Senate |

NFO thee of tbe Becvstarp

SEVENTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )

Second Regular Session ) "18 FEB 26 P2 55

SENATE oy

RECEIVED EY
s.No._1705

Senator SONNY ANGARA

AN ACT
AMENDING SECTIONS 28 AND 112 OF REPUBLIC ACT NO, 8424, OTHERWISE
KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997,
AS AMENDED, AND FOR OTHER PURPOSES

EXPLANATORY NOTE

The recently enacted Tax Reform for Acceleration and Inclusion (TRAIN) -
Package 1 or Republic Act 10963 seeks to make the country’s tax system simpler, fairer
and more efficient. The ultimate goal of such historic tax reform is to provide millions of
Filipinos relief from their tax burdens that would put more money in their pockets to help
them spend for their families. Revenues from TRAIN would be used to jumpstart big
infrastructure projects in the country, which would further improve the lives of every
Filipino.

To complement such comprehensive reform, this bill seeks to increase the final tax
on foreign currency deposits as well as the capital gains tax on stocks not traded in the
stock exchange of foreign corporations, amending Sections 28 of the National Internal
Revenue Code (NIRC), as amended, similar to the provisions under RA 10963. Such
reforms would improve the progressivity of the country’s tax system as these would only
affect those who have the ability to pay more taxes.

By amending Section 112 of the Tax Code, this bill also fulfills the vision of the
Department of Finance and the Bureau of Internal Revenue to grant refunds for the excess
creditable input tax on zero-rated sales or effectively zero-rated sales instead of issuing tax
credit certificates.

In view of the foregoing, approval of this bill is earnestly sought.

SONNY ANGARA



(%) erate
wy ‘Ott Bo ‘Seeretarp:
SEVENTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )
Second Regular Session ) 18 FEB 26 P255

SENATE

s.No._ 1705 ae

Senator SONNY ANGARA

AN ACT
AMENDING SECTIONS 28 AND 112 OF REPUBLIC ACT NO. 8424, OTHERWISE
KNOWN AS 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:

SEC. 1. Section 28 of the NIRC, 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. xxx
xxx
(7) Tax on Certain Incomes Received by a Resident Foreign Corporation. -
(a) Interest from Deposits and Yield or any other Monetary
Benefit from Deposit Substitutes, Trust Funds and Similar
Arrangements and Royalties.- Interest from any currency
bank deposit and yield or any other monetary benefit from
deposit substitutes and from trust funds and_ similar
arrangements and royalties derived from sources within the

Philippines shall be subject to a final income tax at the rate of



twenty percent (20%) of such interest: Provided, however, That
interest income derived by a resident foreign corporation from
a depository bank under the expanded foreign currency
deposit system shall be subject to a final income tax at the rate
of FIFTEEN PERCENT (15%) [seven and one-half percent
(7 /2%)] of such interest income.

(b) Income Derived under the Expanded Foreign Currency
Deposit System. xxx.

(©) Capital Gains from Sale of Shares of Stock Not Traded in the
Stock Exchange. - A final tax at the rate[s prescribed below] OF
FIFTEEN PERCENT (15%) is hereby imposed upon the net
capital gains realized during the taxable year from the sale,
barter, exchange or other disposition of shares of stock in a
domestic corporation except shares sold or disposed of through
the stock exchange:

Not over P 100,000 5%

On any amount in excess of P 100,000 10%]

(d) Intercorporate Dividends. xxx.
(B) Tax on Nonresident Foreign Corporation. -
(1) In General. xxx.
Xxx
(5) Tax on Certain Incomes Received by a Nonresident Foreign Corporation. -
(a) Interest on Foreign Loans. ~ xxx

XXX.



8

9

(c) Capital Gains from Sale of Shares of Stock not Traded in the
Stock Exchange. - A final tax at the rate[s prescribed below] OF
FIFTEEN PERCENT (15%) is hereby imposed upon the net
capital gains realized during the taxable year from the sale,
barter, exchange or other disposition of shares of stock in a
domestic corporation, except shares sold, or disposed of
through the stock exchange:

Not over P 100,000 5%

On any amount in excess of P 100,000 10%]

SEC. 2. Section 112 of the NIRC, as amended, is hereby further amended to read as

SEC, 112. Refunds [or Tax Credits] of Input Tax. -

(A) Zero-rated or Effectively Zero-rated Sales.- Any VAT-registered person,

whose sales are zero-rated or effectively zero-rated may, within two (2) years
after the close of the taxable quarter when the sales were made, apply for the
issuance of a tax credit certificate or] refund of creditable input tax due or
paid attributable to such sales, except transitional input tax, to the extent that
such input tax has not been applied against output tax: Provided, however,
That in the case of zero-rated sales under Section 106(A)(2)(a)(1)[, (2)] and
[(&)] () and Section 108(B)(1) and (2), the acceptable foreign currency
exchange proceeds thereof had been duly accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided,
further, That where the taxpayer is engaged in zero-rated or effectively zero-

rated sale and also in taxable or exempt sale of goods of properties or



services, and the amount of creditable input tax due or paid cannot be
directly and entirely attributed to any one of the transactions, it shall be
allocated proportionately on the basis of the volume of sales. Provided,
finally, That for a person making sales that are zero-rated under Section
108(B)(6), the input taxes shall be allocated ratably between his zero-rated

and non-zero-rated sales.

(B) Cancellation of VAT Registration. - A person whose registration has been
cancelled due to retirement from or cessation of business, or due to changes
in or cessation of status under Section 106(C) of this Code may, within two
(2) years from the date of cancellation, apply for REFUND [the issuance of a
tax credit certificate] for any unused input tax [which may be used in
payment of his other internal revenue taxes}.

XXX.

SEC. 3. Repealing Clause. - All laws, executive and administrative orders or parts
thereof inconsistent with any provision of this Act are hereby repealed or modified

accordingly.

SEC. 4. Separability Clause. - If any provision of this Act is subsequently declared
invalid or unconstitutional, the other provisions hereof which are not affected thereby

shall remain in full force and effect.

SEC. 5. Effectivity. - This Act shall be effective upon its publication in the Official

Gazette or in any two (2) newspapers of general circulation, whichever comes earlier.

Approved,



SEVENTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES ) .
Second Regular Session ) 18 FEB 26 P2 $5

cenare oy

ReCEIVED EY.
s.No._ 1705.

Senator SONNY ANGARA

AN ACT
AMENDING SECTIONS 28 AND 112 OF REPUBLIC ACT NO. 8424, OTHERWISE
KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997,
AS AMENDED, AND FOR OTHER PURPOSES

EXPLANATORY NOTE

The recently enacted Tax Reform for Acceleration and Inclusion (TRAIN) -
Package 1 or Republic Act 10963 seeks to make the country’s tax system simpler, fairer
and more efficient. The ultimate goal of such historic tax reform is to provide millions of
Filipinos relief from their tax burdens that would put more money in their pockets to help
them spend for their families. Revenues from TRAIN would be used to jumpstart big
infrastructure projects in the country, which would further improve the lives of every
Filipino.

To complement such comprehensive reform, this bill seeks to increase the final tax
on foreign currency deposits as well as the capital gains tax on stocks not traded in the
stock exchange of foreign corporations, amending Sections 28 of the National Internal
Revenue Code (NIRC), as amended, similar to the provisions under RA 10963. Such
reforms would improve the progressivity of the country’s tax system as these would only
affect those who have the ability to pay more taxes.

By amending Section 112 of the Tax Code, this bill also fulfills the vision of the
Department of Finance and the Bureau of Internal Revenue to grant refunds for the excess
creditable input tax on zero-rated sales or effectively zero-rated sales instead of issuing tax
credit certificates.

In view of the foregoing, approval of this bill is earnestly sought.

4
SONNY ANGARA



Senate
OA ce of ihe Seereiare

SEVENTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )
Second Regular Session ) "8 FEB26 255

SENATE

s.No. 1705 wens:

Senator SONNY ANGARA

AN ACT
AMENDING SECTIONS 28 AND 112 OF REPUBLIC ACT NO, 8424, OTHERWISE
KNOWN AS 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:

SEC. 1. Section 28 of the NIRC, 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. xxx
xxx
(7) Tax on Certain Incomes Received by a Resident Foreign Corporation. -
(a) Interest from Deposits and Yield or any other Monetary
Benefit from Deposit Substitutes, Trust Funds and Similar
Arrangements and Royalties. - Interest. from any currency
bank deposit and yield or any other monetary benefit from
deposit substitutes and from trust funds and similar
arrangements and royalties derived from sources within the

Philippines shall be subject to a final income tax at the rate of



twenty percent (20%) of such interest: Provided, however, That
interest income derived by a resident foreign corporation from
a depository bank under the expanded foreign currency
deposit system shall be subject to a final income tax at the rate
of FIFTEEN PERCENT (15%) [seven and one-half percent
(7 1/2%)] of such interest income.

(b) Income Derived under the Expanded Foreign Currency
Deposit System. xxx.

(c) Capital Gains from Sale of Shares of Stock Not Traded in the
Stock Exchange. - A final tax at the rate[s prescribed below] OF
FIFTEEN PERCENT (15%) is hereby imposed upon the net
capital gains realized during the taxable year from the sale,
barter, exchange or other disposition of shares of stock in a
domestic corporation except shares sold or disposed of through
the stock exchange.[:

Not over P 100,000 5%

On any amount in excess of P 100,000 10%]

(d) Intercorporate Dividends. xxx.

(B) Tax on Nonresident Foreign Corporation. -

(1) In General. xxx.

Xxx

(5) Tax on Certain Incomes Received by a Nonresident Foreign Corporation. -
(a) Interest on Foreign Loans, = «x

XXX.



1 (c) Capital Gains from Sale of Shares of Stock not Traded in the

Stock Exchange. - A final tax at the rate[s prescribed below] OF

3 FIFTEEN PERCENT (15%) is hereby imposed upon the net
4 capital gains realized during the taxable year from the sale,
5 barter, exchange or other disposition of shares of stock in a
6 domestic corporation, except shares sold, or disposed of
7 through the stock exchange.[:

Not over P 100,000 5%

On any amount in excess of P 100,000 10%]

8 SEC. 2, Section 112 of the NIRC, as amended, is hereby further amended to read as
9 follows:
10 SEC. 112, Refunds [or Tax Credits] of Input Tax. -

u (A) Zero-rated or Effectively Zero-rated Sales.- Any VAT-registered person,

2 whose sales are zero-rated or effectively zero-rated may, within two (2) years
B after the close of the taxable quarter when the sales were made, apply for the
4 issuance of a tax credit certificate or] refund of creditable input tax due or
1s paid attributable to such sales, except transitional input tax, to the extent that
16 such input tax has not been applied against output tax: Provided, however,
17 That in the case of zero-rated sales under Section 106(A)(2)(a)(I)[, (2)] and
18 [(b)] () and Section 108(B)(1) and (2), the acceptable foreign currency
9 exchange proceeds thereof had been duly accounted for in accordance with
20 the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided,
2 further, That where the taxpayer is engaged in zero-rated or effectively zero-

2 rated sale and also in taxable or exempt sale of goods of properties or



services, and the amount of creditable input tax due or paid cannot be
directly and entirely attributed to any one of the transactions, it shall be
allocated proportionately on the basis of the volume of sales. Provided,
finally, That for a person making sales that are zero-rated under Section
108(B)(6), the input taxes shall be allocated ratably between his zero-rated

and non-zero-rated sales.

(B) Cancellation of VAT Registration. - A person whose registration has been
cancelled due to retirement from or cessation of business, or due to changes
in or cessation of status under Section 106(C) of this Code may, within two
2) years from the date of cancellation, apply for REFUND [the issuance of a
tax credit certificate] for any unused input tax [which may be used in
payment of his other internal revenue taxes].

XXX.

SEC. 3. Repealing Clause. - All laws, executive and administrative orders or parts
thereof inconsistent with any provision of this Act are hereby repealed or modified

accordingly.

SEC. 4. Separability Clause. - If any provision of this Act is subsequently declared
invalid or unconstitutional, the other provisions hereof which are not affected thereby

shall remain in full force and effect.

SEC. 5. Effectivity. - This Act shall be effective upon its publication in the Official

Gazette or in any two (2) newspapers of general circulation, whichever comes earlier.

Approved,