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RECEIVED

DATE:

TiiE:,
BY:

Republic of the Philippines

HOUSE OF REPRESENTATIVES REGISTRATION UNIT
Quezon City BILLS AND iNuEX SERVIC!
SEVENTEENTH CONGRESS
First Regular Session

24D
HOUSE BILL NO. ede

Introduced by Representative Paolo Everardo S. Javier

EXPLANATORY NOTE

The country's individual income taxpayers have lamentably suffered inequity on
account of the tax system's inability to keep up with rising inflation rates for quite
some time. From the effectivity of the National Internal Revenue Code (NIRC) of
1997 on January 1, 1998, the individual income tax rates have remained based
on the 1998 Consumer Price Index (CP!) of 67.8%, which is less than half
compared to the current CPI of 142%. This means that a working man’s monthly
pay of P10,000 back in 1998 is equivalent to P21,500, which should just be
entirely taxed at the rate of 5% instead of a higher rate. Otherwise put, the tax on
his salary should merely be P1,075.00 and not P1,650.00, leaving him with an
additional monthly take home pay of P575.00 or P6,900.00 more disposable
income on a yearly basis. This amount would undeniably help in keeping every
ordinary Filipino family weather the current challenges it faces financially.

On the other hand, corporate income tax in our jurisdiction is 30% on taxable
income, which lamentably is the highest and most burdensome among
Association of South East Asian Nations (ASEAN) member-countries as the rates
of our regional neighbors merely range from 17%-25%. For the Philippines to be
a haven for business investments, it is a must that the corporate tax rate has to
be lowered to 25%. Indeed, this is indispensable to making the country
competitive once again

Considering this unfair situation, it is just timely that individual and corporate
income tax rates be fixed to make these more equitable and competitive,
respectively, which was what Congress truly intended when the NIRC of 1997


was fashioned.

Accordingly, passage of the measure is earnestly sought.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

SEVENTEENTH CONGRESS
First Regular Session

240%
House BILL Now 4

Introduced by Honorable Representative Paolo Everardo S. Javier

AN ACT
RESTRUCTURING THE INCOME TAXES IMPOSED ON INDIVIDUALS AND
CORPORATIONS, AMENDING FOR THE PURPOSE SECTIONS 24 (A) (2); 27
(A); 28 (A) (1) AND (B) (1); AND 35 (B) OF THE NATIONAL INTERNAL
REVENUE CODE OF 1997, AS AMENDED

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

SECTION. 1. Section 24 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

“SEC. 24. Income Tax Rates, —
(A) xxx
(1) xxx

(2) Rates of Tax on Taxable Income of Individuals. ~ The tax shall
be computed in accordance with and at the rates established in the
following schedule:

[ Not over P10,000 5% |

| Over P10,000 but not over P30,000 P500+10% of the excess
‘over P10,000 |

| Over P30,000 but not over P70,000 P2,500+15% of the excess
‘over P30,000 |

[ Over P70,000 but not over P140,000 P8,500+20% of the excess


47
48
49
50
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53

[ Over P140,000 but not over P250,000
[ Over P250,000 but not over P500,000

| Over P500,000

NOT OVER P21,500
OVER P21,500 BUT NOT OVER Pé4,s00

‘OVER P64,500 BUT NOT OVER P1S0,500
(OVER 150,500 BUT NOT OVER P30!,000
‘OVER 301,000 BUT NOT OVER P537,500
‘OVER 337,500 BUT NOT OVER P1,075.000

(OVER P1,075,000

XXX

XXX

over P70,000 |
P22,500+25% of the excess
lover P140,000 |
P50,000+30% of the excess
over P250,000 |
P125,000=32% of the excess
over P500,000 |

3%
1,07S+10% OF THE EXCESS
OVER P21,500

5,375+ 15% OF THE EXCESS
OVER Pod,500

P18,275+20% OF THE EXCESS
OVER P150,500

'P48,375+25% OF THE EXCESS
COVER 301,000

P107,300+30% OF THE EXCESS
OVER 337,500
P268,750+32% OF THE EXCESS
OVER PI,075,000

PROVIDED, FINALLY, THAT NOT LATER THAN THREE (3)
YEARS AFTER THE EFFECTIVITY OF THIS ACT AND
EVERY THREE (3) YEARS THEREAFTER, EACH NET
TAXABLE INCOME LEVEL AND NOMINAL TAX RATE
HEREIN STATED SHALL BE ADJUSTED TO ITS PRESENT
VALUE USING THE CONSUMER PRICE INDEX, AS
PUBLISHED BY THE NATIONAL STATISTICS OFFICE

(NSO).
(B) xxx
(©) xxx

(D) xxx.”

SEC. 2. Section 27 (A) of the National Internal Revenue Code of 1997, as amended, is

hereby further amended to read as follows:

“SEC. 27. Rates of Income Tax on Domestic Corporations. —

(A) In General. ~ Except as otherwise provided in this Code, an income
tax of [thirty-five] TWENTY-FIVE percent [(35%)] (25%) is hereby


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XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
(B)
(Cc)
(D)

(E)

mended, is

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%0]

XXX
XXX
XXX

XXX.”

3. Section 28 (A) (1) and (B) (1) of the National Internal Revenue Code of 1997,
hereby further amended to read as follows:

“SEC. 28. Rates of Income Tax on Foreign Corporations. —

(A)

a

Tax on Resident Foreign Corporations. -

In General. — Except as otherwise provided in this Code, a
corporation organized, authorized, or existing under the laws of any
foreign country, engaged in trade or business within the Philippines,
shall be subject to an income tax equivalent to [thirty-five]



Q)
(3)
@
(5)
(6)
(2)

(B)

qd)

2)
G)
a)

TWENTY-FIVE percent [(35%)] (25%) of the 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%)].

Tax on Nonresident Foreign Corporations.

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] TWENTY-FIVE percent [(35%]
(25%) 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 gains subject to tax under subparagraph 5 (c)[: Provided, That
effective January 1, 2009, the rate of income tax shall be thirty
percent (30%)]

XXX
XXX
XXX

XXX.


SEC. 4. Section 35 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

PROVIDED, FURTHER, THAT NOT LATER THAN THREE (3)
YEARS AFTER THE EFFECTIVITY OF THIS ACT AND EVERY
THREE (3) YEARS THEREAFTER, THE AMOUNTS OF BASIC
PERSONAL EXEMPTION AND ADDITIONAL EXEMPTION
FOR DEPENDENTS HEREIN STATED SHALL BE ADJUSTED
TO PRESENT VALUES USING THE CONSUMER PRICE
INDEX, AS PUBLISHED BY THE NATIONAL STATISTICS
OFFICE (NSO).

Xxx
(C) xxx
(D) xxx.”
SEC. 5. Implementing Rules and Regulations. — The Secretary of Finance shall, upon
the recommendation of the Commissioner of Internal Revenue, promulgate upon the

effectivity of this Act the necessary Rules and Regulations for its effective
implementation.

SEC. 6. Separability Clause. — If any provision of this Act is subsequently declared
invalid or unconstitutional, other provisions hereof which are not affected thereby shall
remain in full force and effect.

SEC. 7. Repealing Clause. - All laws, acts, presidential decrees, executive orders,
issuances, presidential proclamations, rules and regulations or parts thereof which are


NaureEne

contrary to and inconsistent with any provisions of this Act are hereby repealed, amended
or modified accordingly.

SEC. 8, Effectivity Clause. - This Act shall take effect fifteen (15) days after its complete
publication either in the Official Gazette, or in at least two (2) newspapers of general
circulation.

Approved,