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EIGHTEENTH CONGRESS OF THE ) 2 SEP 09 209
REPUBLIC OF THE PHILIPPINES )
First Regular Session y .
HOUSE OF REPRESENTATIVE
H.B.No, 4455_

Introduced by Representative TEODORICO T. HARESCO, JR.

EXPLANATORY NOTE

In 2007, the ASEAN Economic Community (AEC) was signed and some member-
states started to lower their corporate income taxes. Thailand, for example, gradually
reduced its corporate income tax rate from thirty percent (30%) in 2011 to twenty-three
percent (23%) in 2012, and down to twenty percent (20%) in 2013. Recently, Vietnam also
lowered its corporate income tax rate from twenty-five percent (25%) to twenty-two
percent (22%) and further reduced it to twenty percent (20%).

According to Department of Finance Undersecretary Karl Kendrick T. Chua,
“compared to other economies in the ASEAN, the Philippines imposes the highest corporate
income tax (CIT) rate but is among those at the bottom in terms of collection efficiency. The
Philippines currently imposes a CIT rate of 30 percent (30%) but with a tax collection
efficiency of only 12.3 percent (12.3%), while Thailand's CIT rate is only 20 percent but it
collects almost triple-a 30.5-percent efficiency rate-that represents 6.1 percent of its GDP
[gross domestic product].”!

This bill seeks to amend Sections 27 and 28 of the National Internal Revenue Code of
1997, as amended, by gradually reducing the rate of corporate income tax over a three-year

period beginning January 1, 2020, in order to be competitive with our neighboring countries.

ER JR.

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EIGHTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES
H.B. No.

Introduced by Representative TEODORICO T. HARESCO, JR.

AN ACT
LOWERING THE CORPORATE INCOME TAX RATE,
AMENDING SECTIONS 27 AND 28 OF THE NATIONAL INTERNAL REVENUE CODE OF
1997, AS AMENDED, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:
SECTION 1. Section 27(A) of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:
"Sec. 27. Rates of Income Tax on Domestic Corporations. ~
“(A) In General. - Except as otherwise provided in this Code, an income tax of [thirty
fivepercent-{35%}] TWENTY-NINE PERCENT (29%) BEGINNING JANUARY 1,
2020, TWENTY-SEVEN PERCENT (27%) BEGINNING JANUARY 1, 2021 AND
‘TWENTY-FIVE PERCENT (25%) BEGINNING JANUARY 1, 2022, is hereby imposed
upon the taxable income derived during each taxable year from all sources within
and without the Philippines by every corporation, as defined in Section 22(B) of this
Code and taxable under this Title as a corporation, organized in, or existing under the
laws of the Philippines [;-Provided, That effective January-1,2009,the rate of income
taxshall be thirty percent (30%)].

XXX.

‘SEC. 2. Section 28 of the National Internal Revenue Code of 1997, as amended, is hereby
further amended to read as follows:

“Sec. 28. Rates of Income Tax on Foreign Corporations. -

“(A) Tax on Resident Foreign Corporations. -

(1) In General. - Except as otherwise provided in this Code, a corporation
organized, authorized, or existing under the laws of any foreign country,
engaged in trade or business within the Philippines, shall be subject to an
income tax equivalent to [thirtyfive-percent-{35%}] TWENTY-NINE
PERCENT (29%) BEGINNING JANUARY 1, 2020, TWENTY-SEVEN


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PERCENT (27%) BEGINNING JANUARY 1, 2021 AND TWENTY-FIVE
PERCENT (25%) BEGINNING JANUARY 1, 2022 of the table income
derived in the preceding taxable year from all sources within the
Philippines [;- Provided, That effective January1, 2009, the rate of income
tax-shall-be thirty percent (30%)].

XXX
“(B) Tax on Nonresident Foreign Corporations. -

(1)In General. - Except as otherwise provided in this Code, a foreign
corporation not engaged in trade or business in the Philippines shall pay a
tax equal to [thirty-five percent {35%}] TWENTY-NINE PERCENT (29%)
BEGINNING JANUARY 1, 2020, TWENTY-SEVEN PERCENT (27%)
BEGINNING JANUARY 1, 2021 AND TWENTY-FIVE PERCENT (25%)
BEGINNING JANUARY 1, 2022 of the gross income received during each
taxable year from all sources within the Philippines, such as interests,
dividends, rents, royalties, salaries, premiums (except reinsurance
premiums), annuities, emoluments or other fixed or determinable annual,
periodic or casual gains, profits and income, and capital gains, except
capital gains subject to tax under subparagraph 5(c) [;-Previded,That
£30%}].

XXX

(5) Tax on Certain Incomes Received by a Nonresident Foreign Corporation. -

(a) xxx

(b) Intercorporate Dividends. - A final withholding tax at the rate of fifteen
percent (15%) is hereby imposed on the amount of cash and/or property dividends
received from a domestic corporation, which shall be collected and paid as provided in
Section 57(A) of this Code, subject to the condition that the country in which the
nonresident foreign corporation is domiciled, shall allow a credit against the tax due from
the nonresident foreign corporation taxes deemed to have been paid in the Philippines
equivalent to [twenty-percent (20%)] FOURTEEN PERCENT (14%), which represents
the difference between the regular income tax of [thirty-five percent (35%)] TWENTY-
NINE (29%) BEGINNING JANUARY 1, 2020 and the fifteen percent (15%) tax on
dividends as provided in this subparagraph: Provided, That effective January 1, [2009]
2021, the credit against the tax due shall be equivalent to [fiteen-percent-(15%)]


‘TWELVE PERCENT (12%), AND EFFECTIVE JANUARY 1, 2022, EQUIVALENT TO TEN
PERCENT (10%), which represents the difference between the regular income tax of
[thirty_percent(30%}] TWENTY-SEVEN PERCENT (27%) AND TWENTY-FIVE
PERCENT (25%), RESPECTIVELY, and the fifteen percent (15%) tax on dividends.

XXX.”

SEC. 3. Implementing Rules and Regulations. - The Secretary of Finance shall promulgate
the necessary rules and regulations for the effective implementation of the provisions of this
Act.

SEC 4. Repealing Clause. - All laws, decrees, orders, rules and regulations, or other
issuances or parts thereof inconsistent with the provisions of this Act are hereby repealed or

modified accordingly.
SEC. 5. Separability Clause. - If any portion or provision of this Act is declared
unconstitutional, the remainder of this Act or any provision not affected thereby shall remain in

force and effect.

SEC. 6. Effectivity. - This Act shall take effect on January 1, 2020 following its publication
in the Official Gazette or in a newspaper of general circulation.

Approved,