Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 2086

Introduced by Representative Junie E. Cua

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

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

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

b. Susceptibility to arbitrage — The variations in tax rates and unequal tax
treatment of equivalent or comparable financial instruments give rise to
arbitrage. Different tax treatment among sectors, or between financial
institutions and non-financial institutions offering the same service
and/or product, or between interests and dividends, open window for
arbitrage and leveraging. These disparities in tax treatment distort
investment decisions considering that tax impositions overshadow all


other considerations. Competitive advantage arises in favor of the
financial sector favored by the law’s tax treatment.

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

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

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

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

High administrative and compliance cost — The complicated structure of
the current tax system makes administration and compliance difficult
and costly. For instance, firms have to pay different taxes that are
derived from the same tax base.

.. Not supportive of capital market development — There are a number of
taxes on financial transactions that hinder capital market development.
Initial public offering (IPO) tax, for instance, is essentially a tax on capital,


and does not take into consideration income generation. Such an
imposition serves as a deterrent to public listing. This results in the
Philippine Stock Exchange (PSE) lagging behind other ASEAN countries in
terms of market capitalization.

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

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

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

b. Simplify what has become a complex tax system.
c. Improve equity across investors and savers.
d. Minimize arbitrage opportunities.

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

To achieve these, this bill proposes the following reforms:

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

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


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

Pre-need, pension, life, and HMO insurance are all taxed similarly at a
2% premium tax rate. Meanwhile, non-life insurance is subject to 12%
value-added tax.

. 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.

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

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

gae-

tine E. Cua
~ resentative
Lone District, Quirino


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 2086

Introduced by Representative Junie E. Cua

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) xxx
XXX XXX XXX

(L) The term ‘shares of stock’ shall include shares of stock of a
corporation, warrants and/or options, WHETHER TO BUY OR SELL
SECURITIES, FUTURES CONTRACTS, AND SUCH OTHER
DERIVATIVE SECURITIES LISTED AND TRADED IN A LOCAL
EXCHANGE OR AN ORGANIZED MARKETPLACE, as well as units of
participation in a partnership (except general _ professional
partnerships), joint stock companies, joint accounts; 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.

XXX XXX XXX

(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.

XXX XXX XXX

(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’ mcans 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.

(2) The term ‘deposit substitutes’ shall mean an alternative form of
obtaining funds from the public (the term ‘public’ means borrowing

4


from twenty (20) or more individual or corporate lenders at any one
time) other than deposits, through the issuance, endorsement, or
acceptance of debt instruments for the borrowers own account, for the
purpose of relending or purchasing of receivables and other obligations,
or financing their own needs or the needs of their agent or dealer. These
instruments may include, but need not be limited to bankers’
acceptances, promissory notes, repurchase agreements, [including]
EXCLUDING reverse repurchase agreements entered into by and
between the Bangko Sentral ng Pilipinas (BSP) and any authorized
agent bank, certificates of assignment or participation and similar
instruments with recourse.

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

XXX OXXK XXX

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

XXX XXX XXX

(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

5


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. A CLOSED-END CIS SHALL NOT
BE ALLOWED TO INCREASE ITS NUMBER OF SECURITIES.

(JJ) THE TERM ‘UNIT LINKED INVESTMENT INSTRUMENT’ SHALL
MEAN A CONTRACTUAL CIS ORGANIZED PURSUANT TO A
CONTRACT, SUCH AS TRUST INDENTURE, OR AS AN INVESTMENT
COMPONENT OF 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?’ IS 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

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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.

(O00) 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. -

XXX XXX XXX,

(B) Rate of Tax on Certain Passive Incom.

(1) Interests[, Royalties, Prizes, and Other Winnings.] ~ A final tax
at the rate of [twenty percent (20%)] FIFTEEN PERCENT (15%) is
hereby imposed upon the amount of interest, YIELD, OR ANY OTHER
MONETARY BENEFIT EARNED OR RECEIVED FROM DEBT
INSTRUMENT, BANK DEPOSIT, DEPOSIT SUBSTITUTE, 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

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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, for |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 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.

[((C(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 in a domestic corporation, except shares
sold, or disposed of through A LOCAL [the] stock exchange[.] OR AN
ORGANIZED MARKETPLACE.

(C4) PRESUMPTIVE CAPITAL GAINS FROM THE SALE,
EXCHANGE, BARTER, OR DISPOSITION OF SHARES OF STOCK

9


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.


Bomavaneunn

(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

i


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 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. ~ ]A 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

12


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 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%;]
IThree (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

13


16
7
18
19
20
2a
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
a7
48

determinable annual or periodic or casual gains, profits, and income,
[and capital gains, Ja FINAL tax equal to twenty five percent (25%) of
such income. Capital gains realized by a nonresident alien individual
not engaged in trade or business in the Philippines from the sale of
[shares of stock in any domestic corporation and] real property shall be
subject to the income tax prescribed under Subsection[s (C) and (D) ]
(B) (7) of Section 24.

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

XXX XXX XXX

SEC. 6. Section 27 (D) of the National Internal Revenue Code of 1997, as
amended, is hereby amended to read as follows:

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

(A) In General. - Except as otherwise provided in this Code, an income
tax of thirty-five percent (35%) is hereby imposed upon the taxable
income derived during each taxable year from all sources within and
without the Philippines by every corporation, as defined in Section 22(B)
of this Code and taxable under this Title as a corporation, organized in,
or existing under the laws of the Philippines: Provided, That effective
January 1, 2009, the rate of income tax shall be thirty percent (30%).

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

[(1) Interest from Deposits and Yield or any other Monetary Benefit
from Deposit Substitutes and from Trust Funds and Similar
Arrangements, and Royalties. - A final tax at the rate of twenty
percent (20%) is hereby imposed upon the amount of interest on
currency bank deposit and yield or any other monetary benefit from
deposit substitutes and from trust funds and similar arrangements
received by domestic corporations, and royalties, derived from sources
within the Philippines: Provided, however, That interest income derived
by a domestic corporation from a depository bank under the expanded
foreign currency deposit system shall be subject to a final income tax
at the rate of fifteen percent of such interest income.]}

(2) 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

15


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

16


FOREIGN CORPORATION, OR BY THE GOVERNMENT OR ANY OF
ITS AGENCIES OR INSTRUMENTALITIES, SHALL BE SUBJECT TO
A FINAL TAX AT THE RATE OF FIFTEEN PERCENT (15%) UPON
THE NET CAPITAL GAINS REALIZED.

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

ANY GAIN REALIZED FROM THE SALE, EXCHANGE, BARTER, OR
DISPOSITION OF DEBT INSTRUMENTS AND OTHER SECURITIES,
LISTED OR UNLISTED, BY A DEALER IN SECURITIES OR OTHER
ENTITIES LICENSED BY THE APPROPRIATE GOVERNMENT
REGULATORY AGENCIES TO BUY AND SELL IN DEBT
INSTRUMENTS SECURITIES, 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

XXX OXXK XXX

(4) Gross Income Defined. - xxx

a7


XXX XXX 200C

1

2

3

4 In the case of taxpayers engaged in the sale of service, ‘gross income’
5 means gross receipts less sales returns, allowances, discounts and cost
6 of services. ‘Cost of services’ shall mean all direct costs and expenses
7 necessarily incurred to provide the services required by the customers
8 and clients including (A) salaries and employee benefits of personnel,
9 consultants and specialists directly rendering the service and (B) cost

10 of facilities directly utilized in providing the service such as depreciation
1 or rental of equipment used and cost of supplies: Provided, however,
2 That in the case of banks AND OTHER FINANCIAL INTERMEDIARIES,
3 ‘cost of services’ shall include interest expense.

14

15 SEC. 7. Section 28 (A) and (B) of the National Internal Revenue Code of 1997,
16 as amended, is hereby amended to read as follows:
7

18 SEC. 28. Rates of Income Tax on Foreign Corporations. -

19

20 (A) Tax on Resident Foreign Corporations. -

21

2 (1) In General. - Except as otherwise provided in this Code, a
23 corporation organized, authorized, or existing under the laws of any
24 foreign country, engaged in trade or business within the Philippines,
25 shall be subject to [an] income tax UNDER SECTION 27 OF THIS
26 CODE [equivalent to thirty-five percent (35%) of the] ON taxable income
27 derived in the preceding taxable year from all sources within the
28 Philippines[: Provided, That effective January 1, 2009, the rate of
29 income tax shall be thirty percent (30%I].

30

31 XXX XXX xxx

32

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

38

39 (3) International Carrier. - x x x

40

a (4) Offshore Banking Units. - The provisions of any law to the contrary
42 notwithstanding, income derived by offshore banking units authorized
43 by the Bangko Sentral ng Pilipinas (BSP), from foreign currency
44 transactions with nonresidents, other offshore banking units, local
45 commercial banks, including branches of foreign banks that may be
46 authorized by the Bangko Sentral ng Pilipinas (BSP) to transact
a7 business with offshore banking units shall be exempt from all taxes
48 except net income from such transactions as may be specified by the
49 Secretary of Finance, upon recommendation of the Monetary Board

18


which shall be subject to the regular income tax payable by banks:
Provided, however, That any interest income derived from foreign
currency loans granted to residents other than offshore banking units
or local commercial banks, including local branches of foreign banks
that may be authorized by the BSP to transact business with offshore
banking units, shall be subject only to a final tax at the rate of ten
percent (10%),]

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

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

((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 shall be subject to a final
income tax at the rate of seven and one-half percent (7 1/2%) of such
interest income.]

[(b) Income Derived under the Expanded Foreign Currency Deposit
System - Income derived by a depository bank under the expanded
foreign currency deposit system from foreign currency transactions
with nonresidents, offshore banking units in the Philippines, local

19


commercial banks including branches of foreign banks that may be
authorized by the Bangko Sentral ng Pilipinas (BSP) to transact
business with foreign currency deposit system units and other
depository banks under the expanded foreign currency deposit system
shall be exempt from all taxes, except net income from such
transactions as may be specified by the Secretary of Finance, upon
recommendation by the Monetary Board to be subject to the regular
income tax payable by banks: Provided, however That interest income
from foreign currency loans granted by such depository banks under
the said expanded system to residents other than ofishore 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%J]

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

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

[Not over —_—P100,000.. vee BMY
[On any amount in excess of P100,000.......10%]

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

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

XK XXX XXX,

20


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

a


Seevauaunne

Gees

14

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

(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 forena or availed
for the purpose of avoiding the income tax wich Tespect to its

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
THER FINANCIAL INSTITUTIONS AS MAY BE DETERMINED

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.

(C) Evidence of Purpose to Avoid Income Tax. -

[(1) Prima Facte Evidence. - The fact that any corporation is a mere

holding company or investment company shaill be prima facie evidence
of a purpose to avoid the tax upon its shareholders or members]

22


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.

XXX XXX XXX

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

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

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

[(B) Mutual savings bank not having a capital stock represented by
shares, and cooperative bank without capital stock organized and
operated for mutual purposes and without 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 benefits exclusively to the members
of such society, order, or association, or nonstock corporation or their
dependents;

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

[(E)(D) Nonstock corporation or association organized and operated

exclusively for religious, charitable, scientific, athletic, or cultural
purposes, or for the rehabilitation of veterans, no part of its net income

23


Seavansunn

GESEES

or asset shall belong to or inure to the benefit of any member, organizer,
officer or any specific person;

(NB) Business league, chamber of Commerce, or board of trade, not
peeanized for profit and no part of the net income of which inures to the
benefit of any private stockholder or individual;

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

[(H)NG) A nonstock and nonprofit educational institution;

{()]() Government educational institution;

wennbany, 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)(3) 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
fimchety Selling expenses on the basis of the quantity of produce
finished by them;

Notwithstanding the provisions in the Preceding paragraphs, the
income of whatever kind and character of the foregoing organizations
from any of their properties, real or Personal, or from any of their
activities conducted for profit regardless of the disposition made of such

income, shall be subject to tax imposed under this Code.

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

SEC. 32. Gross Income. - xxx

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

XXK XXX XXX

(7) Miscetlaneous Items. -

20K 2K 200K

lg) Gains from the Sale of Bonds, Debentures or other Certificate
of Indebtedness. - Gains realized from the same or exchange or

24


COVoueune

ctirement of bonds, debentures or other Certificate of indebtedness
with a maturity of more than five (5) years]

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
S

in [Mutual Fund) COLLECTIVE INVESTMENT SCHEMES -— Gains
realized by the investor upon Zedemption, of shares of stock lin a

2K xX xxx,

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:

allowed under this Section, in A), aeuting taxable income subject to
income tax under Sections 24(A); 25(A); 26; 27(4), (B) and (C); and
28(A\(1), there shall be allowed the following deductions from gross
income:

(A) Expenses, -

(1) Ordinary ana Necessary Trade, Business or Professional
es. —

(a) _In General. - There shall be allowed as deduction from
8ross income alll 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 of exercise of a profession,
including:

22K XXX soo

25


COVaueRENE

(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
or eha se being deducted, and (ii) the direct connection or relation

(c) Bribes, Kickbacks and Other Similar Payments. - No
deduction from gross income shall be allowed under Subsection

employee of a government-owned or -controlled corporation, or to
an official or employee or representative of a foreign government,
or to @ private corporation, general professional Partnership, or a
similar entity, if the payment constitutes a bribe or kickback.

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)

OF FINANCE: PROVIDED, THAT INTEREST EXPENSES
SUBJECTED TO THE LIMITATION UNDER SECTION 34(B)(1)
2K KK sox
(B) Interest. -

(1)__In General. - The amount of interest Paid or incurred within a
taxable year on indebtedness in connection with the taxpayer's

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.

26


Seevauaunn

(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[iJnterest
EXPENSE incurred to acquire property used in trade, business or
exercise of a profession THAT WILL BENEFIT THE BUSINESS
LONGER THAN ONE YEAR SHALL [may] BE CAPITALIZED AND
THEREAFTER AMORTIZED OR DEPRECIATED AS PART OF THE
COST OF THE ASSET.

XXX XXX XXX
(E) Bad Debts. -
(1) In General. - xxx

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

27


ORDINARY LOSSES THAT ARE ALLOWED AS DEDUCTION FROM
TAXABLE INCOME.

2K XX 3K

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

xO XXX XXX,

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

28


1 LICENSED BY THE APPROPRIATE GOVERNMENT REGULATORY
2 AGENCIES TO BUY AND SELL IN SECURITIES EITHER FOR THE
3 ENTITIES OWN ACCOUNT OR FOR THE ACCOUNT OF OTHERS and
4 with respect to a transaction made in the ordinary course of the
5 business of such dealer.

6

7 XXX XXX xXx

8

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

sty

12 SEC. 39. Capital Gains and Losses. -

3

rT (A) Definitions. ~ As used in this Title -

15

16 XO KK 20K

7

18 [(B) Percentage Taken Into Account. - In the case of a taxpayer, other
19 than a corporation, only the following percentages of the gain or loss
20 recognized upon the sale or exchange of a capital asset shall be taken
21 into account in computing net capital gain, net capital loss, and net
22 income:]

23
24 [(1) One hundred percent (100%) if the capital asset has been held for
25 not more than twelve (12) months; and]
26
27 [(2) Fifty percent (50%) if the capital asset has been held for more than
28 twelve (12) months;]

29

30 [(C)] (B) Limitation on Capital Losses. - Losses from sales or
31 exchanges of capital assets shall be allowed only to the extent of the
32 gains from such sales or exchanges. If a [bank, or a trust company]
33 DEALER IN SECURITIES OR OTHER ENTITIES OR FINANCIAL
34 INTERMEDIARIES DULY LICENSED BY THE APPROPRIATE
35 GOVERNMENT REGULATORY AGENCIES TO TRADE IN
36 SECURITIES, sells any bond, debenture, note, or certificate or other
37 evidence of indebtedness issued by any corporation (including one
38 issued by a government or political subdivision thereof), with interest
39 coupons or in registered form, any loss resulting from such sale shall
40 not be subject to the foregoing limitation and shall not be included in
a determining the applicability of such limitation to other losses.
a2
43 [(D) Net Capital Loss Carry-over. - If any taxpayer, other than a
44 corporation, sustains in any taxable year a net capital loss, such loss
45 (in an amount not in excess of the net income for such year) shall be
46 treated in the succeeding taxable year as a loss from the sale or
47 exchange of a capital asset held for not more than twelve (12) months.]
48

49 [(E)\C) Retirement of Bonds, etc. - x x x

29


[(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:

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;

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

(1) General Rule. -

30


XXX XXX XXX

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

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

SEC. 51. Individual Return. -

(A) Requirements. - x x x

XXX XXX XK

(C) When to File. -

XXX XXX XXX

(2) Individuals subject to tax on capital gains:

(a) From the sale or exchange of shares of stock OR DEBT
INSTRUMENTS AND OTHER SECURITIES not traded [thru]
THROUGH a local [stock] exchange OR AN ORGANIZED
MARKETPLACE as prescribed under SectionS 24[(C)|(B) (3) and [(4)]
(8), 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

31


THE PRECEDING WEEK, AND OF ALL TAXES COLLECTED AND
‘TURNED OVER TO THE BUREAU OF INTERNAL REVENUE.

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

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

SEC. 52. Corporation Returns. —

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

XXX XXX XXX

(D) Return on Capital Gains Realized from Sale of Shares of Stock,
DEBT INSTRUMENT, AND OTHER SECURITIES not Traded in the
Local [Stock] Exchange OR AN ORGANIZED MARKETPLACE. -
Every corporation deriving capital gains from the sale or exchange of
shares of stock, DEBT INSTRUMENTS AND OTHER SECURITIES not
traded thru a local [stock] exchange OR AN ORGANIZED
MARKETPLACE as prescribed under SECTIONS 27(D)(3), AND (5),
AND 28 [Sections 24(C), 25(A)(3), 27(E)(2), 28(A)(8)(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

32


or before the fifteenth (15') day of the fourth (4th) month following the
close of the taxable quarter.)

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

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

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

33


TRUSTOR OR BENEFICIARY BE REQUIRED TO DECLARE THE
INCOME AS PART OF ITS TAXABLE INCOME.

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

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

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

(A) Payment of Tax. -
XXX XXX XXX
(3) Payment of Capital Gains Tax. -

A. IN GENERAL - The total amount of tax imposed and prescribed
under Section 24[(C)](B)(3), 24[(D)](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:

34


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 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),

wavanesunn

10 27(D)(3), 27(D){5); 28(A)(4), 28(A)(5), 28(A)(7)(a), 28(A)(7)(b), 28(A)(7)(c),
a 28(B)(1), 28(B)(2), 28(B)(3), 28(B)(4), 28(B)(5)(a), 28()(S)(b), 28(B)(5)(c)Is
12 33; and 282 of this Code on specified items of income SUBJECT TO
13 FINAL TAX shall be withheld by payor-corporation and/or person and
4 paid in the same manner and subject to the same conditions as
15 provided in Section 58 of this Code.

16

7 (B) xxx xxx xxx

18

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

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

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

40

a1 (A) Definition of Dividends. - The term ‘dividends’ when used in this
42 Title means any distribution made by a corporation to its shareholders
3 out of its earnings or profits and payable to its shareholders, whether
44 in money or in other property.

45

46 Where a corporation distributes alll of its assets in complete liquidation
a7 or dissolution, the gain realized or loss sustained by the stockholder,
48 whether individual or corporate, is a taxable income or a deductible

35


loss, UNDER SECTIONS 24(A), 25(A), 25(B), 27(A), 28(A) AND 28 (B),
as the case may be.

(B) Stock Dividend. - x x x

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

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

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

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:

XXX XXX XXX

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

SEC. 121. Tax on Banks and Non-Bank Financial Intermediaries
Performing Quasi-Banking Functions. - There shall be collected a
tax on gross receipts derived from sources within the Philippines by all
banks and non-bank financial intermediaries PERFORMING QUASI-

36


BANKING FUNCTIONS AT THE RATE OF FIVE PERCENT (5%) ON
INCOME SUCH AS INTEREST, COMMISSIONS, AND DISCOUNTS
FROM LENDING ACTIVITIES AS WELL AS INCOME FROM
FINANCIAL LEASING, ROYALTIES, RENTALS OF PROPERTY, REAL
OR PERSONAL, PROFITS FROM SALE OR EXCHANGE INCLUDING
GAINS DERIVED FROM SALE OR TRANSFER OF REAL
PROPERTIES, NET TRADING GAINS WITHIN THE TAXABLE YEAR
OF FOREIGN CURRENCY, DEBT SECURITIES, DERIVATIVES, AND
OTHER SIMILAR FINANCIAL INSTRUMENTS, AND ALL OTHER
ITEMS TREATED AS GROSS INCOME UNDER SECTION 32 OF THIS
CODE, EXCEPT DIVIDENDS AND EQUITY SHARES AND NET
INCOME OF SUBSIDIARIES 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 cc. 5%]

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

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

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

[(d) On net trading gains within the taxable year of foreign currency,
debt securities, derivatives, and other similar _financial
instruments. 1. 7%

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

Provided, That FOR PURPOSES OF COMPUTING THE GROSS
RECEIPTS, the generally accepted accounting principles OF
RECORDING INCOME AS ADOPTED BY THE BANK SHALL BE
FOLLOWED. 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

37


WITHIN THE SAME BUSINESS ACTIVITY CAN BE OFFSET TO
DETERMINE THE NET GAIN SUBJECT TO THIS TAX: PROVIDED,
FURTHER, THAT SUCH OFFSETTING SHALL BE ON A QUARTERLY
BASIS, AND ANY NET LOSS INCURRED IN A QUARTER CAN BE
CARRIED OVER AS DEDUCTION IN THE SUCCEEDING
QUARTER/S: PROVIDED FINALLY, THAT NET LOSS INCURRED IN
A TAXABLE YEAR CANNOT BE CARRIED OVER TO THE
SUCCEEDING TAXABLE YEAR.

[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]

XXX XXX KX,

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

38


the date of pretermination for purposes of classifying the transaction
and the correct rate of tax shall be applied accordingly.]

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

FINANCIAL INTERMEDIARIES SUBJECT TO TAX UNDER THIS
SECTION SHALL 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 BE SUBJECT TO THE SAME TAX APPLICABLE
TO THE PRINCIPAL BUSINESS ACTIVITY OR TRANSACTION.

39


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 Premiumsj,] .
- There shall be collected from every person, company or corporation,
(except purely cooperative companies or associations) doing life
insurance business of any sort in the Philippines A PREMIUM TAX AT
‘THE FOLLOWING RATES:

(A) FOR LIFE INSURANCE INCLUDING HEALTH INSURANCE
AS A RIDER TO LIFE INSURANCE POLICY, a tax of two percent
(2%) of the total premium collected, whether such premiums are
paid in money, notes, credits or any substitute for money; but
premiums refunded within six (6) months after payment on
account of rejection of risk or returned for other reason to a
person insured shall not be included in the taxable receipts; nor
shall any tax be paid upon reinsurance by a company IF THE
TAX [that] has already BEEN paid [the tax] ON THE DIRECT
PREMIUM; nor upon premiums collected or received by any
branch of a domestic corporation, firm or association doing
business outside the Philippines on account of any life insurance
of the insured who is a nonresident, if any tax on such premium
is imposed by the foreign country where the branch is
established; nor upon premiums collected or received on account
of any reinsurance, if the insured, in case of personal insurance,
resides outside the Philippines, if any tax on such premiums is
imposed by the foreign country where the original insurance has
been issued or perfected; nor upon that portion of the premiums
collected or received by the insurance companies on variable
contracts IN A COLLECTIVE INVESTMENT SCHEME in excess
of the amounts necessary to insure the lives of the variable

40


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 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.

41


1 ANY INCOME, OTHER THAN RECEIPT OF PREMIUM SUCH AS
2 MANAGEMENT FEES, SERVICE FEES, CHARGES, AND PENALTIES,
3 COMMISSIONS, INCOME FROM THE SALE OR TRANSFER OF
4 GOODS, PROPERTIES OR SERVICES, EARNED OR RECEIVED AS
5 AN INCIDENT OF DOING THE BUSINESS OF LIFE, NON-LIFE AND
6 OTHER INSURANCE ACTIVITIES, SHALL BE SUBJECT TO THE
7 VALUE ADDED TAX UNDER SECTION 105 OF THIS CODE;
8 PROVIDED, THAT INCOME RECEIVED FROM THE INVESTMENT
9 AND REINVESTMENT OF PREMIUMS EARNED SHALL NOT BE

10 SUBJECT TO VALUE ADDED TAX NOR TO THE GROSS RECEIPTS
11 TAX IMPOSED UNDER SECTIONS 121 AND 122 OF THIS CODE.

12

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

25 SEC. 26. Section 127 of the National Internal Revenue Code of 1997, as
26 amended, is hereby deleted:
7

28 [SEC. 127. Tax on Sale, Barter or Exchange of Shares of Stock
29 Listed and Traded through the Local Stock Exchange or through
30 Initial Public Offering. -]

31

32 [(A) Tax on Sale, Barter or Exchange of Shares of Stock Listed and
33 Traded through the Local Stock Exchange. - There shall be levied,
34 assessed and collected on every sale, barter, exchange, or other
35 disposition of shares of stock listed and traded through the local stock
36 exchange other than the sale by a dealer in securities, a tax at the rate
37 of six-tenths of one percent (6/10 of 1%) of the gross selling price or
38 gross value in money of the shares of stock sold, bartered, exchanged
39 or otherwise disposed which shall be paid by the seller or transferor.]
40

41 [(B) Tax on Shares of Stock Sold or Exchanged through Initial
42 Public Offering. - There shall be levied, assessed and collected on
a3 every sale, barter, exchange or other disposition through initial public
a4 offering of shares of stock in closely-held corporations, as defined
45 herein, a tax at the rates provided hereunder based on the gross selling
46 price or gross value in money of the shares of stock sold, bartered,
47 exchanged or otherwise disposed in accordance with the proportion of

48 shares of stock sold, bartered, exchanged or otherwise disposed to the

42


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%) .. oo 244

[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’ includes only his brothers and sisters
(whether by whole or half-blood), spouse, ancestors and lineal
descendants.]

[(3) Option. - If any person has an option to acquire stock, such stock
shall be considered as owned by such person. For purposes of this
paragraph, an option to acquire such an option and each one of a series
of options shall be considered as an option to acquire such stock.]

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

43


Swevauauwne

[(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:

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 represented 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.

44


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

1

2

3

4 [SEC. 175. Stamp Tax on Sales, Agreements to Sell, Memoranda
5 of Sales, Deliveries or Transfer of Shares or Certificates of Stock.
6 ~ On all sales, or agreements to sell, or memoranda of sales, or
7 deliveries, or transfer of shares or certificates of stock in any
8 association, company, or corporation, or transfer of such securities by
9 assignment in blank, or by delivery, or by any paper or agreement, or

10 memorandum or other evidences of transfer or sale whether entitling
ott the holder in any manner to the benefit of such stock, or to secure the
2 future payment of money, or for the future transfer of any stock, there
B shall be collected a documentary stamp tax of One peso and fifty
14 centavos (P1.50) on each Two hundred pesos (P200), or fractional part
15 thereof, of the par value of such stock: Provided, That only one tax shall
16 be collected on each sale or transfer of stock from one person to
v7 another, regardless of whether or not a certificate of stock is issued,
18 indorsed, or delivered in pursuance of such sale or transfer: and
19 Provided, further, That in the case of stock without par value the
20 amount of the documentary stamp tax herein prescribed shall be
a equivalent to fifty percent (50%) of the documentary stamp tax paid
22 upon the original issue of said stock.]

23

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

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

36

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

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

45


CoVauaune

[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 representing borrowing and lending transactions including
but not limited to debentures, certificates of indebtedness, due bills,
bonds, loan agreements, including those signed abroad wherein the
object of contract is located or used in the Philippines, instruments and
securities issued by the government or any of its instrumentalities,
deposit substitute debt instruments, certificates or other evidences of
deposits that are either drawing interest significantly higher the regular
savings deposit taking into consideration the size of the deposit and the
risks involved or drawing interest and having a specific maturity date,
orders for payment of any sum of money otherwise than at sight ot 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:

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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 collecteda
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
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

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 shail
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 PS00,000

but does not exceed P750,000 - P100.00
If the amount of insurance exceeds P7S0,000

but does not exceed P1,000,000 - P150.00
If the amount of insurance exceeds P1 ,000,000 - P200.00

a7


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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 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, stearn
boiler, burglar, elevator, automatic sprinkler, or other branch of
insurance (except life, marine, inland, and fire insurance), and all
bonds, undertakings, or recognizance, 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%),

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1 JANUARY 1, 2023: NINE AND ONE-HALF PERCENT (9.5%),

2

3 JANUARY 1, 2024: EIGHT AND ONE-HALF PERCENT (8.5%),

4

5 JANUARY 1, 2025: SEVEN AND ONE-HALF PERCENT (7.5%).

6

7 SEC. 186. Stamp Tax on [Policies of Annuities, and] Pre-Need
8 Plans- [On all policies of annuities, or other instruments by whatever
9 name the same may be called, whereby an annuity may be made,
10 transferred or redeemed, there shall be collected a documentary stamp
11 tax One peso (P1.00) on each Two hundred pesos (P200), or fractional
12 part thereof, of the premium or installment payment on contract price,
13 collected.] On pre-need plans, THERE SHALL BE COLLECTED A
14 DOCUMENTARY STAMP TAX OF TWENTY PERCENT OF ONE
15 PERCENT (0.2%) OF THE PREMIUM OR INSTALLMENT PAYMENT
16 ON CONTRACT PRICE, OR CONTRIBUTION CHARGED. [Forty
v7 centavos (P0.40) on each Two hundred pesos (P200), or fractional part
18 thereof, of the premium or contribution collected.]

19
20 SEC. 187. Stamp Tax on Indemnity Bonds. - On all bonds for
21 indemnifying any person, firm or corporation who shall become bound
22 or engaged as surety for the payment of any sum of money or for the
23 due execution or performance of the duties of any office or position or
24 to account for money received by virtue thereof, and on all other bonds
25 of any description, except such as may be required in legal proceedings,
26 or are otherwise provided for herein, there shall be collected a
27 documentary stamp tax of [Thirty centavos (P0.30) on each Four pesos
28 (P4.00), or fractional part thereof, ] SEVEN AND ONE-HALF PERCENT
29 (7.5%) OF THE PREMIUM CHARGED.
30
31 SEC. 188. Stamp Tax on Certificates. — On each certificate of damage
32 or otherwise, and on every other certificate or document issued by any
33 customs officer, marine surveyor, or other Person acting as such, and
34 on each certificate issued by a notary public, and on each certificate of
35 any description required by law or by rules or regulations of a public
36 office, or which is issued for the purpose of giving information, or
37 establishing proof of a fact, and not otherwise specified herein, there
38 shall be collected a documentary stamp tax of [Thirty] FORTY pesos
39 (P[3]40.00).
40

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

43
4a [SEC. 192. Stamp Tax on Proxies. -On each proxy for voting at any
45 election of officers of any company or association, or for any other
46 purpose, except proxies issued affecting the affairs of associations or
47 corporations organized for religious, charitable or literary purposes,
48 there shall be collected a documentary stamp tax of Thirty Pesos
49 (P30.00).]

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[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 ot
municipality, there shall be collected a documentary stamp tax of Ten
pesos (P10.00).]

SEC 35. 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:]

(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).}

XXX XXX XXX

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
faltering or otherwise] ALTERATION OF SUCH AGREEMENT,
CONTRACT OR CHARTER, there shall be levied, collected and paid a
documentary stamp tax, at the same rate as that imposed on the
original instrument.

SEC. 199. 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

50


Seevawsunn

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.

XK XXX XXX

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

(0) 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
shalll take effect on income and transactions beginning January 1, 2020. Any
tax exemption on interest income and gains granted to long-term instruments
and securities prior to the effectivity of this Act shall remain exempt.

SEC. 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:

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

(b) Sections 6, 7, and 8, insofar as tax exemption on interest income,
capital gains, and documentary stamp tax is concerned, of Executive

51


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”;

(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”

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

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

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

(i) Section 2(g), insofar as tax exemption on interest income is
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;

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

() 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;

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

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

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

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

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

(1) __ 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”;

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

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

(v)__ Section 9, insofar as tax exemption on interest income, capital
gains, and documentary stamp tax on bonds is 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’;

()__ 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

54


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. 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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