Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City

Eighteenth Congress
First Regular Session

HOUSE BILL No.__ 304

Introduced by Representative JOEY SARTE SALCEDA

AN ACT
AMENDING SECTIONS 22, 24, 25, 27, 28, 29, 30, 32, 34, 37, 38, 39, 42, S1, 52, 54, 56,
57, 73, 108, 121, 122, 123, 174, 176, 179, 181, 182, 183, 184, 185, 186, 187, 188, 189, 190,
191, 194, 195, 196, 197, 198, AND 199; AND REPEALING SECTIONS 127, 175, 177,
178, 180, 192, AND 193; ALLL UNDER REPUBLIC ACT NO. 8424, OTHERWISE
KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS
AMENDED, AND FOR OTHER PURPOSES

EXPLANATORY NOTE

‘The bill covers the fourth package of the Duterte Administration's comprehensive tax
reform program. It complements the recently passed Tax Reform for Acceleration and
Inclusion Act (R.A. No, 10963) by making capital income taxes and financial intermediary
taxes simpler, fairer, and more efficient.

With the sizable contribution of the financial sector to the economy and the crucial role
it plays in financing large-scale investments, including the Build, Build, Build (BBB) program,
there are man y compelling reasons to undertake a comprehensive tax reform in this sector
several deficiencies

(a) Complicated tax structure — The taxation of capital income and financial services
has become overly complex. Based on the current tax system, there are 80 tax base
and tax rate combinations applicable to financial income, financial intermediation
services, and financial transactions. Tax on income also depends on many factors
and conditions which are difficult to ascertain. Factors that affect the taxation of
income include the type of product, type of lending, issuer, currency, maturity,
taxpayer, residency, business status, and various special laws. These result in the
variations in the tax base and tax rate, even among comparable financial instruments
and transactions.

(b) Susceptibility to arbitrage — the variations in tax rates and unequal tax treatment of
equivalent or comparable financial instruments give rise to arbitrage. Different tax
treatment among sectors, or between financial institutions and non-financial
institutions offering the same service and/or product, or between interests and

1


dividends, open window for arbitrage and leveraging. These disparities in tax
treatment distort investment decisions considering that tax impositions overshadow
all other considerations. Competitive advantage arises in favor of the financial
sector favored by the law’s tax treatment.

(c) Uneven playing field — The current tax system provides certain concessions or
different tax treatments of certain transactions for some types of financial
institutions (Fis) compared to similar transactions of other Fls. For instance, there
are exemptions allowed on long-term investments, bank deposits, individual trust
funds, and investment management accounts in favor of resident individuals. Such
exemptions do not cover long-term savings offered by other Fis, such as life
insurance, pre-need/pension plans, investment houses, among others.

Also, classifications between different Fls cause unequal treatment, considering
that some are subject to gross receipts tax (GRT), while some are subject to
premium tax, while others are subject to the value-added tax (VAT). For instance,
banks, quasi-banks, and other Fis are subject to GRT, while life insurance
companies are subject to premium tax, and lending investors, property insurers, pre-
need companies, health maintenance organizations (HMOs), and money remitters
are subject to VAT.

(d) Inequitable distribution of tax burden — Investments in equity and some forms of
long-terms instruments are subject to lower tax rates. Hence, those who have more
money to place in these kinds of investment tend to pay lower taxes compared to
working class individuals who are content with placing their funds in short-term
investments or savings deposit with higher taxes.

(e) Uncompetitive tax system — A comparison of taxes on capital income in ASEAN
nations shows that Philippine tax on capital income remains the highest in the
region, Considering this, the Philippine capital market remain shallow and
uncompetitive, and continues to lag behind ASEAN neighbors

(f) High administrative and compliance cost. The complicated structure of taxes on
financial transactions that hinder capital market development. Initial public offering
(IPO) tax, for instance, is essentially a tax on capital, and does not take into
consideration income generation. Such an imposition serves as a deterrent to public
listing. This results in the Philippine Stock Exchange (PSE) lagging behind other
ASEAN countries in terms of market capitalization

‘The inclusion of the capital income and financial services in the current
administration's comprehensive tax reform program provides a window of opportunity to
achieve the much-needed reform in the financial sector. The taxation of the financial system
should indeed be viewed as a major component of these reforms, an ingredient that could fuel
and direct the movement of capital rightly to where they are most needed, so that higher,
sustainable, and more inclusive growth can be achieved.

And so, this bill seeks to reform the taxation of capital income and financial services in
the country, by redesigning the financial sector taxation into a simpler, fairer, more efficient,
and a revenue neutral tax system. This bill aims to achieve the following objectives:


(a) Provide neutrality in the tax treatment across financial institutions and financial
instruments.

(b) Simplify what has become a complex tax system.

(c) Improve equity across investors and savers.

(d) Minimize arbitrage opportunities.

(e) Promote capital market development and tax competitiveness within the context of
financial globalization, increased capital mobility, and financial inclusion.

To achieve these, this bill proposes the following reforms:

(a) Reduction in the number of rates of withholding taxes- Due to the difficulties posed
by various tax mates on interest income, distinctions are removed, such that a more
uniform tax treatment is imposed on interest income regardless of currency,
maturity, issuer, and other differentiating factors. Likewise, special rates and
exemptions are removed.

(b) Unification of tax rates for interests, dividends, and capital gains — Considering the
complicated tax system on capital income, a more unified rate of tax is imposed for
interests, dividends, and capital gains.

(c) Harmonization of business taxes — A single GRT rate forall Fis, excluding premium
tax on insurance, is imposed. For further harmonization of taxes, distinction
between lending and non-lending activities, as well as the term of maturity of an
instrument, is removed. A single rate of 5% is imposed.

(d) Pre-need, pension, life, and HMO insurance are all taxed similarly at a 2% premium
tax rate. Non-life insurance is also subjected to a similar 5% premium tax rate,

(e) Removal or minimization of barriers to a capital market development -IPO tax,
which is found to be detrimental to capital market development is removed.

(0) Overall, the DST of the financial sector is being rationalized to promote capital
mobility.

(g) Adoption of a regionally competitive tax system — Considering that Philippine taxes
‘on capital income is the highest in the ASEAN region, measures are taken towards
the adoption of tax rates comparable to those of neighboring ASEAN nations and
their best practices. With the reform, the proposed rates would be at par with the
rates imposed in ASEAN to ensure competitiveness of the domestic capital market.

Financial sector taxation is indeed ripe for reform. The approval of this bill is earnestly
sought so we can compete better in attracting capital and investment, which is urgently needed
to finance infrastructure, create more and better jobs, and boost the inclusive and sustainable
growth of the economy.

In view of the foregoing, the passage of this bill iseenesiyeotgi

JOEY, SALCEDA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Eighteenth Congress
First Regular Session

304
HOUSE BILL NO.

Introduced by Representative JOEY SARTE SALCEDA

AN ACT
AMENDING SECTIONS 22, 24, 25, 27, 28, 29, 30, 32, 34, 37, 38, 39, 42, 51, 52, 54, 56,
57, 73, 108, 121, 122, 123, 174, 176, 179, 181, 182, 183, 184, 185, 186, 187, 188, 189, 190,
191, 194, 195, 196, 197, 198, AND 199; AND REPEALING SECTIONS 127, 175, 177,
178, 180, 192, AND 193; ALL UNDER 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 Represematives of the Philippines in Congress
assembled:

SECTION. I. Title. ~ This Act shall be known as the “Passive Income and Financial
Intermediary Taxation Act.”

SEC. 2. Declaration of Policy. — The financial sector plays a significant role in the long-
term growth of the national economy. A key policy consideration is to allow the capital market
to develop as efficiently as possible, with the least intervention. The optimal taxation of capital
markets, and the products and transactions that come with them, is an essential clement in
developing the capital market. Towards this end, the State recognizes the necessity of a simpler,
fairer, more efficient, and regionally more competitive tax system for passive income and
financial intermediation to encourage savings and develop as well as deepen the capital
markets. Accordingly, the State adopts the following policies:

1, The State shall promote and develop a tax system that provides neutrality in the tax
treatment across financial institutions and financial instruments.

2. The State shall endeavor to simplify an otherwise complex tax system for casy
compliance.

3. The State shall ensure that the taxation of passive income and financial transactions
is equitable across all stakeholders and discourages arbitrage opportunities

4. ‘The State shall promote capital market development and tax competitiveness within
the context of globalization, increased capital mobility, and financial inclusion.


SEC, 3. Section 22 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC. 22. Definitions - When used in this Title:

(A) xxx

(B) The term ‘corporation’ shall include partnerships, no matter how created or
organized, joint-stock companies, joint accounts (cuentas en participacion SUCH AS
COLLECTIVE INVESTMENT SCHEMES), associations, or insurance companies,
but does not include general professional partnerships and a joint venture or consortium
formed for the purpose of undertaking construction projects or engaging in petroleum,
coal, geothermal and other energy operations pursuant to an operating or consortium
agreement under a service contract with the Government. ‘General professional
partnerships’ ate partnerships formed by persons for the sole purpose of exercising
their common profession, no part of the income of which is derived from engaging in
any trade or business. A COLLECTIVE INVESTMENT SCHEME MAY OR MAY
NOT BE REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

XXX XXX XXX

(L) The term ‘shares of stock’ shall include shares of stock of a corporation, warrants
and/or options, WHETHER TO BUY OR SELL SECURITIES, FUTURES
CONTRACTS, AND SUCH OTHER DERIVATIVE SECURITIES LISTED
AND TRADED IN A LOCAL EXCHANGE OR AN ORGANIZED
MARKETPLACE, as well as units of participation in a partnership (except general
professional partnerships), joint stock companies, joint accounts; SUCH AS
COLLECTIVE INVESTMENT SCHEMES, joint ventures taxable as corporations,
associations and recreation or amusement clubs (such as golf, polo or similar clubs),
mutual funds certificates.

(M) The term ‘shareholder" shall include holders of a share/s of stock, warrant/s and/or
options, WHETHER TO BUY OR SELL SECURITIES, FUTURES
CONTRACTS, AND SUCH OTHER DERIVATIVE SECURITIES LISTED
AND TRADED IN A LOCAL EXCHANGE OR AN ORGANIZED
MARKETPLACE, as well as a holder of a unit of participation in a partnership (except
general professional partnerships), in a joint stock company, a joint account SUCH AS
COLLECTIVE INVESTMENT SCHEMES, a taxable joint venture, a member of an
association, recreation or amusement club (such as golf, polo, or similar clubs), and a
holder of a mutual fund certificate, a member in an association, joint-stock company,
or insurance company

XXX XXX_-XNX

(1) The term ‘securities’ means [shares of stock in a corporation, and rights to subscribe
for or to receive such shares, The term includes bonds, debentures, notes or certificates,
or other evidence of indebtedness, issued by any corporation, including those issued by
a government or political subdivision thereof, with interest coupons or in registered
form.| SHARES, PARTICIPATION, OR INTERESTS IN A CORPORATION

2


OR IN A COMMERCIAL ENTERPRISE OR PROFIT-MAKING VENTURE
EVIDENCED BY A CERTIFICATE, CONTRACT, INSTRUMENTS,
WHETHER WRITTEN OR ELECTRONIC IN CHARACTER. IT INCLUDES:

(1) SHARES OF STOCK, BONDS, DEBENTURES, NOTES,
EVIDENCES OF INDEBTEDNESS, ASSET-BACKED
SECURITIES;

(2) INVESTMENT CONTRACTS, CERTIFICATES OF INTEREST, OR
PARTICIPATION IN A PROFIT SHARING AGREEMENT SUCH
AS COLLECTIVE INVESTMENT SCHEMES, CERTIFICATE OF
DEPOSIT FOR A FUTURE SUBSCRIPTION;

(3) FRACTIONAL UNDIVIDED INTERESTS IN OIL, GAS, OR
OTHER MINERAL RIGHTS;

(4) DERIVATIVES LIKE OPTIONS AND WARRANTS;
(5) CERTIFICATES OF ASSIGNMENTS, CERTIFICATES OF

PARTICIPATION, TRUST CERTIFICA1 VOTING TRUST
CERTIFICATES, OR SIMILAR INST! Ss;

(6) PROPRIETARY OR N PROPRIETARY MEMBERSHIP
CERTIFICATES IN CORPORATIONS; AND

(7) OTHER INSTRUMENTS AS MAY IN THE FUTURE BE
ED BY THE SECURITIES AND EXCHANGE
ION.

(V) The term ‘bank’ [means every banking institution, as defined in Section 2 Republic
Act No. 337, as amended, otherwise known as the General Banking Act. A bank may
either be, a commercial bank, a thrift bank, a development bank, a rural bank, a
specialized government bank, or a cooperative bank] AS DEFINED IN SECTION 3
OF REPUBLIC ACT NO. 8791, OTHERWISE KNOWN AS THE GENER.
BANKING LAW OF 2000, SHALL REFER TO ENTITIES ENGAGED IN THE
LENDING OF FUNDS OBTAINED IN THE FORM OF DEPOSITS, BANKS
SHALL BE CLASSIFIED INTO UNIVERSAL BANKS, COMMERCIAL
BANKS, THRIFT BANKS COMPOSED OF: (A) SAVINGS AND MORTGAGE
BANKS; (B) STOCK SAVINGS AND LOAN ASSOCIATIONS; AND (C)
PRIVATE DEVELOPMENT BANKS, AS DEFINED IN REPUBLIC ACT NO.
7906, OR THE THRIFT BANKS ACT, RURAL BANKS, AS DEFINED
REPUBLIC ACT NO. 7353 OT THE RURAL BANKS ACT; COOPERATIVE
BANKS, AS DEFINED IN REPUBLIC ACT NO, 6938 OR THE COOPERATIVE
CODE, ISLAMIC BANKS AS DEFINED IN REPUBLIC ACT NO. 6848, OR
THE CHARTER OF AL AMANAH ISLAMIC INVESTMENT BANK OF THE
PHILIPPINES, AND OTHER CLASSIFICATIONS OF BANKS AS
DETERMINED BY THE MONETARY BOARD OF THE BANGKO SENTRAL,
NG PILIPINAS.



(W) The term ‘non-bank financial intermediary’ means PERSONS OR ENTITIES
ENGAGED IN THE BORROWING OF FUNDS, FOR THE BORROWER'S
OWN ACCOUNT, THROUGH THE ISSUANCE, ENDORSEMENT, OR
ACCEPTANCE OF DEBT INSTRUMENTS OF ANY KIND OTHER THAN
DEPOSITS, OR THROUGH THE ISSUANCE OF PARTICIPATIONS,
CERTIFICATES OF ASSIGNMENT, OR SIMILAR INSTRUMENTS WITH
RECOURSE, TRUST CERTIFICATES, OR OF REPURCHASE
AGREEMENTS, FROM TWENTY (20) OR MORE LENDERS AT ANY ONE
TIME, FOR PURPOSES OF RELENDING OR PURCHASING OF
RECEIVABLES AND OTHER OBLIGATIONS, BUT DOES NOT INCLUDE
COMMERCIAL, INDUSTRIAL, AND OTHER NON-FINANCIAL
COMPANIES, WHICH BORROW FUNDS THROUGH ANY OF THESE
MEANS FOR THE LIMITED PURPOSE OF FINANCING THEIR OWN
NEEDS OR THE NEEDS OF THEIR AGENTS OR DEALERS, OR a financial
intermediary, as defined in [Section 2(D\(c) of] Republic Act No. 337, as amended,
otherwise known as the General Banking Act, authorized by the Bangko Sentral ng
Pilipinas (BSP) to perform quasi-banking activities

(X) THE TERM ‘QUASI-BANK’ SHALL REFER TO ENTITIES ENGAGED IN
THE BORROWING OF FUNDS THROUGH THE ISSUANCE,
ENDORSEMENT OR ASSIGNMENT WITH RECOURSE OR ACCEPTANCE
OF DEPOSIT SUBSTITUTES, AS DEFINED IN SECTION 95 OF REPUBLIC
ACT NO. 7653, OR THE NEW CENTRAL BANKING ACT FOR PURPOSES
OF RELENDING OR PURCHASING OF RECEIVABLES AND OTHER
OBLIGATIONS.

(Y) The term ‘quasi-banking activities’ means borrowing funds from twenty (20) or
more [personal] INDIVIDUAL or corporate lenders at any one time through the
issuance, endorsement, or acceptance of debt instruments of any kind other than
deposits for the borrower's own account, or through the issuance of certificates of
assignment or similar instruments, with recourse, or of repurchase agreements for
purposes of relending or purchasing receivables and other similar obligations
Provided, however, That commercial, industrial and other non-financial companies,
which borrow funds through any of these means for the limited purpose of financing
their own needs or the needs of their agents or dealers, shall not be considered as
performing quasi-banking functions. THE PHRASE “AT ANY ONE TIME”
SHALL BE COUNTED AT THE TIME OF ORIGINATION OR ISSUANCE OF
THE DEBT INSTRUMENT.

(Z) The term ‘deposit substitutes’ shall mean an alternative form of obtaining funds
from the public (the term ‘public’ means borrowing from twenty (20) or more individual
or corporate lenders at any one time) other than deposits, through the issuance,
endorsement, or acceptance of debt instruments for the borrowers own account, for the
purpose of relending or purchasing of receivables and other obligations, or financing
their own needs or the needs of their agent or dealer. These instruments may include,
but need not be limited to bankers’ acceptances, promissory notes, repurchase
agreements, [including] EXCLUDING reverse repurchase agreements entered into by


and between the Bangko Sentral ng Pilipinas (BSP) and any authorized agent bank,
certificates of assignment or participation and similar instruments with recourse.

DEBT INSTRUMENTS ISSUED BY THE GOVERNMENT AND ANY OF ITS
AGENCIES AND INSTRUMENTALITIES, INCLUDING GOVERNMENT
FINANCIAL INSTITUTIONS SHALL BE DEEMED ISSUED TO THE PUBLIC
AND CONSIDERED DEPOSIT SUBSTITUTES. Provided, however, that debt
instruments issued for interbank call loans with maturity of not more than five (5) days
to cover deficiency in reserves against deposit liabilities, including those between or
among banks and quasi-banks, shall not be considered as deposit substitute debt
instruments.

XXX XXX XXX

(BB) The term ‘mutual fund company’ shall mean ANY INVESTMENT
COMPANY WHICH IS OR HOLDS ITSELF OUT AS BEING ENGAGED
PRIMARILY, OR PROPOSES TO ENGAGE PRIMARILY IN THE BUSINESS
OF POOLING TOGETHER MONEY FROM VARIOUS INVESTORS AND
INVESTS, REINVESTS, OR TRADES THE SAME IN SECURITIES,
WHETHER IN STOCKS, BONDS, MONEY-MARKET INSTRUMENTS,
OTHER SECURITIES, CASH, OR ANY OTHER ASSET, OR an open-end and
close-end investment company as defined under REPUBLIC ACT NO. 2629, ALSO
KNOWN AS the Investment Company Act OF THE PHILIPPINES.

XXX XXX XXX

(EF) The term [long-term deposit or investment certificate’ shall refer to certificate of
time deposit or investment in the form of savings, common or individual trust funds,
deposit substitutes, investment management accounts and other investments with a
maturity period of not less than five (5) years, the form of which shall be prescribed by
the Bangko Sentral ng Pilipinas (BSP) and issued by banks only (not by nonbank
financial intermediaries and finance companies) to individuals in denominations of Ten
thousand pesos (P10,000) and other denominations as may be prescribed by the
BSP.| ‘FINANCIAL INSTITUTIONS’ OR ‘FINANCIAL INTERMEDIARIES’
SHALL MEAN PERSONS OR ENTITIES WHOSE PRINCIPAL FUNCTIONS
INCLUDE THE BUSINESS OF LENDING, FINANCING, INVESTING, OR
PLACEMENT OF FUNDS OR EVIDENCES OF INDEBTEDNESS OR EQUITY
DEPOSITED WITH THEM, ACQUIRED BY THEM, OR OTHERWISE
COURSED THROUGH THEM, EITHER FOR THEIR OWN ACCOUNT OR
FOR THE ACCOUNT OF OTHERS, AND ARE AUTHORIZED BY THE
BANGKO SENTRAL NG PILIPINAS OR BY THE SECURITIES AND
EXCHANGE COMMISSION DEPENDING ON THE GOVERNMENT
AGENCY AUTHORIZED TO REGULATE THEM. IT SHALL INCLUDE
BANKS, QUASL-BANKS, TRUST ENTITIES, PAWNSHOPS, FOREIGN
EXCHANGE DEALERS, MONEY BROKERS, CREDIT COOPERATIVES,
FINANCING COMPANIES, FINANCE LEASING COMPANIES,
INVESTMENT COMPANIES, AND OTHER COLLECTIVE INVESTMENT
SCHEMES, INVESTMENT HOUSES, LENDING INVESTORS, AND OTHER
TYPES OF BUSINESS THAT MAY BE CLASSIFIED BY THE BANGKO


SENTRAL NG PILIPINAS OR THE SECURITIES AND EXCHANGE
COMMISSION AS FINANCIAL INSTITUTIONS.

LIFE AND NON-LIFE INSURANCE COMPANIES, PRE-NEED COMPANIES
AND HEALTH MAINTENANCE ORGANIZATIONS ARE ALSO
CONSIDERED FINANCIAL INSTITUTIONS UNDER THE SUPERVISION OF
‘THE INSURANCE COMMISSION.

(GG) The term ‘statutory minimum wage’ x x.
(HE) The term “minimum wage earner’ x xx

(1) THE TERM ‘COLLECTIVE INVESTMENT SCHEMES’ OR ‘CIS’ SHALL
MEAN ANY ARRANGEMENT WHEREBY FUNDS ARE SOLICITED FROM.
THE INVESTING PUBLIC AND POOLED TOGETHER FOR THE PURPOSE
OF INVESTING, RE-INVESTING, AND/OR TRADING IN SECURITIES OR
OTHER ASSETS OR DIFFERENT CLASSES THEREOF AS ALLOWED
UNDER THE LAW, WHICH MAY EITHER HAVE A CORPORATE
STRUCTURE, SUCH AS AN INVESTMENT COMPANY, OR A
CONTRACTUAL STRUCTURE, SUCH AS A UNIT INVESTMENT TRUST
FUND OR SIMILAR SCHEME HELD BY A TRUST CORPORATION OR A
SEPARATE ACCOUNT FUND ESTABLISHED PURSUANT TO A VARIABLE
UNIT LINKED LIFE INSURANCE POLICY ISSUED BY AN INSURANCE
COMPANY, AND SUCH OTHER FORMS OF COLLECTIVE INVESTMENT
SCHEMES AS MAY BE DETERMINED BY THE APPROPRIATE
GOVERNMENT REGULATORY AGENCIES SUCH AS THE BANGKO
SENTRAL NG PILIPINAS, THE SECURITIES AND EXCHANGE
COMMISSION AND THE INSURANCE COMMISSION, A CIS MAY EITHER
BE OPEN-END OR CLOSED-END, DEFINED AS FOLLOWS:

‘OPEN-END CIS’ MEANS A CIS WHERE SECURITIES ARE
OFFERED AND ARE ALWAYS REDEEMABLE BY THE CIS; AND

‘CLOSED-END CIS’ MEANS A CIS WHERE A FIXED NUMBER OF
SECURITIES ARE OFFERED IN AN INITIAL PUBLIC OFFERING
AND THEREAFTER MAY BE TRADED IN AN ORGANIZED
MARKETPLACE AS DETERMINED BY THE SECURITIES AND
EXCHANGE COMMISSION, BUT MAY NOT BE REDEEMED BY THE
CIS. A CLOSED-END CIS SHALL NOT BE ALLOWED TO INCREASE
ITS NUMBER OF SECURITIES,

(JJ) THE TERM ‘UNIT LINKED INVESTMENT INSTRUMENT? SHALL
MEAN A CONTRACTUAL CIS ORGANIZED PURSUANT TO A CONTRACT,
SUCH AS TRUST INDENTURE, OR AS AN INVESTMENT COMPONENT OF
ONTRACT, ENGAGED OR HOLDS ITSELF OUT AS
BEING ENGAGED, OR PROPOSES TO ENGAGE, IN THE BUSINESS OF
INVESTING, REINVESTING, AND/OR TRADING IN SECURITIES OR
OTHER INVESTMENT ASSETS, AND ISSUES UNITS OF PARTICIPATION,
EACH OF WHICH REPRESENTS AN UNDIVIDED INTEREST IN A POOL
OF INVESTMENT ASSETS.



(KK) THE TERM ‘HOLDING COMPANY’ SHALL REFER TO ANY
CORPORATION ORGANIZED TO HOLD THE STOCK OF ANOTHER OR
OTHER CORPORATIONS, AND OTHER FORMS OF HOLDING
COMPANIES AS MAY BE DETERMINED BY APPROPRIATE
GOVERNMENT REGULATORY AGENCIES.

(LL) THE TERM ‘DEBT INSTRUMENT SHALL REFER TO INSTRUMENTS
REPRESENTING BORROWING AND LENDING TRANSACTIONS
INCLUDING BUT NOT LIMITED TO DEBENTURES, CERTIFICATES OF
INDEBTEDNESS, DUE BILLS, BONDS, LOAN AGREEMENTS,
INSTRUMENTS, AND SECURITIES ISSUED BY THE GOVERNMENT OR
ANY OF ITS INSTRUMENTALITIES, DEPOSIT SUBSTITUTES, DEBT
INSTRUMENTS, CERTIFICATES OR OTHER EVIDENCES OF DEPOSITS,
PROMISSORY NOTES, WHETHER NEGOTIABLE OR NON-NEGOTIABL
OTHER SIMILAR INSTRUMENTS, AND OTHER INSTRUMENTS AS MAY
BE DETERMINED BY APPROPRIATE GOVERNMENT AGENCIES,

AN EXCHANG|

(MM) THE TERM ‘ORGANIZE
OVE! f-COUNTER MARKET, AL RADING SYSTEM,
REGISTERED AND LICENSED BY THE AND EXCHANGE
COMMISSION AS AN EXCHANGE UNDER REPUBLIC ACT NO. 8799, AS
AMENDED, AND GOVERNED BY, AMONG OTHERS, TRANSPARENT AND
BINDING RULES AND MARKET CONVENTIONS ON MEMBERSHIP,
TRADING, PRICE TRANSPARI TRADE REPORTING, MARKET
MONITORING AND ORDERLY C JCT/OPERATION OF THE MARKET
WHICH ARE ENFORCEABLE ON THE MEMBERS AND PARTICIPANTS,

(NN) THE TERM ‘CLOSELY HELD CORPORATION’ MEANS ANY
CORPORATION WITH AT L (50%) IN VALUE OF
OUTSTAN ‘APITAL STOCK OR AT LEAST FIFTY PERCENT (50%)
OF THE SOMBINED VOTING POWER OF ALL SSES OF
STOCK ENTITLED TO VOTE IS OWNED DIRECTLY OR INDIRECTLY BY
OR FOR NOT MORE THAN TWENTY (20) INDIVIDUALS.

FOR PURPOSES OF DETERMINING WHETHER THE CORPORATION IS A
cL LY HELD CORPORATION, INSO DETERMINATION
IS BASED ON STOCK OWNERSHIP, THE FOLLOWING RULES SHALL BE
APPLI

°K NOT OWNED BY INDIVIDUALS, ~ STOCK OWNED
Y OR INDIRECTLY BY OR FOR A CORPORATION,
PARTNERSHIP, ESTATE OR TRUST SHALL BE CONSIDERED AS
BEING OWNED PROPORTIONATELY BY ITS SHAREHOLDERS,
PARTNERS OR BENEFICIARIES.

(2) FAMILY AND PARTNERSHIP OWNERSHIPS. ~ AN INDIVIDU
SHALL BE CONSIDERED AS OWNING THE STOCK OWNED,
DIRECTLY OR INDIRECTLY, BY OR FOR THE INDIVIDUAL’S
FAMILY, OR PAR’ 'R. FOR PURPOSES OF THE PARAGRAPH,

7G


THE ‘FAMILY OF AN INDIVIDUAL’ INCLUDES ONLY BROTHERS
AND SISTERS (WHETHER BY WHOLE OR HALF-BLOOD),
SPOUSE, ANCESTORS AND LINEAL DESCENDANTS.

(3) OPTION. — IF ANY PERSON HAS AN OPTION TO ACQUIRE
STOCK, SUCH STOCK SHALL BE CONSIDERED AS OWNED BY
SUCH PERSON. FOR PURPOSES OF THIS PARAGRAPH, AN
OPTION TO ACQUIRE SUCH AN OPTION AND EACH ONE OF A
SERIES OF OPTIONS SHALL BE CONSIDERED AS AN OPTION TO
ACQUIRE SUCH STOCK.

(4) CONSTRUCTIVE OWNERSHIP AS ACTUAL OWNERSHIP. ~—
STOCK CONSTRUCTIVELY OWNED BY REASON OF THE
APPLICATION OF PARAGRAPH (1) OR (3) HEREOF SHALL, FOR
PURPOSES OF APPLYING PARAGRAPH (1) OR (2), BE TREATED
AS ACTUALLY OWNED BY SUCH PERSON; BUT STOCK
CONSTRUCTIVELY OWNED BY THE INDIVIDUAL BY REASON
OF THE APPLICATION OF PARAGRAPH (2) HEREOF SHALL NOT
BE TREATED AS OWNED BY HIM FOR PURPOSES OF AGAIN
APPLYING SUCH PARAGRAPH IN ORDER TO MAKE ANOTHER
PERSON THE CONSTRUCTIVE OWNER OF SUCH STOCK.

SEC. 4, Section 24 (B) and (C) of the National Internal Revenue Code of 1997, as
amended, is hereby amended to read as follows:

SEC. 24, Income Tax Rates, ~

(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien of the
Philippines. ~

XXX XXX XXX
(B) Rate of Tax on Certain Passive Income: —

(1) Interests{, Royalties, Prizes, and Other Winnings.| ~ A final tax at the rate of
[twenty percent (20%)] FIFTEEN PERCENT (15%) is hereby imposed upon the
amount of interest, YIELD, OR ANY OTHER MONETARY BENEFIT EARNED
OR RECEIVED FROM DEBT INSTRUMENT, BANK DEPOSIT, DEPOSIT
SUBSTITUTE, AND ANY OTHER FORM OF DEBT INSTRUMENT AND
SIMILAR ARRANGEMENTS. [from any currency bank deposit, and yield or any
other monetary benefit from deposit substitutes, and from trust funds and similar
arrangements; royalties, except on books, as well as other literary works and musical
‘compositions, which shall be imposed a final tax of ten percent (10%), prizes (except
prizes amounting to Ten thousand pesos (P10,000) or less which shall be subject to tax
under Subsection (A) of Section 24); and other winnings (except winnings amounting
to Ten Thousand or less from Philippine Charity Sweepstakes and Lotto which shall be
exempt), derived from sources within the Philippines: Provided, however, That interest
income received by an individual taxpayer (except a nonresident individual) 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%) of such interest income:
Provided, further, That interest income from long-term deposit or investment in the
form of savings, common or individual trust funds, deposit substitutes, investment
management accounts and other investments evidenced by certificates in such form
prescribed by the Bangko Sentral ng Pilipinas (BSP) shall be exempt from the tax
imposed under this Subsection: Provided, finally, That should the holder of the
certificate pre-terminate the deposit or investment before the fifth (5) year, a final tax
shall be imposed on the entire income and shall be deducted and withheld by the
depository bank from the proceeds of the long-term deposit or investment certificate
based on the remaining maturity thereof:

Four (4) years to less than five (5) years — 5%;
‘Three (3) years to less than (4) years — 12%; and
‘Less than three (3) years ~ 20%.)

(2) Cash and/or Property Dividends. ~ A final tax at the RATE OF FIFTEEN
PERCENT (15%) [ten percent (10%)| shall be imposed upon the cash and/or
property dividends actually or constructively received by an individual from a
domestic corporation or from a joint stock company, insurance, {or |mutual fund
companies, COLLECTIVE INVESTMENT SCHEMES, and regional operating
headquarters of multinational companies, or on the share of an individual in the
distributable net income after tax of « partnership (except a general professional
partnership) of which he is a partner, or on the share of an individual in the net
income after tax of an association, a joint account, or a joint venture or consortium
taxable as # corporation of which he is a member or co-venturer: PROVIDED,
HOWEVER, THAT THE FIFTEEN PERCENT (15%) TAX ON DIVIDENDS
SHALL APPLY ONLY ON INCOME EARNED ON OR AFTER JANUARY 1,
2019. INCOME FORMING PART OF RETAINED EARNINGS AS OF
DECEMBER 31, 2018, EVEN IF DECLARED OR DISTRIBUTED ON OR
AFTER JANUARY 1, 2019, SHALL BE SUBJECT TO TEN PERCENT (10%)
TAX,

LIQUIDATING DIVIDEND SHALL BE SUBJECT TO SECTION 24(A) BASED
ON NET GAIN.

[(C]@) Capital Gains from THE Sale, EXCHANGE, BARTER, OR DISPOSITION of
Shares of Stock not Traded in the Stock Exchange OR ORGANIZED MARKETPLACE.
~ [The provisions of Section 39(B) notwithstanding, a] 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 A LOCAL the stock exchangel] OR AN ORGANIZED
MARKETPLACE.

[Not over P100,000...0.0... cesses see set ses ee
On any amount in excess of P100,000 ...........0..0.s0ese0e. 10%]


(Cl) PRESUMPTIVE CAPITAL GAINS FROM THE SALE, EXCHANGE,
BARTER, OR DISPOSITION OF SHARES OF STOCK TRADED IN THE STOCK
EXCHANGE OR AN ORGANIZED MARKETPLACE. — THERE SHALL BE
LEVIED, ASSESSED AND COLLECTED ON EVERY SALE, BARTER,
(CHANGE, OR ANY OTHER MODE OF DISPOSITION OF SHARES OF
OCK LISTED AND TRADED THROUGH A LOCAL STOCK EXCHANGE
OR AN ORGANIZED MARKETPLACE, A FINAL TAX AT THE RATE OF
NTH OF ONE PERCENT (6/10 OF 1%), AND SHALL BE REDUCED
‘ORDING TO THE FOLLOWING SCHEDULE:

JANUARY 1, 2020: FIVE-TENTH OF ONE PERCENT (5/10 OF 1%),
JANUARY 1, 2021: FOUR-TENTH OF ONE PERCENT (4/10 OF 1%),
JANUARY 1, 2022: THREE-TENTH OF ONE PERCENT (3/10 OF 1%),
JANUARY 1, 2023: TWO-TENTH OF ONE PERCENT (2/10 OF 1%),
JANUARY 1, 2024: ONE-TENTH OF ONE PERCENT (1/10 OF 1%).

THE TAX SHALL BE BASED ON THE GROSS SELLING PRICE OR GROSS
VALUE IN MONEY OF THE SHARES OF STOCK SOLD, BARTERED,

EXCHANGED, OR OTHERWISE DISPOSED OF, TO BE PAID BY THE
SI ER OR TRANSFEROR,

ANY GAIN EARNED FROM SHARES OF STOCK IN A DOMESTIC
CORPORATION TRADED IN A FOREIGN EXCHANGE, SHALL BE TAXED
UNDER SUBSECTION (A) OF THIS SECTION,

ANY GAIN REALIZED FROM THE SA’
DISPOSITION OF SHARES OF STOCK, LISTED OR UNLISTED, BY A
DEALER IN SECURITIES LICENSE! BY THE APPROPRIATE
GOVERNMENT REGULATORY AGENCIES TO BUY AND SELL IN
SECURITIES, FOR THE DEALER’S OWN ACCOUNT IN THE ORDINARY
COURSE OF BUSINESS, SHALL NOT BE SUBJECT TO TAX UNDER THIS
SUBSECTION BUT SUBSECTION (A) AS AN ORDINARY INCOME.

EXCHANGE, BARTER, OR

(5) CAPITAL GAINS FROM SALE, EXCHANGE, TRANSFER, BARTER,
DISPOSITION OF NON-LISTED AND NON-TRADED DEBT INSTRUMENTS
AND OTHER SECURITIES NOT INCLUDED IN SECTION 24(B)(3) AND (4). —
ANY GAIN EARNED FROM A DEBT INSTRUMENT AND OTHER
SECURITIES NOT INCLUDED IN SUBSECTIONS (B)(3) AND (4), ISSUED BY
A CITIZEN OR RESIDENT ALIEN, OR BY A DOMESTIC CORPORATION,
OR A RESIDENT FOREIGN CORPORATION, OR BY THE GOVERNMENT
OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES, SHALL BE
SUBJECT TO A FINAL TAX AT THE RATE OF FIFTEEN PERCENT (15%)
UPON THE NET CAPITAL GAINS REALIZED.

(6) PRESUMPTIVE CAPITAL GAINS ON LISTED AND TRADED DEBT
INSTRUMENTS AND OTHER SECURITIES NOT INCLUDED IN SECTION

10


24(B)(3) AND (4) - THERE SHALL BE LEVIED, ASSESSED, AND
COLLECTED ON EVERY SALE, BARTER, EXCHANGE, OR OTHER
DISPOSITION OF DEBT INSTRUMENTS AND OTHER SECURITIES,
LISTED AND TRADED THROUGH A LOCAL STOCK EXCHANGE OR A
LICENSED ORGANIZED MARKETPLACE, A FINAL TAX AT THE RATE
OF ONE-TENTH OF ONE PERCENT (1/10 OF 1%) OF THE GROSS SELLING
PRICE OR GROSS VALUE IN MONEY OF THE DEBT INSTRUMENT OR
SECURITIES SOLD, BARTERED, EXCHANGED, OR OTHERWISE
DISPOSED, WHICH SHALL BE PAID BY THE SELLER OR TRANSFEROR.
IF TRADED IN A FOREIGN EXCHANGE, THE GAIN SHALL BE SUBJECT
TO TAX UNDER SUBSECTION (A) HEREOF.

ANY GAIN REALIZED FROM THE SALE, EXCHANGE, BARTER OR
DISPOSITION OF DEBT INSTRUMENTS AND OTHER SECURITIES,
LISTED OR UNLISTED, BY A DEALER IN SECURITIES OR OTHER
ENTITIES LICENSED BY THE APPROPRIATE GOVERNMENT
REGULATORY AGENCY TO BUY AND SELL IN DEBT INSTRUMENTS.
SECURITIES, WHETHER OR NOT UNDERTAKEN AS A PRIMARY
BUSINESS UNDERTAKING FOR THE DEALER'S OWN ACCOUNT OR FOR
THE ACCOUNT OF OTHERS, OR UNDERTAKEN IN A FIDUCIARY
CAPACITY, SHALL NOT BE SUBJECT TO TAX UNDER THIS SUBSECTION
BUT TO SECTION 24(A) AS AN ORDINARY INCOME.

[(D)|(7) Capital Gains from Sale of Real Property. ~

(a) In General. — [The provisions of Section 39(B) notwithstanding, a] A final tax of
six percent (6%) based on the gross selling price or current fair market value as
determined in accordance with Section 6(E) of this Code, whichever is higher, is hereby
imposed upon capital gains presumed to have been realized from the sale, exchange, or
other disposition of real property located in the Philippines, classified as capital assets,
including pacto de retro sales and other forms of conditional sales, by individuals,
including estates and trusts: Provided, That the tax liability, if any, on gains from sales
or other dispositions of real property to the government or any of its political
subdivisions or agencies or to government-owned or -controlled corporations shall be
determined either under Subsection (A) or under this Subsection, at the option of the

taxpayer,

(b) Exception. — The provisions of paragraph (1) of this Subsection to the contrary
notwithstanding, capital gains presumed to have been realized from the sale or
disposition of their principal residence by natural persons, the proceeds of which is fully
utilized in acquiring or constructing a new principal residence within eighteen (18)
calendar months from the date of sale or disposition, shall be exempt from the capital
gains tax imposed under this Subsection: Provided, That the historical cost or adjusted
basis of the real property sold or disposed shall be carried over to the new principal
residence built or acquired: Provided, further, That the Commissioner shall have been
duly notified by the taxpayer within thirty (30) days from the date of sale or disposition
through a prescribed return of his intention to avail of the tax exemption herein
mentioned: Provided, still further, That the said tax exemption can only be availed of
once every ten (10) years: Provided, finally, That if there is no full utilization of the
proceeds of sale or disposition, the portion of the gain presumed to have been realized

sey


from the sale or disposition shall be subject to capital gains tax. For this purpose, the
gross selling price or fair market value at the time of sale, whichever is higher, shall be
multiplied by a fraction which the unutilized amount bears to the gross selling price in
order to determine the taxable portion and the tax prescribed under paragraph (1) of this
Subsection shall be imposed thereon.

(C) ROYALTIES, PRIZES, AND OTHER WINNINGS - A FINAL TAX AT THE
RATE OF TWENTY PERCENT (20%) IS HEREBY IMPOSED ON THE
FOLLOWING INCOME DERIVED FROM SOURCES WITHIN THE
PHILIPPINES: (1) ROYALTIES EARNED AS PASSIVE INCOME, EXCEPT
ROYALTIES FROM BOOKS, AS WELL AS OTHER LITERARY WORKS
AND MUSICAL COMPOSITIONS WHICH SHALL BE SUBJECT TO A
FINAL TAX OF TEN PERCENT (10%); (2) PRIZES (EXCEPT PRIZES
AMOUNTING TO TEN THOUSAND PESOS (P10,000) OR LESS) WHICH
SHALL BE SUBJECT TO TAX UNDER SECTION 24 (A); AND (3) OTHER
WINNINGS (EXCEPT WINNINGS AMOUNTING TO PHP10,000 OR LESS
FROM PHILIPPINE CHARITY SWEEPSTAKES AND LOTTO WHICH
SHALL BE EXEMPT).

SEC. 5. Section 25 (A) and (B) of the National Internal Revenue Code of 1997, as
amended, is hereby amended to read as follows:

SEC. 25, Tax on Nonresident Alien Individual. —

(A) Nonresident Alien Engaged in Trade or Business Within the Philippines. - ((1)
In General. ~ | nonresident alien individual engaged in trade or business in the
Philippines shall be subject to {an} income tax UNDER SECTION 24 OF THIS
CODE|, in the same manner as an individual citizen and a resident alien individual, |
on taxable income received from all sources within the Philippines. A nonresident alien
individual who shall come to the Philippines and stay therein for an aggregate period
of more than one hundred eighty (180) days during any calendar year shall be deemed
a ‘nonresident alien doing business in the Philippines’, Section 22(G) of this Code
notwithstanding

[(2) Cash and/or Property Dividends from a Domestic Corporation or Joint Stock
Company, or Insurance or Mutual Fund Company or Regional Operating Headquarter
or Multinational Company, or Share in the Distributable Net Income of a Partnership
(Except a General Professional Partnership), Joint Account, Joint Venture Taxable as
a Corporation or Association, Interests, Royalties, Prizes, and Other Winnings. ~ Cash
and/or property dividends from a domestic corporation, or from a joint stock company,
or from an insurance or mutual fund company or from a regional operating
headquarterS of A multinational company, or the share of a nonresident alien individual
in the distributable net income after tax of a partnership (except a general professional
partnership) of which he is a partner, or the share of a nonresident alien individual in
the net income after tax of an association, a joint account), or a joint venture taxable as
4 corporation of which he is a member or a co-venturer, royalties (in any form), and
prizes (except prizes amounting to Ten thousand pesos (P10,000) or less which shall be
subject to tax under Subsection (B)(1) of Section 24); and other winnings (except
Philippine Charity Sweepstakes and Lotto winnings), shall be subject to an income tax
of twenty percent (20%) on the total amount thereof: Provided, however, That royalties

2


on books as well as other literary works, and royalties on musical compositions shall
be subject to a final tax of ten percent (10%) on the total amount thereof: Provided,
‘further, That cinematographic films and similar works shall be subject to the tax
provided under Section 28 of this Code: [Provided, furthermore, That interest income
from long-term deposit or investment in the form of savings, common or individual
trust funds, deposit substitutes, investment management accounts and other investments
evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas
(BSP) shall be exempt from the tax imposed under this Subsection: Provided, finally,
‘That should the holder of the certificate pre-terminate the deposit or investment before
the fifth (5") year, a final tax shall be imposed on the entire income and shall be
deducted and withheld by the depository bank from the proceeds of the long-term
deposit or investment certificate based on the remaining maturity thereof]

{Four (4) years to less than five (5) years ~ 5%;]
[Three (3) years to less than four (4) years ~ 12%; and]
[Less than three (3) years ~ 20%]

12) Capital Gains. — Capital gains realized from sale, barter or exchange of shares of
stock in domestic corporations not traded through the local stock exchange, and real
properties shall be subject to the tax prescribed under Subsections (C) and (D) of
Section 24.]

(B) Nonresident Alien Individual Not Engaged in Trade or Business Within the
Philippines. — There shall be levied, collected and paid for each taxable year upon the
entire income received from all sources within the Philippines by every nonresident
alien individual not engaged in trade or business within the Philippines as [interest, cash
and/or property dividends,} rents, salaries, wages, premiums, annuities, compensation,
remuneration, emoluments, or other fixed or determinable annual or periodic or casual
gains, profits, and income, [and capital gains, Ja FINAL tax equal to twenty five percent
(25%) of such income. Capital gains realized by a nonresident alien individual not
engaged in trade or business in the Philippines from the sale of [shares of stock in any
domestic corporation and] real property shall be subject to the income tax prescribed
under Subsection|s (C) and (D) | (B) (7) of Section 24.

INTEREST, DIVIDENDS AND CAPITAL GAINS ON SALE OF SHARES OF
STOCK, DEBT INSTRUMENTS, AND OTHER SECURITIES SHALL BE
SUBJECT TO TAX PRESCRIBED UNDER SECTION 24 (B), OR TO THE
PROVISIONS OF APPLICABLE TAX TREATY.

XXX XXX XXX

SEC. 6, Section 27 (D) of the National Internal Revenue Code of 1997, as amended, is
hereby 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-
five percent (35%) is hereby imposed upon the taxable income derived during each

B


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 tax shall be thirty percent (30%).

XXX XXX XXX
(D) Rates of Tax on Certain Passive Incomes.

{(1) Interest from Deposits and Yield or any other Monetary Benefit from Deposit
Substitutes and from Trust Funds and Similar Arrangements, and Royalties. — A
final tax at the rate of twenty percent (20%) is hereby imposed upon the amount of
interest on currency bank deposit and yield or any other monetary benefit from deposit
substitutes and from trust funds and similar arrangements received by domestic
corporations, and royalties, derived from sources within the Philippines: Provided,
however, That interest income derived by a domestic 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 of such interest income. |

[(2) Capitat Gains from the Sale of Shares of Stock Not Traded in the Stock
Exchange. — A finai tax at the rates prescribed below shall be imposed on net capital
gains realized during the taxable year from the sale, exchange or other disposition of
shares of stock in a domestic corporation except shares sold or disposed of through the
stock exchange]

INot over P100,000............e..s0s0sss0sesessenee SM)
{Amount in excess of P100,000.................. 10%]

[(3) Tax on Income Derived under the Expanded Foreign Currency Deposit System.
= Income derived by a depository bank under the expanded foreign currency deposit
system from foreign currency transactions with nonresidents, offshore banking units in
the Philippines, local commercial banks, including branches of foreign banks that may
be authorized by the Bangko Sentral ng Pilipinas (BSP) to transact business with
foreign currency depository system units and other depository banks under the
expanded foreign currency deposit system shall be exempt from all taxes, except net
income from such transactions as may be specified by the Secretary of Finance, upon
recommendation by the Monetary Board to be subject to the regular income tax payable
by banks: Provided, however, That interest income from foreign currency loans granted
by such depository banks under said expanded system to residents other than offshore
banking units in the Philippines or other depository banks under the expanded system,
shall be subject to a final tax at the rate of ten percent (10%) of such income.)

[Any income of nonresidents, whether individuals or corporations, from transactions
‘with depository banks under the expanded system shall be exempt from income tax.]

[(4) Intercorporate Dividends, — Dividends received by a domestic corporation from
another domestic corporation shall not be subject to tax.

14


(1) INTERESTS. — A FINAL TAX AT THE RATE OF FIFTEEN PERCENT
(15%) IS HEREBY IMPOSED UPON THE AMOUNT OF INTEREST, YIELD,
OR OTHER MONETARY BENEFIT EARNED OR RECEIVED FROM A
DEBT INSTRUMENT, BANK DEPOSIT, DEPOSIT SUBSTITUTE, AND
SIMILAR ARRANGEMENTS.

(2) CASH AND/OR PROPERTY DIVIDENDS. - INTERCORPORATE
DIVIDENDS OR DIVIDENDS RECEIVED FROM A _ DOMESTIC
CORPORATION SHALL NOT BE SUBJECT TO TAX IMPOSED UNDER
THIS SUBSECTION,

LIQUIDATING DIVIDEND SHAL
BASED ON NET GAIN.

|. BE SUBJECT TO SECTION 27(A) AND

R OR DISPOSITION

(3) CAPITAL GAINS FROM THE SALi
SHARES OF STOCK NOT TRAD IN THE STOCK iE OR AN
ORGANIZED MARKETPLACE - A FINAL TAX AT THE RATE OF FIFTEEN
PERCENT (15%) IS HEREBY IMPOSED UPON THE NET CAPITAL GAINS
REALIZED DURING THE TAXABLE YEAR FROM THE SALE, BARTER,
EXCHANGE, OR OTHER MODES OF DISPOSITION OF SHARES OF
STOCK IN A DOMESTIC CORPORATION, EXCEPT SHARES SOLD, OR
DISPOSED OF THROUGH A LOCAL STOCK EXCHANGE OR AN
ORGANIZED MARKETPLACE,

(4) PRESUMPTIVE CAPITAL GAINS FROM THE SALE, EXCHANGE, BARTER
OR DISPOSITION OF SHARES OF STOCK TRADED IN THE STOCK
EXCHANGE OR AN ORGANIZED MARKETPLACE, ~THERE SHALL BE
LEVIED, ASSESSED AND COLLECTED ON EVERY SALE, BARTE
EXCHANGE, OR OTHER DISPOSITION OF SHARES OF STOCK LISTED
AND TRADED THROUGH A LOCAL STOCK EXCHANGE OR AN
ORGANIZED MARKET CE, A FINAL TAX AT THE RATE OF SIX-
TENTH OF ONE PERCENT (6/10 OF 1%), AND SHALL BE REDUCED
ACCORDING TO THE FOLLOWING SCHEDULE:

JANUARY 1, 2020: FIVE-TENTH OF ONE PERCENT (5/10 OF 1%),
JANUARY 1, 2021: FOUR-TENTH OF ONE PERCENT (4/10 OF 1%),
JANUARY 1, 2022: THREE-TENTH OF ONE PERCENT (3/10 OF 1%),
JANUARY 1, 2023: TWO-TENTH OF ONE PERCENT (2/10 OF 1%),
JANUARY 1, 2024: ONE-TENTH OF ONE PERCENT (1/10 OF 1%).

THE TAX SHALL BE BASED ON THE GROSS SELLING PRICE OR GROSS
VALUE IN MONEY OF THE SHARES OF STOCK SOLD, BARTERED,

15


EXCHANGED, OR OTHERWISE DISPOSED OF, TO BE PAID BY THE
SELLER OR TRANSFEROR.

ANY GAIN EARNED FROM SHARES OF STOCK IN A DOMESTIC
CORPORATION TRADED IN A FOREIGN EXCHANGE, SHALL BE TAXED
UNDER SECTION 27 (A) HEREOF.

ANY GAIN REALIZED FROM THE SALE, EXCHANGE, BARTER, OR
DISPOSITION OF SHARES OF STOCK, LISTED OR UNLISTED, BY A
DEALER IN SECURITIES LICENSED BY THE APPROPRIATE
GOVERNMENT REGULATORY AGENCIES TO BUY AND SELL IN
SECURITIES, FOR HIS OWN ACCOUNT IN THE ORDINARY COURSE OF
BUSINESS SHALL NOT BE SUBJECT TO TAX UNDER THIS SUBSECTION
BUT TO SECTION 27(A) AS AN ORDINARY INCOME.

(5) CAPITAL GAINS FROM SALE, EXCHANG:
DISPOSITION OF NON-:
OTHER SECURITIES NOT INCLUDED IN SECTION 27(D)(3) AND (4). — ANY
GAIN EARNED FROM DEBT INSTRUMENT AND OTHER SECURITIES NOT
INCLUDED IN SECTION 27(D)\(3) AND (4), ISSUED BY A CITIZEN OR
RESIDENT ALIEN, OR BY A DOMESTIC CORPORATION, OR A RESIDENT
FOREIGN CORPORATION, OR BY THE GOVERNMENT OR ANY OF ITS
AGENCIES OR INSTRUMENTALITIES, SHALL BE SUBJECT TO A FINAL TAX
AT THE RATE OF FIFTEEN PERCENT (15%) UPON THE NET CAPITAL
GAINS REALIZED.

(6) PRESUMPTIVE CAPITAL GAINS ON LISTED AND TRADED DEBT
INSTRUMENTS AND OTHER SECURITIES NOT INCLUDED IN SECTION
27(D)3) AND (4) - THERE SHALL BE LEVIED, ASSESSED, AND
COLLECTED ON EVERY SALE, BARTER, EXCHANGE, OR OTHER
DISPOSITION OF DEBT INSTRUMENTS AND OTHER SECURITIES,
LISTED AND TRADED THROUGH A LOCAL EXCHANGE OR AN
ORGANIZED MARKETPLACE, A FINAL TAX AT THE RATE OF ONE-
TENTH OF ONE PERCENT (1/10 OF 1%) OF THE GROSS SELLING PRICE
OR GROSS VALUE IN MONEY OF THE DEBT INSTRUMENT OR
SECURITIES SOLD, BARTERED, EXCHANGED, OR OTHERWISE
DISPOSED, WHICH SHALL BE PAID BY THE SELLER OR TRANSFEROR.
IF TRADED IN A FOREIGN EXCHANGE, THE GAIN SHALL BE SUBJECT
TO TAX UNDER SECTION 27 (A) HEREOF.

ANY GAIN REALIZED FROM THE SALE, EXCHANGE, BARTER, OR
DISPOSITION OF DEBT INSTRUMENTS AND OTHER SECURITIES,
LISTED OR UNLISTED, BY A DEALER IN SECURITIES OR OTHER
ENTITIES LICENSED BY THE APPROPRIATE GOVERNMENT
REGULATORY AGENCIES TO BUY AND SELL IN DEBT INSTRUMENTS
SECURITIES, WHETHER OR NOT UNDERTAKEN AS A PRIMARY
BUSINESS UNDERTAKING, FOR THE DEALER’S OWN ACCOUNT OR
FOR THE ACCOUNT OF OTHERS, OR UNDERTAKEN IN A FIDUCIARY
CAPACITY, SHALL NOT BE SUBJECT TO TAX UNDER THIS SUBSECTION
BUT TO SECTION 27(A) AS AN ORDINARY INCOME.

16


[)|() Capital Gains Realized from the Sale, Exchange or Disposition of Lands
and/or Buildings. — A final tax of six percent (6%) is hereby imposed on the gain
presumed to have been realized on the sale, exchange or disposition of lands and/or
buildings which are not actually used in the business of a corporation and are treated as:
capital assets, based on the gross selling price or fair market value as determined in
accordance with Section 6(E) of this Code, whichever is higher, of such lands and/or
buildings.

(E) ROYALTIES - A FINAL TAX AT THE RATE OF TWENTY PERCENT
(20%) IS HEREBY IMPOSED ON ROYALTIES EARNED AS PASSIVE
INCOME.

[E|(F) Minimum Corporate Income Tax on Domestic Corporations ~
(1) Imposition of tax. xxx

XXX XXX XXX

(4) Gross Income Defined. — xxx

XXX XXX KX,

In the case of taxpayers engaged in the sale of service, ‘gross income’ means gross
receipts less sales returns, allowances, discounts and cost of services, ‘Cost of services’
shall mean all direct costs and expenses necessarily incurred to provide the services
required by the customers and clients including (A) salaries and employee benefits of
personnel, consultants and specialists directly rendering the service and (B) cost of
facilities directly utilized in providing the service such as depreciation or rental of
‘equipment used and cost of supplies: Provided, however, That in the case of banks AND
OTHER FINANCIAL INTERMEDIARIES, ‘cost of services’ shall include interest

expense.

SEC. 7. Section 28 (A) and (B) of the National Internal Revenue Code of 1997, as
amended, is hereby 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 UNDER SECTION
27 OF THIS CODE {equivalent to thirty-five percent (35%) of the] ON taxable
income derived in the preceding taxable year from all sources within the Philippines(:
Provided, That effective January 1, 2009, the rate of income tax shall be thirty percent
(30%).

XK KK XXX

7


(2) Minimum Corporate Income Tax on Resident Foreign Corporations. — A
minimum corporate income tax of two percent (2%) of gross income, as prescribed
under Section 27([E]F) of this Code, shall be imposed, under the same conditions, on a
resident foreign corporation taxable under paragraph (1) of this Subsection.

(3) International Carrier. — xxx

14) Offshore Banking Units. — The provisions of any law to the contrary
notwithstanding, income derived by offshore banking units authorized by the Bangko
‘Sentral ng Pilipinas (BSP), from foreign currency transactions with nonresidents, other
offshore banking units, local commercial banks, including branches of foreign banks
that may be authorized by the Bangko Sentral ng Pilipinas (BSP) to transact business
with offshore banking units shall be exempt from all taxes except net income from such
transactions as may be specified by the Secretary of Finance, upon recommendation of
the Monetary Board which shall be subject to the regular income tax payable by banks:
Provided, however, That any interest income derived from foreign currency loans
granted to residents other than offshore banking units or local commercial banks,
including local branches of foreign banks that may be authorized by the BSP to transact
business with offshore banking units, shall be subject only to a final tax at the rate of
ten percent (10%).}

[Any income of nonresidents, whether individuals or corporations, from transactions
with said offshore banking units shall be exempt from income tax.]

[5)] (4) Tax on Branch Profits Remittances. ~ Any profit remitted by a branch to its
head office shall be subject to a tax of fifteen percent (15%) which shall be based on
the total profits applied or earmarked for remittance without any deduction for the tax
component thereof. {(except those activities which are registered with the Philippine
Economic Zone Authority)]. The tax shall be collected and paid in the same manner as
provided in Sections 57 and 58 of this Code: Provided, That interests, dividends, rents,
royalties, including remuneration for technical services, salaries, wages, premiums,
annuities, emoluments or other fixed or determinable annual, periodic or casual gains,
profits, income and capital gains received by a foreign corporation during each taxable
year from all sources within the Philippines shall not be treated as branch profits unless
the same are effectively connected with the conduct of its trade or business in the
Philippines.

{(\(5) Regional or Area Headquarters and Regional Operating Headquarters of

Multinational Companies, — x x x

[(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 seven and one-half
percent (7 1/2%) of such interest income. ]

[(b) Income Derived under the Expanded Foreign Currency Deposit System - Income
derived by a depository bank under the expanded foreign currency deposit system from
foreign currency transactions with nonresidents, offshore banking units in the
Philippines, local commercial banks including branches of foreign banks that may be
authorized by the Bangko Sentral ng Pilipinas (BSP) to transact business with foreign
currency deposit system units and other depository banks under the expanded foreign
currency deposit system shall be exempt from all taxes, except net income from such
transactions as may be specified by the Secretary of Finance, upon recommendation by
the Monetary Board to be subject to the regular income tax payable by banks: Provided,
however That interest income from foreign currency loans granted by such depository
banks under the said expanded system to residents other than offshore banking units in
the Philippines or other depository banks under the expanded system shall be subject to
a final tax at the rate of ten percent (10%)]

[Any income of nonresidents, whether individuals or corporations, from transactions
with depository banks under the expanded system shall be exempt from income tax }

{(c) Capital Gains from Sale of Shares of Stock Not Traded in the Stock Exchange. - A
final tax at the rates prescribed below 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 P100,000... . 5%]
{On any amount in excess of P100,000.......10%)

[(d) Intercorporate Dividends. - Dividends received by a resident foreign corporation
from a domestic corporation liable to tax under this Code shall not be subject to tax
under this Title.)

(B) Tax on Nonresident Foreign Corporation. ~

(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%) 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 S{(c)|: Provided, That effective January 1,
2009, the rate of income tax shall be thirty percent (30%).

XXX XXX XXX,


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

{(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, 1986;]

[(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%), which represents the difference between the regular
income tax of thirty-five percent (35%) and the fifteen percent (15%) tax on dividends
as provided in this subparagraph; Provided, That effective January 1, 2009, the credit
against the tax due shall be equivalent to fifteen percent (15%), which represents the
difference between the regular income tax of thirty percent (30%) and the fifteen
percent (15%) tax on dividends;]

[(©) Capital Gains from Sale of Shares of Stock not Traded in the Stock Exchange. —
A final tax at the rates prescribed below 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 POO 000 sessctsecstscsercsse seems 3%]
[On any amount in excess of P100,000......... 10%]

INTERESTS AND CAPITAL GAINS FROM SALE, TRANSFER, BARTER, OR
DISPOSITION OF SHARES OF STOCK, DEBT INSTRUMENTS, DEPOSIT
SUBSTITUTES, AND OTHER SECURITIES SHALL BE SUBJECT TO TAX
UNDER SECTION 27(D)(1), (3), (4), (5) AND (6) OF THIS CODE, OR TO THE
PROVISIONS OF THE APPLICABLE TAX TREATY.

CASH AND/OR PROPERTY DIVIDENDS RECEIVED FROM A DOMESTIC
CORPORATION SHALL BE SUBJECT TO A FINAL TAX OF FIFTEEN
PERCENT (15%) OR TO THE PROVISIONS OF THE APPLICABLE TAX
TREATY.

20


SEC, 8, Section 29(A), (B) AND (C) of the National Internal Revenue Code of 1997,
as amended, is hereby amended to read as follows:

SEC. 29, Imposition of Improperly Accumulated Earnings Tax. ~

(A) In General ~ In addition to other taxes imposed by this Title, there is hereby
imposed for each taxable year on the improperly accumulated taxable income of each
corporation described in Subsection B hereof, an improperly accumulated earnings tax
‘equal to ten] FIFTEEN percent {(10)] (15%) of the improperly accumulated taxable
income.

(B) Tax on Corporations Subject to Improperly Accumulated Earnings Tax. ~

(1) In General, ~The improperly accumulated earnings tax imposed in the preceding
Section shall apply to every corporation formed or availed for the purpose of avoiding
the income tax with respect to its sharcholders or the shareholders of any other
corporation, by permitting earnings and profits to accumulate instead of being divided
or distributed,

(2) Exceptions. ~The improperly accumulated earnings tax as provided for under this
Section shall not apply to

(a) Publicly-held corporations;

(b) Banks, [and other] nonbank financial intermediaries, AND OTHER
FINANCIAL INSTITUTIONS AS MAY BE DETERMINED BY THE
APPROPRIATE GOVERNMENT REGULATORY AGENCIES; and

(c) Insurance companies, SUCH AS LIFE AND NON-LIFE, REINSURANCE.
COMPANIES, PRE-NEED COMPANIES, PENSION FUNDS, HEALTH
MAINTENANCE ORGANIZATIONS AND OTHER ENTITIES DOING
BUSINESS SIMILAR TO OR AKIN TO INSURANCE.

(©) Evidence of Purpose to Avoid Income Tax. ~

[(1) Prima Facie Evidence. ~The fact that any corporation is a mere holding company
or investment company shall be prima facie evidence of a purpose to avoid the tax upon
its shareholders or members.)

{(2) Evidence Determinative of Purpose. ~ The fact that the earnings or profits of a
corporation are permitted to accumulate beyond the reasonable needs of the business
shall be determinative of the purpose to avoid the tax upon its shareholders or members
unless the corporation, by the clear preponderance of evidence, shall prove to the

contrary.

THE FACT THAT THE EARNINGS OR PROFITS OF A CORPORATION ARE
PERMITTED TO ACCUMULATE BEYOND THE REASONABLE NEEDS OF
THE BUSINESS SHALL BE DETERMINATIVE OF THE PURPOSE TO
AVOID THE TAX UPON ITS SHAREHOLDERS OR MEMBERS UNLESS

2a


THE CORPORATION, BY THE CLEAR PREPONDERANCE OF EVIDENCE,
SHALL PROVE TO THE CONTRARY,

XXX XXX XXX

SEC. 9. Section 30 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC, 30, Exemption from tax on Corporations, - The following organizations shall
not be taxed under this Title in respect to income received by them as such:

(A) Labor, agricultural or horticultural organization not organized principally for profit;

[(B) Mutual savings bank not having a capital stock represented by shares, and
cooperative bank without capital stock organized and operated for mutual purposes and
without profits]

[(©)1(B) A beneficiary society, order or association, operating for the exclusive benefit
of the members such as a fraternal organization operating under the lodge system, or a
mutual aid association or a nonstock corporation organized by employees providing for
the payment of life, sickness, accident, or other benefits exclusively to the members of
such society, order, or association, or nonstock corporation or their dependents,

[(D)|(C) Cemetery company owned and operated exclusively for the benefit of its
members;

{(E)](D) Nonstock corporation or association organized and operated exclusively for
religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of
veterans, no part of its net income or asset shall belong to or inure to the benefit of any
member, organizer, officer or any specific person;

[(E)ICH) Business league, chamber of commerce, or board of trade, not organized for
profit and no part of the net income of which inures to the benefit of any private
stockholder or individual;

[G)|() Civie league or organization not organized for profit but operated exclusively
for the promotion of social welfare;

{(H)|(G) A nonstock and nonprofit educational institution;

{()|(4) Government educational institution;

{()]() Farmers’ or other mutual typhoon or fire insurance company, mutual ditch or
irrigation company, mutual or cooperative telephone company, or like organization of
‘a purely local character, the income of which consists solely of assessments, dues, and
fees collected fram members for the sole purpose of meeting its expenses; and

[(K)|() Farmers’, fruit growers’, or like association organized and operated as a sales
agent for the purpose of marketing the products of its members and turning back to


them the proceeds of sales, less the necessary selling expenses on the basis of the
quantity of produce finished by them;

Notwithstanding the provisions in the preceding paragraphs, the income of
whatever kind and character of the foregoing organizations from any of their
properties, real or personal, or from any of their activities conducted for profit
regardless of the disposition made of such income, shall be subject to tax imposed
under this Code.

SEC, 10. Section 32(B)(7)(g) and (h) of the National Internal Revenue Code of 1997,
as amended, is hereby amended to read as follows:

SEC, 32, Gross Income. ~ xxx

(B) Exclusions from Gross Income, ~ The following items shall not be included in
gross income and shall be exempt from taxation under this Title:

XXX XXX XXX
(7) Miscellaneous Items, —
XXX XXX XXX

((g) Gains from the Sale of Bonds, Debentures or other Certificate of Indebtedness.
= Gains realized from the same or exchange or retirement of bonds, debentures or other
certificate of indebtedness with a maturity of more than five (5) years.|

(G) INTEREST INCOME FROM, AND GAINS FROM THE SALE,
TRANSFER, OR DISPOSITION OF, PROJECT SPECIFIC BONDS THAT ARE
ISSUED TO FINANCE CAPITAL EXPENDITURES OR PROGRAMS
COVERED BY THE PHILIPPINE DEVELOPMENT PLAN OR ITS
EQUIVALENT AND OTHER GOVERNMENT PROGRAMS CONSIDERED
TO BE OF HIGH-LEVEL PRIORITY OF THE COUNTRY: PROVIDED,
THAT, THE EXEMPTION SHALL BE UPON THE APPROVAL BY THE
SECRETARY OF FINANCE.

(h) Gains from Redemption of Shares OR UNITS OF PARTICIPATION in (Mutual
Fund| COLLECTIVE INVESTMENT SCHEMES ~ Gains realized by the investor
upon redemption, of shares of stock [in a mutual fund] OR UNITS OF
PARTICIPATION IN A COLLECTIVE INVESTMENT SCHEME as defined [in]
UNDER Section 22 [BB] (Il) of this Code.

KXX XXX AXK

SEC. 11, Section 34(A), (B), (C) and (E) of the National Internal Revenue Code of
1997, as amended, is hereby further amended to read as follows:

SEC. 34. Deductions from Gross Income. — Except for taxpayers earning
compensation income arising from personal services rendered under an employer-
employee relationship where no deductions shall be allowed under this Section, in

23


computing taxable income subject to income tax under Sections 24(A); 25(A); 26;
27(A), (B) and (C); and 28(A)(1), there shall be allowed the following deductions from
gross income:

(A) Expenses. ~
(1) Ordinary and Necessary Trade, Business or Professional Expenses. ~

(a) In General, ~ There shall be allowed as deduction from gross income
all the ordinary and necessary expenses paid or incurred during the taxable year
in carrying on or which are directly attributable to, the development,
management, operation and/or conduct of the trade, business or exercise of a
profession, including:

XXX XXX 200K

(b) Substantiation Requirements. — No deduction from gross income shall be
allowed under Subsection (A) hereof unless the taxpayer shall substantiate with
sufficient evidence, such as official receipts or other adequate records: (i) the
amount of the expense being deducted, and (ii) the direct connection or relation
of the expense being deducted to the development, management, operation
and/or conduct of the trade, business or profession of the taxpayer.

(c) Bribes, Kickbacks and Other Similar Payments. ~ No deduction from gross
income shall be allowed under Subsection (A) hereof for any payment made,
directly or indirectly, to an official or employee of the national government, or
to an official or employee of any local government unit, or to an official or
employee of a government-owned or -controlled corporation, or to an official
or employee or representative of a foreign government, or to a private
corporation, general professional partnership, or a similar entity, if the payment
constitutes a bribe or kickback.

(D) EXPENSES RELATED TO OR IN CONNECTION WITH INCOME
NOT SUBJECT TO REGULAR TAX UNDER SECTIONS 24(A), 25(A),
27(A) AND (B), AND 28(A) SHALL NOT BE ALLOWED AS
DEDUCTIONS UNDER SUBSECTION (A) HEREOF. EXPENSES
THAT CANNOT BE SPECIFICALLY IDENTIFIED OR ARE
COMMON SHALL BE ALLOCATED BASED ON A REASONABLE
METHOD OF MEASUREMENT AS PROVIDED IN A REGULATION
ISSUED BY THE SECRETARY OF FINANCE: PROVIDED, THAT
INTEREST EXPENSES SUBJECTED TO THE LIMITATION UNDER
SECTION 34(B)(1) SHALL BE EXCLUDED FROM THIS SECTION.

XXX OXKK XK
(B) Interest. —

(1) In General,— The amount of interest paid or incurred within a taxable year on
indebtedness in connection with the taxpayer's profession, trade or business shall be
allowed as deduction from gross income: Provided, however, That the taxpayer's

24


otherwise allowable deduction for interest expense shall be reduced by forty-two
percent (42%) of the interest income subjected to final tax: Provided, That effective
January 1, 2009, the percentage shall be thirty-three percent (33%): PROVIDED
FURTHER, THAT EFFECTIVE JANUARY 1, 2019, THE PERCENTAGE
SHALL BE FIFTY PERCENT (50%).

ANY DIVIDEND DISGUISED AS INTEREST AND CLAIMED AS A
DEDUCTION UNDER THIS SUBSECTION SHALL NOT BE ALLOWED AS A
DEDUCTIBLE INTEREST EXPENSE.

(2) Exceptions, — No deduction shall be allowed in respect of interest under the
succeeding subparagraphs:

(a) If within the taxable year an individual taxpayer reporting income on the cash basis
incurs an indebtedness on which an interest is paid in advance through discount or
otherwise: Provided, That such interest shall be allowed as a deduction in the year the
indebtedness is paid: Provided, further, That if the indebtedness is payable in periodic
amortizations, the amount of interest which corresponds to the amount of the principal
amortized or paid during the year shall be allowed as deduction in such taxable year,

(b) If both the taxpayer and the person to whom the payment has been made or is to be
made are persons specified under Section 36(B); or

[(6) Ifthe indebtedness is incurred to finance petroleum exploration |

(3) [Optional| Treatment of Interest Expense RELATED TO ACQUISITION OF
ASSET. ~ {At the option of the taxpayer,] I[iJterest EXPENSE incurred to acquire
property used in trade, business or exercise of a profession THAT WILL BENEFIT
THE BUSINESS LONGER THAN ONE YEAR SHALL [may] BE
CAPITALIZED AND THEREAFTER AMORTIZED OR DEPRECIATED AS
PART OF THE COST OF THE ASSET.

XXX XAX AXX
(E) Bad Debts. ~
(1) In General. — xxx

(2) Securities Becoming Worthless. ~ If securities, as defined in Section 22(T), are
ascertained to be worthless and charged off within the taxable year and are capital
assets, the loss resulting therefrom shall, [in the case of a taxpayer other than a bank or
trust company incorporated under the laws of the Philippines a substantial part of whose
business is the receipt of deposits, for the purpose of this Title,] be considered as a loss
from the sale or exchange OF CAPITAL ASSETS, on the last day of such taxable
year[, of capital assets]. SECURITIES HELD BY A DEALER IN SECURITIES
OR AN ENTITY LICENSED BY THE APPROPRIATE GOVERNMENT
REGULATORY AGENCIES TO BUY AND SELL IN SECURITIES
INCLUDING BANKS, AND OTHER FINANCIAL INTERMEDIARIES,
SHALL BE CONSIDERED ORDINARY ASSETS, AND SECURITIES HELD
THAT ARE ASCERTAINED TO BE WORTHLESS SHALL BE CONSIDERED

25


ORDINARY LOSSES THAT ARE ALLOWED AS DEDUCTION FROM
TAXABLE INCOME.

XK XXX XAK

SEC. 12. Section 37(B) of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC. 37. Special Provisions Regarding Income and Deductions of Insurance
Companies, Whether Domestic or Foreign. ~

(A) Special Deductions Allowed to Insurance Companies. — xxx

(B) Mutual Insurance Companies. ~ in the case of MUTUAL LIFE, mutual fire and
mutual employers” liability and mutual workmen’s compensation and mutual casualty
insurance companies requiring their members to make premium deposits to provide for
losses and expenses, said companies shall not INCLUDE [retum] as income any
portion of the premium deposits returned to their policyholders, but shall INCLUDE
[return] as taxable income all income received by them from all other sources plus such
portion of the premium deposits as are retained by the companies for purposes other
than the payment of losses and expenses and reinsurance reserves.

XXX XXX XK

SEC. 13, Section 38 (A) of the National Internal Revenue Code of 1997, as amended,
is hereby amended to read as follows:

SEC. 38. Losses from Wash Sales of Stock or Securities. ~

(A) In the case of any loss claimed to have been sustained from any sale or other
disposition of shares of stock or securities where it appears that within a period
beginning thirty (30) days before the date of such sale or disposition and ending thirty
(30) days after such date, the taxpayer has acquired (by purchase or by exchange upon
which the entire amount of gain or loss was recognized by law), or has entered into a
contract or option so AS to acquire, substantially identical stock or securities, then no
deduction for the loss shall be allowed under Section 34 unless the claim is made by a
dealer in stock or securities, OR BY ANY ENTITY'S OR A FINANCIAL
INTERMEDIARY DULY LICENSED BY THE APPROPRIATE
GOVERNMENT REGULATORY AGENCIES TO BUY AND SELL IN
SECURITIES EITHER FOR THE ENTITIES OWN ACCOUNT OR FOR THE
ACCOUNT OF OTHERS and with respect to a transaction made in the ordinary
course of the business of such dealer.

HX XK KK

SEC. 14. Section 39 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:


SEC. 39, Capital Gains and Losses. ~
(A) Definitions. ~ As used in this Title ~
XXX XXX KK

((B) Percentage Taken Into Account, — In the case of a taxpayer, other than a
corporation, only the following percentages of the gain or loss recognized upon the sale
or exchange of a capital asset shall be taken into account in computing net capital gain,
net capital loss, and net income:}

[(1) One hundred percent (100%) if the capital asset has been held for not more than
twelve (12) months; and]

{(2) Fifty percent (50%) if the capital asset has been held for more than twelve (12)
months;]

[©] (B) Limitation on Capital Losses, — Losses from sales or exchanges of capital
assets shall be allowed only to the extent of the gains from such sales or exchanges, If
f [bank, or a trust company] DEALER IN SECURITIES OR OTHER ENTITIES
OR FINANCIAL INTERMEDIARIES DULY LICENSED BY THE
APPROPRIATE GOVERNMENT REGULATORY AGENCIES TO TRADE IN
SECURITIES, sells any bond, debenture, note, or certificate or other evidence of
indebtedness issued by any corporation (including one issued by a government or
political subdivision thereof), with interest coupons or in registered form, any loss
resulting from such sale shall not be subject to the foregoing limitation and shall not be
included in determining the applicability of such limitation to other losses,

[(D) Net Capital Loss Carry-over. ~ If any taxpayer, other than a corporation, sustains
in any taxable year # net capital loss, such loss (in an amount not in excess of the net
income for such year) shall be treated in the succeeding taxable year as a loss from the
sale or exchange of a capital asset held for not more than twelve (12) months,]
[(E)(C) Retirement of Bonds, etc. ~ x x x

{(F) Gains or Losses from Short Sales, Etc. — For purposes of this Title -

(1) Gains or losses from short sales of property shall be considered as gains or losses
from sales or exchanges of capital assets; and

(2) Gains or losses attributable to the failure to exercise privileges or options to buy or
sell property shall be considered as capital gains or losses.

SEC. 15. Section 42(A)(1), (2) and (B)(2) of the National Internal Revenue Code of
1997, as amended, is hereby amended to read as follows:

27


SEC. 42. Income from Sources Within the Philippines. ~

(A) Gross Income From Sources Within the Philippines. — The following items of
gross income shall be treated as gross income from sources within the Philippines:

(1) Imerests, - Interests AND YIELD [derived from sources within the Philippines,
and interests] FROM DEBT INSTRUMENTS, BANK DEPOSITS, DEPOSIT
SUBSTITUTES, AND SIMILAR ARRANGEMENTS SUCH AS bonds, notes or
other interest-bearing obligations of residents, corporate or otherwise, INCLUDING
DEBT INSTRUMENTS OR DEBT SECURITIES ISSUED BY THE
GOVERNMENT OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES;

(2) Dividends, ~The amount received as dividends:
(a) From a domestic corporation; and

(b) From a foreign corporation [ unless less ] WITH MORE than fifty percent (50%)
of the gross income of such foreign corporation for the three-year period ending with
the close of its taxable year preceding the declaration of such dividends (or for such
part of such period as the corporation has been in existence) was derived from sources
within the Philippines as determined under the provisions of this Section; but only in
an amount which bears the same ratio to such dividends as the gross income of the
corporation for such period derived from sources within the Philippines bears [to] ON
its gross income from all sources;

XXX RR XXX
(B) Taxable Income From Sources Within the Philippines, ~

(1) General Rute, —

XXX XXX XXX

(2) Exception. — No deductions for interest paid or incurred abroad shall be allowed
from the item of gross income specified in Subsection (A) unless indebtedness was
actually incurred to provide funds for use in connection with the conduct or operation
of trade or business in the Philippines OR ON A TRADE OR BUSINESS OUTSIDE
THE PHILIPPINES PROVIDED THAT INCOME GENERATED OR
RECEIVED FROM THE USE OF SUCH FUNDS IN CONNECTION WITH
THE CONDUCT OR OPERATION OF TRADE OR BUSINESS IN THE
PHILIPPINES IS A TAXABLE INCOME IN THE PHILIPPINES,

SEC. 16. Section 51(C)(2) of the National Internal Revenue Code of 1997, as amended,
is hereby amended to read as follows:

SEC. 1. Individual Return. —
(A) Requirements, xxx
XXX XKK XX

28


(C) When to Fite. -
KX EK
(2) Individuals subject to tax on capital gains:

(a) From the sale or exchange of shares of stock OR DEBT INSTRUMENTS AND
OTHER SECURITIES not traded [thru] THROUGH a local [stock] exchange OR
AN ORGANIZED MARKETPLACE as prescribed under SectionS 24{(C)|(B) (3)
and {(4)] (5), AND 25(A) AND (B), {shall file] a return SHALL BE FILED within
thirty (30) days after each transaction. [and a final consolidated return on or before April
15 of cach year covering all stock transactions of the preceding taxable year, and]

(B) FROM THE SALE, EXCHANGE, OR BARTER OF SHARES OF STOCK
OR DEBT INSTRUMENTS AND OTHER SECURITIES TRADED THROUGH
A LOCAL EXCHANGE OR AN ORGANIZED MARKETPLACE AS
PRESCRIBED UNDER SECTIONS 24(B)(4) AND (6), AND 25(A) AND (B), THE
TAX SHALL BE COLLECTED BY THE BROKER WHO EFFECTED THE
SALE, AND SHALL BE REMITTED TO THE BUREAU OF INTERNAL
REVENUE WITHIN FIVE (5) BANKING DAYS FROM THE DATE OF
COLLECTION THEREOF. THE BROKER SHALL LIKEWISE SUBMIT ON
MONDAYS OF EACH WEEK TO THE SECRETARY OF THE LOCAL
EXCHANGE OR ORGANIZED MARKETPLACE OF WHICH THE BROKER
IS A MEMBER, A TRUE AND COMPLETE RETURN WHICH SHALL
CONTAIN A DECLARATION OF ALL THE TRANSACTIONS EFFECTED
DURING THE PRECEDING WEEK, AND OF ALL TAXES COLLECTED AND
TURNED OVER TO THE BUREAU OF INTERNAL REVENUE.

{(b)] (C) From the sale or disposition of real property under Section 24{(D)} (B) (7)
shall file a return within thirty (30) days following each sale or other disposition.

SEC. 17. Section 52(A) and (D) of the National Internal Revenue Code of 1997, as
amended, is hereby amended to read as follows:

SEC. 52. Corporation Returns. ~

(A) Requirements. Every corporation AS DEFINED UNDER SECTION 22(B) OF
THIS CODE, AND subject to the tax herein imposed, except foreign corporations not
engaged in trade or business in the Philippines, shall render, in duplicate, a true and
accurate quarterly income tax retum and final or adjustment return in accordance with
the provisions of Chapter XII of this Title. The income tax return shall consist of a
maximum of four (4) pages in paper form or electronic form, be filed by the president,
vice-president or other principal officer, shall be swam to by such officer and by the
treasurer or assistant treasurer, and shall only contain the following information:

(1) Corporate profile and information;

(2) Gross sales, receipts or income from services rendered, or conduct of trade or
business, except income subject to final tax as provided under this Code;

(3) Allowable deductions under this Code,

23


(4) Taxable income as defined in Section 31 of this Code; and
(5) Income tax due and payable.

Provided, That the foregoing provisions shall not affect the implementation of Republic
‘Act No. 10708 or TIMTA.

XXX XXX XXX

(D) Return on Capital Gains Realized from Sale of Shares of Stock, DEBT
INSTRUMENT, AND OTHER SECURITIES not Traded in the Local {Stock
Exchange OR AN ORGANIZED MARKETPLACE. — Every corporation deriving
capital gains from the sale or exchange of shares of stock, DEBT INSTRUMENTS
AND OTHER SECURITIES not traded thru a local [stock] exchange OR AN
ORGANIZED MARKETPLACE as prescribed under SECTIONS 27(D)(3), AND
(5), AND 28 [Sections 24(C), 25(A)(3), 27(E\(2), 28(A(8\e) and 28(B)(5)(c),] shall
file a return within thirty (30) days after each transaction.[ and a final consolidated
return of all transactions during the taxable year on or before the fifteenth (15") day of
the fourth (4%) month following the close of the taxable quarter. ]

(E) RETURN ON CAPITAL GAINS REALIZED FROM SALE OF SHARES OF
STOCK, DEBT INSTRUMENTS, AND OTHER SECURITIES TRADED IN THE
LOCAL EXCHANGE OR AN ORGANIZED MARKETPLACE. — IT SHALL BE
‘THE DUTY OF EVERY BROKER WHO EFFECTED THE SALE, SUBJECT
TO THE TAX IMPOSED UNDER SECTION 27(D)(4) AND (6), AND 28, TO
COLLECT THE TAX DUE AND REMIT THE SAME TO THE BUREAU OF
INTERNAL REVENUE WITHIN FIVE (5) BANKING DAYS FROM THE
DATE OF COLLECTION THEREOF, AND TO SUBMIT ON MONDAYS OF
EACH WEEK TO THE SECRETARY OF THE LOCAL EXCHANGE OR
ORGANIZED MARKETPLACE, OF WHICH THE BORROWER IS A
MEMBER, A TRUE AND COMPLETE RETURN WHICH SHALL CONTAIN
A DECLARATION OF ALL THE TRANSACTIONS EFFECTED DURING
THE PRECEDING WEEK, AND TAXES COLLECTED AND TURNED OVER
TO THE BUREAU OF INTERNAL REVENUE.

SEC. 18. Section 54 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC. 54, Returns of Receivers, Trustees, [in Bankruptcy] or Assignees. — [In cases
wherein r[Receivers, ADMINISTRATORS, trustees in AN IRREVOCABLE
‘TRUST OR bankruptcy, or ANY OTHER PERSON ASSIGNED OR [assignees are]
IN-CHARGE OF operating the property or business of [a |ANOTHER PERSON OR
corporation subject to the tax UNDER THIS CODE [imposed by this Title, such
receivers, trustees or assignees] shall BE IMPOSED WITH THE OBLIGATION TO
FILE |make] THE returns AND PAY THE TAXES FOR SUCH PERSON OR
CORPORATION IN THE SAME MANNER REQUIRED UNDER THIS CODE.
{of net income as and for such corporation, in the same manner and form as such
organization is hereinbefore required to make returns, and] Any tax due on the income
as returned by receivers, ADMINISTRATORS, trustees or assignees shall be assessed
and collected in the same manner as if assessed directly against the {organizations}


PERSON, ESTATE OR ORGANIZATION [of] whose businesses or properties they
haye custody or control,

‘THE TRUSTOR IN A REVOCABLE TRUST, NOT THE TRUSTEE, SHALL BE
RESPONSIBLE IN FILING THE RETURNS REQUIRED UNDER THIS CODE
AND IN DECLARING THE INCOME RECEIVED FROM THE TRUST IN
ACCORDANCE WITH SECTIONS 24, 25, 27 AND 28 OF THIS CODE.
INCOME OF THE TRUST SUBJECTED TO FINAL TAX UNDER SECTIONS
24, 25, 27 AND 28 SHALL NO LONGER BE SUBJECT TO TAX UPON
DISTRIBUTION OF THE INCOME TO THE TRUSTOR OR BENEFICIARY,
NOR SHALL THE TRUSTOR OR BENEFICIARY BE REQUIRED TO
DECLARE THE INCOME AS PART OF ITS TAXABLE INCOME.

ANY INCOME OF A REVOCABLE TRUST NOT SUBJECTED TO FINAL
TAX SHALL BE SUBJECT TO CREDITABLE WITHHOLDING TAX UPON
DISTRIBUTION OF THE INCOME TO THE TRUSTOR OR THE
BENEFICIARY AT A RATE NOT EXCEEDING THE HIGHEST RATE OF
TAX IMPOSED ON INDIVIDUALS UNDER SECTION 24 IN THE CASE OF
INDIVIDUAL TRUSTORS, OR THE CORPORATE INCOME TAX UNDER
SECTION 27 IN THE CASE OF CORPORATE TRUSTORS,

SEC. 19. Section 56 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC. 56. Payment and Assessment of Income Tax for Individuals and Corporations.

(A) Payment of Tax. ~
XXX XXX XX
(3) Payment of Capitat Gains Tax. ~

A. IN GENERAL - The total amount of tax imposed and prescribed under SectionS
24[(C)|(B)B), 24{(D)|(BY\S), 24(B)(7), 25, 27[(E\(2)|(D)B), 27(D\(5), 27(D)(7),
28(A)[(8)(¢)] and 28(B)(5){(c)] shall be paid on the date the return prescribed therefor
is filed by the person liable thereto: Provided, That if the seller submits proof of his
intention to avail himself of the benefit of exemption of capital gains under existing
special laws OR TAX TREATY, no such payments shall be required: Provided,
‘further, That in case of failure to qualify for exemption under such special laws, TAX
TREATY and implementing rules and regulations, the tax due on the gains realized
from the original transaction shall immediately become due and payable, and subject to
the penalties prescribed under applicable provisions of this Code: Provided, finally,
That if the seller, having paid the tax, submits such proof of intent within six (6) months
from the registration of the document transferring the real property, he shall be entitled
to a refund of such tax upon verification of his compliance with the requirements for
such exemption.

XXX

31


SEC. 20. Section 57 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC. 57. Withholding of Tax at Source. —

“ Withholding of Final Tax on Certain Incomes. — Subject to rules and regulations

the Secretary of Finance may promulgate, upon the recommendation of the
Commissioner, requiring the filing of income tax return by certain income payees , the
tax imposed or prescribed [by] UNDER Sections 24(B), 24(C), 25(A), 25(B), 27(D),
27(E), 28(A) AND 28(B)(5) ((2), 25(A\(3) AND 25(B), 25(C), 25(D), 25(E); 27(D\(1),
2H(D\2), 27(DX3), 27(DX5), 28(AX4), 28(AXS), 28(AX7Xa), 28(AX7\b),
28(A\(7\(c), 28(B\(1), 28(B)(2), 28(B)3), 28(BX4), 28(B\(5\(a), 28(BX5\Xb),
28(B)(5)(c)]; 33; and 282 of this Code on specified items of income SUBJECT TO
FINAL TAX shall be withheld by payor-corporation and/or person and paid in the
same manner and subject to the same conditions as provided in Section 58 of this Code.

(B) xxx x KX

((C) Tax-free Covenant Bonds. — In any case where bonds, mortgages, deeds of trust or
other similar obligations of domestic or resident foreign corporations, contain a contract
or provision by which the obligor agrees to pay any portion of the tax imposed in this
Title upon the obligee or to reimburse the obligee for any portion of the tax or to pay
the interest without deduction for any tax which the obligor may be required or
permitted to pay thereon or to retain therefrom under any law of the Philippines, or any
state or country, the obligor shall deduct and withhold a tax equal to thirty percent
(30%) of the interest or other payments upon those bonds, mortgages, deeds of trust or
other obligations, whether the interest or other payments are payable annually or at
shorter or longer periods, and whether the bonds, securities or obligations had been or
will be issued or marketed, and the interest or other payment thereon paid, within or
without the Philippines, if the interest or other payment is payable to a nonresident alien
or to a citizen or resident of the Philippines. |

SEC. 21. Section 73 (A) of the National Internal Revenue Code of 1997, as amended,
is hereby amended to read as follows:

SEC. 73. Distribution of Dividends or Assets by Corporations. —

(A) Definition of Dividends. ~ The term ‘dividends? when used in this Title means any
distribution made by a corporation to its shareholders out of its earnings or profits and
payable to its shareholders, whether in money or in other property.

Where a corporation distributes all of its assets in complete liquidation or dissolution,
the gain realized or loss sustained by the stockholder, whether individual or corporate,
is a taxable income or a deductible loss, UNDER SECTIONS 24(A), 25(A), 25(B),
27(A), 28(A) AND 28 (B), as the case may be

(B) Stock Dividend. - x x x

SEC. 22. Section 108 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:


SEC. 108, Value-added Tax on Sale of Services and Use or Lease of Properties. ~
(A) Rate and Base of Tax. — xxx

‘The phrase ‘sale or exchange of services’ means the performance of all kinds of services
in the Philippines for others for a fee, remuneration or consideration, including those
performed or rendered by construction and service contractors; stock, real estate,
commercial, customs and immigration brokers; lessors of property, whether personal
or real; warehousing services; lessors or distributors of cinematographic films; persons
engaged in milling, processing, manufacturing or repacking goods for others;
proprietors, operators or keepers of hotels, motels, resthouses, pension houses, inns,
resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other
cating places, including clubs and caterers; dealers in securities; [lending investors ;]
transportation contractors on their transport of goods or cargoes, including persons who
transport goods or cargoes for hire and other domestic common carriers by land relative
to their transport of goods or cargoes, common carriers by air and sea relative to their
transport of passengers, goods or cargoes from one place in the Philippines to another
place in the Philippines; sales of electricity by generation companies, transmission, by
any entity and distribution companies, including electric cooperatives; services of
franchise grantees of electric utilities, telephone and telegraph, radio and television
broadcasting and all other franchise grantees except those under Section 119 of this
Code and non-life insurance companies (except their crop insurances), including surety,
fidelity, indemnity and bonding companies ; and similar services regardless of whether
or not the performance thereof calls for the exercise or use of the physical or mental
faculties. The phrase ‘sale or exchange of services” shall likewise include:

XXX NX XXX

SEC. 23. Section 121 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC. 121. Tax on Banks and Non-Bank Financial Intermediaries Performing
Quasi-Banking Functions. — There shall be collected a tax on gross receipts derived
from sources within the Philippines by all banks and non-bank financial intermediaries
PERFORMING QUASI-BANKING FUNCTIONS AT THE RATE OF FIVE
PERCENT (5%) ON INCOME SUCH AS INTEREST, COMMISSIONS, AND
DISCOUNTS FROM LENDING ACTIVITIES AS WELL AS INCOME FROM
FINANCIAL LEASING, ROYALTIES, RENTALS OF PROPERTY, REAL OR
PERSONAL, PROFITS FROM SALE OR EXCHANGE INCLUDING GAINS
DERIVED FROM SALE OR TRANSFER OF REAL PROPERTIES, NET
TRADING GAINS WITHIN THE TAXABLE YEAR OF FOREIGN
CURRENCY, DEBT SECURITIES, DERIVATIVES, AND OTHER SIMILAR
FINANCIAL INSTRUMENTS, AND ALL OTHER ITEMS TREATED AS
GROSS INCOME UNDER SECTION 32 OF THIS CODE, EXCEPT
DIVIDENDS AND EQUITY SHARES AND NET INCOME OF SUBSIDIARIES

33


WHICH SHALL BE SUBJECT TO ZERO PERCENT (0%) [in accordance with
the following schedule}:

[(a) On interest, commissions and discounts from lending activities as well as income
from financial leasing, on the basis of remaining maturities of instruments from which
such receipts are derived:]

[Maturity period is five years or less ........ 5%]
[Maturity period is more than five years 1%]

[(b) On dividends and equity sharesand net income of subsidiaries
. 0%]

{(c) On royalties, rentals of property, real or personal, profits, from exchange and all
other items treated as gross income under Section 32 of this Code 7%]

{(d) On net trading gains within the taxable year of foreign currency, debt securities,
derivatives, and other similar financial instruments... ..... 7%)

[Provided, however, That in case the maturity period referred to in paragraph (a) is
shortened thru pre-termination, then the maturity period shall be reckoned to end as of
the date of pre-termination for purposes of classifying the transaction and the correct
rate of tax shall be applied accordingly. |

Provided, That FOR PURPOSES OF COMPUTING THE GROSS RECEIPTS, the
generally accepted accounting principles OF RECORDING INCOME AS
ADOPTED BY THE BANK SHALL BE FOLLOWED. BANKS USING THE
ACCRUAL BASIS OF FINANCIAL REPORTING SHALL USE THE
ACCRUAL METHOD IN COMPUTING THE GROSS RECEIPTS: PROVIDED,
THAT, ONCE ADOPTED, IT SHALL BE CONSISTENT FROM YEAR TO
YEAR: PROVIDED, FURTHER, THAT FOR PURPOSES OF DETERMINING
THE GROSS RECEIPTS, NO DEDUCTION SHALL BE MADE ON THE
INCOME EXCEPT IN THE CASE OF GAINS FROM DEALINGS IN
PROPERTY AND TRADING GAINS, WHERE NET LOSS WITHIN THE
SAME BUSINESS ACTIVITY CAN BE OFFSET TO DETERMINE THE NET
GAIN SUBJECT TO THIS TAX: PROVIDED, FURTHER, THAT SUCH
OFFSETTING SHALL BE ON A QUARTERLY BASIS, AND ANY NET LOSS
INCURRED IN A QUARTER CAN BE CARRIED OVER AS DEDUCTION IN
THE SUCCEEDING QUARTER/S: PROVIDED FINALLY, THAT NET LOSS
INCURRED IN A TAXABLE YEAR CANNOT BE CARRIED OVER TO THE
SUCCEEDING TAXABLE YEAR

Jas may be prescribed by the Bangko Sentral ng Pilipinas for the bank or non-bank
financial intermediary performing quasi-banking functions shall likewise be the basis
for the calculation of gross receipts]

XXX XXX XXX,


SEC. 24, Section 122 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC. 122. Tax on Other Non-Bank Financial Intermediaries, ~ There shall be
collected a tax of five percent (5%) on the gross receipts derived by other non-bank
financial intermediaries doing business in the Philippines, from interest, commissions
AND discounts FROM LENDING ACTIVITIES, AS WELL AS INCOME FROM
FINANCIAL LEASING, ROYALTIES, RENTALS OF PROPERTY, REAL OR
PERSONAL, PROFITS FROM SALE OR EXCHANGE INCLUDING GAINS
DERIVED FROM SALE OR TRANSFER OF REAL PROPERTIES, NET
TRADING GAINS WITHIN THE TAXABLE YEAR OF FOREIGN
CURRENCY, DEBT SECURITIES, DERIVATIVES, AND OTHER SIMILAR
FINANCIAL INSTRUMENTS, UNDERWRITING FEES, SERVICE INCOME,
AND ALL OTHER ITEMS TREATED AS GROSS INCOME UNDER SECTION
32 OF THIS CODE, EXCEPT DIVIDENDS AND EQUITY SHARES AND NET
INCOME OF SUBSIDIARIES WHICH SHALL BE SUBJECT TO ZERO
PERCENT (0%), {and all other items treated as gross income under this Code. [.
Provided, That interests, commissions and discounts from lending activities, as well as
income from financial leasing, shall be taxed on the basis of the remaining maturities
of the instruments from which such receipts are derived, in accordance with the
following schedule: |

[Maturity is five years of less .... . 5%]
[Maturity period is more than five years 1%

[Provided, however, That in case the maturity period is shortened thru pretermination,
then the maturity period shall be reckoned to end as of the date of pretermination for
purposes of classifying the transaction and the correct rate of tax shall be applied
accordingly.)

GROSS RECEIPTS SHALL BE COMPUTED IN THE SAME MANNER
PROVIDED UNDER SECTION 121,

FINANCIAL INTERMEDIARIES SUBJECT TO TAX UNDER THIS SECTION
SHALL LUDE FINANCING COMPANIES, FINANCE LEASING
COMPANIES, INVESTMENT HOUSES, PAWNSHOPS, REIGN
EXCHANGE DEALERS AND MONEY BROKERS, TRUST ENTITIES,
CREDIT CARD COMPANIES, LENDING INVESTORS, SAVINGS AND
LOAN ASSOCIATIONS, AND OTHER FINANCIAL INTERMEDIARIES
EXCEPT BANKS AND NON-BANKS PERFORMING QUASI-BANKING
FUNCTIONS WHICH SHALL BE TAXED UNDER SECTION 121 OF THIS
CODE.

COLLECTIVE INVESTMENT SCHEMES SUCH AS MUTUAL FUNDS, UNIT
LINKED INVESTMENT TRUST FUNDS, UNIT LINKED VARIABLE
INSURANCE, AND OTHER COLLECTIVE INVESTMENT SCHEMES AS
MAY BE DETERMINED BY APPROPRIATE GOVERNMENT
REGULATORY AGENCIES SHALL NOT BE SUBJECT TO GROSS
RECEIPTS TAX AND OTHER PERCENTAGE TAXES IMPOSED UNDER

a5


TITLE V, AND THE VALUE ADDED TAX IMPOSED UNDER TITLE IV OF
THIS CODE. FOR PURPOSES OF THIS EXEMPTION, A CIS SHALL HAVE
AT LEAST ONE THOUSAND (1,000) OWNERS, INVESTORS OR
PARTICIPANTS, AND SHALL HAVE COMPLIED WITH THE MINIMUM
PUBLIC OWNERSHIP REQUIREMENT OF THE APPROPRIATE
GOVERNMENT REGULATORY AGENCIES,

IF A PERSON OR COMPANY NOT LICENSED TO DO FINANCIAL
INTERMEDIATION BUT ENGAGES IN FINANCIAL INTERMEDIATION
SERVICES AS AN INCIDENT TO ITS MAIN BUSINESS ACTIVITY, AND
RECEIVING INCOME THEREFROM, SUCH INCOME FROM FINANCIAL
INTERMEDIATION SHALL BE SUBJECT TO THE TAX IMPOSED ON ITS
PRINCIPAL ACTIVITY. TO BE CONSIDERED INCIDENTAL, THE INCOME
FROM INTERMEDIATION SERVICES SHALL NOT EXCEED FIFTY
PERCENT (50%) OF ITS TOTAL ANNUAL INCOME. IF MORE THAN FIFTY
PERCENT (50%), WITH AT LEAST SIX (6) TRANSACTIONS ENTERED
INTO DURING THE YEAR, THE TOTAL INCOME FROM FINANCIAL
INTERMEDIATION SHALL BE SUBJECT TO TAX UNDER THIS
SUBSECTION.

IN-HOUSE LENDING OR SELLER FINANCING SHALL NOT BE SUBJECT
TO TAX UNDER THIS SUBSECTION. ANY INCOME EARNED OR
RECEIVED FROM IN-HOUSE LENDING OR SELLER FINANCING SHALL
BE SUBJECT TO THE SAME TAX APPLICABLE TO THE PRINCIPAL
BUSINESS ACTIVITY OR TRANSACTION,

HOLDING COMPANIES SHALL BE SUBJECT TO EITHER VALUE ADDED
TAX OR GROSS RECEIPTS TAX DEPENDING ON THE NATURE OF ITS
BUSINESS ACTIVITIES. IF UNDERTAKING FINANCING AND OTHER
SIMILAR ACTIVITIES, IT SHALL BE SUBJECT TO GROSS RECEIPTS TAX
UNDER THIS SECTION. INCOME DERIVED FROM THE SALE OF GOODS,
PROPERTIES AND OTHER SERVICES SHALL BE SUBJECT TO VALUE
ADDED TAX UNDER SECTION 105 OF THIS CODE.

[Provided finally, ‘That the generally accepted accounting principles as may be
prescribed by the Securities and Exchange Commission for other non-bank financial
intermediaries shall likewise be the basis for the calculation of gross receipts. |

Nothing in this Code shall preclude the Commissioner from imposing the same tax
herein provided on persons performing similar [financing] FINANCIAL
INTERMEDIATION activities

SEC. 25. Section 123 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC. 123. Tax on Life Insurance AND REINSURANCE Premiums|,| .— There shall
be collected from every person, company or corporation, (except purely cooperative


companies or associations) doing life insurance business of any sort in the Philippines
A PREMIUM TAX AT THE FOLLOWING RATES

(A) FOR LIFE INSURANCE INCLUDING HEALTH INSURANCE AS A
RIDER TO LIFE INSURANCE POLICY, a tax of two percent (2%) of the
total premium collected, whether such premiums are paid in money, notes,
credits or any substitute for money; but premiums refunded within six (6)
months after payment on account of rejection of risk or returned for other reason
to a person insured shall not be included in the taxable receipts; nor shall any
tax be paid upon reinsurance by a company IF THE TAX [that] has already
BEEN paid [the tax} ON THE DIRECT PREMIUM; nor upon premiums
collected or received by any branch of a domestic corporation, firm or
association doing business outside the Philippines on account of any life
insurance of the insured who is a nonresident, if any tax on such premium is
imposed by the foreign country where the branch is established; nor upon
premiums collected or received on account of any reinsurance, if the insured, in
case of personal insurance, resides outside the Philippines, if any tax on such
premiums is imposed by the foreign country where the original insurance has
been issued or perfected; nor upon that portion of the premiums collected or
received by the insurance companies on variable contracts IN A
COLLECTIVE INVESTMENT SCHEME in excess of the amounts
necessary to insure the lives of the variable contract owners; PROVIDED,
THAT THE CIS SHALL HAVE AT LEAST ONE THOUSAND (1,000)
OWNERS, INVESTORS OR PARTICIPANTS, AND THAT ANY
MINIMUM PUBLIC OWNERSHIP AS MAY BE REQUIRED BY
APPROPRIATE GOVERNMENT REGULATORY AGENCIES SHALL
BE COMPLIED WITH.

(B) PERSONS DOING BUSINESS SIMILAR OR AKIN TO LIFE AND
HEALTH INSURANCE SUCH AS PRE-NEED COMPANIES, PENSION
FUND COMPANIES, HEALTH MAINTENANCE ORGANIZATIONS
AND OTHER COMPANIES SIMILAR TO LIFE INSURANCE, AS MAY
BE DETERMINED BY THE APPROPRIATE GOVERNMENT
REGULATORY AGENCIES, SHALL BE SUBJECT TO TAX UNDER
THIS SUBSECTION AT THE RATE OF TWO PERCENT (2%) OF THE
GROSS PREMIUM, PLAN PAYMENT, OR INSTALLMENT
PAYMENTS COLLECTED WITHOUT ANY DEDUCTION FOR THE
AMOUNTS REQUIRED BY THE APPROPRIATE GOVERNMENT
REGULATORY AGENCIES TO BE EARMARKED FOR THE
BENEFIT OF THE INSURED, OR PLANHOLDER.

NOTHING IN THIS CODE SHALL PRECLUDE THE COMMISSIONER
FROM IMPOSING THE SAME TAX HEREIN PROVIDED ON PERSONS
PERFORMING SIMILAR INSURANCE BUSINESS ACTIVITIES.

LIFE REINSURANCE COMPANIES SHALL BE SUBJECT TO PREMIUM
TAX ON PREMIUMS COLLECTED UNDER SUBSECTION (A) HEREOF,
HOWEVER, PREMIUMS COLLECTED WHERE THE TAX ON THE DIRECT
PREMIUM HAS ALREADY BEEN PAID BY THE DIRECT INSURER SHALL

37


BE EXCLUDED FROM THE GROSS PREMIUM SUBJECT TO PREMIUM
TAX.

NON-LIFE REINSURANCE COMPANIES SHALL BE SUBJECT TO VALUE
ADDED TAX ON PREMIUMS COLLECTED UNDER SECTION 108 OF THIS
CODE. HOWEVER, PREMIUMS COLLECTED WHERE THE TAX ON THE
DIRECT PREMIUM HAS ALREADY BEEN PAID BY THE DIRECT
INSURER SHALL BE EXCLUDED FROM THE GROSS PREMIUM SUBJECT
TO VALUE ADDED TAX.

FOR THE PURPOSE OF CLAIMING EXEMPTION, A CERTIFICATION AND
A SUMMARY REPORT TO BE PRESCRIBED IN A REGULATION, ISSUED
BY THE DIRECT INSURER, THAT THE TAX THEREON HAS ALREADY
BEEN PAID, SHALL BE ATTACHED TO THE QUARTERLY PREMIUM TAX
RETURN OR VALUE ADDED TAX RETURN TO BE FILED. ANY
MISREPRESENTATION SHALL SUBJECT THE DIRECT INSURER TO
PENALTIES UNDER SECTIONS 248, 253, 254, 255, 256, AND 257 OF THIS
CODE.

ANY INCOME, OTHER THAN RECEIPT OF PREMIUM SUCH AS
MANAGEMENT FEES, SERVICE FEES, CHARGES, AND PENALTIES,
COMMISSIONS, INCOME FROM THE SALE OR TRANSFER OF GOODS,
PROPERTIES OR SERVICES, EARNED OR RECEIVED AS AN IN ENT
OF DOING THE BUSINESS OF LIFE, NON-LIFE AND OTHER INSURANCE
ACTIVITIES, SHALL BE SUBJECT TO THE VALUE ADDED TAX UNDER
SECTION 105 OF THIS CODE; PROVIDED, THAT INCOME RECEIVED
FROM THE INVESTMENT AND REINVESTMENT OF PREMIUMS
EARNED SHALL NOT BE SUBJECT TO VALUE ADDED TAX NOR TO THE
GROSS RECEIPTS TAX IMPOSED UNDER SECTIONS 121 AND 122 OF THIS
CODE.

A VARIABLE INSURANCE CONTRACT WHERE AMOUNTS IN EXCESS OF
INSURANCE COSTS ARE COLLECTED AS PART OF THE PREMIUM AND
WHERE UNITS OF PARTICIPATION IN A POOLED FUND ARE ISSUED TO
THE INSURED REPRESENTING ITS SHARE IN THE POOLED FUNDS, IS A
COLLECTIVE INVESTMENT SCHEME. THE AMOUNTS OF PREMIUM
COLLECTED IN EXCESS OF THE INSURANCE COST IS NOT SUBJECT TO
PREMIUM TAX UNDER THIS SECTION AND TO THE GROSS RECEIPTS
TAX IMPOSED UNDER SECTIONS 121 AND 122, OR TO ANY
PERCENTAGE TAX IMPOSED UNDER TITLE V AND TO VALUE ADDED
TAX UNDER SECTION 105, TITLE IV OF THIS CODE.

SEC. 26, Section 127 of the National Internal Revenue Code of 1997, as amended, is
hereby deleted:

{SEC. 127. Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded
through the Local Stock Exchange or through Initial Public Offering. -|

[(A) Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded through
the Local Stock Exchange. — There shall be levied, assessed and collected on every

38


sale, barter, exchange, or other disposition of shares of stock listed and traded through
the local stock exchange other than the sale by a dealer in securities, a tax at the rate of
one-half of one percent (4 of 1%) of the gross selling price or gross value in money of
the shares of stock sold, bartered, exchanged or otherwise disposed which shall be paid
by the seller or transferor]

[(B) Tax on Shares of Stock Sold or Exchanged through Initial Public Offering. ~
‘There shall be levied, assessed and collected on every sale, barter, exchange or other
disposition through initial public offering of shares of stock in closely-held
corporations, as defined herein, a tax at the rates provided hereunder based on the gross
selling price or gross value in money of the shares of stock sold, bartered, exchanged
or otherwise disposed in accordance with the proportion of shares of stock sold,
bartered, exchanged or otherwise disposed to the total outstanding shares of stock after
the listing in the local stock exchange:}

[Up to twenty-five percent (25%) «0.0... ee 4%)

{Over twenty-five percent (25%) but not over thiny-tre and one third percent (33
WM) corsovsveveose 2%I

{Over thirty-three and one third percent (33 4%)... 1%

‘The tax herein imposed shall be paid by the issuing corporation in primary offering or
by the seller in secondary offering. |

[For purposes of this Section, the term ‘closely held corporation’ means any
corporation at least fifty percent (50%) in value of outstanding capital stock or at least
fifty percent (50%) of the total combined voting power of all classes of stock entitled
to vote is owned directly or indirectly by or for not more than twenty (20) individuals.
|

[For purposes of determining whether the corporation is a closely held corporation,
insofar as such determination is based on stock ownership, the following rules shall be
applied: |

[(1) Stock Not Owned by Individuals, — Stock owned directly or indirectly by or for a
corporation, partnership, estate or trust shall be considered as being owned
proportionately by its shareholders, partners or beneficiaries. |

[(2) Famity and Partnership Ownerships. — An individual shall be considered as
owning the stock owned directly or indirectly, by or for his family, or by or for his
partner. For purposes of the paragraph, the ‘family of an individual’ includes only his
brothers and sisters (whether by whole or half-blood), spouse, ancestors and lineal
descendants.

[@) Option. — if any person has an option to acquire stock, such stock shall be
considered as owned by such person. For purposes of this paragraph, an option to


acquire such an option and cach one of a series of options shall be considered as an
option to acquire such stock.]

[(4) Constructive Ownership as Actual Ownership. ~ Stock constructively owned by
reason of the application of paragraph (1) or (3) hereof shall, for purposes of applying
paragraph (1) or (2), be treated as actually owned by such person; but stock
constructively owned by the individual by reason of the application of paragraph (2)
hereof shall not be treated as owned by him for purposes of again applying such
paragraph in order to make another the constructive owner of such stock]

[(C) Return on Capital Gains Realized from Sale of Shares of Stocks. -|

[(1) Return on Capital Gains Realized from Sale of Shares of Stock Listed and Traded
in the Local Stock Exchange. — \t shall be the duty of every stock broker who effected
the sale subject to the tax imposed herein to collect the tax and remit the same to the
Bureau of Internal Revenue within five (5) banking days from the date of collection
thereof and to submit on Mondays of each week to the secretary of the stock exchange,
of which he is a member, a true and complete return which shall contain a declaration
of all the transactions effected through him during the preceding week and of taxes
collected by him and tuned over to the Bureau of Internal Revenue. |

[(@2) Return on Public Offerings of Shares of Stock. ~ In case of primary offering, the
corporate issuer shall file the return and pay the corresponding tax within thirty (30)
days from the date of listing of the shares of stock in the local stock exchange. In the
case of secondary offering, the provision of Subsection (C)(1) of this Section shall
apply as to the time and manner of the payment of the tax.}

[(D) Common Provisions. ~ Any gain derived from the sale, barter, exchange or other
disposition of shares of stock under this Section shall be exempt from the tax imposed
in Sections 24(C), 27(D\(2), 28(A\(8\(c), and 28(B)(5)(c) of this Code and from the
regular individual or corporate income tax. Tax paid under this Section shall not be
deductible for income tax purposes. |

SEC. 27. Sections 174, 175, 176, 177, 178, 179, 180, 181, 182, 183, 184, 185, 186, 187,
188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 198, and 199 of the National Internal Revenue
Code of 1997, as amended, is hereby amended to read as follows:

SEC. 174. Stamp Tax on Original Issue of Shares of Stock. — On every original issue,
whether on organization, reorganization or for any lawful purpose, of shares of stock
by any association, company, or corporation, INCLUDING SHARES OF STOCK
OR UNITS OF PARTICIPATION IN A COLLECTIVE INVESTMENT
SCHEME, there shall be collected a documentary stamp tax OF SEVENTY-FIVE
PERCENT OF ONE PERCENT (0.75%) OF THE PAR VALUE [Two pesos
(P2.00) on each Two hundred pesos (P200), or fractional part thereof, of the par value,
lof such shares of stock: Provided, That in the case of the original issue of shares of
stock without par value, the amount of the documentary stamp tax herein prescribed
shall be based upon the actual consideration for the issuance of such shares of stock

Provided, further, That in the case of stock dividends, on the actual value represented
by each share, PROVIDED, FINALLY, THAT IN THE CASE OF COLLECTIVE
INVESTMENT SCHEMES WITHOUT PAR VALUE, THE DOCUMENTARY

40


STAMP TAX SHALL BE BASED ON THE INITIAL NET ASSET VALUE PER
UNIT.

|SEC. 175. Stamp Tax on Sales, Agreements to Sell, Memoranda of Sales, Deliveries
or Transfer of Shares or Certificates of Stock. — On all sales, or agreements to sell, or
memoranda of sales, or deliveries, or transfer of shares or certificates of stock in any
association, company, or corporation, or transfer of such securities by assignment in
blank, or by delivery, or by any paper or agreement, or memorandum of other evidences
of transfer or sale whether entitling the holder in any manner to the benefit of such
stock, or to secure the future payment of money, or for the future transfer of any stock,
there shall be collected a documentary stamp tax of One peso and fifty centavos (P1.50)
‘on each Two hundred pesos (P200), or fractional part thereof, of the par value of such
stock: Provided, That only one tax shall be collected on each sale or transfer of stock
from one person to another, regardless of whether or not a certificate of stock is issued,
indorsed, or delivered in pursuance of such sale or transfer: and Provided, further, That
in the case of stock without par value the amount of the documentary stamp tax herein
prescribed shall be equivalent to fifty percent (50%) of the documentary stamp tax paid
upon the original issue of said stock |

SEC [176]175. Stamp Tax on Bonds, Debentures, Certificates of Stock or
Indebtedness Issued in Foreign Countries. — On all bonds, debentures, certificates of
stock, or certificates of indebtedness issued in any foreign country, there shall be
collected from the person selling or transferring the same in the Philippines, A
DOCUMENTARY STAMP TAX OF SEVENTY-FIVE PERCENT OF ONE
PERCENT (0.75%) OF THE VALUE OF THE TRANSACTION. [such tax as is
required by law on similar instruments when issued, sold or transferred in the
Philippines]

{SEC. 177. Stamp Tax on Certificates of Profits or Interest in Property or
Accumulations. — On all certificates of profits, or any certificate or memorandum
showing interest in the property or accumulations of any association, company or
corporation, and on all transfers of such certificates or memoranda, there shall be
collected a documentary stamp tax of One peso (P1.00) on each Two hundred pesos
(P200), or fractional part thereof, of the face value of such certificates or
memorandum.}

[SEC. 178. Stamp Tax on Bank Checks, Drafts, Certificates of Deposit not Bearing
Interest, and Other Instruments. — On each bank check, draft, or certificate of deposit
not drawing interest, or order for the payment of any sum of money drawn upon or
issued by any bank, trust company, or any person or persons, companies or
corporations, at sight or on demand, there shall be collected a documentary stamp tax
of Three pesos (P3.00),]

SEC. [179]176. Stamp Tax on All Debt Instruments, — On every original issue of debt
instruments, there shall be collected a documentary stamp tax OF SEVENTY-FIVE
PERCENT OF ONE PERCENT (0.75%) [One peso and fifty centavos (P1.50) on
each Two hundred pesos (P200), or fractional part thereof,] of the issue price of any
such debt instruments: Provided, That for such debt instruments with terms of less than
one (1) year, the documentary stamp tax to be collected shall be of a proportional
amount in accordance with the ratio of its term in number of days to three hundred

a


sixty-five (365) days: Provided, further, That only one documentary stamp tax shall be
imposed on either loan agreement, or promissory notes issued to secure such loan

For purposes of this section, the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to
debentures, certificates of indebtedness, due bills, bonds, loan agreements, including
those signed abroad wherein the object of contract is located or used in the Philippines,
instruments and securities issued by the government or any of its instrumentalities,
deposit substitute debt instruments, certificates or other evidences of deposits that are
either drawing interest significantly higher the regular savings deposit taking into
consideration the size of the deposit and the risks involved or drawing interest and
having a specific maturity date, [orders for payment of any sum of money otherwise
than at sight or on demand,] promissory notes, whether negotiable or non-negotiable,
except bank notes issued for circulation

{SEC. 180. Stamp Tax on All Bills of Exchange or Drafts. - On all bills of exchange
(between points within the Philippines) or drafts, there shall be collected a documentary
stamp tax of Sixty centavos (PO,60) on each Two hundred pesos (P200) or fractional
part thereof, of the face value of any such bill of exchange or draft.)

SEC. [181]177. Stamp Tax Upon Acceptance of Bills of Exchange and Others.-Upon
any acceptance or payment of any bill of exchange or order for the payment of money
purporting to be drawn in a foreign country but payable in the Philippines, there shall
be collected a documentary stamp tax OF THIRTY PERCENT OF ONE PERCENT
(0.30%) [Sixty centavos (P0.60) on each Two hundred pesos (P200), or fractional part
thereof} of the face value of any such bill of exchange, or order, or the Philippine
equivalent of such value, if expressed in foreign currency,

SEC. [182]78. Stamp Tax on Foreign Bills of Exchange and Letters of Credit, — On
all foreign bills of exchange and letter of credit (including orders, by telegraph or
otherwise, for the payment of money issued by express or steamship companies or by
any person or persons) drawn in but payable out of the Philippines in a set of three (3)
‘or more according to the custom of merchants and bankers, there shall be collected a
documentary stamp tax OF THIRTY PERCENT OF ONE PERCENT (0.30%)
[Sixty centavos (PO.60) on each Two hundred pesos (P200), or fractional part thereof}
of the face value of any such bill of exchange or letter of credit, or the Philippine
equivalent of such face value, if expressed in foreign currency: PROVIDED, THAT,
IN THE CASE OF A LETTER OF CREDIT ON WHICH THE
DOCUMENTARY STAMP TAX IMPOSED UNDER THIS SECTION IS PAID
UPON OPENING, THE SAME SHALL NOT BE SUBJECT AGAIN TO
SECTION 195 UPON AVAILMENT OF THE TRUST RECEIPT LINE WHERE
THE PROPERTY SUBJECT OF THE LETTER OF CREDIT IS MADE A
SECURITY FOR PAYMENT.

SEC. [183]179. Stamp Tax on Life AND HEALTH Insurance Policies. ~ On all
policies of insurance or other instruments by whatever name the same may be called,
whereby any insurance shall be made or renewed upon any life or lives AND HEALTH
OF PERSONS, there shall be collected a one-time documentary stamp tax at the
following rates:

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If the amount of insurance does not exceed P100,000 - Exempt
If the amount of insurance exceeds P100,000

but does not exceed P300,000 ~P20.00

If the amount of insurance exceeds P300,000

but does not exceed PS00,000 ~P50.00

Ifthe amount of insurance exceeds P500,000

but does not exceed P750,000 ~P100.00

Ifthe amount of insurance exceeds P750,000

‘but does not exceed P1,000,000 ~P150,00
Ifthe amount of insurance exceeds P1,000,000 ~ P200.00

SEC, |184]180, Stamp Tax on Policies of Insurance Upon Property. —On all policies
of insurance or other instruments by whatever name the same may be called, by which
insurance shall be made or renewed upon property of any description, including rents
or profits, against peril by sea or on inland waters, or by fire or lightning, there shall be
collected a documentary stamp tax OF TWELVE AND ONE-HALF PERCENT
(12.5%) [Fifty centavos (P0.50) on each Four pesos (P4.00), o fractional part thereof,
of the amount of premium charged: Provided, however, That no documentary stamp
tax shall be collected on reinsurance contracts or on any instrument by which cession
or acceptance of insurance risks under any reinsurance agreement is effected or
recorded: PROVIDED, FURTHER, THAT SUCH RATE SHALL BE REDUCED
ACCORDING TO THE FOLLOWING SCHEDULE:

JANUARY 1, 2020: ELEVEN AND ONE-HALF PERCENT (11.5%),
JANUARY 1, 2021: TEN AND ONE-HALF PERCENT (10.5%),
JANUARY 1, 2022: NINE AND ONE-HALF PERCENT (9.5%),
JANUARY 1, 2023: EIGHT AND ONE-HALF PERCENT (8.5%),
JANUARY 1, 2024: SEVEN AND ONE-HALF PERCENT (7.5%).

SEC. [185]181. Stamp Tax on Fidelity Bonds and Other Insurance Policies. ~ On all
policies of insurance or bonds or obligations of the nature of indemnity for loss, damage
or liability made or renewed by any person, association, company or corporation
transacting the business of accident, fidelity, employer's liability, plate, glass, steam
boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life,
marine, inland, and fire insurance), and all bonds, undertakings, or recognizances,
conditioned for the performance of the duties of any office or position, for the doing or
not doing of anything therein specified, and on all obligations guaranteeing the validity
or legality of any bond or other obligations issued by any province, city, municipality,
or other public body or organization, and on all obligations guaranteeing the title to any
real estate, or guaranteeing any mercantile credits, which may be made or renewed by
any such person, company or corporation, there shall be collected a documentary stamp
tax OF TWELVE AND ONE-HALF PERCENT (12.5%) [Fifty centavos (P0.50) on
cach Four pesos (P4.00), or fractional part thereof,| of the premium charged:
PROVIDED, FURTHER, THAT SUCH RATE SHALL BE REDUCED
ACCORDING TO THE FOLLOWING SCHEDULE:


JANUARY 1, 2020: ELEVEN AND ONE-HALF PERCENT (11.5%),
JANUARY 1, 2021: TEN AND ONE-HALF PERCENT (10.5%),
JANUARY 1, 2022: NINE AND ONE-HALF PERCENT (9.5%),
JANUARY 1, 2023: EIGHT AND ONE-HALF PERCENT (8.5%),
JANUARY 1, 2024: SEVEN AND ONE-HALF PERCENT (7.5%).

SEC. [186]182. Stamp Tax on Policies of Annuities and Pre-Need Plans, ~ On all
policies of annuities, or other instruments by whatever name the same may be called,
whereby an annuity may be made, transferred or redeemed, there shall be collected a
documentary stamp tax OF ONE-HALF OF ONE PERCENT (0.5%) [One peso
(P1.00) on each Two hundred pesos (P200), or fractional part thereof,] of the premium
or installment payment on contract price, OR CONTRIBUTION [collected |
CHARGED. On pre-need plans, OR OTHER INSTRUMENTS BY WHATEVER
NAME THE SAME MAY BE CALLED, WHEREBY AN ANNUITY MAY BE
MADE, TRANSFERRED OR REDEEMED, THERE SHALL BE COLLECTED
A DOCUMENTARY STAMP TAX OF TWENTY PERCENT OF ONE
PERCENT (0.2%) OF THE PREMIUM OR INSTALLMENT PAYMENT ON
CONTRACT PRICE, OR CONTRIBUTION CHARGED, [Forty centavos (P0.40)
on each Two hundred pesos (P200), or fractional part thereof, of the premium or
contribution collected.]

SEC, [187]183. Stamp Tax on Indemnity Bonds. — On all bonds for indemnifying any
person, firm or corporation who shall become bound or engaged as surety for the
payment of any sum of money or for the due execution or performance of the duties of
any office or position or to account for money received by virtue thereof, and on all
ather bonds of any description, except such as may be required in legal proceedings, or
are otherwise provided for herein, there shall be collected a documentary stamp tax of
[Thirty centavos (0.30) on each Four pesos (P4.00), or fractional part thereof, |
SEVEN AND ONE-HALF PERCENT (7.5%) OF THE PREMIUM CHARGED.

SEC, [188]184. Stamp Tax on Certificates. — On each certificate of damage or
otherwise, and on every other certificate or document issued by any customs officer,
marine surveyor, or other person acting as such, and on each certificate issued by a
notary public, and on each cettificate of any description required by law or by rules or
regulations of a public office, or which is issued for the purpose of giving information,
or establishing proof of a fact, and not otherwise specified herein, there shall be
collected a documentary stamp tax of [Thirty] FORTY pesos (P[3]40.00)

SEC, [189]185, Stamp Tax on Warehouse Receipts. — xxx

SEC. [190]186. Stamp Tax on Jai-alai, Horse Race Tickets, Lotto or Other
Authorized Numbers Games. ~ xxx.

SEC. |191]187, Stamp Tax on Bills of Lading or Receipts. — xxx


[SEC. 192, Stamp Tax on Proxies, -On each proxy for voting at any election of officers
of any company or association, or for any other purpose, except proxies issued affecting
the affairs of associations or corporations organized for religious, charitable or literary
purposes, there shall be collected a documentary stamp tax of Thirty Pesos (P30.00),]

[SEC. 193. Stamp Tax on Powers of Attorney, —On each power of attorney to perform
any act whatsoever, except acts connected with the collection of claims due from or
accruing to the Government of the Republic of the Philippines, or the government of
any province, city or municipality, there shall be collected a documentary stamp tax of
Ten pesos (P10.00).]

SEC. [194]188. Stamp Tax on Leases and Other Hiring Agreements. ~ xxx

SEC. [195]189. Stamp Tax on Mortgages, Pledges and Deeds of Trust. — On every
mortgage or pledge of lands, estate, or property, real or personal, heritable or movable,
whatsoever, where the same shall be made as a security for the payment of any definite
and certain sum of money lent at the time or previously due and owing or forborne to
be paid, being payable, and on any conveyance of land, estate, or property whatsoever,
in trust or to be sold, or otherwise converted into money which shall be and intended
only as security, either by express stipulation or otherwise, there shall be collected a
documentary stamp tax OF THIRTY PERCENT OF ONE PERCENT (0.3%) OF
‘THE AMOUNT SECURED, [at the following rates:]

[(a) When the amount secured does not exceed Five thousand pesos (P5,000), Forty
pesos (P4000),

{(b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of
Five thousand pesos (PS,000), an additional tax of Twenty pesos (P20.00).|

XXX XXX XXX

SEC, [196]190. Stamp Tax on Deeds of Sale, Conveyances and Donation of Real
Property. ~ xxx

SEC, [197]191, Stamp Tax on Charter Parties and Similar Instruments, — xxx

SEC, [198]192, Stamp Tax on [Assignments and] Renewals of Certain Instruments.
~ Upon each and every [assignment or transfer of any mortgage, lease or policy of
insurance, or the] renewal or continuance of any agreement, contract, charter, or any
evidence of obligation or indebtedness by THE EXTENSION OF THE TERM OR
MATURITY BY faltering or otherwise] ALTERATION OF SUCH
AGREEMENT, CONTRACT OR CHARTER, there shall be levied, collected and
paid a documentary stamp tax, at the same rate as that imposed on the original
instrument.

SEC. [199]193. Documents and Papers Not Subject to Stamp Tax. ~ The provisions
of Section 173 to the contrary notwithstanding, the following instruments, documents
and papers shall be exempt from the documentary stamp tax:

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(a) Policies of insurance or annuities made or granted by a fraternal or beneficiary
society, order, association or cooperative company, operated on the lodge system or
local cooperation plan and organized and conducted solely by the members thereof for
the exclusive benefit of each member and not for profit.

XXX XX XXX,

(n) Interbank call loans with maturity of not more than [seven (7)] FIVE (5) days to
cover deficiency in reserves against deposit liabilities, including those between or
among banks and quasi-banks.

(O) REDEMPTION, SALE, BARTER, EXCHANGE, OR OTHER MODES OF
DISPOSITION OR EXCHANGE OF SHARES OF STOCK OR UNITS OF
PARTICIPATION IN A COLLECTIVE INVESTMENT SCHEME OR OTHER:
CIS SECURITIES LISTED AND TRADED IN A LOCAL EXCHANGE OR AN
ORGANIZED MARKETPLACE, THE ORIGINAL ISSUANCE OF SHARES
OR UNITS OF PARTICIPATION IN A CIS SHALL NOT BE COVERED BY
‘THIS EXEMPTION,

SEC, 28. Prospectivity Clause. — The changes introduced under this Act shall take
effect on income and transactions beginning January 1, 2019. Any tax exemption on interest
income and gains granted to long-term instruments and securities prior to the effectivity of this
Act shall remain exempt

SEC. 29. Implementing Rules and Regulations. ~ The Department of Finance, in
consultation with the Securities and Exchange Commission, Bangko Sentral ng Pilipinas,
Insurance Commission, the Bureau of the Treasury, and the Bureau of Internal Revenue, shall
issue the implementing rules and regulations for the effective implementation of this Act.

SEC. 30. Separability Clause. — If, for any reason any article or provision of this Act,
or any portion thereof, or application of such article, provision, or portion thereof to any person,
group, or circumstance is declared invalid or unconstitutional, the remainder of this Act shall
not be affected by such decision or declaration.

SEC. 31. Repealing Clause. — The following laws or provisions of laws are hereby
repealed or modified accordingly and the persons and/or transactions affected herein are hereby
made subject to applicable taxes on interest income, dividends, and capital gains, gross receipts
tax, premium tax, and documentary stamp tax under the National Internal Revenue Code of
1997, as amended:

(a) Section 9, insofar as the tax exemption on the issuance of bonds and securities
is concerned, of Presidential Decree 1648, known as “Reorganizing The National
Development Company and Establishing A Revised Charter Therefor”,

(b) Sections 6, 7, and 8, insofar as tax exemption on interest income, capital gains,
and documentary stamp tax is concerned, of Executive Order 603, entitled “Creating A
Light Rail Transit Authority, Vesting The Same With Authority to Construct and
Operate The Light Rail Transit (LRT) Project and Providing Funds Therefor”;


(©) Section 14, insofar as tax exemption on interest income, capital gains, and
documentary stamp tax is concemed, of Republic Act 7354, entitled “An Act Creating
The Philippine Postal Corporation, Defining ts Powers, Functions And
Responsibilities, Providing For Regulation of ‘The Industry and for Other Purposes
Connected Therewith";

(4) Section 12, insofar as tax exemption on interest income, capital gains, and
documentary stamp tax is concerned, of Republic Act 4850, entitled “An Act Creating
‘The Laguna Lake Development Authority, Prescribing its Powers, Functions and
Duties, Providing Funds Therefor, and for Other Purposes”;

(€) Number 8, insofar as tax exemption on interest income, capital gains, and
documentary stamp tax is concerned, of Presidential Decree 37, entitled “Creating The
Nayong Pilipino Foundation”

(Section 12, insofar as tax exemption on interest income, capital gains, and
documentary stamp tax is concerned, of Presidential Decree 205, entitled “Creating and
Establishing The Development Academy of The Philippines, Defining Its Powers,
Functions, and Responsibilities, and for Other Purposes”:

(g) Article 202, insofar as tax exemption on interest income, capital gains,
documentary stamp tax, and premium tax is concerned, of Presidential Decree 442 as
amended by Presidential Decree 626, entitled “Labor Code Of The Philippines”;

(h) Section 10, insofar as tax exemption on interest income, capital gains, and
documentary stamp tax of subsidiaries of Philippine Aerospace Development
Corporation is concerned, of Presidential Decree 696, entitled “Revising Presidential
Decree No, 286, dated September 5, 1973, as amended, otherwise known as The
Charter of The Philippine Aerospace Development Corporation and for Other

Purposes”;

(i) Section 2(g), insofar as tax exemption on interest income is concemed, of
Republic Act 85, as amended by Republic Act 2081, entitled “An Act Creating The
Rehabilitation Finance Corporation”;

(i) _ Sections 76, 77 and 98, insofar as tax exemption on interest income, dividends,
capital gains, and documentary stamp tax on bonds is concerned, of Republic Act 3844
or The Agricultural Land Reform Code;

(k) Section 37, insofar as tax exemption on interest income, capital gains, gross
receipts tax, and documentary stamp tax is concerned, of Republic Act 6848 or The
Charter of The Al-Amanah Islamic Investment Bank of the Philippines;

w Sections 10, insofar as tax exemption on interest income is concerned, of
Republic Act 3591, as amended by Republic Act 9576 or An Act Increasing The
Maximum Deposit insurance Coverage, and in Connection Therewith, To Strengthen
The Regulatory And Administrative Authority, And Financial Capability of The
Philippine Deposit Insurance Corporation (Pic), Amending for this Purpose Republic
Act Numbered Three Thousand Five Hundred Ninety-One, as amended, otherwise
known as The PDIC Charter, and for Other Purposes,

47


(m) Section 12, insofar as tax exemption on interest income, capital gains, and
documentary stamp tax is concerned, of Executive Order 1037, entitled “An Act
Creating The Philippine Retirement Park System, Providing Funds Therefor and for
Other Purposes”;

(n) Section 19, insofar as tax exemption on interest income and documentary stamp
tax is concerned, of Republic Act 8763 or Home Guaranty Corporation Act of 2000;

(0) Section 19, insofar as tax exemption on documentary stamp tax is concerned, of
Republic Act 7279 or The Urban Development and Housing Act Of 1992,

(p) Section 8(a), insofar as tax exemption on interest income, capital gains, and
documentary stamp tax of bonds is concerned, as provided under Section 1 of Republic
Act 6395 or An Act Revising The Charter of The National Power Corporation;

(q) Section 15, insofar as tax exemption on interest income, capital gains, and
documentary stamp tax is concerned, of PD 334, entitled “Creating The Philippine
National Oil Company, Defining its Powers and Functions, Providing Funds Therefore,
and for Other Purposes”;

(rf) Section 16, insofar as tax exemption on interest income, capital gains, and
documentary stamp tax is concerned, of Presidential Decree 1467, entitled “An Act
Creating The Philippine Crop Insurance Corporation, Prescribing Its Powers And
Activities, Providing For Its Capitalization and for The Required Government Premium
Subsidy, and for Other Purposes”,

(s) Section 3, insofar as tax exemption on interest income, capital gains, and
documentary stamp tax of bonds is concemed, of Republic Act 3601, entitled “An Act
Granting The National Irrigation Administration”,

(t) Section 6 (a, xviii (2)), in so far as tax exemption on interest income and
documentary stamp tax is concerned, of PD 1485, as amended by PD 1770, entitled
“Reconstituting The National Grains Authority to The National Food Authority,
Broadening its Functions and Powers and for Other Purposes”,

(u) Section 5 (e), insofar as tax exemption on interest income, capital gains, and
documentary stamp tax on bonds is concerned, of Republic Act 6260, entitled “An Act
Instituting A Coconut Investment Fund and Creating A Coconut Investment Company
for the Administration Thereof”;

(v) Section 9, insofar as tax exemption on interest income, capital gains, and
documentary stamp tax on bonds is concemed, of Republic Act 10744 Or Credit Surety
Fund Act OF 2014;

(w) Section 20, insofar as tax on interest income, capital gains und documentary
stamp tax is concerned, of Republic Act 10693, entitled “An Act Strengthening
Nongovernment Organizations (NGOs) Engaged in Microfinance Operations for the
Poor”;


(x) Section 7, insofar as tax exemption on documentary stamp tax and premium tax
is concerned, of Republic Act 7111, entitled “An Act Establishing The Overseas
Workers’ Investment Fund to Provide Incentives to Overseas Workers, Reduce the
Foreign Debt Burden and for Other Purposes”;

(¥) Section 56, insofar as tax exemption on interest income, capital gains, and
documentary stamp tax is concemed, of Republic Act 10801, entitled “An Act
Governing The Operations and Administration of the Overseas Workers Welfare
Administration”,

(2) Section 5, insofaras tax exemption on interest income is concerned, of Republic
‘Act 8367, entitled “An Act Providing for the Regulation of the Organization and
Operation of Non-Stock Savings and Loan Associations”,

(aa) Section 28, insofar as tax exemption on capital gains on shares of stock and
documentary stamp tax is concerned, of Republic Act 9267 or The Securitization Act
Of 2004",

(bb) Section 17, insofar as tax exemption on interest income, capital gains, gross
receipts tax and documentary stamp tax is concemed, of Republic Act 7906, entitled
“An Act Providing for the Regulation of the Organization and Operations Of Thrift
Banks, and for Other Purposes”,

(cc) Section 15, insofar as tax exemption on capital gains and documentary stamp
tax is concerned, of Republic Act 9182, as amended by Republic Act 9343, entitled
“An Act Granting Tax Exemptions and Fee Privileges to Special Purpose Vehicles
which Acquire or Invest in Non-Performing Assets, Setting The Regulatory Framework
‘Therefor, and for Other Purposes”;

(dd) Sections 13 and 14, insofar as tax exemption on DST and dividends is
concerned, of R.A. 9856 or The Real Estate Investment Act of 2009; and

(ce) Section 23, insofar as no deduction from gross income shall be allowed in
respect of any interest if the indebtedness is incurred to finance petroleum exploration
is concerned, of P_D. 87, entitled Amending Presidential Decree No. 8 Issued On
October 2, 1972, and Promulgating an Amended Act To Promote The Discovery and
Production of Indigenous Petroleum and Appropriate Funds Therefor.

SEC. 32. Effectivity Clause. - This Act shall take effect on January 1, 2019, or fifteen
(15) days after its complete publication in the Official Gazette or in at least two (2) newspaper
of general circulation, whichever comes earlier.

Approved,

49