Republic of the Philippines

HOUSE OF REPRESENTATIVES
Quezon City

HOUSE BILL, xo, 8885

Introduced by Representative Manuel F. Zubiri

1)

PLANATORY NOTE,

With the ASEAN Economic Integration and the anticipated influx of increased regional
competition among the ASEAN member-states nearing operational reality, there is a great need for the
Philippines to revisit and examine its prevailing corporate income tax rates and structures to further
enhance the country’s capacity to effectively compete and prevail against its neighbors within the region,
Within ASEAN, the Philippines has the highest corporate tax at 30 percent, followed by Indonesia with
25 percent, Thailand with 23 percent: Vietnam with 22 percent and Cambodia with 20 percent, As
Singapore levies the lowest income tax rate of 17 percent, it should therefore come as no surprise that the
said nation attracts the most foreign direct investments (FDI) to its shores. Conversely, the Philippines.
with the highest income tax rate, receives the lowest FDI among its ASEAN neighbors year on year.

To effectively mect and surmount the challenges posed by a unified ASEAN market, it is
incumbent upon the Philippine Government to institute and implement such measures as may be
necessary to attract foreign direct investments. While it may take considerable time, resources, and
political will to upgrade the country’s ageing infrastructure, address bureaucratic inefficiencies, lower the
high cost of power, and minimize, if not entirely eliminate, the incidence of corruption, the Philippine
government can immediately push for the restructuring of corporate income tax rates in the country to
attract new investments ~ both foreign and local - and encourage the expansion of existing ones,

In a recent study presented by Commissioner Stella Quimbo of the Philippine Competition
Commission, any reduction in corporate income tax are expected to result in an increase in both domestic
and foreign investments. Based on her research, Commissioner Quimbo explained that a one-percentage
point reduction in corporate income tax would translate to a dramatic rise in investments ranging from 6.1
percent to 7.9 percent, or from P31 billion to P33 billion, Through the same report, Commissioner
Quimbo disspelled the notion that high tax rates would automatically translate into higher revenue
collections.

In view of the foregoing, this proposed measure seeks to reduce the corporate income tax rates to
be implemented starting from Janyary 1, 2018 in order to bring down the corporate income tax rate to 25
percent from the present 30 pupéent, Any foregone tax revenue resulting from this proposed measure’s
reduction of the corporate ingome tax rate is expected to be offset by an anticipated expansion in the
country’s economic activitigé and creation of employment opportunities duc to the consequential increase
in foreign and local diregf investments, Moreover, the expected inerease in the country’s economic
activity is also expected y4 broaden the tax base, thereby resulting in increased revenue collections in the
Jong term

Thy iyo approval of this bill is therefore camestly sought.

MANUEL ANT
Repfesentative

INIO F, ZUBIRI


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Seventeenth Congress
First Regular Session

3835

HOUSE BILL NO.

Introduced by Representative Manuel F. Zubiri

AN ACT REDUCING THE CORPORATE INCOME TAX RATE,
AMENDING SI IONS 27 AND 28 OF THE NATIONAL INTERNAL REVENUE

CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSE:

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

“TION 1. Section 27(A) of the National Internal Revenue Code of 1997, as amended, is hereby

further amended to read as follows’

"Sco, 27, Rates of Income Tax on Domestic Corporations. ~

(A) In Ge
percent (35%)]| TWENTY-FIVE PERCENT (25%) BEGINNING JANUARY 1, 2018, is

s within

ec

weral ~ Except as otherwise provided in this Code, an income tax of [thirty

hereby imposed upon the taxable income derived during each taxable year from all sour

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%).."

SECTION 2. Section 28 of the National Internal Revenue Code of 1997, as amended, is hereby further

amended to read as follows

28. Rates of Income Tax on Foreign Corporations

"(A) Tax on Resident oreign Corporations

(1) Jn General. ~ Except as otherwise provided in this Code, a corporation organized,

authorized, or existing under the laws of any foreign country, engaged in trade or business within
the Philippines, shall be subject to an income tax equivalent to [thirty-five percent (35%)]
TWENTY-FIVE PERCENT (25%) BEGINNING JANUARY 1, 2018, of the taxable income
derived in the preceding taxable year from all sources within the Philippines [: Provided, That

effective January 1, 2009, the rate of ineome tax shall be thirty percent (30%).}
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"(B) Tax on Non-resident Foreign Corporations. —


(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%)]
TWENTY-FIVE PERCENT (25%) BEGINNING JANUARY 1, 2018, of the gross income
received during each taxable year from all sources within the Philippines, such as interests,

dividends, rents, royalties, salaries, premiums (except reinsurance premiums), annuities,

emoluments or other fixed or determinable annual, periodic or casual gains, profits and income,
and capital gains, except capital gains subject to tax under subparagraph 5(c) [: Provided, That

effective 19 January 1, 2009, the rate of income tax shall be thirty percent (30%).]
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(3) Fax on Certain Incomes Received by a Non-resident Foreign Corporation. -
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“A fi

(b) Imercorporate Dividends ail 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 non-resident foreign corporation is
domiciled, shall allow a credit against the tax due from the non-resident foreign corporation taxes
deemed to have been paid in the Philippines equivalent to [twenty percent (20%)] TEN
PERCENT (10%), which represents the difference between the regular income tax of [thirty-five
percent (35%)] TWENTY-FIVE PERCENT (25%) BEGINNING JANUARY 1, 2018, and the

fifteen percent (15%) tax on dividends as provided in this subparagraph:

SEI etary of Finance shall promulgate the

necessary rules and regulations for the effective implementation of the provisions of this Act

TION 3. Implementing Rules and Regulations. - The Sec

SECTION 4, Repealing Clause. - All laws, orders, issuances, circulars, rules and regulations or parts:

thereof, which are inconsistent with the provisions of this Act are hereby repealed or modified

accordingly

SEC 5, Separability Clause. - If any provision of this Act is declared unconstitutional or invalid, other

shall continue to be in full force and effect

ions hereof not affected ther

parts or prov by

SEC. 6, Effvetivity, - This Act shall take effect on January 1, 2017 following its publication in at least two

(2) newspapers of general circulation

Approved.