officials and employees not
foreign governments, and (iii) international or regional financial covered by Presidential Decree No. 851, as amended by
institutions established by foreign governments. Memorandum Order No. 28, dated August 13, 1986; and

(b) Income Derived by the Government or its Political (iv) Other benefits such as productivity incentives and
Subdivisions. - Income derived from any public utility or from Christmas bonus.
the exercise of any essential governmental function accruing to
the Government of the Philippines or to any political subdivision (f) GSIS, SSS, Medicare and Other Contributions. - GSIS,
thereof. SSS, Medicare and Pag-Ibig contributions, and union dues of
individuals.
(c) Prizes and Awards. - Prizes and awards made primarily in
recognition of religious, charitable, scientific, educational, (g) Gains from the Sale of Bonds, Debentures or other
artistic, literary, or civic achievement but only if: (dapat Certificate of Indebtedness. - Gains realized from the same or
nominated, hindi sumali) – Ms Universe does not apply exchange or retirement of bonds, debentures or other certificate
of indebtedness with a maturity of more than five (5) years.
(i) The recipient was selected without any action on his part to
enter the contest or proceeding; and (h) Gains from Redemption of Shares in Mutual Fund. -
Gains realized by the investor upon redemption of shares of
(ii) The recipient is not required to render substantial future stock in a mutual fund company as defined in Section 22 (BB) of
services as a condition to receiving the prize or award. this Code.

(d) Prizes and Awards in sports Competition. - All prizes and (i) Income Derived from the Sale of Gold Pursuant to
awards granted to athletes in local and international sports Republic Act No. 7076. – Income derived from the following
competitions and tournaments whether held in the Philippines or transactions pursuant to Republic Act No. 7076, otherwise
abroad and sanctioned by their national sports associations. known as the “People’s Small-scale Mining Act of 1991”:
(1) The sale of gold to the Bangko Sentral ng Pilipinas by dividing the actual monetary value of the fringe benefit by the
registered small-scale miners, as defined under Republic Act. difference between one hundred percent (100%) and the
No. 7076, and accredited traders; and applicable rates of income tax under Subsections (B), (C), (D),
and (E) of Section 25.
(2) The sale of gold by registered small-scale miners to
accredited traders for eventual sale to the Bangko Sentral ng (B) Fringe Benefit Defined. - For purposes of this Section, the
Pilipinas. term 'fringe benefit' means any good, service or other benefit
furnished or granted in cash or in kind by an employer to an
SEC. 33. Special Treatment of Fringe Benefit. – (benefit is individual employee (except rank and file employees as defined
given to an employee who is NOT RANK-AND-FILE) herein) such as, but not limited to, the following:

- What if given sa rank-and-file? Taxable, kasama sa (1) Housing;

compensation
(2) Expense account;
The value already received is the net of the tax
(3) Vehicle of any kind;
- Not limited to cash
(4) Household personnel, such as maid, driver and others;
How do you compute for the gross?
(5) Interest on loan at less than market rate to the extent of the
(A) Imposition of Tax. – Effective January 1, 2018 and difference between the market rate and actual rate granted;
onwards, a final tax of thirty-five percent (35%) is hereby
imposed on the grossed-up monetary value of fringe benefit (6) Membership fees, dues and other expenses borne by the
furnished or granted to the employee (except rank and file employer for the employee in social and athletic clubs or other
employees defined herein) by the employer, whether an similar organizations;
individual or a corporation (unless the fringe benefit is required
by the nature of, or necessary to the trade, business or (7) Expenses for foreign travel;
profession of the employer, or when the fringe benefit is for the
convenience or advantage of the employer). The tax herein (8) Holiday and vacation expenses;
imposed is payable by the employer which tax shall be paid in
the same manner as provided for under Section 57 (A) of this (9) Educational assistance to the employee or his dependents;
Code. The grossed-up monetary value of the fringe benefit shall and
be determined by dividing the actual monetary value of the
fringe benefit by sixty-five percent (65%) effective January 1, (10) Life or health insurance and other non-life insurance
2018 and onwards: Provided, however, That fringe benefit premiums or similar amounts in excess of what the law allows.
furnished to employees and taxable under Subsections (B), (C),
(D) and (E) of Section 25 shall be taxed at the applicable rates (C) Fringe Benefits Not Taxable. - The following fringe benefits
imposed thereat: Provided, further, That the grossed -up are not taxable under this Section:
monetary value of the fringe benefit shall be determined by
(1) Fringe benefits which are authorized and exempted from tax (a) From a domestic corporation; and
under special laws;
(Always income from within)
(2) Contributions of the employer for the benefit of the employee
to retirement, insurance and hospitalization benefit plans; (b) From a foreign corporation, unless less than fifty
percent (50%) of the gross income of such foreign
(3) Benefits given to the rank and file employees, whether corporation for the three-year period ending with the
granted under a collective bargaining agreement or not; and close of its taxable year preceding the declaration of such
dividends or for such part of such period as the
(4) De minimis benefits as defined in the rules and regulations to corporation has been in existence) was derived from
be promulgated by the Secretary of sources within the Philippines as determined under the
provisions of this Section; but only in an amount which
Finance, upon recommendation of the Commissioner. bears the same ratio to such dividends as the gross
income of the corporation for such period derived from
The Secretary of Finance is hereby authorized to promulgate, sources within the Philippines bears to its gross income
upon recommendation of the Commissioner, such rules and from all sources;
regulations as are necessary to carry out efficiently and fairly the
provisions of this Section, taking into account the peculiar nature EX. ZALORA issued dividends (market is in the PH but
and special need of the trade, business or profession of the incorporated in Singapore) – taxable in the PH.
employer.
Since it is a foreign corporation, it can establish
operations in several places.

SEC. 42. Income from Sources Within the Philippines. - What is the ratio of the PH income to the worldwide
income? – 40%, which is less than required by the Code.
(A) Gross Income from Sources Within the Philippines. - Since it is LESS THAN 50%, it is not income derived from
The following items of gross income shall be treated as gross within.
income from sources within the Philippines:
What if income within becomes 60%, but only up to the
(1) Interests. - Interests derived from sources within the extent of the total income of the period? – dividend of
Philippines, and interests on bonds, notes or other interest- 60% only came from the PH, so only 60% is taxable.
bearing obligation of residents, corporate or otherwise;
(3) Services. - Compensation for labor or personal services
Atlas Consolidated case performed in the Philippines; (renders service in the PH,
irrespective of how much he may have earned…)
Mitusbihsi Metal case
(4) Rentals and Royalties. - Rentals and royalties from
(2) Dividends. - The amount received as dividends: property located in the Philippines or from any interest in such
property, including rentals or royalties for –
 (a) The use of or the right or privilege to use in the (5) Sale of Real Property. - Gains, profits and income from the
Philippines any copyright, patent, design or model, plan, sale of real property located in the Philippines; and
secret formula or process, goodwill, trademark, trade
brand or other like property or right; (6) Sale of Personal Property. - Gains; profits and income from
the sale of personal property, as determined in Subsection (E)
(b) The use of, or the right to use in the Philippines any of this Section.
industrial, commercial or scientific equipment;
(B) Taxable Income From Sources Within the Philippines. –
(c) The supply of scientific, technical, industrial or
commercial knowledge or information; (1) General Rule. - From the items of gross income specified in
Subsection (A) of this Section, there shall be deducted the
(d) The supply of any assistance that is ancillary and expenses, losses and other deductions properly allocated
subsidiary to, and is furnished as a means of enabling the thereto and a ratable part of expenses, interests, losses and
application or enjoyment of, any such property or right as other deductions effectively connected with the business or
is mentioned in paragraph (a), any such equipment as is trade conducted exclusively within the Philippines which cannot
mentioned in paragraph (b) or any such knowledge or definitely be allocated to some items or class of gross income:
information as is mentioned in paragraph (c); Provided, That such items of deductions shall be allowed only if
fully substantiated by all the information necessary for its
(e) The supply of services by a nonresident person or his calculation. The remainder, if any, shall be treated in full as
employee in connection with the use of property or rights taxable income from sources within the Philippines.
belonging to, or the installation or operation of any brand,
machinery or other apparatus purchased from such (2) Exception. - No deductions for interest paid or incurred
nonresident person; abroad shall be allowed from the item of gross income specified
in subsection (A) unless indebtedness was actually incurred to
(f) Technical advice, assistance or services rendered in provide funds for use in connection with the conduct or
connection with technical management or administration operation of trade or business in the Philippines.
of any scientific, industrial or commercial undertaking,
venture, project or scheme; and (C) Gross Income From Sources Without the Philippines. -
The following items of gross income shall be treated as income
(g) The use of or the right to use: from sources without the Philippines:

(i) Motion picture films; (1) Interests other than those derived from sources within the
(ii) Films or video tapes for use in connection with Philippines as provided in paragraph (1) of Subsection (A) of
television; and this Section;
(iii) Tapes for use in connection with radio
broadcasting. (2) Dividends other than those derived from sources within the
Philippines as provided in paragraph (2) of Subsection (A) of
Consider the place where the privilege is used. this Section;
(3) Compensation for labor or personal services performed deducting the expenses, losses or other deductions apportioned
without the Philippines; or allocated thereto and a ratable part of any expense, loss or
other deduction which cannot definitely be allocated to some
(4) Rentals or royalties from property located without the items or classes of gross income; and the portion of such
Philippines or from any interest in such property including taxable income attributable to sources within the Philippines
rentals or royalties for the use of or for the privilege of using may be determined by processes or formulas of general
without the Philippines, patents, copyrights, secret processes apportionment prescribed by the Secretary of Finance. Gains,
and formulas, goodwill, trademarks, trade brands, franchises profits and income from the sale of personal property produced
and other like properties; and (in whole or in part) by the taxpayer within and sold without the
Philippines, or produced (in whole or in part) by the taxpayer
(5) Gains, profits and income from the sale of real property without and sold within the Philippines, shall be treated as
located without the Philippines. derived partly from sources within and partly from sources
without the Philippines.
(D) Taxable Income From Sources Without the Philippines. -
From the items of gross income specified in Subsection (C) of Gains, profits and income derived from the purchase of personal
this Section, there shall be deducted the expenses, losses, and property within and its sale without the Philippines, or from the
other deductions properly apportioned or allocated thereto and a purchase of personal property without and its sale within the
ratable part of any expense, loss or other deduction which Philippines shall be treated as derived entirely form sources
cannot definitely be allocated to some items or classes of gross within the country in which sold: Provided, however, That gain
income. The remainder, if any, shall be treated in full as taxable from the sale of shares of stock in a domestic corporation shall
income from sources without the Philippines. be treated as derived entirely form sources within the
Philippines regardless of where the said shares are sold. The
(E) Income From Sources Partly Within and Partly Without transfer by a nonresident alien or a foreign corporation to
the Philippines.- Items of gross income, expenses, losses and anyone of any share of stock issued by a domestic corporation
deductions, other than those specified in Subsections (A) and shall not be effected or made in its book unless: (1) the
(C) of this Section, shall be allocated or apportioned to sources transferor has filed with the Commissioner a bond conditioned
within or without the Philippines, under the rules and regulations upon the future payment by him of any income tax that may be
prescribed by the Secretary of Finance, upon recommendation due on the gains derived from such transfer, or (2) the
of the Commissioner. Where items of gross income are Commissioner has certified that the taxes, if any, imposed in this
separately allocated to sources within the Philippines, there Title and due on the gain realized from such sale or transfer
shall be deducted (for the purpose of computing the taxable have been paid. It shall be the duty of the transferor and the
income therefrom) the expenses, losses and other deductions corporation of the shares of which are sold or transferred, to
properly apportioned or allocated thereto and a ratable part of advise the transferee of this requirement.
other expenses, losses or other deductions which cannot
definitely be allocated to some items or classes of gross income. Pag retail – personal property purchased wihtout and sold
The remainder, if any, shall be included in full as taxable income within, shall be treated as sources within the country in which it
from sources within the Philippines. In the case of gross income was sold.
derived from sources partly within and partly without the
Philippines, the taxable income may first be computed by - If sold in the PH, it is taxable
If shares of stock and domestic corporation, kahit san ibenta
yan, income from within because it is not registered.

(F) Definitions. - As used in this Section the words 'sale' or

'sold' include 'exchange' or 'exchanged'; and the word
'produced' includes 'created', 'fabricated,' 'manufactured',
'extracted,' 'processed', 'cured' or 'aged.'