Republic of the Philippines
House of Representatives
Quezon City

Eighteenth Congress
First Regular Session

2399

Introduced by Representatives
Estrellita B. Suansing and Horacio P. Suansing, Jr.

EXPLANATORY NOTE

This bill covers the fourth package of the Duterte Administration’s
comprehensive tax reform program. It complements the recently passed 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 sizeable 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. These
result in the 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.

c. Uneven playing field - The current tax system provides certain
concessions or different tax treatment of certain transactions for some types of
financial institutions (FIs) 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.

d. Inequitable distribution of tax burden - Investments in equity and some
forms of long-term 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.

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

g. 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 impositions 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.

c. 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. Non-life insurance is also subjected to a similar 5% premium tax
rate.

d. 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.

e. 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.

This bill is originally filed during the 17% Congress and has been approved on
third and final reading.

“ys District, Nueva Eqjia oa Distrie ” Sultan Kudarat


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Republic of the Philippines
House of Representatives
Quezon City

Eighteenth Congress
First Regular Session
2399

House Bill No.

Introduced by Representatives
Estrellita B. Suansing and Horacio P. Suansing, Jr.

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, 189, 190, 191, 194, 195, 196, 197, 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 discourage arbitrage
opportunities.


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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) 200x,

(B) The term ‘corporation’ shall include partnerships, no matter how
created or organized, joint-stock companies, joint accounts (cuentas en
participacion SUCH AS COLLECTIVE INVESTMENT SCHEMES),
associations, or insurance companies, but does not include general
professional partnerships and a joint venture or consortium formed for the
purpose of undertaking construction projects or engaging in petroleum,
coal, geothermal and other energy operations pursuant to an operating or
consortium agreement under a service contract with the Government.
‘General professional partnerships’ are partnerships formed by persons
for the sole purpose of exercising their common profession, no part of the
income of which is derived from engaging in any trade or business. A
COLLECTIVE INVESTMENT SCHEME MAY OR MAY NOT BE
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION.

XXK 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, SUCH AS COLLECTIVE INVESTMENT
SCHEMES, joint ventures taxable as corporations, associations and
recreation or amusement clubs (such as golf, polo or similar clubs), mutual
fund 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 ina
partnership (except general professional partnerships), in a joint stock
company, a joint account SUCH AS COLLECTIVE INVESTMENT
SCHEMES, 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.


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(1) The term ‘securities’ means [shares of stock in a corporation, and
rights to subscribe for or to receive such shares. The term includes bond,
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.

XXK 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

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REPUBLIC ACT NO. 7353, OR 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
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, OR 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 SECTION 95 OF
REPUBLIC ACT NO. 7653, OR THE NEW CENTRAL BANKING ACT FOR
PURPOSES OF RELENDING OR PURCHASING OF RECEIVABLES AND
OTHER OBLIGATIONS.

() The term ‘quasi-banking activities’ means 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.
THE PHRASE “AT ANY ONE TIME” SHALL BE COUNTED AS THE TIME
OF ORIGINATION OR ISSUANCE OF THE DEBT INSTRUMENT.

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

XK OXKK 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 | XKK XX

(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 fiscal
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,


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FINANCING, INVESTING, OR PLACEMENT OF FUNDS OR EVIDENCES
OR INDEBTEDNESS OR EQUITY DEPOSITED WITH THEM, ACQUIRED
BY THEM, OR OTHERWISE COURSED THROUGH THEM, EITHER FOR
‘THEIR OWN ACCOUNT OF 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
COLLECTIVE INVESTMENT SCHEMES, INVESTMENT HOUSES,
LENDING INVESTORS, 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.

(0) THE TERM ‘COLLECTIVE INVESTMENT SCHEME’ 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

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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 OR INDEBTEDNESS, DUE BILLS, BONDS, LOAN
AGREEMENTS, INSTRUMENTS, AND SECURITIES ISSUED BY THE
GOVERNMENT OR ANY OF ITS INSTRUMENTALITIES, DEPOSIT
SUBSTITUTES, DEBT INSTRUMENTS, 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,
REGISTERED AND LICENSED 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) THE TERM ‘CLOSELY HELD CORPORATION MEANS ANY
CORPORATION WITH AT LEAST FIFTY PERCENT (50%) IN VALUE OF
OUTSTANDING CAPITAL STOCK OR AT LEAST FIFTY PERCENT (50%)


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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 THE INDIVIDUAL’S
FAMILY, OR PARTNER. FOR PURPOSES OF THE PARAGRAPH,
‘THE ‘FAMILY OF AN INDIVIDUAL’ INCLUDES ONLY 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
PERSON THE CONSTRUCTIVE OWNER OF SUCH STOCK.

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 XK XXX


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(B) Rate of Tax on Certain Passive Income. -

(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, 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 accounts and other investments evidenced by
certificates in such form prescribed by the Bangko Sentral ng Pilipinas
(BSP) shall be exempt from 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 four (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, [or] mutual fund companies, 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


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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.

ICK3) 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 through A LOCAL stock exchange[.] OR AN ORGANIZED
MARKETPLACE.

[Not over P100,000.. 5%

On any amount in excess of P100,000.... 10%]

(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 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 SIXTEENTH 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 MONET OF THE SHARES OF STOCK SOLD,
BARTERED, EXCHANGED, OR OTHERWISE DISPOSED OF, TO BE
PAID BY THE SELLER OR TRANSFEROR.

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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.

(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, WHETHER OR NOT UNDERTAKEN AS A PRIMARY
BUSINESS UNDERTAKING FOR THE DEALER’S OWN ACCOUNT OR
FOR THE ACCOUNT OF OTHERS, OR UNDERTAKEN IN A FIDUCIARY
CAPACITY, SHALL NOT BE SUBJECT TO TAX UNDER THIS
SUBSECTION BUT TO SECTION 24(A) AS AN ORDINARY INCOME.

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[(D)|(7) Capital Gains from Sale of Real Property. -

{a) In General. - [The provisions of Section 39(B) notwithstanding, a] A
final tax of sic 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 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 of 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 A TAX UNDER SECTION 24 (A); AND (3)
OTHER WINNINGS (EXCEPT WINNINGS AMOUNTING TO PHP10,000

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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 CODEj, 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 (180) 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
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

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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 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 finterest, cash and/or property
dividends,] rents, salaries, wages, premiums, annuities, compensation,
remuneration, emoluments, or other fixed or determinable annual or
periodic or casual gains, profits, and income, [and capital gains, ] a 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.

INTERESTS, 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.

XX OXKK 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%).

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(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 deposit 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 rates prescribed below 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:]

[Not over P100,000.

[Amount in excess of P100,000....

[(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%) of such income]

[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.]

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(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,
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 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.

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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 BY 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.

(8) 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 NON INCLUDED IN SECTION 27(D)(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.

(6) PRESUMPTIVE CAPITAL GAINS ON LISTED AND TRADED DEBT
INSTRUMENTS AND OTHER SECURITIES NOT INCLUDED IN SECTION
27(DX3) 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 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 MONET 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, WHETHER OR NOT UNDERTAKEN AS A PRIMARY
BUSINESS UNDERTAKING, FOR THE DEALER’S OWN ACCOUNT OR
FOR THE ACCOUNT OF OTHERS, OR UNDERTAKEN IN A FIDUCIARY
CAPACITY, SHALL NOT BE SUBJECT TO TAX UNDER THIS
SUBSECTION BUT TO SECTION 27(A) AS AN ORDINARY INCOME.

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[(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.

[(£)\(F) Minimum Corporate Income Tax on Domestic Corporations. -
(1) Imposition of tax. - x xx

XXX XXX XXX

(4) Gross Income Defined. - x x x

XXX XXX XXX

In the case of taxpayers engaged in the sale of service, ‘gross income’
means gross receipts less sales returns, allowances, discounts and cost of
services. ‘Cost of services’ shall mean all direct costs and expenses
necessarily incurred to provide the services required by the customers and
clients including (A) salaries and employee benefits of personnel,
consultants and specialists directly rendering the service and (B) cost of
facilities directly utilized in providing the service such as depreciation or
rental of equipment used and cost of supplies: Provided, however, That in
the case of banks AND OTHER FINANCIAL INTERMEDIARIES, ‘cost of
services’ shall include interest expense.

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

SEC. 28. Rates of Income Tax on Foreign Corporations. —
(A) Tax on Resident Foreign Corporations. -

(1) 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 fan]
income tax UNDER SECTION 27 OF THIS CODE [equivalent to thirty-five
percent (35%) of the] ON 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%)}.

KKK XK

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

(3) International Carrier. - x x x

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

I(7) Tax on Certain Incomes Received by a Resident Foreign Corporation. -]

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[la) 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 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
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.]

[() 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%)}

(a) 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]

(B) Tax on Nonresident Foreign Corporation. -

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(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%).

XXX OXKK XXX

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

la) 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 similar 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

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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.

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.

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 is
hereby imposed for each taxable year on the improperly accumulated
taxable income of each corporation described in Subsection B hereof, an
improperly accumulated earnings tax equal to [ten] FIFTEEN percent
[(10%] (15%) of the improperly accumulated taxable income.

(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 formed or availed for the
purpose of avoiding the income tax with respect to its shareholders or the
shareholders of any other corporation, by 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 OTHER
FINANCIAL INSTITUTIONS AS MAY BE DETERMINED BY THE
APPROPRIATE GOVERNMENT REGULATORY AGENC!I and

(c) Insurance companies, SUCH AS LIFE AND NON-LIFE, REINSURANCE
COMPANIES, PRE-NEED COMPANIES, PENSION FUNDS, HEALTH
MAINTENANCE ORGANIZATIONS AND OTHER ENTITIES DOING
BUSINESS SIMILAR TO OR AKIN TO INSURANCE.

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

[(1) Prima Facie Evidence. - The fact that any corporation is a mere
holding company or investment company shall be prima facie evidence of
a purpose to avoid the tax upon its shareholders or members.

[(2) Evidence Determinative of Purpose. - The fact that the earnings or
profits of a corporation are permitted to accumulate beyond the reasonable

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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.]

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.

XK 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
derived by them as such:

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

[(8) 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)I(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;

[@)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 or
asses shall belong to or inure to the benefit of any member, organizer,
officer, or any specific person;

[(F)I(®) Business league, chamber of commerce, or board of trade, not
organized for profit and no part of the net income of which inures to the
benefit of any private stockholder or individual;

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

{(H)G) A nonstock and nonprofit educational institution;

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[()]08) Government educational institution;

[()]) Farmers’ or other mutual typhoon or fire insurance company,
mutual ditch or irrigation company, mutual or cooperative telephone
company, 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)\9) 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 necessary 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 associations 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 read as follows:

SEC. 32. Gross Income. - xxx

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

XXX OXKK KK
(7) Miscellaneous Items. -
XXK KK XXX

lle) Gains from the Sale of Bonds, Debentures or other Certificate of
Indebtedness. - Gains realized from the same or exchange or retirement
of bonds, debentures or other certificate of indebtedness with a maturity
of more than five (5) years.]

(G) INTEREST INCOME FROM, AND GAINS FROM THE SALE,
‘TRANSFER, OR DISPOSITION OF, PROJECT SPECIFIC BONDS THAT
ARE ISSUED TO FINANCE CAPITAL EXPENDITURES OR PROGRAMS
COVERED BY THE PHILIPPINE 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
in [Mutual Fund] COLLECTIVE INVESTMENT SCHEMES. - Gains
realized by the investor upon redemption of shares of stock fin a mutual

24


1 fund] OR UNITS OF PARTICIPATION IN A COLLECTIVE INVESTMENT
2 SCHEME as defined [in] UNDER Section 22 [BB] (11) of this Code.

3 XXK XXX XXX

4 SEC. 11. Section 34(A), (B), (C) and (E) of the National Internal Revenue Code of

5 1997, as amended, is hereby further amended to read as follows:
6 SEC. 34. Deductions from Gross Income. - Except for taxpayers earning
7 compensation income arising from personal services rendered under an
8 employer-employee relationship where no deductions shall be allowed
9 under this Section, in computing taxable income subject to income tax
10 under Sections 24(A); 25(A); 26; 27(A), (B) and (C); and 28(A)(1), there shall
un be allowed the following deductions from gross income:
2 (A) Expenses. -
1B (1) Ordinary and Necessary Trade, Business or Professional
14 Expenses.
15 {a) In General. - There shall be allowed as deduction from gross
16 income all the ordinary and necessary expenses paid or incurred
v7 during the taxable year in carrying on or which are directly
18 attributable to, the development, management, operation and/or
19 conduct of the trade, business or exercise of a profession, including:
20 XXX = =«-XXX~=—XXX
21 (b) Substantiation Requirements. - No deduction from gross
2 income shall be allowed under Subsection (A) hereof unless the
23 taxpayer shall substantiate with sufficient evidence, such as official
24 receipts or other adequate records: (i) the amount of the expense
25 being deducted, and (ii) the direct connection or relation of the
26 expense being deducted to the development, management,
27 operation and/or conduct of the trade, business or profession of the
28 taxpayer.
29 (c) Bribes, Kickbacks and Other Similar Payments. - No
30 deduction from gross income shall be allowed under Subsection (A)
31 hereof for any payment made, directly or indirectly, to an official or
32 employee of the national government, or to an official or employee
33 of any local government unit, or to an official or employee of a
34 government-owned or -controlled corporation, or to an official or
35 employee or representative of a foreign government, or to a private
36 corporation, general professional partnership, or a similar entity, of
37 the payment constitutes a bribe or kickback.
38 (D) EXPENSES RELATED TO OR IN CONNECTION WITH INCOME
39 NOT SUBJECT TO REGULAR TAX UNDER SECTIONS 24(A),
40 25(A), 27(A) AND (B), AND 28(A) SHALL NOT BE ALLOWED AS

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DEDUCTIONS UNDER SUBSECTION (A) HEREOF. EXPENSES
THAT CANNOT BE SPECIFICALLY IDENTIFIED OR ARE
COMMON SHALL BE ALLOCATED BASED ON A REASONABLE
METHOD OF MEASUREMENT AS PROVIDED IN A REGULATION
ISSUED BY THE SECRETARY OF FINANCE: PROVIDED, THAT
INTEREST EXPENSES SUBJECTED TO THE LIMITATION
UNDER SECTION 34({B)(1) SHALL BE EXCLUDED FROM THIS
SECTION.

XXK XXX XK
(B) Interest. -

(1) In General. - The amount of interest paid or incurred within a taxable
year on indebtedness in connection with the taxpayer's profession, trade
or business shall be allowed as deduction from gross income: Provided,
however, That the taxpayer’s otherwise allowable deduction for interest
expense shall be reduced by forty-two percent (42%) of the interest income
subjected to final tax: Provided, That effective January 1, 2009, the
percentage shall be thirty-three percent (33%): PROVIDED, FURTHER,
‘THAT EFFECTIVE JANUARY 1, 2020, 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.

(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

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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 shalll, fin the case
of a taxpayer other than a bank or trust company incorporated under the
laws of the Philippines as substantia 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 HEALD THAT ARE ASCERTAINED TO BE WORTHLESS
SHALL BE CONSIDERED ORDINARY LOSSES THAT ARE ALLOWED AS
DEDUCTION FROM TAXABLE INCOME.

XXX XXX XXX

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. ~ xxx

(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.

XK XXX XXX

SEC. 13. Section 38(A) of the National Internal Revenue Code of 1997, as amended,
is hereby amended to read as follows:

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

XXK XXX XXX

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

SEC. 39. Capital Gains and Losses. -
(A) Definitions. - As used in this Title —
XXX XXX XXX

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

{(1) One hundred percent (100%) of the capital asset has been held for not
more than twelve (12) months; and]

[(2) Fifty percent (50%) if the capital asset has been held for more than
twelve (12) months:]

{(C)|(B) Limitation on Capital Losses. - Losses from sales or exchanges
of capital assets shall be allowed only to the extent of the gains from such
sales or exchanges. If a [bank, or a trust company] DEALER IN
‘SECURITIES OR OTHER ENTITIES OR FINANCIAL INTERMEDIARIES
DULY LICENSED BY THE APPROPRIATE GOVERNMENT REGULATORY
AGENCIES TO TRADE IN SECURITIES, sells any bond, debenture, note,
or certificate or other evidence of indebtedness issued by any corporation
(including one issued by a government or political subdivision thereof,
with interest coupons or in registered form, any loss resulting from such
sale shall not be subject to the foregoing limitation and shall not be
included in determining the applicability of such limitation to other losses.

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[(D) Net Capital Loss Carryover. - If any taxpayer, other than a
corporation, sustains in any taxable year a net capital loss, such loss (in
an amount not in excess of the net income for such year) shall be treated
in the succeeding taxable year as a loss from the sale or exchange of a
capital asset held for not more than twelve (12) months.]

[(C)MC) Retirement of Bonds, etc. - xxx
[(F) Gains or Losses from Short Sales, Etc. - For purposes of this Title
d

[(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, 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 foreign corporation [unless less] WITH MORE 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 XXX

29


warvaus

14

15

16

7

18

19

20

21
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23
24
25
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27

28
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31
32
33
34
35
36
37
38
39

(B) Taxable Income From Sources Within the Philippines. -
(1) General Rule. -
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
IN 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 xx

XXX XKK KK

(C) When to File. -

XXX KK KK

(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
Section 24{(C)](B) (3) and [(4)] (5), AND 25(A) AND (B), [shall file] a return
SHALL BE FILED within thirty (30) days after each transaction.fand a final
consolidated return on or before April 15 of each year covering all stock
transactions of the preceding taxable year; and]

(8) 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

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

30


x

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en

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12
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14
1s
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7
18
19

20

21
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23

24

25

26

27
28

29

30
31
32
33
34
35
36
37
38

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

[()(C) From the sale or disposition of real property under Section 24{(D)]
(8) (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 from 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
through a local [stock] exchange OR AN ORGANIZED MARKETPLACE as
prescribed under [Sections 24(C), 25(A)(3), 27(E)(2), 28(A)(8)(c) and
28(B)(5)(c),] SECTIONS 27(D){3), AND (5), AND 28 shall file a return within
thirty (30) days after each transaction.fand a final consolidated return of

31


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20
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22
23
24
25
26
27
28
29
30
31
32
33
34
35

36
37
38
39

41
42
43

all transactions during the taxable year on or before the fifteenth (15%) day
of the fourth (4!) 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 SECTIONS 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.
= fn 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 TRUSTOR OR BENEFICIARY BE

32


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.

wovauaw

8

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

2 SEC. 56. Payment and Assessment of Income Tax for Individuals and
2B Corporations. -

14 (A) Payment of Tax. -

1s ‘XXX «XXX = -XXK

16 (3) Payment of Capital Gains Tax. -

17 A. IN GENERAL. - The total amount of tax imposed and prescribed under
18 SectionS 24{(C)](B)(3), 24{(D)(B)(5), 24(B\(7), 25, 27((E)(2)] (V3),
19 27(D\(5), 28(A)[(8)(c)] and 28(B)(5)[(c)] shall be paid on the date the return
20 prescribed therefor is filed by the person liable thereto: Provided, That if
21 the seller submits proof of his intention to avail himself of the benefit of
2 exemption of capital gains under existing special laws OR TAX TREATY,
23 no such payments shall be required: Provided, further, That in case of
24 failure to qualify for exemption under such special laws, TAX TREATY and
25 implementing rules and regulations, the tax due on the gains realized from
26 the original transaction shall immediately become due and payable, and
27 subject to the penalties prescribed under applicable provisions of this
28 Code: Provided, finally, That if the seller, having paid the tax, submits such
29 proof of intent within six (6) months from the registration of the document
30 transferring the real property, he shall be entitled to a refund of such tax
31 upon verification of his compliance with the requirements for such
32 exemption.

33 ‘XXX = =-XXK)— XXX

34 SEC. 20. Section 57 of the National Internal Revenue Code of 1997, as amended, is
35 hereby amended to read as follows:

36 SEC. 57. Withholding of Tax at Source. -
37 (A) Withholding of Final Tax on Certain Incomes. - Subject to rules
38 and regulations the Secretary of Finance may promulgate, upon the

39 recommendation of the Commissioner, requiring the filing of income tax

33


1 return by certain income payees, the tax imposed or prescribed [by]
2 UNDER Sections 24(B), 24{C), 25(B), 27(D), 27(E), 28(A), AND 28(B)(5)
3 12), 25(A)(3) and 25(B), 25(C), 25(D), 25(8); 27(D)(1), 27(D\(2), 27(D)(3),
4 27(D)(5); 28(A)(4), 28(A)(5), 28(A)(7)(a), 28(A)(7)(b), 28(A)(7)(c), 28(B)(1),
5 28(B)(2), 28(B)(3), 28(B)(4), 28(B)(5)(a), 28(B)(5)(b), 28(B)(5)(c)}; 33; and 282
6 of this Code on specified items of income SUBJECT TO FINAL TAX shall
7 be withheld by payor-corporation and/or person and paid in the same
8 manner and subject to the same conditions as provided in Section 58 of
9 this Code.

10 (B) xx xxx

uu [(C) Tax-free Covenant Bonds. -In any case where bonds, mortgages, deeds

2 of trust or other similar obligations of domestic or resident foreign

B corporations, contain a contract or provision by which the obligor agrees

4 to pay any portion of the tax imposed in this Title upon the oblige or to

15 reimburse the oblige for any portion of the tax or to pay the interest without

16 deduction for any tax which the obligor may be required or permitted to

7 pay thereon or to retain therefrom under any law of the Philippines, or any

18 state or country, the obligor shall deduct and withhold a tax equal to thirty

19 percent (30%) of the interest or other payments upon those bonds,

20 mortgages, deeds of trust or other obligations, whether the interest or other

21 payments are payable annually or at shorter or longer periods, and

22 whether the bonds, securities or obligations had been or will be issued or

23 marketed and the interest or other payment thereon paid, within or

24 without the Philippines, if the interest or other payment is payable to a

25 nonresident alien or to a citizen or resident of the Philippines.]

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

28 SEC. 73. Distribution of Dividends or Assets by Corporations. -

29 {A) Definition of Dividends. - The term ‘dividends’ when used in this
30 Title means any distribution made by a corporation to its shareholders out
31 of its earnings or profits and payable to its shareholders, whether in money
32 or in other property.

33 Where a corporation distributes all of its assets in complete liquidation or
34 dissolution, the gain realized or loss sustained by the stockholder, whether
35 individual or corporate, is a taxable income or a deductible loss, UNDER
36 SECTIONS 24(A), 25(A), 25(B), 27(A), 28(A), AND 28(B), as the case may
37 be.

38 (B) Stock Dividend. -x x x

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

34


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

3 (A) Rate and Base of Tax. -xxx
4 ‘The phrase ‘sale or exchange of services’ means the performance of all
5 kinds of services in the Philippines for others for a fee, remuneration or
6 consideration, including those performed or rendered by construction and
7 service contractors; stock, real estate, commercial, customs, and
8 immigration brokers; lessors of property, whether personal or real;
9 warehousing services; lessors or distributors of cinematographic films;

10 persons engaged in milling, processing, manufacturing or repacking goods

a for others; proprietors, operators or keepers of hotels, motels, resthouses,

2 pension houses, inns, resorts; proprietors or operators of restaurants,

1B refreshment parlors, cafes and other eating places including clubs and

14 caterers; dealers in securities; [lending investors;] transportation

1s contractors on their transport goods or cargoes for hire and other domestic

16 common carriers by land relative to their transport of goods or cargoes;

7 common carriers by air and sea relative to their transport of passengers,

18 goods or cargoes from one place in the Philippines to another place in the

19 Philippines; sales of electricity by generation companies, transmission, by

20 any entity and distribution companies, including electric cooperatives;

21 services of franchise grantees of electric utilities, telephone and telegraph,

2 radio and television broadcasting and all other franchise grantees except

23 those under Section 119 of this Code and non-life insurance companies

24 (except their crop insurances), including surety, fidelity, indemnity and

25 bonding companies; and similar services regardless of whether or not the

26 performance thereof calls for the exercise or use of the physical or mental

27 faculties. The phrase ‘sale or exchange of services’ shall likewise include:

28 XXX XXX XXX

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

31 SEC. 121. Tax on Banks and Non-Bank Financial Intermediaries
32 Performing Quasi-Banking Functions. - There shall be collected a tax on
33 gross receipts derived from sources within the Philippines by all banks and
34 non-bank financial intermediaries PERFORMING QUASI-BANKING
35 FUNCTIONS AT THE RATE OF FIVE PERCENT (5%) ON INCOME SUCH
36 AS INTEREST, COMMISSIONS, AND DISCOUNTS FROM LENDING
37 ACTIVITIES AS WELL AS INCOME FROM FINANCIAL LEASING,
38 ROYALTIES, RENTALS OF PROPERTY, REAL OR PERSONAL, PROFITS
39 FROM SALE OR EXCHANGE INCLUDING GAINS DERIVED FROM SALE
40 OR TRANSFER OR REAL PROPERTIES, NET TRADING GAINS WITHIN
41 THE TAXABLE YEAR OF FOREIGN CURRENCY, DEBT SECURITIES,
42 DERIVATIVES AND OTHER SIMILAR FINANCIAL INSTRUMENTS, AND
43 ALL OTHER ITEMS TREATED AS GROSS INCOME UNDER SECTION 32

35


10

u
12
13

14
15
16

7
18
19
20
21

22
23
24
25
26
27
28
29
30
31
32
33

35
36
37
38
39

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. 5%]

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

[(b) On dividends and equity shares and net income of
0%)

I(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 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 all 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. BANKS
USING THE ACCRUAL BASIS OF FINANCIAL REPORTING SHALL USE
THE ACCRUAL METHOD IN COMPUTING THE GROSS RECEIPTS:
PROVIDED, THAT, ONCE ADOPTED, IT SHALL BE CONSISTENT FROM
YEAR TO YEAR: 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
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.

36


cS

10
u
2
13
14
15
16
7
18
19
20
2
22
23
24
25

26

27

28
29
30
31

32
33

34
35
36
37
38
39
40

[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.]

XKK XXX XXX

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 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 or 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 shalll be reckoned to end as of 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

37


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.

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.]

38


we

wana

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u
12
13
14
15
16
7
18
19
20
2
22
23
24
25
26
27
28
29
30
31
32
33
34

35
36
37
38
39
40
41
42
43

Nothing in this Code shall preclude the Commissioner from imposing the
tax herein provided on persons 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 Premiums|. -
‘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 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

39


waren

nu

2
13
14
15
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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, A CERTIFICATION
AND A SUMMARY REPORT TO BE PRESCRIBED IN A REGULATION,
ISSUED BY THE DIRECT INSURER, THAT THE TAX THEREON HAS
ALREADY BEEN PAID, SHALL BE ATTACHED TO THE QUARTERLY
PREMIUM TAX RETURN OR VALUE-ADDED TAX RETURN TO BE
FILED. ANY MISREPRESENTATION SHALL SUBJECT THE DIRECT
INSURER TO PENALTIES UNDER SECTIONS 248, 253, 254, 255, 256,
AND 257 OF THIS CODE.

ANY INCOME, OTHER THAN RECEIPT OF PREMIUM SUCH AS
MANAGEMENT FEES, SERVICE FEES, CHARGES, AND PENALTIES,
COMMISSIONS, INCOME FROM THE SALE OR TRANSFER OF GOODS,
PROPERTIES OR SERVICES, EARNED OR RECEIVED AS AN INCIDENT
OF DOING THE BUSINESS OF LIFE, NON-LIFE AND OTHER
INSURANCE ACTIVITIES, SHALL BE SUBJECT TO THE VALUE-ADDED
‘TAX UNDER SECTION 105 OF THIS CODE; PROVIDED, THAT INCOME,
RECEIVED FROM THE INVESTMENT AND REINVESTMENT OF
PREMIUMS EARNED SHALL NOT BE SUBJECT TO VALUE-ADDED TAX
NOR TO THE GROSS RECEIPTS TAX IMPOSED UNDER SECTIONS 121
AND 122 OF THIS CODE.

A VARIABLE INSURANCE CONTRACT WHERE AMOUNTS IN EXCESS
OF INSURANCE COSTS ARE COLLECTED AS PART OF THE PREMIUM
AND WHERE UNITS OF PARTICIPATION IN A POOLED FUND ARE
ISSUED TO THE INSURED REPRESENTING ITS SHARE IN THE
POOLED FUNDS, IS A COLLECTIVE INVESTMENT SCHEME. THE
AMOUNTS OF PREMIUM COLLECTED IN EXCESS OF THE INSURANCE
COST IS NOT SUBJECT TO PREMIUM TAX UNDER THIS SECTION AND

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TO THE GROSS RECEIPTS TAX IMPOSED UNDER SECTIONS 121 AND
122, OR TO ANY PERCENTAGE TAX IMPOSED UNDER TITLE V AND
TO VALUE-ADDED TAX UNDER SECTION 105, TITLE IV OF THIS
CODE.

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

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

[(A) Tax on Sale, Barter or Exchange of Shares of Stock Listed and
‘Traded through the Local Stock Exchange. - There shall be levied,
assessed and collected on every sale, barter, exchange, or other
disposition of shares of stock listed and traded though the local stock
exchange other than the sale by a dealer in securities, a tax at the rate of
one-half of one percent (1/2 of 1%) of the gross selling price or gross value
in money of the shares of stock sold, bartered, exchanged or otherwise
disposed which shall be paid by the seller or transferor]

[08) Tax on Shares of Stock Sold or Exchanged through Initial Public
Offering. - There shall be levied, assessed and collected on every sale,
barter, exchange or other disposition through initial public offering of
shares of stock in closely-held corporations, as defined herein, a tax at
the rates provided hereunder based on the gross selling price or gross
value in money of the shares of stock sold, bartered, exchanged or
otherwise disposed in accordance with the proportion of shares of stock
sold, bartered, exchanged or otherwise disposed to the 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 1/3%) 2%]

1%)

[Over thirty-three and one third percent (33 1/3%).

[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:]

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[(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
ofan 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 option and each one of a series of
options shall be considered as an option to acquire such stock.]

[(4) Constructive Ownership as Actual Oumership. - 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.]

[(C) Return on Capital Gains Realized from Sale of Shares of Stocks.
4

[(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.]

[() 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

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income tax. Tax paid under this Section shall not be deductible for income
tax purposes.]

SEC. 27. Sections 174, 175, 176, 177, 178, 179, 180, 181, 182, 183, 184, 185, 186,
187, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 198 and 199 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,] of 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 ASSES VALUE PER UNIT.

[SEC. 175. Stamp Tax on Sales, Agreements to Sell, Memoranda of
Sales, Deliveries or Transfer of Shares or Certificates of Stock. - On
all sales, or agreements to sell, or memoranda of sales, or deliveries, or
transfer of shares or certificates of stock in any association, company, or
corporation, or transfer of such securities by assignment in blank, or by
delivery, or by any paper or agreement, or memorandum or other evidences
of transfer or sale whether entitling the holder in any manner to the benefit
of such stock or to secure the future payment of money, of for the future
transfer of any stock, there shall be collected a documentary stamp tax of
‘One peso and fifty centavos (P1.50) on each Two hundred pesos (P200), or
fractional part thereof, of the par value of such stock: Provided, That only
one tax shall be collected on each sale or transfer of stock from one person
to another, regardless of whether or not a certificate of stock is issued,
indorsed, or delivered in pursuance of such sale or transfer: and Provided,
further, That in the case of stock without par value the amount of the
documentary stamp tax herein prescribed shall be equivalent to fifty
percent (50%) of the documentary stamp tax paid upon the original issue
of said stock.]

SEC. [176]175. Stamp Tax on Bonds, Debentures, Certificates of Stock
or Indebtedness Issued in Foreign Countries. - On all bonds,
debentures, certificates of stock, or certificates of indebtedness issued in
any foreign country, there shall be collected from the person selling or
transferring the same in the Philippines, A DOCUMENTARY STAMP TAX

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OF SEVENTY-FIVE PERCENT OF ONE PERCENT (0.75%) OF THE
VALUE OF THE TRANSACTION. [such tax as is required by law on similar
instruments when issued, sold or transferred in the Philippines.]

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

{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. [179]176. 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 ration 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 ofits 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 or on demand,] promissory notes,
whether negotiable or non-negotiable, except bank notes issued for
circulation.

[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

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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. [181]177. 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 collected a 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]178. 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 a
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 AVAILMENT OF THE
TRUST RECEIPT LINE WHERE THE PROPERTY SUBJECT OF THE
LETTER OF CREDIT IS MADE A SECURITY FOR PAYMENT.

SEC. [183]179. Stamp Tax on Life AND HEALTH Insurance Policies. -
On all policies of insurance or other instruments by whatever name the
same may be called, whereby any insurance shall 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 P500,000
but does not exceed P750,000 - P100.00

If the amount of insurance exceeds P750,000
but does not exceed P1,000,000 - P150.00

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If the amount of insurance exceeds P1,000,000 - P200.00

SEC. [184]180. 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 instrament 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]181. 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, steam boiler, burglar, elevator,
automatic sprinkler, or other such branch of insurance (except life,
marine, inland, and fire insurance), and all bonds, undertakings, or
recognizances, 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, THAT SUCH
RATE SHALL BE REDUCED ACCORDING TO THE FOLLOWING
SCHEDULE:

JANUARY 1, 2021: ELEVEN AND ONE-HALF PERCENT (11.5%),

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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. [186]182. Stamp Tax on Policies of Annuities and Pre-Need Plans.
- On all policies of annuities, or other instruments by whatever name the
same may be called, whereby an annuity may be made, transferred or
redeemed, there shall be collected a documentary stamp tax OF ONE-
HALF OF ONE PERCENT (0.5%) [One peso (P1.00) on each Two hundred
pesos (P200), or fractional part thereof] of the premium or installment
payment in contract price, OR CONTRIBUTION [collected] CHARGED. On
pre-need plans, OR OTHER INSTRUMENTS BY WHATEVER NAME THE
SAME MAY BE CALLED, WHEREBY AN ANNUITY MAY BE MADE,
TRANSFERRED OR REDEEMED, THERE SHALL BE COLLECTED A
DOCUMENTARY STAMP TAX OF TWENTY PERCENT OF ONE
PERCENT (0.2%) OF THE PREMIUM OR INSTALLMENT PAYMENT ON
CONTRACT PRICE, OR CONTRIBUTION CHARGED. [Forty centavos
(P0.40) on each Two hundred pesos (P200), or fractional part thereof, of
the premium or contribution collected.]

SEC. [187]183. Stamp Tax on Indemnity Bonds. - On all bonds for
indemnifying any person, firm or corporation who shall become bound or
engaged as surety for the payment of any sum of money or for the due
execution or performance of the duties of any office or position or to
account for money received by virtue thereof, and on all other bonds of any
description, except such as may be required in legal proceedings, or are
otherwise provided for herein, there shall be collected a documentary
stamp tax of [Thirty centavos (P0.30) on each Four pesos (P4.00), or
fractional part thereof,) SEVEN AND ONE-HALF PERCENT (7.5%) OF
THE PREMIUM CHARG!

SEC. [188]184. Stamp Tax on Certificates. - On each certificate of
damage or otherwise, and on every other certificate or document issued by
any customs officer, marine surveyor, or other person acting as such, and
on each certificate issued by a notary public, an on each certificate of any
description required by law or by rules or regulations of a public office, or
which is issued for the purpose of giving information, or establishing proof
of a fact, and not otherwise specified herein, there shall be collected a
documentary stamp tax of [Thirty] FORTY pesos (P{3]40.00).

SEC. [189]185. Stamp Tax on Warehouse Receipts. - xxx

SEC. [190]186. Stamp Tax on Jai-alai, Horse Race Tickets, Lotto or
Other Authorized Numbers Games. - xxx

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SEC. [191]187. Stamp Tax on Bills of Lading or Receipts. — xx

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

ISEC. 193. Stamp Tax on Powers of Attorney. - On each power of
attorney to perform any act whatsoever, except as 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 or municipality,
there shall be collected a documentary stamp tax of Ten pesos (P10.00),]

SEC. [194]188. Stamp Tax on Leases and Other Hiring Agreements. -
xxx

SEC. [195]189. 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)]

XXK XXX XXX

SEC. [196]190. Stamp Tax on Deeds of Sale, Conveyances and
Donation of Real Property. - xxx

SEC. [197]191. Stamp Tax on Charter Parties and Similar
Instruments. - xxx

SEC. [198]192. 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

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[altering 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]193. 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 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 OXKK 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.

(O) 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. 28. Propectivity Clause. - The changes introduced under this Act shall 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. 29. 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. 30. 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. 31. Repealing Clause. - The following laws or provisions of laws are hereby
repealed or modified accordingly and the persons and/or transaction affected herein

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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:

fa) 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 Order 603,
entitled “Creating A Light Rail Transit Authority, Vesting The Same With Authority
‘To Construct And Operated The Light Rail Transit (LRT) Project And Providing Funds
Therefor”;

() 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”;

(c) 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”;

(2) 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”;

@ 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”;

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() 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;

(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;

() Section 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”;

(2) 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;

(@) 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”;

() 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”;

(8) 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)), insofar 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 Thereo?”;

(*) 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 exemption 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 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”;

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(dd) Sections 13 and 14, insofar as tax exemption on documentary stamp
tax and dividends is concerned, of Republic Act 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 PD 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’.

SEC. 32. 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) newspapers of general circulation, whichever comes earlier.

Approved,

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