SENG

owe JUL 10

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Queon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO.

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

EXPLANATORY NOTE

Taxation is the very lifeblood of the State. It is an inherent power that allows the State
to provide goods and services for the jurisdiction it serves. Thereby, it must not only
be fiscally adequate and administratively feasible — it must be fair and unhindered. In
line with this, the fourth package under the Comprehensive Tax Reform Program
(CTRP) of the Duterte Administration is hereby proposed as the Passive Income and
Financial Intermediary Taxation Act.

The bill seeks to reform the taxation of the financial sector, including capital and
financial sector, including capital and financial services, to be simpler, fairer, more
efficient, and revenue neutral. As of the moment, there are some 80 tax rates and tax
bases pertinent to the financial sector. The combinations of applicable tax rates on tax
bases upon meeting certain qualifiers results in a complicated tax map with plenty of
room for tax arbitrage or sly mechanisms to reduce a taxpayer's liability. This
complexity entails high administrative and compliance cost, and discourages more
transparent returns since taxpayers end up paying different taxes derived from the
same base. The bill also encourages capital market development by adjusting, if not
removing altogether, taxes that deter legitimate movement towards initial public listing

of companies


The specific objectives of the bill are the following:

« Provide neutrality in tax treatment across financial institutions and financial
instruments;

* Simply complex tax system

« Improve equity across investors and savors;

Minimize arbitrage opportunities; and

* Promote capital market development and tax competitiveness within the
context of financial globalization, increased capital mobility, and financial

inclusion.

To achieve the aforementioned goals, the Capital Income and Financial Intermediary
Taxation Act of 2018 shall reform the financial sector taxation by the:

a) Reduction in the number of rates of withholding taxes — Due to the difficulties posed
by various tax rates on interest income, distinctions are removed, such that 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 for all Fls, 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. 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.

d) Removal or minimization of barriers to capital market development — IPO tax, which
is found to be detrimental to capital market development is removed. Overall, the
DST of the financial sector is being rationalized to promote capital mobility.

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e) 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
tates imposed in ASEAN to ensure competitiveness of the domestic capital market.

The Duterte Administration remains steadfast in delivering its unprecedented
economic goals, part of which is the massive Build, Build, Build infrastructure program
already underway. In order to fund the aforementioned projects, this Representation
believes that this proposed bill is of critical importance and must not be delayed.

In consideration of the foregoing premises, the passage if this bill is urgently sought.

WA

Luis MUND “LRAY” F, VILLAFUERTE, JR.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House Bit No, 1207

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

‘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, 195, 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 Representatives of the Philippines
in Congress assembled:

SECTION. 1. 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 element 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
easy 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) 0x
WK OK OK

(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;
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 option/s, 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, A COLLECTIVE INVESTMENT SCHEME, 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.

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(T) 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 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 CERTIFICATES, VOTING TRUST
CERTIFICATES, OR SIMILAR INSTRUMENTS;

(6) PROPRIETARY OR NON-PROPRIETARY MEMBERSHIP
CERTIFICATES IN CORPORATIONS; AND

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

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(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 GENERAL 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 IN 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
CERTIFICATES 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. [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 SUBSECTION (Z) HEREOF
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. PROVIDED FURTHER THAT IF THE INTENTION IS FOR THE


DEBT INSTRUMENTS TO BE HELD BY MORE THAN 19 HOLDERS
DURING THE ENTIRE TERM OF THE DEBT INSTRUMENT AND IF THE
TENOR AND DENOMINATION ARE SUCH THAT THEY CAN BE HELD BY
MORE THAN 19 LENDERS, THEN THE INSTRUMENT SHALL BE
CONSIDERED DEPOSIT SUBSTITUTES.

(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
fo 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.

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(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.

OK OK OK
(FF) 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, QUASI-
BANKS, TRUST ENTITIES, PAWNSHOPS, FOREIGN EXCHANGE
DEALERS, MONEY BROKERS, CREDIT COOPERATIVES, FINANCING
COMPANIES, FINANCE LEASING COMPANIES, INVESTMENT
COMPANIES, AND OTHER ENTITIES ENGAGED IN COLLECTIVE
INVESTMENT SCHEMES, INVESTMENT HOUSES, LENDING INVESTORS.
OR ENTITIES ENGAGED IN FINANCIAL INTERMEDIATION ACTIVITIES,
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 x.
(HH) The term ‘minimum wage earner’ x x x.

(Il) 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. ACLOSED-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 AN
INSURANCE CONTRACT, 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,
CERTIFICATES OR OTHER EVIDENCES OF DEPOSITS, PROMISSORY
NOTES, WHETHER NEGOTIABLE OR NON-NEGOTIABLE, OTHER


SIMILAR INSTRUMENTS, AND OTHER INSTRUMENTS AS MAY BE
DETERMINED BY APPROPRIATE GOVERNMENT AGENCIES.

(MM) THE TERM ‘ORGANIZED MARKETPLACE’ |S AN EXCHANGE, AN
OVER-THE-COUNTER MARKET, ALTERNATIVE TRADING SYSTEM,
RECOGNIZED AS SUCH BY THE SECURITIES 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 TRANSPARENCY, TRADE REPORTING, MARKET
MONITORING AND ORDERLY CONDUCT/OPERATION OF THE MARKET
WHICH ARE ENFORCEABLE ON THE MEMBERS AND PARTICIPANTS.

(NN) HEALTH INSURANCE PRODUCTS ARE THOSE THAT ARE BEING
OFFERED AND SOLD BY INSURANCE COMPANIES, EITHER LIFE OR
NON-LIFE, WHEREIN THERE IS A LIST OF COVERED ILLNESSES OF
WHICH THE COMPANIES ASSUME RISKS AND INDEMNIFY LOSSES
BROUGHT BY THE SAID COVERED ILLNESSES.

(00) HEALTH MAINTENANCE ORGANIZATION (HMO) PRODUCTS
REFER TO PRE-AGREED OR DESIGNATED HEALTH CARE SERVICES TO
THE ENROLLED MEMBERS FOR A FIXED PRE-PAID FEE FOR A
SPECIFIED PERIOD OF TIME THROUGH THE USE OF SELECTED
NETWORK OF HEALTH CARE PROVIDERS. HMO PRODUCTS PROVIDE
A WIDE ARRAY OF MEDICAL, SURGICAL AND HOSPITAL SERVICES
THAT INCLUDE PREVENTIVE CARE AND WELLNESS PROGRAMS AND
GENERALLY HAVE NO CASH-OUT TRANSACTION.

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. ~

OK OK HK
(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,

i


DEPOSIT SUBSTITUTE, TRUST FUND, 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, ENTITIES ENGAGED IN 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 a
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 a 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, 2020. INCOME FORMING PART OF
RETAINED EARNINGS AS OF DECEMBER 31, 2019, EVEN IF DECLARED

12


OR DISTRIBUTED ON OR AFTER JANUARY 1, 2020, SHALL BE SUBJECT
TO TEN PERCENT (10%) TAX.

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

((Cl(3) 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 ina
domestic corporation, except shares sold, or disposed of through A LOCAL
[the] stock exchange[.] OR AN ORGANIZED MARKETPLACE.

{(C](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,
BARTER, EXCHANGE, OR ANY OTHER MODE OF DISPOSITION OF
SHARES OF STOCK LISTED AND TRADED THROUGH A LOCAL STOCK
EXCHANGE OR AN ORGANIZED MARKETPLACE, 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, 2021: FIVE-TENTH OF ONE PERCENT (5/10 OF 1%),
JANUARY 1, 2022: FOUR-TENTH OF ONE PERCENT (4/10 OF 1%),
JANUARY 1, 2023: THREE-TENTH OF ONE PERCENT (3/10 OF 1%),
JANUARY 1, 2024: TWO-TENTH OF ONE PERCENT (2/10 OF 1%),
JANUARY 1, 2025: 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
SELLER 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 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 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.

(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
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, FOR THE DEALER’S OWN ACCOUNT IN THE ORDINARY
COURSE OF BUSINESS , 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 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

1s


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. - JA 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
THREE (183) 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 headquarter of 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.
a 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 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

16


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%.]

[(3) 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.

OK OK HK

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 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%).

XK OK KK
(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) Capital Gains from the Sale of Shares of Stock Not Traded in the Stock
Exchange. ~ A final tax at the rate of fifteen percent (15%) 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.]

[(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%).

[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.]

(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, TRUST FUND,
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 SHALL BE SUBJECT TO SECTION 27(A) AND
BASED ON NET GAIN.

(3) CAPITAL GAINS FROM THE SALE, EXCHANGE, BARTER OR
DISPOSITION OF SHARES OF STOCK NOT TRADED IN THE STOCK
EXCHANGE 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,
BARTER, EXCHANGE, OR OTHER DISPOSITION OF SHARES OF STOCK
LISTED AND TRADED THROUGH A LOCAL STOCK EXCHANGE OR AN
ORGANIZED MARKETPLACE, 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, 2021; FIVE-TENTH OF ONE PERCENT (5/10 OF 1%),
JANUARY 1, 2022: FOUR-TENTH OF ONE PERCENT (4/10 OF 1%),
JANUARY 1, 2023: THREE-TENTH OF ONE PERCENT (3/10 OF 1%),
JANUARY 1, 2024: TWO-TENTH OF ONE PERCENT (2/10 OF 1%),
JANUARY 1, 2025: 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
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, EXCHANGE, TRANSFER, BARTER,
DISPOSITION OF NON-LISTED AND NON-TRADED DEBT INSTRUMENTS
AND 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 AFINAL 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,

20


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, FOR THE DEALER’S 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)\(7) 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. - x x x

WOK XK 0K
(4) Gross Income Defined. — xx

OK XK 0K

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

21


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%)].

WK OK 0K

(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. — x x x

[(4) 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

22


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.

{(6)(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 shalll 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

23


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 — P1400, 000... 5%]
[On any amount in excess of P100,000.......10%]

{(¢) 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.]

(8) 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 5[(c)]: Provided, That effective January 1, 2009, the rate
of income tax shall be thirty percent (30%).

OK 0K 00K

24


(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;]

[(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.......cccceccseeeeene — 5%]
[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, PROVIDED THAT ANY
INCOME OF NONRESIDENTS, WHETHER INDIVIDUALS OR
CORPORATIONS, FROM TRANSACTIONS WITH DEPOSITORY BANKS
UNDER THE EXPANDED SYSTEM AND OFFSHORE BANKING UNITS
SHALL BE EXEMPT FROM INCOME TAX.

CASH AND/OR PROPERTY DIVIDENDS RECEIVED FROM A DOMESTIC
CORPORATION SHALL BE SUBJECT TO A FINAL TAX OF FIFTEEN

25


PERCENT (15%) OR TO THE PROVISIONS OF THE APPLICABLE TAX
TREATY.

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 shareholders 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, AND OTHER ENTITIES DOING BUSINESS SIMILAR TO OR
AKIN TO INSURANCE.

26


(C) 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 THE
CORPORATION, BY THE CLEAR PREPONDERANCE OF EVIDENCE,
SHALL PROVE TO THE CONTRARY.

WK KOK

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 profit;]

[(C)(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

27


benefits exclusively to the members of such society, order, or association, or
nonstock corporation or their dependents;

[(0)(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;

{(F)E) 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;

I(G)F) Civic league or organization not organized for profit but operated
exclusively for the promotion of social welfare;

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

{(J)]()) 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 from members for the sole purpose of
meeting its expenses; and

[(K)(J) 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
regardiess 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:

28


SEC. 32. Gross Income. - 0x

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

XK OK 0K
(7) Miscellaneous Items. =
WOK OK 10K

[(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 BY
THE REPUBLIC OF THE PHILIPPINES OR ANY OF ITS
INSTRUMENTALITIES 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] (II) of this Code.

WK OK HK

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 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:

29


(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:

WOK KK

(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.

OK WOK 0K

30


(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 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, 2020,
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

[(C) If the 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[i]nterest 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.

HK KK

31


(E) Bad Debts. -
(1) In General. - xx

(2) Securities Becoming Worthless. - |f 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 ORDINARY LOSSES THAT
ARE ALLOWED AS DEDUCTION FROM TAXABLE INCOME,

HK KK

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, PRE-NEED
COMPANIES, AND PENSION FUNDS. - In the case of insurance companies,
PRE-NEED COMPANIES, AND PENSION FUNDS, whether domestic or
foreign, doing business in the Philippines, the net additions, if any, required by
law to be made within the year to reserve funds and the sums other than
dividends paid within the year on policy and annuity contracts may be deducted
from their gross income: Provided, however, That the released reserve be
treated as income for the year of release.

(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 [return] 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

32


deposits as are retained by the companies for purposes other than the payment
of losses and expenses and reinsurance reserves.

OK KKK

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.

OK 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 -
OK OK 10K

{(8) Percentage Taken Into Account. - In the case of a taxpayer, other than
a corporation, only the following percentages of the gain or loss recognized

33


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:]

[(4) 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;]

{(C)] (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 a [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. - \f any taxpayer, other than a corporation,
‘sustains in any taxable year a 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:

34


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) Interests. - Interests AND YIELD [derived from sources within the
Philippines, and interests] FROM DEBT INSTRUMENTS, BANK DEPOSITS,
DEPOSIT SUBSTITUTES, TRUST FUNDS, 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 AT LEAST [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;

OK OK OK
(B) Taxable Income From Sources Within the Philippines. -

(1) General Rule. —

XK OK HK

(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

35


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. 51, Individual Return. -
(A) Requirements. - x x x

0K 0K 0K

(C) When to File. -

OO bees bees

(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
Section$ 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 each 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.

36


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 return and final or
adjustment return in accordance with the provisions of Chapter Xil 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 sworn 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;

(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.

WOK KKK

(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)(c) 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

37


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 rJReceivers, 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 JANOTHER 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 have 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

38


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. -
OK OK 1K
(3) Payment of Capital Gains Tax. -

A. IN GENERAL - The total amount of tax imposed and prescribed under
SectionS 24[(C)](B)(3), 24[(D)1(B)(5), 24(B)(7), 25, 27[(E)(2)(D)(3), 27(D)(5),
27(D)(7), 28(A)[(8)(c)] 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

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. -
(A) 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

39


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), 27(D)(2), 27(0)(3),
27(D)(5); 28(A)(4), 28(A)(5), 28(A)(7)(a), 28(A)(7)(b), 28(A)(7)(c), 28(B)(1),
28(B)(2), 28(B)(3), 28(B)(4), 28(B)(5)(a), 28(B)(5)(b), 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) xx XK 0K

[(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 xx

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

40


SEC. 108. Value-added Tax on Sale of Services and Use or Lease of
Properties. —

(A) Rate and Base of Tax. - xx x

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 eating 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:

WK OK KK

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

41


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 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 shares and net income of
SUDSIIATIES 62.0... eee cece OW]

[(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
IMStrUMENtS.........0. ceceeeeeeeeee TH]

[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. PROVIDED THAT MERE
INCREASE OR DECREASE IN VALUE OF PROPERTY AS A RESULT OF
CHANGES IN MARKET VALUES SHALL NOT BE CONSIDERED IN THE
COMPUTATION OF GROSS RECEIPTS.: 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:

42


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
QUARTERIS: PROVIDED FINALLY, THAT NET LOSS INCURRED IN A
TAXABLE YEAR CANNOT BE CARRIED OVER TO THE SUCCEEDING
TAXABLE YEAR.

[as 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.}

OK OK KK

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

43


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 INCLUDE FINANCING COMPANIES, FINANCE LEASING
COMPANIES, INVESTMENT HOUSES, PAWNSHOPS, FOREIGN
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 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

44


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 OR ENTITIES 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

45


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
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 ON REINSURANCE

PREMIUMS, THE SECRETARY OF FINANCE, UPON THE
RECOMMENDATIONS OF THE COMMISSIONER OF INTERNAL REVENUE

46


AND INSURANCE COMMISSIONER, SHALL PROMULGATE THE
REQUIRED REPORTS TO BE SUBMITTED TO THE BUREAU OF
INTERNAL REVENUE. ANY MISREPRESENTATION SHALL SUBJECT THE
DIRECT INSURER AND/OR REINSURER TO PENALTIES UNDER
SECTIONS 248, 249, 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 INCIDENT
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 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 six-tenths of one percent (6/10 of 1%)
of the gross selling price or gross value in money of the shares of stock sold,

47


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%) 4%)

[Over twenty-five percent (25%) but not over thirty-three and one third percent
(33 4%) ossseceee cece 2%)

{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) Family 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’

48


includes only his brothers and sisters (whether by whole or haif-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 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. - It 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
turned 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. Section 174 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

49


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, Jof 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
tepresented by each share; PROVIDED, FINALLY, THAT IN THE CASE OF
COLLECTIVE INVESTMENT SCHEMES WITHOUT PAR VALUE, THE
DOCUMENTARY STAMP TAX SHALL BE BASED ON THE INITIAL NET
ASSET VALUE PER UNIT.

SEC 28. Section 175 of the National Internal Revenue Code of 1997, as amended, is
hereby repealed.

[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 or 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. 29. Section 176 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC 176. 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

50


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 30. Sections 177 and 178 of the National Internal Revenue Code of 1997, as
amended, are hereby repealed.

[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 31. Section 179 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC. 179. 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 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
tepresenting 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

Si


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 32. Section 180 of the National Internal Revenue Code of 1997, as amended, is
hereby repealed.

[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 (P0.60) on each Two
hundred pesos (P200) or fractional part thereof, of the face value of any such
bill of exchange or draft.]

SEC 33. Sections 181, 182, 183 184, 185, 186, 187 and 188 of the National Internal
Revenue Code of 1997, as amended, are hereby amended to read as follows:

SEC. 181. 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. 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 (P0.60) 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.

52


SEC. 183. Stamp Tax on Life AND HEALTH Insurance, POLICIES OF
ANNUITIES, AND HEALTH MAINTENANCE ORGANIZATION PRODUCTS
— 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:

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 P500,000 - P50.00
If the amount of insurance exceeds P500,000

but does not exceed P750,000 - P100.00
If the amount of insurance exceeds P750,000

but does not exceed P1,000,000 -P150.00

If the amount of insurance exceeds P1,000,000 - P200.00

SEC. 184. 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), or 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, 2021: ELEVEN AND ONE-HALF PERCENT (11.5%),
JANUARY 1, 2022: TEN AND ONE-HALF PERCENT (10.5%),
JANUARY 1, 2023: NINE AND ONE-HALF PERCENT (9.5%),
JANUARY 1, 2024: EIGHT AND ONE-HALF PERCENT (8.5%),
JANUARY 1, 2025: SEVEN AND ONE-HALF PERCENT (7.5%).

SEC. 185. Stamp Tax on Fidelity Bonds and Other Insurance Policies. —
On all policies of insurance or bonds or obligations of the nature of indemnity

53


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 each 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, 2021: ELEVEN AND ONE-HALF PERCENT (11.5%),
JANUARY 1, 2022: TEN AND ONE-HALF PERCENT (10.5%),
JANUARY 1, 2023: NINE AND ONE-HALF PERCENT (9.5%),
JANUARY 1, 2024: EIGHT AND ONE-HALF PERCENT (8.5%),
JANUARY 1, 2025: SEVEN AND ONE-HALF PERCENT (7.5%).

SEC. 186. Stamp Tax on [Policies of Annuities, and] Pre-Need Plans- [On
ail 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 One peso (P1.00) on each Two
hundred pesos (P200), or fractional part thereof, of the premium or installment
payment on contract price, collected.) On pre-need plans, 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. 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 other bonds of any description, except such as may be

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required in legal proceedings, or are otherwise provided for herein, there shall
be collected a documentary stamp tax of [Thirty centavos (P0.30) on each Four
pesos (P4.00), or fractional part thereof, ] SEVEN AND ONE-HALF PERCENT
(7.5%) OF THE PREMIUM CHARGED.

SEC. 188. 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 certificate 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 34. Sections 192 and 193 of the National Internal Revenue Code of 1997, as
amended, are hereby repealed.

[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 36. Sections 195, 198, and 199 of the National Internal Revenue Code of 1997,
as amended, are hereby amended to read as follows:

SEC. 195. 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:]

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[(a) When the amount secured does not exceed Five thousand pesos
(P5,000), Forty pesos (P40.00).]

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

OK OK 0K

SEC. 198. 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 [altering 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. 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:

(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.

KOK 00K

(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. 36. Prospectivity Clause. - The changes introduced under this Act shall take
effect on income and transactions beginning January 1, 2020. Any tax exemption on

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interest income and gains granted to long-term instruments and securities prior to the
effectivity of this Act shall remain exempt.

SEC. 37. 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. 38. 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. 39. 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:

(2) 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’;

(c) Section 14, insofar as tax exemption on interest income, capital gains,
and documentary stamp tax is concerned, of Republic Act 7354, entitled “An
Act Creating The Philippine Postal Corporation, Defining Its 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";

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(e) | 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”

(f) 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”;

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

@ 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 concemed, of Republic Act
6848 or The Charter of The Al-Amanah Islamic Investment Bank of the
Philippines;

() 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 (Pdic), 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;

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(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;

(a) 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”;

() 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 concerned, 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 § (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’;

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

(w) Section 20, insofar as tax on interest income, capital gains and
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”;

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

(2) Section 5, insofar as 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 concerned, 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

(ee) 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.

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8 Issued On October 2, 1972, and Promulgating an Amended Act To Promote
The Discovery and Production of Indigenous Petroleum and Appropriate Funds
Therefor.

(ff) Section 6, insofar as tax exemption on interest income, dividends and
capital gains are concerned, of RA 6426, as amended.

SEC. 40. Effectivity Clause. - This Act shall take effect on January 1, 2020, 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,

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