Republic of the Philippines - pe

HOUSE OF REPRESENTATIVES. Sig
Quezon City :

SIXTEENTH CONGRESS, SN
Second Regular session =

4996

HOUSE BILL NO.

Introduced by Representative GIORGIDI B. AGGABAO.

EXPLANATORY NOTE

As a member country of the ASEAN Integration which will take effect in 201
have committed to create a “single market and production base” known as the ASEAN
Economic Community that will provide a highly competitive and integrated global economy.

Many economists and business experts agree that a major step towards this direction
is the provision of a market that is attractive to long term foreign direct investments (FDI)
While our FDI has increased by 20% in the last year, there is no denying that we are lagging
behind our neighboring countries and that there is much yet to be done to make our economy
globally competitive. One of the reasons advanced why we seem to lag behind is the high
cost of doing business in the country

Our country charges the highest corporate tax rate at 30% among the ASEAN
member nations. The average rate among the 10 ASEAN member nations is 23% with
Singapore charging the the lowest at 17%. Even our VAT rate ig the highest at 12%
compared to other ASEAN members with rates of zero to 10%.

Presently, domestic corporations in the Philippines are taxed at 30% on their net
taxable income derived from all income within and outside of the Philippines, Resident
foreign corporations, on the other hand are taxed at the same rate of 30% , but only on their
net taxable income derived from sources within the country

This bill aims to keep our tax rates at par with our neighboring countries, creating a
globally competitive and more attractive climate for foreign investments.

Approval of this bill is earnestly sought

GIORGIDT : *



Republic of the Philippines
House of Representatives
Quezon City

SIXTEENTH CONGRESS
Second Regular Session

House Bill No. 4996

Introduced by Representative Giorgidi B. Aggabao

AN ACT REDUCING THE CORPORATE INCOME TAX RATE, AMENDING
SECTIONS 27 AND 28 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997,
AS AMENDED, AND FOR OTHER PURPOSES

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

SECTION 1. Section 27 (A) of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

“Sec. 27. Rates of Income Tax on Domestic Corporations -

“(A) In General - Except as otherwise provided in this Code, an income tax of [ thirty
five percent (35%)] TWENTY-EIGHT PERCENT (28%) BEGINNING JANUARY I, 2015,
AND TWENTY-FIVE PERCENT (25%) BEGINNING JANUARY 1, 2017, is hereby
imposed upon the taxable income derived during each taxable year from all sources with 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%)].”

SEC, 2. Section 28 of the National Internal Revenue Code of 1997, as amended, is hereby
further amended to read as follows:

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

(A) Tax on Resident Foreign Corporations -

(I) In General- ( Except as otherwise provided in this Code, a corporation
organized, authorized, or existing under the laws of any foreign country, engaged in trade or
business within the Philippines, shall be subject to an income tax equivalent to [thirty-five
percent (35%] TWENTY-EIGHT PERCENT (28%) BEGINNING JANUARY 1, 2015, AND
TWENTY-FIVE PERCENT (25%) BEGINNING JANUARY 1, 2017 of the taxable income
derived in the preceding taxable year from all sources within the Philippines [:Provided, That
effective January 1, 2009, the rate of income tax shall be thirty percent (30%)]

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“(B) Tax on Nonresident. 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-EIGHT PERCENT
(28%) BEGINNING JANUARY 1, 2015, AND TWENTY-FIVE
PERCENT (25%) BEGINNING JANUARY 1, 2017 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( ¢ )
[: Provided, That effective January 1, 2009, the rate of income tax shall be
thirty percent (30%)]

(5) Tax on Certain Incomes Received by a Nonresident Foreign Corporation.-

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(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 $7 (A) of this Code, subject to the condition that
the country in which the non-resident foreign corporation is domiciled, shall
allow credit against the tax due from the nonresident foreign corporation taxes
deemed to have been paid in the Philippines equivalent to [twenty percent
(20%)}] THIRTEEN PERCENT (13%), which represent the difference
between the regular income tax of [thirty-five percent (35%) TWENTY-
EIGHT PERCENT (28%) beginning January 1, 2015 and the fifteen percent
(15%) tax on dividends as provided in this subparagraph. Provided, That
effective January 1, [2009] 2017, the credit against the tax due shall be
equivalent to [fifteen percent (15%)] TEN PERCENT (10%), which
represents the difference between the regular income tax of [thirty percent
(30%)] TWENTY-FIVE PERCENT (25%) and the fifteen percent (15%) tax
on dividends,”

SEC. 3. Implementing Rules and Regulations — The Secretary of Finance shall
promulgate the necessary rules and regulations for the effective implementation of the
provisions of this Act

SEC. 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 parts or provisions hereof not affected thereby shall continue to be in
full force and effect

SEC.6. Effectivity- This Act shall take effect on January 1, 2015 following its
publication in at least two (2) newspapers of general circulation

Approved