EIGHTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
S E N A T E
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•19 JW.17 P6fl7
S. No.
Introduced by Senator Ralph G. Recto
AN ACT
INSTITUTING  
INCOME TAX 
REFORM 
FOR CORPORATE TAXPAYERS, 
AMENDING 
FOR THIS PURPOSE SECTIONS 27(A ) AND 28 OF THE 
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED
EXPLANATORY NOTE
One of the inherent powers of the State is the power of taxation. However, 
there are limitations on the exercise of such power. Section 28, Article VI of the 
1987 Philippine Constitution provides that the rule of taxation shall be uniform and 
equitable and that Congress shall evolve a progressive system of taxation.
Jurisprudence is replete with cases explaining that uniformity of taxation and 
the equal protection clause require that all subjects or objects of taxation similarly 
situated are to be treated alike both in privileges and liabilities. A progressive system 
of taxation as well as the concept of equity in taxation suggests that the tax rates 
should be based on the taxpayer's ability to pay. Therefore, a tax system is 
progressive when the tax rate increases as the tax base increases.
This bill seeks to amend Sections 27(A) and 28 of the NIRC, as amended, to 
replace the unitary or single income tax rate with a graduated income tax schedule 
for corporate taxpayers similar to those provided for the individual taxpayers. The 
basis for adopting this tax system is to align income taxation for corporations with 
the constitutional mandate of a progressive system of taxation and the rule on 
uniform and equitable taxation.


Under the Revised Corporation Code, a duly organized corporation is clothed 
with a personality separate and distinct from the persons composing it. Therefore, 
being a juridical person, a corporation is recognized by law as a person similar to a 
natural person. Thus, a corporation can sue and be sued in its corporate name, and 
it can also purchase, receive, take or grant, hold, convey, sell, lease, pledge, 
mortgage and otherwise deal with real and personal property. Therefore, it is but 
proper that for purposes of taxation, a corporation should be treated like an 
individual. Like an individual taxpayer, a corporate taxpayer should be afforded a 
system of income taxation based on its ability to pay.
Also, this bill seeks to lower the corporate income tax rate from the current 
unitary or single income tax rate of 30% with graduated rates ranging from 5% to 
25%. In the ASEAN Region, the average corporate income tax rate is at 22.4%. 
Among the ASEAN-member countries, the Philippines has the highest corporate 
income tax rate at 30% while Singapore has the lowest rate at 17%.1 This would 
help the country in becoming more attractive to foreign direct investments.
It is noteworthy that this proposed measure seeks to provide a uniform 
graduated income tax schedule for individual and corporate taxpayers. The intent is 
to simplify income taxation for all taxpayers and to make the same easier to 
comprehend. A tax is a burden on the taxpayer, it being an enforced proportional 
contribution to finance the operation of the government and other public needs. To 
ease the burden, a simplified system for the payment of taxes should be provided.
In view of the foregoing, immediate approval of this bill is earnestly sought.
RALPH Gc'R
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1 Comparative Corporate Income Taxation in ASEAN Member-Countries (NTRC Tax Researcli Journal, Vol. 
XXX. 1 January-February 2018)


EIGHTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
oi UX &  'cntnrp
S E N A T E
*19 
JUL 17 P6 ;07
Introduced by Senator Ralph G. Recto
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AN ACT
INSTITUTING  
INCOME TAX 
REFORM 
FOR CORPORATE TAXPAYERS, 
AMENDING 
FOR THIS PURPOSE SECTIONS 27(A ) AND 28 OF THE 
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED
Be it enacted by the Senate and House o f Representatives o f the Philippines in 
Congress assembled:
Section 1. Section 27(A) of the National Internal Revenue Code of 1997, as 
amended, is hereby further amended to read as follows:
"Sec. 27. Rates o f Income Tax on Domestic Corporations. -  
"(A) In General. -  Except as otherwise provided in this Code, an 
income tax {of thirty-ffvo percent (35%)]  is hereby imposed upon the 
taxable income derived 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 [ :- Providcdr ^ h at -effective
THE TAX SHALL BE COMPUTED IN  ACCORDANCE W ITH AND AT 
THE RATES ESTABLISHED IN  THE FOLLOWING SCHEDULE:
TAXABLE INCOME 
"NOT OVER P400,000 
"OVER P400,000 BUT 
NOT OVER P800,000 
"OVER P800,000 BUT
TAX RATE
5 %
P20,000 + 1 0 %  OF THE 
EXCESS OVER P400,000 
P60,000 + 1 5 %  OF THE


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NOT OVER P2,000,000 
"OVER P2,000,000 BUT 
NOT OVER P8,000,000 
"OVER P8,000,000
"XXX"
EXCESS OVER P800,000 
P240,000 + 2 0 %  OF THE 
EXCESS OVER P2,000,000 
P l,4 4 0 ,0 0 0  + 2 5 %  OF THE 
EXCESS OVER P8,000,000
Sec. 2. Section 28 of the National Internal Revenue Code of 1997, as 
amended, is hereby further amended to read as follows:
"Sec. 28. Rates o f Income Tax on Foreign Corporations. -
"(A) Tax on Resident Foreign Corporations. -
"(1) In Generai. -  Except as otherwise provided in this Code,
AN INCOME TAX IS  HEREBY IMPOSED UPON THE TAXABLE 
INCOME DERIVED IN  THE PRECEDING TAXABLE YEAR FROM ALL 
SOURCES W ITH IN  THE PHILIPPINES BY EVERY corporation 
organized, authorized, or existing under the laws of any foreign country, 
engaged in trade or business within the Philippines[, shall be subject to 
an income tax equivalent to thifty-fivc percent (35%) of thc- taxabic 
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% )]. THE TAX SHALL BE COMPUTED IN  
ACCORDANCE W ITH AND AT THE RATES ESTABLISHED IN  THE 
FOLLOWING SCHEDULE:
TAXABLE INCOME 
"NOT OVER P400,000 
"OVER P400,000 BUT 
NOT OVER P800,000 
"OVER P800,000 BUT 
NOT OVER P2,000,000 
"OVER P2,000,000 BUT 
NOT OVER P8,000,000 
"OVER P8,000,000
TAX RATE
5 %
P20,000 + 10 %  OF THE 
EXCESS OVER P400,000 
P60,000 + 15%  OF THE 
EXCESS OVER P800,000 
P240,000 + 2 0 %  OF THE 
EXCESS OVER P2,000,000 
P l,4 4 0 ,0 0 0  + 2 5 %  OF THE 
EXCESS OVER P8,000,000


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"(B) Tax on Nonresident Foreign Corporation. -
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"(1) In General. -  Except as otherwise provided in this Code, a
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foreign corporation not engaged in trade or business in the Philippines
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shall pay a tax equal to fth irty-fivc percent (35%)]  TWENTY-FIVE
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PERCENT (2 5 % ) of the gross income received during each taxable year
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from all sources within the Philippines, such as interests, dividends, rents,
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royalties, salaries, premiums (except reinsurance premiums), annuities,
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emoluments or other fixed or determinable annual, periodic or casual
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gains, profits and income, and capital gains, except capital gains subject
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to tax under subparagraph 5(c) 
Provided, That effective Jonuar/ 1,
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2009, the rate of income tax shall be thirty percent (30% )]."
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Sec. 3. Implementing Rules and Regulations (IRR). -  Within thirty (30) days
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from the effectivity of this Act, the Secretary of Finance, upon the recommendation
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of the Commissioner of Internal Revenue, shall promulgate the necessary rules and
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regulations for its effective implementation.
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Sec. 4. Repealing Clause. -  All laws, acts, decrees, executive orders,
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issuances, and rules and regulations or parts thereof which are contrary to and
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inconsistent with this Act are hereby repealed, amended or modified accordingly.
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Sec. 5. 
Effectivity. -  This Act shall take effect fifteen (15) days after its
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complete publication in the Official Gazette or in at least two (2) newspapers of
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general circulation.
Approved,