Republic of the Philippines
HOUSE OF REPRESENTATIVE!
Quezon City. Metro Manila

Nineteenth Congress
First Regular Session

375

House Bill No.

Introduced by Representative JOEY SARTE SALCEDA

AN ACT
AMENDING SECTIONS 22, 24, 25, 27, 28, 29, 32, 34, 37, 38, 39, 42,
51, $2, 54, 56, 57, 73, 108, 121, 122, 123, 174, 176, 179, 181, 182, 183,
184, 185, 186, 187, 195, 198, AND 199; AND REPEALING SECTIONS
127, 175, 177, 178, 180, 188, 192, AND 193; ALL UNDER

REPUB! ACT NO, 8424, OTHERWISE KNOWN AS THE
NATIONAL ERNAL REVENUE CODE OF 1997, AS AMENDED,
AND FOR OTHER PURPOSES
EXPLANATORY NOTE

‘This proposed measure. popularly known as the “Passive Income and Financial Intermediary
‘Taxation Act (PIFITA)” was approved on Third and Final Reading in the 18" Congress
primarily authored under my leadership as Committee on Ways and Means Chairperson.

This measure will redesign the taxation of the financial sector by making it simpler, fairer. and
more efficient, critical to its role in the long-term growth and development of the economy. In
2020, the government's total collection from bank deposits amounted to 758.84 biltion while
the percentage taxes on financial institutions was around P42.90 billion,’ These significant
contributions add to government coffers used to finance large-scale infrastructure. create more
and better jobs. and boost economic growth.

Currently. there are 80 tax rates and tax bases on passive income. finaneial services. and
transactions. The tax on income meanwhile varies depending on the term of the instrument, the
issuer. the currency involved. and the residency of the income recipient, Likewise. stamp taxes
depend on the types of instrument or transactions involved. the terms, and the issuers. These
variations in the tax base and tax rates. even among comparable financial instruments and
transactions, result in a complicated tax structure with plenty of room for tax arbitrage. Further.
disparities in tax treatments interfere with investment decisions.

Moreover. the inequitable tax burden on investments in equity and some long-term instruments
allows the rich to pay lower taxes. while working-class individuals pay higher rates because
they can only afford short-term investments or savings deposits.

2 Be Annual Repeat

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This measure aims to level the playing field by harmonizing tax treatments for certain
transactions of financial institutions. It seeks to simplify the complex structure of the financial
sector. ensure neutrality in tax treatment across financial institutions, improve equity among
investors and savers, minimize arbitrage opportunities. and promote capital market
development and tax competitiveness within the context of financial globalization. increased
capital mobility and financial inclusion.

To achieve these, the bill proposes the following reforms:
1) Reduction in the number of final withholding tax rates on interest income, A

single rate of 15% final tax on interest income. in general. will be imposed
regardless of currency. maturity. issuer. and other differentiating factors.

2) Unification of tax rates on passive income. A single rate of 15%. in general. will

be levied on interest income, dividends and capital gains.

Harmonization of business taxes on financial intermediaries. A single gross
receipt tax (GRT) rate of 5% will be charged on banks, quasi banks. and certain
non-bank financial intermediaries (Fis). The distinction between lending and non-
lending income. as well as the maturity of the instrument, will be removed. All types
of income will be taxed at 5%. except dividends, equity shares, and net income of
subsidiaries, which will remain exempt.

3

re-need, pension. life. and HMO insurance will be taxed uniformly at 2% of the
premium. Non-life insurance will remain subject to VAT, while crop insurance will
remain exempt from VAT. Income other than the premium will be subject to VAT.

4) Removal of the initial public offering (IPO) tax which is found to be
detrimental to capital market development. The IPO tax will be removed as it is
seen as an imposition on capital and is detrimental to capital markets. particularly
since collections from IPO tax are minimal. only averaging #273 million annually
from 2000 to 2016. Income tax on listed shares of stock and debt securities will also

be gradually removed to further promote capital market development.

5)

Rationalization of Documentary Stamp Tax (DST) to promote capital mobility,
‘The tax treatment of debt and equity will be equalized by: (a) a gradual reduction
of the 0.6% stock transaction tax (STT) by 0.1 percentage point every year until it
reaches 0 by 2026, and (b) a temporary imposition of a 0.1% transaction tax on
listed and traded debt instruments at the Philippine Dealing Exchange (PDEx).
which will also be removed by 2026. Finally. documents which are non-monetary
in nature will also be exempied from DST.

The passage of this bill is earnestly sought as it will reform the taxatiop-*yStem of the financial

sector, helping accelerate the movement of capital and grow th

JOEY SARTE SALCEDA

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

Nineteenth Congress
First Regular Session

House Bill No. 375

Introduced by Representative JOLY SARTE SALCEDA

AN ACT

AMENDING SECTIONS 22, 24, 25, 27, 28, 29, 32, 34, 37, 38, 39, 42,

$1, 2, $4, 56, 57, 73, 108, 121, 122, 123, 174, 176, 179, 181, 182, 183,
184, 185, 186, 187, 195, 198, AND 199; AND REPEALING SECTIONS

127, 175, 177, 178, 180, 188, 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
assenibled:

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 neutrali 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 shal! ensure that the taxation of passive income and financial transactions
is equitable across all stakeholders and discourages 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) xxx

XXX XXX. XXX

(L) The term ‘shares of stock’ shall [include] REFER TO shares of stock ofa
corporation, warrants and/or options [to purchase shares of stock} WHETHER TO
BUY OR SELL SECURITIES, FUTURES CONTRACTS, AND SUCH OTHER
DERIVATIVE SECURITIES LISTED AND TRADED IN A LOCAL
EXCHANGE OR AN ORGANIZED MARKETPLACE, as well as units of
participation in a partnership (except general professional partnerships), joint stock
‘companies, joint accounts, COLLECTIVE INVESTMENT SCHEMES. joint
ventures taxable as corporations, associations, and recreation or amusement clubs (such
as golf, polo or similar clubs), and mutual fund certificates

(M) The term ‘shareholder’ shall {include} REFER TO holders of a share/s of
stock, warrants and/or option/s [to purchase shares of stock of a corporation].
WHETHER TO BUY OR SELL SECURITIES, FUTURES CONTRACTS, AND
SUCH OTHER DERIVATIVE SECURITIES LISTED AND TRADED IN A
LOCAL EXCHANGE OR AN ORGANIZED MARKETPLACE, as well as a
holder of a unit of participation in a partnership (except general professional
partnerships). in a joint stock company. a joint account, A COLLECTIVE
INVESTMENT SCHEME, a taxable joint venture, a member of an association,
recreation or amusement club (such as golf, polo, oF similar clubs), and a holder of @
mutual fund certificate, member in an association, joint-stock company, or insurance
company.

XXX NRK KX

(1) The term ‘securities’ [means] SHALL REFER TO [shares of stock in a
corporation and rights to subscribe for or to receive such shares. The term includes
bonds, debentures, notes or certificates. or other evidence of indebtedness, issued by
any corporation, including those issued by a government or political subdivision
thereof, with interest coupons or in registered form|.|, SHARES, PARTICIPATION,

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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. THESE INCLUDE:

(1) SHARES OF STOCK, BONDS, DEBENTURES, NOTES,
EVIDENCES or INDEBTEDNESS, ASSET-BACKED
SECURITIES;

@) INVESTMENT CONTRACTS, CERTIFICATES OF INTEREST, OR
PARTICIPATION IN A PROFIT SHARING AGREEMENT SUCH
AS COLLECTIVE INVESTMENT SCHEMES OR CERTIFICATE
OF DEPOSIT FOR A FUTURE SUBSCRIPTION;

(3) FRACTIONAL UNDIVIDED INTERESTS IN OIL, GAS, OR
OTHER MINERAL RIGHTS;

(4) CERTIFICATES OF ASSIGNMENTS, CERTIFICATES OF
PARTICIPATION, TRUST CERTIFICATES, VOTING TRUST
CERTIFICATES, OR SIMILAR INSTRUMENTS;

(5) PROPRIETARY OR NON-PROPRIETARY MEMBERSHIP
CERTIFICATES IN CORPORATIO!

(6) OTHER INSTRUMENTS AS MAY BE D
SECURITIES AND EXCHANGE COMMISSION.

XXX ONAX 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. development bank, a rural
bank or specialized government 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, AND THRIFT BANKS COMPOSED OF: (A) SAVINGS AND
MORTGAGE BANKS; (B) STOCK SAVINGS AND LOAN ASSOCIATIONS;
AND (C) PRIVATE DEVELOPMENT BANKS, AS DEFINED IN REPUBLIC
ACT NO, 7906, OR THE THRIFT BANKS ACT; RURAL BANKS, AS
DEFINED IN REPUBLIC ACT NO. 7353 OF THE RURAL BANKS ACT;

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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| SHALL REFER
TO [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] PERSONS OR
ENTITIES ENGAGED IN THE BORROWING OF FUNDS, FOR THE
BORROWER'S OWN ACCOUNT, THROUGH THE ISSUANCE,
ENDORSEMENT, OR ACCEPTANCE OF DEBT INSTRUMENTS OF ANY
KIND OTHER THAN DEPOSITS, OR THROUGH THE ISSUANCE OF
CERTIFICATES OF PARTICIPATIONS, CE! ‘ATES 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.

(X) THE TERM ‘QUASI-BANK’ SHALL REFER TO ENTITIES
ENGAGED IN THE BORROWING OF FUNDS THROUGH THE ISSUANCE,
ENDORSEMENT OR ASSIGNMENT WITH RECOURSE OR ACCEPTANCE
OF DEPOSIT SUBSTITUTES, AS DEFINED IN SUBSECTION (Z) HEREOF
FOR PURPOSES OF RELENDING OR PURCHASING OF RECEIVABLES
AND OTHER OBLIGATION:

[QQ] (Y) The term ‘QUASI-BANKING ACTIVITIES? |means| SHALL.
REFER TO borrowing funds from twenty (20) or more [personal] INDIVIDUALS 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,

Page | 4


or of repurchase agreements for purposes of relending or purchasing reccivables and
other similar obligations: Provided. however, That commercial, industrial and other
non-financial companies, which borrow funds through any of these means for the
limited purpose of financing their own needs or the needs of their agents or dealers.
shall not be considered as performing quasi-banking functions. PROVIDED,
FURTHER, THAT IF THE INTENTION IS FOR THE DEBT INSTRUMENTS
‘TO BE HELD BY MORE THAN NINETEEN (19) HOLDERS DURING THE
ENTIRE. TERM OF THE DEBT INSTRUMENT AND IF THE TENOR AND
DENOMINATION ARE SUCH THAT THEY CAN BE HELD BY MORE THAN
NINETEEN (19) LENDERS, THEN THE INSTRUMENT SHALL BE
CONSIDERED DEPOSIT SUBSTITUTES.

ICYD] (Z) The term “deposit substitutes’ shall [mean] REFER TO analiemative
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 borrowers
‘own account, for the purpose of relending or purchasing of receivables and other
obligations, or financing their own needs or the needs of their agent or dealer. These
instruments may include, but need not be limited to bankers’ acceptances. promissory
notes. repurchase agreements, [including] EXCLUDING reverse repurchase
‘agreements entered into by and between the Bangko Sentral ng Pilipinas (BSP) and any
authorized agent bank, certificates of assignment or participation and similar
instruments with recourse. DEBT INSTRUMENTS ISSUED BY THE
GOVERNMENT AND ANY OF ITS AGENCIES AND INSTRUMENTALITIES,
INCLUDING GOVERNMENT FINANCIAL INSTITUTIONS SHALL BE
DEEMED ISSUED TO THE PUBLIC AND CONSIDERED DEPOSIT
SUBSTITUTES. Provided. however, That debt instruments issued for interbank call
loans with maturity of not more than five (5) days to cover deficiency in reserves against
deposit liabilities. including those between or among banks and quasi-banks, shall not
be considered as deposit substitute debt instruments.

((Z)] (AA) The term ‘ordinary income’ xxx XXX XXX

[(AA)] (BB) The term ‘rank and file employees’ xxx XXX XXX

[(BB)] (CC) The term ‘mutual fund company” shall {mean} REFER TO ANY
INVESTMENT COMPANY WHICH IS OR HOLDS ITSELF OUT AS BEING
ENGAGED PRIMARILY, OR PROPOSES TO ENGAGE PRIMARILY IN THE

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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,
{(CC)] (DD) The term ‘trade, business or profession’ xxx XXX XXX
[(DD)] (EE) The term ‘regional or area headquarters’ xxx Xxx XXX
{(EE)] (FF) The term ‘regional operating headquarters’ xxx xxx xxx
[(FF)] (GG) 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
non-bank financial intermediaries and finance companies) to individuals in
denominations of Ten thousand pesos (P10,000) and other denominations as may be
prescribed by the BSP.| FINANCIAL INSTITUTIONS’ OR “FINANCIAL
INTERMEDIARIES’ SHALL REFER TO PERSONS OR ENTITIES WHOSE
PRINCIPAL FUNCTIONS INCLUDE THE BUSINESS OF LENDING,
FINANCING, INVESTING, OR PLACEMENT OF FUNDS OR EVIDENCES OF
INDEBTEDNESS OR EQUITY DEPOSITED WITH THEM, ACQUIRED BY
THEM, OR OTHERWISE COURSED THROUGH THEM, EITHER FOR
THEIR OWN ACCOUNT OR FOR THE ACCOUNT OF OTHERS, AND ARE
AUTHORIZED BY THE BANGKO SENTRAL NG PILIPINAS OR BY THE
SECURITIES AND EXCHANGE COMMISSION DEPENDING ON THE
GOVERNMENT AGENCY AUTHORIZED TO REGULATE THEM. THESE.
SHALL INCLUDE BANKS, QUASI-BANKS, TRUST ENTITIES,
PAWNSHOPS, FOREIGN EXCHANGE DEALERS, MONEY BROKERS,
CREDIT COOPERATIVES, FINANCING COMPANIES, FINANCE LEASING
COMPANIES, INVESTMENT COMPANIES, AND OTHER ENTITIES
ENGAGED IN COLLECTIVE INVESTMENT SCHEMES, INVESTMENT
HOUSES, LENDING INVESTORS OR ENTITIES ENGAGED IN FINANCIAL

Page [6


INTERMEDIATION ACTIVITIES, AND OTHER TYPES OF BUSINESS THAT
MAY BE CLASSIFIED BY THE BANGKO SENTRAL NG PILIPINAS OR THE
SECURITIES AND EXCHANGE COMMISSION AS FINANCIAL
INSTITUTIONS.

LIFE AND NON-LIFE INSURANCE COMPANIES, PRE-NEED
COMPANIES AND HEALTH MAINTENANCE ORGANIZATIONS ARE
ALSO CONSIDERED FINANCIAL INSTITUTIONS UNDER THE
SUPERVISION OF THE INSURANCE COMMISSION.

[(GG)] (HH) The term ‘statutory minimum wage? xxx xxx XXX

[(HH)] (11) The term ‘minimum wage earner” XxX XXX XXX

(JJ) THE TERM ‘COLLECTIVE INVESTMENT SCHEMES’ OR ‘CIS”
SHALL REFER TO ANY ARRANGEMENT WHEREBY FUNDS ARE
SOLICITED FROM THE INVESTING PUBLIC AND POOLED TOGETHER
FOR THE PURPOSE OF INVESTING, RE-ANVESTING, 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 FOLLOW:

‘OPEN-END CIS’ SHALL REFER TO A CIS WHERE SECURITIES ARE
OFFERED AND ARE ALWAYS REDEEMABLE BY THE CIS; AND

‘CLOSED-END CIS’ SHALL, REFER TO A CIS WHERE A FIXED
NUMBER OF SECURITIES ARE OFFERED IN AN INITIAL PUBLIC
OFFERING AND THEREAFTER MAY BE TRADED IN AN ORGANIZED
MARKETPLACE AS DETERMINED BY THE SECURITIES AND EXCHANGE

Page |7


COMMISSION, BUT MAY NOT BE REDEEMED BY THE CIS. A CLOSED—
END CIS SHALL NOT BE ALLOWED TO INCREASE ITS NUMBER OF
SECURITIES.

(KK) THE TERM ‘UMT LINKED INVESTMENT INSTRUMENT’
SHALL REFER TO 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, 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.

(LL) 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,

(MM) THE TERM ‘DEBT INSTRUMENT SHALL REFER TO
INSTRUMENTS REPRESENTING BORROWING AND LENDING
TRANSACTIONS INCLUDING BUT NOT LIMITED TO DEBENTURES,
CERTIFICATES OF INDEBTEDNESS, DUE BILLS, BONDS, LOAN
AGREEMENTS, INSTRUMENTS, AND SECURITIES ISSUED BY THE
GOVERNMENT OR ANY OF ITS INSTRUMENTALITIES, DEPOSIT
SUBSTITUTES, CERTIFICATES OR OTHER EVIDENCES OF DEPOSITS,
PROMISSORY NOTES, WHETHER NEGOTIABLE OR NON-NEGOTIABLE,
OTHER SIMILAR INSTRUMENTS, AND OTHER INSTRUMENTS AS MAY
BE DETERMINED BY APPROPRIATE GOVERNMENT AGENCIES.

(NN) THE TERM ‘ORGANIZED MARKETPLACE’ SHALL REFER TO
AN EXCHANGE, AN OVER-THE-COUNTER MARKET, OR AN
ALTERNATIVE TRADING EM RECOGNIZED AS SUCH BY THE
SECURITIES AND EXCHANGE COMMISSION AS AN EXCHANGE UNDER
REPUBLIC ACT NO. 8799, AS AMENDED, AND GOVERNED BY, AMONG
OTHERS, TRANSPARED AND BINDING RULES AND MARKET
CONVENTIONS ON MEMBERSHIP, TRADING, PRICE TRANSPARENCY,

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TRADE REPORTING, MARKET MONITORING AND ORDERLY CONDUCT
OF THE MARKET WHICH ARE ENFORCEABLE ON THE MEMBERS AND
PARTICIPANTS.

(OO) THE TERM HEALTH INSURANCE PRODUCTS SHALL REFER
TO THOSE THAT ARE BEING OFFERED AND SOLD BY INSURANCE
COMPANIES, EITHER LIFE OR NON-LIFE, WHEREIN THERE IS A LIST
OF COVERED ILLNESSES OF WHICH THE COMPANIES ASSUME RISKS
AND INDEMNIFY LOSSES BROUGHT BY THE SAID COVERED
ILLNESSES.

(PP) THE TERM HEALTH MAINTENANCE ORGANIZATION (HMO)
PRODUCTS SHALL REFER TO PRE-AGREED OR DESIGNATED HEALTH
CARE SERVICES TO THE ENROLLED MEMBERS FOR A FIXED PRE-PAID
FEE FOR A SPECIFIED PERIOD OF TIME THROUGH THE USE OF
SELECTED NETWORK OF HEALTH CARE PROVIDERS. HMO
PRODUCTS PROVIDE A WIDE ARRAY OF MEDICAL, SURGICAL AND
HOSPITAL SERVICES THAT INCLUDE PREVENTIVE CARE AND
WELLNESS PROGRAMS AND GENERALLY HAVE NO CASH-OUT
TRANSACTION,

SEC. 4. Section 24 (B) and (C) of the National Intemal 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. —
NX OXNNOXNX

(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 [from any currency bank deposit. and yield or any other monetary
benefit ftom 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

Page | 9


(A) of Section 24; and other winnings (except winnings amounting to Ten Thousand
pesos (P10,000) or less from Philippine Charity Sweepstakes and Lotto which shall be
exempt), derived from sources within the Philippines:| YIELD, OR ANY OTHER
MONETARY BENEFIT EARNED OR RECEIVED FROM BANK DEPOSIT,
DEPOSIT SUBSTITUTE, TRUST FUND, AND SIMILAR ARRANGEMENTS.
[Provided. however, That interest income received by an individual taxpayer (except a
ident individual) from a depository bank under the expanded foreign currency
deposit system shall be subject to @ final income tax at the rate of fifteen percent (15%)

non-

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 the tax imposed under this Subsection: Provided. finally, That should the
holder of the certificate pre-terminate the deposit or investment before the fifth (5")
year, a final tax shall be imposed on the entire income and shall be deducted and
withheld by the depository bank from the proceeds of the long-term deposit or
investment certificate based on the remaining maturity thereof:

Four (4) years to less than five (5) years ~ 5%:

‘Three (3) years to less than (4) years ~ 12%: and

Less than three (3) years — 20%.]

(2) Cash and/or Property Dividends. — A final tax at the rate of [ten percent
(10%)] FIFTEEN PERCENT (15%) 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.
ENTITIES ENGAGED IN COLLECTIVE INVESTMENT SCHEMES, and
regional operating headquarters of multinational companies. or on the share of an
individual in the distributable net income afier tax of a partnership (except a general
professional partnership) of which {he] ONE is a partner. or on the share of an

individual in the net income after tax of an association, a joint account, or a joint venture

‘or consortium taxable as a corporation of which [he] ONE 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

Page | 10


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.

KO) @B) 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 of fifleen percent (15%) is hereby imposed upon the net capital
gains realized during the taxable year from the sale, barter, exchange or other
disposition of shares of stock in a domestic corporation, except shares sold, or disposed
of through A LOCAL [the] stock exchange[.| OR AN ORGANIZED
MARKETPLACE.

(4) PRESUMPTIVE CAPITAL GAINS FROM THE SALE, EXCHANGE,
BARTER, OR DISPOSITION OF SHARES OF STOCK TRADED IN THE STOCK
EXCHANGE OR AN ORGANIZED MARKETPLACE. ~ A FINAL TAX AT THE
RATE OF SIX-TENTH OF ONE PERCENT (6/10 OF 1%) 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, 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: PROVIDED, THAT EFFECTIVE
JANUARY 1, 2026, 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

Page | 21


MARKETPLACE SHALL NOT BE SUBJECT TO TAX UNDER SECTION 24
OF THIS CODE.

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). —
A FINAL TAX AT THE RATE OF FIFTEEN PERCENT (15%) SHALL BE
IMPOSED ON THE NET CAPITAL 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.

(6) PRESUMPTIVE CAPITAL GAINS ON LISTED AND TRADED DEBT
INSTRUMENTS AND OTHER SECURITIES NOT INCLUDED IN SECTION
24(B)(3) AND (4) - 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 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, AND SHALL
BE PAID BY THE SELLER OR TRANSFEROR: PROVIDED, THAT
EFFECTIVE JANUARY 1, 2026, EVERY SALE, BARTER, EXCHANGE, OR

Page | 12


OTHER DISPOSITION OF DEBT INSTRUMENTS AND OTHER
SECURITIES, LISTED AND TRADED THROUGH A LOCAL STOCK
EXCHANGE OR A LICENSED ORGANIZED MARKETPLACE SHALL NOT
BE SUBJECT TO TAX UNDER SECTION 24 OF THIS CODE. 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
AND OTHER SECURITIES FOR THE DEALER'S OWN ACCOUNT IN THE
ORDINARY COURSE OF BUSINESS, SHALL NOT BE SUBJECT TO TAX
UNDER THIS SUBSECTION BUT TO SECTION 24(A) AS AN ORDINARY
INCOME.

{(D)|(7) Capital Gains from Sale of Real Property. ~

[(1)] (a) Jn General. — [The provisions of Section 39(B) notwithstanding, al A
final tax of six percent (6%) based on the gross selling price or current fair market value
as determined in accordance with Section 6(E) of this Code, whichever is higher, is
hereby imposed upon capital gains presumed to have been realized from the sale.
exchange, or other disposition of real property located in the Philippines, classified as
capital assets, including pacto de retro sales and other forms of conditional sales, by
individuals, including estates and trusts: Provided. That the tax liability, ifany, 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 comporations shall be
determined either under Section 24(A) or under this Subsection, at the option of the
taxpayer.

[(2)] (b) Exception. — xxx xxx xxx

(©) 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

Page | 13


AND MUSICAL COMPOSITIONS WHICH SHALL BE SUBJECT TO A
FINAL TAX OF TEN PERCENT (10%); (2) PRIZES (EXCEPT PRIZES
AMOUNTING TO TEN THOUSAND PESOS (P10,000) OR LESS) WHICH
SHALL BE SUBJECT TO TAX UNDER SECTION 24 (A); AND (3) OTHER
WINNINGS (EXCEPT WINNINGS AMOUNTING TO TEN THOUSAND
PESOS (P10,000) OR LESS FROM PHILIPPINE CHARITY SWEEPSTAKES
AND LOTTO WHICH SHALL BE EXEMPT).

SEC. §, 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.
—I(1) In General, — |A nonresident alien individual engaged in trade or business in the
Philippines shal) be subject to [an] income tax UNDER SECTION 24 OF THIS
CODE, in the same manner as an individual citizen and a resident alien individual]
on taxable income received from all sources within the Philippines. A nonresident alien
individual who shall come to the Philippines and stay therein for an aggregate period
of more than Jone hundred eighty (180)] ONE HUNDRED EIGHTY-THREE (183)
days during any calendar year shall be deemed a ‘nonresident alien doing business in
the Philippines’, Section 22(G) of this Code notwithstanding.

[(2) Cash and/or Property Dividends from a Domestic Corporation or Joint
Stock Company, or Insurance or Mutual Fund Company or Regional Operating
Headquarter or Multinational Company. or Share in the Distributable Net Income of a
Partnership (Except a General Professional 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

Page | 14


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:
interests: royalties (in any form): and prizes (except prizes
amounting to Ten thousand pesos (P10,000) or less which shall
be subject to tax under Subsection (B)(1) of Section 24): and
other winnings (except Philippine Charity Sweepstakes and
Lotto winnings), shall be subject to an income tax of twenty
percent (20%) on the total amount thereof: Provided, however, That
royalties on books as well as other literary works, and royalties on musical
compositions shall be subject to a final tax of ten percent (10%) on the total amount
thereof: Provided, further, That cinematographic films and similar works shall be
subject to the tax provided under Section 28 of this Code: Provided, furthermore, That
interest income from long-term deposit or investment in the form of savings. common
or individual trust funds. deposit substitutes. investment management accounts and
other investments evidenced by certificates in such form prescribed by the Bangko
Sentral ng Pilipinas (BSP) shall be exempt from the tax imposed under this Subsection;
Provided, finally. That should the holder of the certificate pre-terminate the deposit or
investment before the fifth (5"") year, a final tax shall be imposed on the entire income
and shall be deducted and withheld by the depository bank from the proceeds of the
long-term deposit or investment certificate based on the remaining maturity thereof]

{Four (4) years to less than five (5) years ~ 5%:}

[Three (3) years to less than four (4) years - 12%: and]

[Less than three (3) years — 20%.)

{(2) 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

Page | 35


the entire income received from all sources within the Philippines by every nonresident
alien individual not engaged in trade or business within the Philippines as interest. cash
and/or property dividends,] rents, salaries, wages, premiums, annuities, compensation.
remuneration, emoluments. or other fixed or determinable annual or periodic or casual
gains, profits. and income. {and capital gains, Ja FINAL tax equal to twenty five percent
(25%) of such income. Capital gains realized by a nonresidem alien individual not
engaged ir, trade or business in the Philippines from the sale of [shares of stock in any
domestic corporation and] real property shall be subject to the income tax prescribed
under Subsection{s (C) and (D) ] (B) (7) of Section 24.

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

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
cach taxable year from all sources within and without the Philippines by every
corporation, as defined in Section 22(B) of this Cade and taxable under this Title as a
corporation. organized in, or existing under the laws of the Philippines: Provided, That

effective January 1, 2009. the rate of income tax shall be thirty percent (30%).
XXX NNN AX

(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 @ depository

Page | 16


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.

{(2) Capital Gains from the Sale of Shares of Stock Not Traded in the Stock
Exchange. — A final tax at the rate of fifteen percent (15%) shall be imposed on net
capital gains realized during the taxable year from the sale, exchange or other
disposition of shares of stock in a domestic corporation except shares sold or disposed

of through the stock exchange.|
[(3) Tax on Income Derived under the Expanded Foreign Currency Deposit

System. — Income derived by a depository bank under the expanded foreign currency
deposit system from foreign currency transactions with nonresidents. offshore banking
units in the Philippines, local commercial banks including branches of foreign banks
that may be authorized by the Bangko Seniral 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 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 shal] be exempt from
income tax.]

{(4) Intercorporate Dividends. — Dividends received by a domestic corporation
from another domestic corporation shall not be subject to tax:}

(1) INTERESTS. — A FINAL TAX AT THE RATE OF FIFTEEN
PERCENT (15%) IS HEREBY IMPOSED UPON THE AMOUNT OF
INTEREST, YIELD, OR OTHER MONETARY BENEFIT EARNED OR
RECEIVED FROM A BANK DEPOSIT, DEPOSIT SUBSTITUTE, TRUST
FUND, AND SIMILAR ARRANGEMENTS.

(2) CASH AND/OR PROPERTY DIVIDENDS, - INTERCORPORATE
DIVIDENDS OR DIVIDENDS RECEIVED FROM A DOMESTIC
CORPORATION SHALL NOT BE SUBJECT TO TAX IMPOSED UNDER

Page | 17


THIS SUBSECTION: PROVIDED, THAT NINETY-FIVE PERC)
DIVIDENDS RECEIVED BY A DOMESTIC CORPORATION FROM
SUBSIDIARY COMPANIES LOCATED OUTSIDE THE PHILIPPINES
SHALL NOT BE SUBJECT TO TAX: PROVIDED, FURTHER, THAT THE
DOMESTIC CORPORATION HOLDS DIRECTLY OR INDIRECTLY AT
LEAST TWENTY PERCENT (20%) SHAREHOLDINGS OF THE
SUBSIDIARY COMPANY AND HAS HELD THE SHAREHOLDINGS FOR A
MINIMUM OF TWO (2) YEARS AT THE TIME OF THE DIVIDENDS
DISTRIBUTION: PROVIDED, FURTHERMORE, THAT, THE SUBSIDIARY
OPERATING COMPANY IS SUBJECT TO AT LEAST TEN PERCENT (10%)
INCOME TAX AND TO WITHHOLDING TAX ON THE DIVIDENDS
DISTRIBUTED TO THE DOMESTIC CORPORATION, UNLESS
OTHERWISE EXEMPT UNDER ITS LOCAL LAWS: PROVIDED, FINALLY,
THAT, THE LIMITATIONS UNDER SECTION 34(C ) SHALL NOT BE
OBSERVED IN CONNECTION WITH ANY TAXES PAID OR ACCRUED IN
ANY FOREIGN COUNTRY IN RESPECT TO SUCH DIVIDEND.

LIQUIDATING DIVIDENDS 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. — A FINAL TAX AT THE
RATE OF SIX-TENTH OF ONE PERCENT (6/10 OF 1%) 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

Page | 18


MARKETPLACE, 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 I, 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: PROVIDED, THAT EFFECTIVE
JANUARY 1, 2026, 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 SHALL NOT BE SUBJECT TO TAX UNDER SECTION 27
OF THIS CODE.

ANY GAIN EARNED FROM SHARES OF STOCK IN A DOMESTIC
CORPORATION TRADED IN A FOREIGN EXCHANGE, SHALL BE TAXED
UNDER SECTION 27 (A) HEREOF.

ANY GAIN REALIZED FROM THE SALE, EXCHANGE, BARTER, OR
DISPOSITION OF SHARES OF STOCK, LISTED OR UNLISTED, BY A
DEALER IN SECURITIES LICENSED BY THE APPROPRIATE
GOVERNMENT REGULATORY AGENCIES TO BUY AND SELL IN
SECURITIES, FOR HIS OWN ACCOUNT IN THE ORDINARY COURSE OF
BUSINESS, SHALL NOT BE SUBJECT TO TAX UNDER THIS SUBSECTION
BUT TO SECTION 27(A) AS AN ORDINARY INCOME.

(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). —
A FINAL TAX AT THE RATE OF FIFTEEN PERCENT (15%) SHALL BE
IMPOSED ON NET CAPITAL GAINS EARNED FROM DEBT INSTRUMENT
AND OTHER SECURITIES NOT INCLUDED IN SECTION 27(D\(3) AND (4),
EN OR RESIDENT ALIEN, OR BY A DOMESTIC

Page | 19


CORPORATION, OR A RESIDENT FOREIGN CORPORATION, OR BY THE
GOVERNMENT OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES.

(6) PRESUMPTIVE CAPITAL GAINS ON LISTED AND TRADED DEBT
INSTRUMENTS AND OTHER SECURITIES NOT INCLUDED IN SECTION
27(D\(3) AND (4) - 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 SHALL BE
LEVIED, ASSESSED, AND COLLECTED ON EVERY SALE, BARTER,
EXCHANGE, OR OTHER DISPOSITION OF DEBT INSTRUMENTS AND
OTHER SI IES, LISTED AND TRADED THROUGH A LOCAL
EXCHANGE OR AN ORGANIZED MARKETPLACE, AND SHALL BE PAID
BY THE SELLER OR TRANSFEROR: PROVIDED, THAT EFFECTIVE
JANUARY 1, 2026, 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 SHALL NOT BE SUBJECT TO
TAX UNDER SECTION 27 OF THIS CODE. 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 INSTRU! ‘TS AND OTHER SECURITE
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
AND OTHER SECURITIES, FOR THE DEALER'S OWN ACCOUNT IN THE
ORDINARY COURSE OF BUSINESS, SHALL NOT BE SUBJECT TO TAX
UNDER THIS SUBSECTION BUT TO SECTION 27(A) AS AN ORDINARY
INCOME.

{(S)| (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

Page | 20


accordance with Section 6(E) of this Code. whichever is higher. of such lands and/or
buildings.

(E) ROYALTIES - A FINAL TAX AT THE RATE OF TWENTY
PERCENT (20%) IS HEREBY IMPOSED ON ROYALTIES EARNED AS
PASSIVE INCOME.

[(E](F) Minimum Corporate Income Tax on Domestic Corporations ~

(1) Imposition of Tax. ~xx x

(2) Carry Forward of Excess Minimum Tax. —x x x

(3) Relief from the Minimum Corporate Income Tax under Certain

Conditions. — xxx

(4) Gross Income Defined, —x x x

XXX OXAK 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 |an} 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 shal be thirty percent (30%).

Page | 21


XXX OXAK XXX

(2) Minimum Corporate Income Tax on Resident Foreign Corporations. —
‘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.

@) International Carrier. ~x xx

{(4) Offshore Banking Units, ~ The provisions 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, shalt 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.]

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

Page | 22


be treated as branch profits unless the same are effectively connected with the conduct
of its trade or business in the Philippines.

{@\) Regional or Area Headquarters and Regional Operating
Headquarters of Multinational Companies. ~ x x x

{(7) Tax on Certain Incomes Received by a Resident Foreign Corporation. ~}

{(a) Jnuerest 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 shal] 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 curreney loans granted
by such depository banks under said expanded system to residents other than offshore
banking units in the Philippines or other depository banks under the expanded system
shall be subject to a final tax at the rate of ten percent (10%).]

{Any income of nonresidents, whether individuals or corporations. from
transactions with depository banks under the expanded system shall be exempt from
income 1ax.]

{(©) 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

Page | 23


disposition of shares of stock in a domestic corporation except shares sold or disposed
of through the stock exchange:]
{Not over 100,000
[On any amount in excess of P100,000

5%

10%]

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

(B) Tax on Nonresident Foreign Corporation. ~

(1) In General. ~ Except as otherwise provided in this Code, @ 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 finterests, dividends,} rents, royaltics,
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 1ax under subparagraph $[(c)]. Provided, That
effective January 1, 2009, the rate of income tax shall be thirty percent (30%).

‘XXX XXX XXX

(5) Tax on Certain Incomes Received by a Nonresident Foreign Corporation.
(a) Interest on Foreign Loans. — A final withholding tax at the rate of twenty
percent (20%) is hereby imposed on the amount of interest on foreign loans contracted

on or after August 1, 1986;]
[(b) Intercorporate Dividends, — A final withholding tax at the rate of fifteen

percent (15%) is hereby imposed on the amount of cash and/or property dividends
received from a domestic corporation, which shall be collected and paid as provided in
Section 57(A) of this Code, subject (o the condition that the country in which the
nonresident foreign corporation is domiciled, shall allow a credi

wainst 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
(159%) 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

Page | 26


(15%), which represents the difference between the regular income tax of thirty percent
(30%) and the fifteen percent (15%) tax on dividends:|

{(e) 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 ftom the sale, barter, exchange or other
disposition of shares of stock in a domestic corporation, except shares sold. or disposed

of through the stock exehange:]
[Not over P100,000...........
{On any amount in excess of P100,000.

3%]
10%)

INTERESTS AND CAPITAL GAINS FROM SALE, TRANSFER,
BARTER, OR DISPOSITION OF SHARES OF STOCK, DEBT
INSTRUMENTS, DEPOSIT SUBSTITUTES, AND OTHER SECURITIES
SHALL BE SUBJECT TO TAX UNDER SECTION 27(D)(1), (3), (4), (5) AND (6)
OF THIS CODE, OR TO THE PROVISIONS OF THE APPLICABLE TAX
TREATY.

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 descried 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

Page | 25


corporation, by permitting earnings and profits to accumulate instead of being divided
or distributed.

(2) Exceptions, — The improperly accumulated eamings tax as provided for
under this Section shall not apply to:

(a) Pablicly-held corporations;

(b) Banks, fand other] nonbank financial intermediaries, AND OTHER
FINANCIAL INSTITUTIONS AS MAY BE DETERMINED BY THE
APPROPRIATE GOVERNMENT REGULATORY AGENCIES: and

(©) Insurance companies|.| SUCH AS LIFE AND NON-LIFE,
REINSURANCE COMPANIES, PRE-NEED COMPANIES, PENSION FUNDS,
AND OTHER ENTITIES DOING BUSINESS SIMILAR TO INSURANCE,

(© 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.|

1€2) Evidence Determinative of Purpose. ~ The fact that the earnings or profits
of a corporation are permitted to accumulate beyond the reasonable necds 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.

XXX XAN | XRW

SEC. 9. Section 32(B\(7\(g) and (h} of the National Internal Revenue Code of 1997, as
amended, is hereby amended to read as follows:

Page | 26


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 OXRN | XKK

(7) Miscellaneous Items. —
XXX NNN XXX

[(g) 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 BY THE REPUBLIC OF THE PHILIPPINES OR ANY OF ITS
INSTRUMENTALITIES 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 fund company] OR UNITS
OF PARTICIPATION IN A COLLECTIVE INVESTMENT SCHEME as detined

[in] UNDER Section 22 [BB] (JJ) of this Code,
XXX XXX XXX

SEC. 10. Section 34(A), (B). (C) and (E) of the National Internal Revenue Code of

1997, as amended, is hereby further amended to read as follows:
SEC. 34. Deductions from Gross Income. — Except for taxpayers
earning compensation income arising from personal services

rendered under an employer—employee relationship where no

Page | 27


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

(A) Expenses. ~

(1) Ordinary and Necessary Trade, Business or Professional Expenses. ~

(a) In General. ~ There shall be allowed as deduction from
gross income all the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on or which are
directly attributable to, the development, management,
operation and/or conduct of the trade, business or exercise of
a profession, including:

XXX OMNK NN

(b) Substantiation Requirements. — No deduction from gross income shall be
allowed under Subsection (A) hereof unless the taxpayer shall substantiate with
sufficient evidence, such as official receipts or other adequate records: (i) the amount
of the expense being deducted, and (ii) the direct connection or relation of the expense
being deducted to the development, management, operation and/or conduct of the trade,
business or profession of the taxpayer.

(c) Bribes, Kickbacks and Other Similar Payments, — No deduction from gross
income shall be allowed under Subsection (A) hereof for any payment made, directly
or indirectly, to an official or employee of the national government, or to an official or
employee of any local government unit, or to an official or employee of a government-
‘owned of -controlled corporation, or to an official or employee or representative of a
foreign government, or to a private corporation, general professional partnership, or a

similar entity, if the payment constitutes a bribe or kickback.
XOX XR XXX

(B) Interest. ~
(1) In General, — The amount of interest paid of 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-

Page | 28


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%).

(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, interest] INTEREST EXPENSE incurred
to acquire property used in trade, business or exercise of a profession THAT WILL
BENEFIT THE BUSINESS LONGER THAN ONE YEAR [may be allowed as a
deduction or treated as a capital expenditure] SHALL BE CAPITALIZED AND
THEREAFTER AMORTIZED OR DEPRECIATED AS PART OF THE COST
OF THE ASSET,

XXX XXX XXX

(E) Bad Debts. —

(1) In General, — xxx

(2) Securities Becoming Worthless. — If securities, as defined in Section 22(T).
are ascertained to be worthless and charged off within the taxable year and are capital
assets, the loss resulting therefrom shall, Jin the case of a taxpayer other than a bank or
trust company incorporated under the laws of the Philippines a substantial part of whose
business is the receipt of deposits. for the purpose of this Title,] be considered as a loss
from the sale or exchange. OF CAPITAL ASSETS. on the last day of such taxable
year|, of capital assets], SECURITIES HELD BY A DEALER IN SECURITIES

Page | 29


OR AN ENTITY LICENSED BY THE APPROPRIATE GOVERNMENT
REGULATORY AGENCIES TO BUY AND SELL IN SECURITIES
INCLUDING BANKS, AND OTHER FINANCIAL INTERMEDIARIES,
SHALL BE CONSIDERED ORDINARY ASSETS, AND SECURITIES HELD
THAT ARE ASCERTAINED TO BE WORTHLESS SHALL BE CONSIDERED
ORDINARY LOSSES THAT ARE ALLOWED AS DEDUCTION FROM
TAXABLE INCOME.

SEC. 11. Section 37 (A) and (B) of the National Internal Revenue Code of 1997, as
amended, is hereby amended to read as follows:

SEC. 37. Special Provisions Regarding Income and Deductions of Insurance
Companies, Whether Domestic or Foreign. ~

(A) Special Deductions Allowed to Insurance Companies, PRE-NEED
COMPANIES, AND PENSION FUNDS. - In the case of insurance companies. PRE-
NEED COMPANIES, AND PENSION FUNDS. whether domestic or foreign doing
business in the Philippines, the net additions, if any. required by law to be made within
the year to reserve funds and the sums other than dividends paid within the year on
policy and annuity contracts may be deducted from their gross income. Provided,
however, That the released reserve be treated as income for the year of release.

(B) Mutual Insurance Companies. ~ \n 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.

XXX XXX XXX

SEC. 12. Section 38 (A) of the National Internal Revenue Code of 1997, as amended,
is hereby amended to read as follows:

Page | 30


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
Jcontact] 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 securitics OR BY ANY ENTITY OR
FINANCIAL INTERMEDIARY DULY LICENSED BY THE APPROPRIATE
GOVERNMENT REGULATORY AGENCIES TQ BUY AND SELL IN
SECURITIES EITHER FOR THE ENTITY'S OWN ACCOUNT OR FOR THE
ACCOUNT OF OTHERS and with respect 10 a transaction made in the ordinary
course of the business of such dealer.

XXX XXX XXX,

SEC, 13. Section 39 of the National Intemal 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 -NNX XXX

(\(B) Percentage Taken Into Account. — \n the case of a taxpayer. other than a
corporation. only the following percentages of the gain of loss recognized upon the sale

Page | 32


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%) if 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 trust company incorporated under the loss of the Philippines.
a substantial part of whose business is the receipt of deposits.) 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 pot be included in determining the applicability of such limitation
to other losses.

[(D) Net Capital Loss Carry-over. ~ Mf 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.]

[(E)M(C) Retirement of Bonds, etc. xxx

[(F) Gains or Losses from Short Sales, Ete. ~ For purposes of this Title -

(1) Gains or losses from short sales of property shall be considered as gains or
losses from sales or exchanges of capital assets; and

(2) Gains or losses attributable to the failure to exercise privileges or options to
buy or sell property shall be considered as capital gains or losses.]

SEC. 14. 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:

Page | 32


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) dnterests. - Interests AND YIELD {derived from sources within the
Philippines. and interests on] FROM DEBT INSTRUM! 'S, BANK DEPOSITS,
DEPOSIT SUBSTITUTES, TRUST FUNDS, AND SIMILAR
ARRANGEMENTS SUCH AS bonds, notes or other interest-bearing obligations of
residents, corporate or otherwise[;], INCLUDING DEBT INSTRUMENTS OR
DEBT SECURITIES ISSUED BY THE GOVERNMENT OR ANY OF ITS
AGENCIES OR INSTRUMENTALITIES;

(2) Dividends. ~ The amount received as dividends:

(a) From a domestic corporation; and

(b) From a foreign corporation. | unless less | WITH AT LEAST [than| fifty
percent (50%) of the gross income of such foreign corporation for the three-year period

‘ending with the close of its taxable year preceding the declaration of such dividends (or
for such part of such period as the corporation has been in existence) was derived from
sources within the Philippines as determined under the provisions of this Section; but
only in an amount which bears the same ratio to such dividendls 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 OXAK | XX
(B) Taxable Income from Sources Within the Philippines. —
(1) General Rule.
XXX XXX XXX
(2) Exception, — No deductions for interest paid or incurred abroad shal be

allowed from the item of gross income specified in Subsection (A) unless indebtedness

was actually incurred to provide funds for use in connection with the conduct or
‘operation of trade or business in the Philippines|.], OR ON A TRADE OR BUSINESS:
OUTSIDE THE PHILIPPINES: PROVIDED, THAT INCOME GENERATED
OR RECEIVED FROM THE USE OF SUCH FUNDS IN CONNECTION WITH
THE CONDUCT OR OPERATION OF TRADE OR BUSINESS IN THE
PHILIPPINES IS A TAXABLE INCOME IN THE PHILIPPINES.

Page | 33


SEC. 15, 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
(B) Where to file. xx x
(©) When to File. xxx
(xxx

(2) Individuals subject to tax on capital gains:

(a) From the sale or exchange of shares of stock OR DEBT INSTRUMENTS
AND OTHER SECURITIES not traded [thru] THROUGH a local [stock] exchange
OR AN ORGANIZED MARKETPLACE as prescribed under [Section] SECTIONS
24{(C)\(B) (3) AND (5), AND 25(A) AND (B), [shall file] a retum SHALL BE FILED
within thirty (30) days afler each transaction and 3 final consolidated return on or before
April 15 of each year covering all stock transactions of the preceding taxable year; and

(B) FROM THE SALE, EXCHANGE, OR BARTER OF SHARES OF
STOCK OR DEBT INSTRUMENTS AND OTHER SECURITIES TRADED
THROUGH A LOCAL EXCHANGE OR AN ORGANIZED MARKETPLACE
AS PRESCRIBED UNDER SECTIONS 24(B)(4) AND (6), AND 25(A) AND (B),
THE TAX SHALL BE COLLECTED BY THE BROKER WHO EFFECTED
THE SALE, AND SHALL BE REMITTED TO THE BUREAU OF INTERNAL
REVENUE WITHIN FIVE (5) BANKING DAYS FROM THE DATE OF
COLLECTION THEREOF. THE BROKER SHALL LIKEWISE SUBMIT ON
MONDAYS OF EACH WEEK TO THE SECRETARY OF THE LOCAL
EXCHANGE OR ORGANIZED MARKETPLACE OF WHICH THE BROKER
1S A MEMBER, A TRUE AND COMPLETE RETURN WHICH SHALL
CONTAIN A DECLARATION OF ALL THE TRANSACTIONS EFFECTED
DURING THE PRECEDING WEEK, AND OF ALL TAXES COLLECTED AND
TURNED OVER TO THE BUREAU OF INTERNAL REVENUE,

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

Page | 34


SEC, 16, Section 52(A) and (D) of the National Internal Revenue Code of 1997, as
amended, is hereby amended to read as follows:
SEC. $2, 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 retum
shall consist of a maximum of four (4) pages in paper form or electronic form. be filed
by the president, vice-president or other principal officer. shall be sworn to by such
officer and by the treasurer or assistant treasurer, and shall only contain the following
information:

(1) Corporate profite 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 shal] not affect the imptementation of
Republic Act No, 10708 or TIMTA

XXX XXX -XAX

(D) Return on Capital Gains Realized from Sale of Shares of Stock, DEBT
INSTRUMENTS, AND OTHER SECURITIES not Traded in the Local \Stock]
Exchange OR AN ORGANIZED MARKETPLACE, ~ Every corporation deriving
capital gains from the sale or exchange of shares of stock. DEBT INSTRUMENTS
AND OTHER SECURITIES not traded [thru] THROUGH a local [stock] exchange
OR AN ORGANIZED MARKETPLACE as prescribed under SECTIONS 27(D)(3),
AND (5), AND 28 [Sections 24(C), 25(A)(3). 2(E)2). 28(AX8)(c) and 28(BX5\(e).]
shall file a return within thirty (30) days after each transaction and a final consolidated

relum of all transactions during the taxable year on or before the fifteenth (15%) day of
the fourth (4") month following the close of the taxable year.

(E) RETURN ON CAPITAL GAINS REALIZED FROM SALE OF SHARES

OF STOCK, DEBT INSTRUMENTS, AND OTHER SECURITIES TRADED IN A

LOCAL EXCHANGE OR AN ORGANIZED MARKETPLACE. ~ \T SHALL BE

Page 35


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

SEC. 17. 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, jin Bankruptcy] or Assignees. — |In
cases wherein receivers] 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
Ja]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} ANY tax due on the income as retuned 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

Page | 36


ORGANIZATION |of] whose businesses or properties they have custody OF or
control OVER.

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
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 WITHHOLD! TAX
UPON DISTRIBUTION OF THE INCOME TO THE TRUSTOR OR THE
BENEFICIARY AT A RATE. NOT EXCEEDING THE HIGHEST RATE OF
TAX IMPOSED ON INDIVIDUALS UNDER SECTION 24 IN THE CASE OF
INDIVIDUAL TRUSTORS, OR THE CORPORATE INCOME TAX UNDER
SECTION 27 IN THE CASE OF CORPORATE TRUSTORS.

SEC. 18. Section 56 of the National Internal Revenue Code of 1997, as amended. is
hereby amended to read as follows:

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

(A) Payment of Tax. —

XXX XXX XXX

(3) Payment of Capital Gains Tax. —

IN GENERAL - The total amount of tax imposed and prescribed under
[Section] SECTIONS 24[(C)|(B)(3). 24f(D)(BYS). 24(B)(7), 25, 27[(EV2)(DVB).
27(D 5), 27(D)(7), 28(A ){(8)e)] and 28(B)(5)|(c)} shall be paid on the date the return
prescribed therefor is filed by the person liable thereto: Provided. That if the seller
submits proof of [his] THE intention to avail [himself] of the benefit of exemption of
capital gains under existing special jaws OR TAX TREATY, no such payments shall

be required: Provided, further, That in case of failure to qualify for exemption under

Page | 37


such special laws, TAX TREATY and implementing rules and regulations, the tax due
fon the gains realized from the original transaction shall immediately become due and
payable, and subject to the penalties prescribed under applicable provisions of this
Code: Provided, finally, That if the seller, having paid the tax, submits such proof of
intent within six (6) months from the registration of the document transferring the real
property, [he] THE SELLER shall be entitled to a refund of such tax upon verification
of [his] compliance with the requirements for such exemption,

XXX ONXK XXX,

SEC. 19. Section 57 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

SEC. 57. Withholding of Tax at Source. -

(A) Withholding of Final Tax on Certain Incomes. ~ Subject to rules and
regulations the Secretary of Finance may promulgate, upon the recommendation of the
Commissioner, requiring the filing of income tax retum by certain income payees , the
tax imposed or prescribed [by] UNDER Sections [24(B)(1), 24(BX2), 24(C). 24D);
25(A\2), 25(AX3), 25(B), 25(C). 25(D), 25(E); 27(D\1), 27(D)(2), 27(D)3),
2H(D\5); 28(A)4). 28(AMS), 28(AN7 Ma), 2B(AN7HD), 2B(ANTHE), 28(B)(1),
28(B\(2), 28(B)(3), 28(B\(4), 28(B)\(5a). 28(BX Sb). 28(BX5}{c)] 24(B), 24(C),
25(A), 25(B), 27(D), 27(E), 28(A) AND 28(B)(5); 33; and 282 of this Code on
specified items of income SUBJECT TO FINAL TAX shall be withheld by payor-
corporation and/or person and paid in the same manner and subject to the same
conditions as provided in Section 58 of this Code.

(B) Xxx XXX XXX

IC) Tax-free Covenant Bonds, — In any case where bonds, mortgages, deeds of
trust or other similar obligations of domestic or resident foreign corporations, contain a
contract or provision by which the obligor agrees to pay any portion of the tax imposed
in this Title upon the obligee or to reimburse the obligee for any portion of the tax or to
pay the interest without deduction for any tax which the obligor may be required or
permitted to pay thereon or to retain therefrom under any law of the Philippines, or any
state or country, the obligor shall deduct and withhold a tax equal to thirty percent
(30%) of the interest or other payments upon those bonds, mortgages, deeds of trust or
other obligations, whether the interest or other payments are payable annually or at
shorter or longer periods, and whether the bonds, securities or obligations had been or

Page | 38


will be issued or marketed, and the interest or other payment thereon paid, within or
without the Philippines, if the interest or other payment is payable to a nonresident alien
or to a citizen or resident of the Philippines. |

SEC. 20. Section 73 (A) of the National Internal Revenue Code of 1997, as amended.
is hereby amended to read as follows:

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

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

Where a corporation distributes all of its assets in complete liquidation or
dissolution, the gain realized or loss sustained by the stockholder. whether individual
or corporate, is a taxable income or a deductible loss, UNDER SECTIONS 24(A),
25(A), 25(B), 27(A), 28(A) AND 28 (B), 2s the case may be.

(B) Stock Dividend. xxx

SEC. 21, Section 108 of the National Internal Revenuc Code of 1997, as amended. is
hereby amended to read as follows:

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

(A) Rate and Base of Tax. - xxx

‘The phrase ‘sale or exchange of services” means the performance of all kinds of
services in the Philippines for others for a fee. remuneration or consideration. including
those performed or rendered by construction and service contractors; stock, real estate,
commercial, customs and immigration brokers; lessors of property. whether personal
ot real: warehousing services: lessors or distributors of cinematographic films; persons
engaged in milling. processing. manufacturing or repacking goods for others:
proprietors, operators or keepers of hotels, motels. resthouses. pension houses. inns.
resorts; proprietors or operators of restaurants. refreshment parlors, cafes and other
cating places, including clubs and caterers; dealers in securities: {lending investors ;]
transportation contractors on their transport of goods or cargoes. including persons who
transport goods or cargoes for hire and other domestic common carriers by land relative

to their transport of goods or cargoes; common cartiers by ait and sea relative to their

Page | 39


transport of passengers, goods or cargoes from one place in the Philippines to another
place in the Philippines; sales of electricity by generation companies, transmission by
any entity, and distribution companies, including electric cooperatives; services of
franchise grantees of electric utilities, telephone and telegraph, radio and television
broadcasting and all other franchise grantees except those under Section 119 of this
Code and nop-life insurance companies (except their crop insurances), including surety,
fidelity, indemnity and bonding companies ; and similar services regardless of whether
of not the performance thereof calls for the exercise or use of the physical or mental
faculties. The phrase ‘sale or exchange of services” shall likewise include:

ARK OXAK XXX

SEC. 22. Section 121 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows;

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

Page | 40


WHICH SHALL BE SUBJECT TO ZERO PERCENT (0%) [in accordance with the
following schedule}:

[(a) On interest, commissions and discounts from Jending 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 -.....cccccsssssessssseerssensssssessses 1%)
I(b) On dividends and equity shares and net income of subsidiaries-

sesssiee OW]

[(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%%]
[(4) On net trading gains within the taxable year of foreign currency, debt
securities, derivatives, and other similar financial _instruments-

seeesscon tt

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

Provided, [finally,] That FOR PURPOSES OF COMPUTING THE GROSS
RECEIPTS, the generally accepted accounting principles 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.
OF RECORDING INCOME AS ADOPTED BY THE BANK SHALL BE
FOLLOWED: PROVIDED, THAT THE MERE INCREASE OR DECREASE IN
VALUE OF PROPERTY AS A RESULT OF CHANGES IN MARKET VALUES
SHALL NOT BE CONSIDERED IN THE COMPUTATION OF GROSS
RECEIPTS: PROVIDED, FURTHER, THAT ¥OR 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, 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

Page | 41


THE SUCCEEDING QUARTERS: PROVIDED FINALLY, THAT NET LOSS
INCURRED IN A TAXABLE YEAR CANNOT BE CARRIED OVER TO THE
SUCCEEDING TAXABLE YEAR.

SEC. 23. 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 sball
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.
[discounts] AND DISCOUNTS FROM LENDING ACTIVITIES, AS WELL AS
INCOME FROM FINANCIAL LEASING, ROYALTIES, RENTALS OF
PROPERTY, REAL OR PERSONAL, PROFITS FROM SALE OR EXCHANGE
INCLUDING GAINS DERIVED FROM SALE OR TRANSFER OF REAL
PROPERTIES, NET TRADING GAINS WITHIN THE TAXABLE YEAR OF
FOREIGN CURRENCY, DEBT SECURITIES, DERIVATIVES, AND OTHER
SIMILAR FINANCIAL INSTRUMENTS, UNDERWRITING FEES, SERVICE
INCOME, AND ALL OTHER ITEMS TREATED AS GROSS INCOME UNDER
SECTION 32 OF THIS CODE, EXCEPT DIVIDENDS AND EQUITY SHARES
AND NET INCOME OF SUBSIDIARIES WHICH SHALL BE SUBJECT TO
ZERO PERCENT (0%). fand 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 (5) five years of less

[Maturity period is more than (5) five years ... 1%]
[Provided, however, That in case the maturity period is shortened thru
pretermination. then the maturity period shall be reckoned to end as of the date of

Page | 42


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

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

FINANCIAL INTERMEDIARIES SUBJECT TO TAX UNDER THIS
SECTION SHALL INCLUDE FINANCING COMPANIES, FINANCE LEASING
COMPANIES, INVESTMENT HOUSES, PAWNSHOPS, FOREIGN
EXCHANGE DEALERS AND MONEY BROKERS, TRUST ENTITIES,
CREDIT CARD COMPANIES, LENDING INVESTORS, SAVINGS AND LOAN
ASSOCIATIONS, AND OTHER FINANCIAL INTERMEDIARIES EXCEPT
BANKS AND NON-BANKS PERFORMING QUASI-BANKING FUNCTIONS
WHICH SHALL BE TAXED UNDER SECTION 121 OF THIS CODE.

COLLECTIVE INVESTMENT SCHEMES SUCH AS MUTUAL FUNDS,
UNIT LINKED INVESTMENT TRUST FUNDS, UNIT LINKED VARIABLE
INSURANCE, AND OTHER COLLECTIVE INVESTMENT SCHEMES AS
MAY BE DETERMINED BY APPROPRIATE GOVERNMENT
ILATORY AGENCIES SHALL NOT BE SUBJECT TO GROSS
EIPTS TAX AND OTHER PERCENTAGE TAXES IMPOSED UNDER
TITLE VY, AND THE VALUE ADDED TAX IMPOSED UNDER TITLE IV OF
THIS CODE. FOR PURPOSES OF THIS EXEMPTION, A CIS SHALL HAVE
AT LEAST TWO HUNDRED (200) 0 SS, INVESTORS OR
PARTICIPANTS, AND SHALL HAVE COMPLIED WITH THE MINIMUM
PUBLIC OWNERSHIP REQUIREMENT OF THE APPROPRIATE
GOVERNMENT REGULATORY AG ES.

THE INCOME OF A PERSON OR COMPANY NOT LICENSED TO DO
FINANCIAL INTERMEDIATION BUT WHICH ENGAGES IN FINANCIAL
INTERMEDIATION SERVICES AS AN INCIDENT TO ITS MAIN BUSINESS
ACTIVITY, AND DERIVES INCOME THEREFROM, 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 THE PERSON
OR THE COMPANY'S TOTAL ANNUAL INCOME, IF THE TOTAL INCOME
RECEIVED FROM FINANCIAL INTERMEDIATION IS MORE THAN FIFTY
PERCENT (50%), AND THE PERSON OR COMPANY HAS ENTERED INTO

Page | 43


AT LEAST SIX (6) TRANSACTIONS DURING THE YEAR, THE TOTAL
INCOME FROM SUCH 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
THEIR BUSINESS ACTIVITIES. IF UNDERTAKING FINANCING AND
OTHER SIMILAR ACTIVITIES, THEY SHALL BE SUBJECT TO GROSS
RECEIPTS TAX UNDER THIS SECTION, INCOME DERIVED FROM THE
SALE OF GOODS, PROPERTIES AND OTHER SERVICES SHALL BE
SUBJECT TO VALUE ADDED TAX UNDER SECTION 105 OF THIS CODE.

[Provided, finally, That the generally accepted accounting principles as may be
prescribed by the Securities and Exchange Commission for other non-bank financial
intermediaries shall likewise be the basis for the calculation of gross receipts.]

Nothing in this Code shall preclude the Commissioner from imposing the same
tax herein provided on persons OR ENTITIES performing similar [financing]
FINANCIAL INTERMEDIATION activities.

SEC, 24. Section 123 of the National Intemal 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, [(Jexcept purely
cooperative companies or associations[)] doing fife 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

Page | $4


included in the taxable receipts: nor shall any tax be paid upon reinsurance by &
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 CIS in excess of the amounts necessary to insure the lives
of the Variable contract owners|.|: PROVIDED, THAT THE CIS SHALL HAVE AT
LEAST TWO HUNDRED (200) OWNERS, INVESTORS OR PARTICIPANTS,
AND THAT ANY MINIMUM PUBLIC OWNERSHIP AS MAY BE REQUIRED
BY APPROPRIATE GOVERNMENT REGULATORY AGENCIES SHALL BE
COMPLIED WITH.

(B) PERSONS DOING BUSINESS SIMILAR OR AKIN TO LIFE AND
HEALTH INSURANCE SUCH AS PRE-NEED COMPANIES, PENSION FUND
COMPANIES, HEALTH MAINTENANCE ORGANIZATIONS AND OTHER
COMPANIES SIMILAR TO LIFE INSURANCE, AS MAY BE DETERMINED
BY THE APPROPRIATE GOVERNMENT REGULATORY AGENCIES,
SHALL BE SUBJECT TO TAX UNDER THIS SUBSECTION AT THE RATE OF
TWO PERCENT (2%) OF THE GROSS PREMIUM, PLAN PAYMENT, OR
INSTALLMENT PAYMENTS COLLECTED WITHOUT ANY DEDUCTION
FOR THE AMOUNTS REQUIRED BY THE APPROPRIATE GOVERNMENT
REGULATORY AGENCIES TO BE EARMARKED FOR THE BENEFIT OF
THE INSURED, OR PLANHOLDER.

NOTHING IN| THIS CODE SHALL PRECLUDE THE
COMMISSIONER FROM IMPOSING THE SAME TAX HEREIN PROVIDED
ON PERSONS PERFORMING SIMILAR INSURANCE BUSINESS
ACTIVITIES.

Page | 45


LIFE REINSURANCE COMPANIES SHALL BE SUBJECT TO
PREMIUM TAX ON PREMIUMS COLLECTED UNDER SUBSECTION (A)
HEREOF, HOWEVER, PREMIUMS COLLECTED ON TRANSACTIONS
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 REI ANCE COMPANIES SHALL BE SUBJECT TO
VALUE ADDED TAX ON PREMIUMS COLLECTED UNDER SECTION 108
OF THIS CODE. HOWEVER, PREMIUMS COLLECTED ON
TRANSACTIONS WHERE THE TAX ON THE DIRECT PREMIUM HAS
ALREADY BEEN PAID BY THE DIRECT INSURER SHALL BE EXCLUDED
FROM THE GROSS PREMIUM SUBJECT TO VALUE ADDED TAX.

FOR THE PURPOSE OF CLAIMING EXEMPTION ON
REINSURANCE PREMIUMS, THE SECRETARY OF FINANCE, UPON THE
RECOMMENDATIONS OF THE COMMISSIONER OF INTERNAL
REVENUE AND INSURANCE COMMISSIONER, SHALL PROMULGATE
THE REQUIRED REPORTS TO BE SUBMITTED TO THE BUREAU OF
INTERNAL REVENUE, ANY MISREPRESENTATION SHALL SUBJECT
THE DIRECT INSURER OR REINSURER TO PENALTIES UNDER
SECTIONS 248, 249, 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

Page | 46


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 THEIR RESPECTIVE
SHARES IN THE POOLED FUND, IS A CIS. THE AMOUNTS OF PREMIUM
COLLECTED IN EXCESS OF THE INSURANCE COST IS NOT SUBJECT TO.
PREMIUM TAX UNDER THIS SECTION AND 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,

Cooperative companies or associations are such as are conducted by the

members thereof with the money collected from among themselves and solely for their

own protection and not for profit.

SEC. 25, Section 127 of the National Internal Revenue Code of 1997. as amended. is
hereby repealed.

SEC. 26. Section 174 of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC. 174, Stamp Tax on Original Issue of Shares of Stock. —On every original
issue, whether on organization. reorganization or for any lawful purpose. of shares of
stock by any association, company. or corporation, INCLUDING SHARES OF
STOCK OR UNITS OF PARTICIPATION IN A COLLECTIVE INVESTMENT
SCHEME, there shall be collected a documentary stamp tax of [Two pesos (P2.00) on
cach Two hundred pesos (P200). or fractional part thereof, of the par value.)
SEVENTY-FIVE PERCENT OF ONE PERCENT (0.75%) 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

Page | 47


of stock: Provided, further, That in the case of stock dividends, on the actual value

represented by each share|.J: PROVIDED, FINALLY, THAT IN THE CASE OF

COLLECTIVE INVESTMENT SCHEMES WITHOUT PAR VALUE, THE

DOCUMENTARY STAMP TAX SHALL BE BASED ON THE INITIAL NET

ASSET VALUE PER UNIT.

SEC 27. Section 175 of the National Internal Revenue Code of 1997, as amended, is
hereby repealed

SEC. 28. Section 176 of the National Intemal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC 176. Stamp Tax on Bonds, Debentures, Certificates of Stock or
Indebtedness Issued in Foreign Countries. — {On all] A DOCUMENTARY STAMP
TAX OF SEVENTY-FIVE PERCENT OF ONE PERCENT (0.75%) OF THE
VALUE OF THE TRANSACTION SHALL BE COLLECTED FROM A
PERSON SELLING OR TRANSFERING 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, such tax as is
required by law on similar instruments when issued, sold or transferred in the
Philippines.)

SEC 29. Sections 177 and 178 of the National Internal Revenue Code of 1997, as
amended, are hereby repealed,

SEC 30. Section 179 of the National Intemal Revenue Code of 1997, as amended, is
hereby amended to read as follows;

SEC. 179. Stamp Tax on Alt Debt Instruments. ~ On every original issue of
debt instruments, there shal! be collected a documentary stamp tax of [Onc peso and
fifty centavos (P1.50) on each Two hundred pesos (P200), or fractional part thereof,
SEVENTY-FIVE PERCENT OF ONE PERCENT (0.75%) of the issue price of any
such debt instruments: Provided, That for such debt instruments with terms of less than
one (1) year. the documentary stamp tax to be collected shall be of a proportional
amount in accordance with the ratio of its term in number of days to three hundred
sixty-five (365) days: Provided, further, That only one documentary stamp tax shall be
imposed on either loan agreement, of promissory notes issued to secure such loan.

Page | 48


For purposes of this section, the term debt instrument shal! mean instruments:
representing borrowing and lending wansactions 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 Phi

instruments and securities issued by the government or any of its instrumentalities.
deposit substitute debt instruments, certificates or other evidences of deposits that are
either drawing interest significantly higher the regular savings deposit taking into
consideration the size of the deposit and the risks involved or drawing interest and
having a specific maturity date, [orders for payment of any sum of money otherwise
than at sight or on demand,] promissory notes, whether negotiable or non-negotiable.
except bank notes issued for circulation.

SEC 31. Section 180 of the National Internal Revenue Code of 1997, as amended. is
hereby repealed.

SEC 32, Sections 181, 182, 183, 184, 185, 186, and 187 of the National Internal
Revenue Code of 1997, as amended, are hereby amended to read as follows:
SEC. 181. Stamp Tax Upon Acceptance of Bills of Exchange and Others.—
Upon any acceptance or payment of any bill of exchange or order for the payment of
money purporting to be drawn in a foreign country but payable in the Philippines. there
shal] 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. 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 bundred 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,
A LETTER OF CREDIT ON WHICH THE DOCUMENTARY STAMP TAX
Page | 49


IMPOSED UNDER THIS SECTION IS PAID UPON OPENING SHALL NOT
BE SUBJECT AGAIN TO THE TAX IMPOSED BY 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. Stamp Tax on Life AND HEALTH Insurance Policies.)
OF ANNUITIES, AND HEALTH MAINTENANCE ORGANIZATION
PRODUCTS. ~ On all policies of insurance or other instruments by whatever name
the same may be called, whereby any insurance shall be made or renewed upon any life
or lives AND HEALTH OF PERSONS, there shall be collected @ 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 = PS0.00
If the amount of insurance excceds P500.000

‘but does not exceed P750,000 ~P100.00
If the amount of insurance excceds P750,000

but does not execed P1,000,000 ~ P150.00
If the amount of insurance exceeds P1,000.000 ~~ P200.00

SEC. 184, Stamp Tax on Policies of Insurance Upon Property. ~ On all
policies of insurance or other instruments by whatever name the same may be called.
by which insurance shall be made or renewed upon property of any description.
including rents or profits, against peril by sea or on inland waters, or by fire or lightning.
there shall be collected a documentary stamp tax of [Fifty centavos (P0.50) on each
Four pesos (P4.00). or fractional part thereof) TWELVE AND ONE-HALF
PERCENT (12.5%) of the amount of premium charged: Provided. however, That no
documentary stamp tax shall be collected on reinsurance contracts or on any instrument
by which cession or acceptance of insurance risks under any reinsurance agreement is
effected or recorded. PROVIDED, FURTHER, THAT SUCH RATE SHALL BE
REDUCED ACCORDING TO THE FOLLOWING SCHEDULE:

Page | 50


JANUARY 1, 2021: ELEVEN AND ONE-HALF PERCENT (11.5%),
JANUARY 1, 2022: TEN AND ONE-HALF PERCENT (10.5%),
JANUARY 1, 2023: NINE AND ONE-HALF PERCENT (9.5%),
JANUARY 1, 2024: EIGHT AND ONE-HALF PERCENT (8.5%),
JANUARY 1, 2025: SEVEN AND ONE-HALF PERCENT (7.5%).

SEC. 185. Stamp Tax on Fidelity Bonds and Other Insurance Policies. —On
all policies of insurance or bonds or obligations of the nature of indemnity for loss,
damage or liability made or renewed by any person, association, company or
corporation transacting the business of accident, fidelity, employer's liability, plate.
glass, steam boiler, burglar, elevator, automatic sprinkler, or other 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 guarantecing 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 [Fifty centavos (P0.50) on cach Four pesos
(P4,00), or fractional part thereof,| TWELVE AND ONE-HALF PERCENT (12.5%)
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%),

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. 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 peso (P1.00) on each Two hundred pesos (P200), or
fractional part thereof, of the premium or installment payment on contract price
collected.] On pre-need plans, |the documentary stamp tax shall be Forty centavos
(P0.40) on each Two hundred pesos (P200), or fractional part thereof, of the premium

Page | 51


or contribution collected| 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.

SEC. 187. 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
[Thiny centavos (P0.30) on each Four pesos (P4.00). or fractional part thereof.)
SEVEN AND ONE-HALF PERCENT (7.5%) of the premium charged.

SEC 33. Section 188 of the National Internal Revenue Code of 1997, as amended, is
hereby repealed.

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

SEC 35, Sections 195, 198, and 199 of the National Internal Revenue Code of 1997, as
amended, are hereby amended to read as follows:

SEC. 195, Stamp Tax on Mortgages, Pledges and Deeds of Trust. ~ On every
mortgage or pledve 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 shal] be and intended
‘only as security, either by express stipulation or otherwise, there shal] be collected a
documentary stamp tax [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).|

Page | $2


OF THIRTY PERCENT OF ONE PERCENT (0.3%) OF THE AMOUNT
SECURED.

XXX XXX _XAX

SEC. 198. Stamp Tax on |Assignments and] Renewals of Certain
Instruments, - Upon each and every |assignment or transfer of any mortgage, lease or
policy of insurance. or the] renewal or continuance of any agreement, contract. charter,
or any evidence of obligation or indebtedness by THE EXTENSION OF THE TERM.
OR MATURITY BY [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, 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.

AXXO AX

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

(0) REDEMPTION, SALE, BARTER, EXCHANGE, OR OTHER
MODES OF DISPOSITION OR EXCHANGE OF SHARES OF STOCK OR
UNITS OF PARTICIPATION IN 4 COLLECTIVE INVESTMENT SCHEME
OR OTHER CIS SECURITIES LISTED AND TRADED IN A LOCAL
EXCHANGE OR AN ORGANIZED MARKETPLACE. THE ORIGINAL
ISSUANCE OF SHARES OR UNITS OF PARTICIPATION IN A CIS SHALL
NOT BE COVERED BY THIS EXEMPTION.

SEC. 36, Prospectivity Clause. ~The changes introduced under this Act shall apply to
transactions taking effect beginning January 1, 2020.

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SEC. 37. Implementing Rules and Regulations, — The Department of Finance, in
consultation with the Securities and Exchange Commission, Bangko Sentral ng Pilipinas,
Insurance Commission, the Bureau of the Treasury, and the Bureau of Internal Revenue, shall
issue the implementing rules and regulations for the effective implementation of this Act.

SEC. 38. Separability Clause. — If, for any reason any article or provision of this Act,
or any portion thereof, or application of such article, provision, or portion thereof to any person,
group, or circumstance is declared invalid or unconstitutional, the remainder of this Act shall
not be affected by such decision or declaration.

SEC. 39. Repeating Clause. — The following laws or provisions of laws are hereby
repealed or modified accordingly and the persons and/or transactions affected herein are hereby
made subject to applicable taxes on interest income, dividends, and capital pains, gross receipts
tax, premium tax, and documentary stamp tex under the National Internal Revenue Code of
1997, as amended:

(@) 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 the tax exemptions on interest income,
capital gains, and documentary stamp tax and on the issuance of bonds are concerned,
of Executive Order 603, entitled “Creating a Light Rail Transit Authority, Vesting the
Same With Authority to Construct and Operate the Light Rail Transit (LRT) Project
and Providing Punds 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”;

(d) Section 12, insofar as the tax exemptions on interest income, capital
gains, and documentary stamp tax and on the issuance of bonds are 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”:

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(e} Number 8. insofar as tax exemption on interest income. capital gains,
and documentary stamp tax is concerned. of Presidential Decree 37, entitled “Creating
the Nayong Pilipino Foundation”;

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

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

(b) Sections 10 and 11, insofar as the tax exemptions on interest income.
capital gains, and documentary stamp tax of subsidiaries of Philippine Aerospace
Development Corporation and on the issuance of bonds are concerned, of Presidential
Decree 696, entitled “Revising Presidential Decree No. 286, dated September 5. 1973,
as amended, otherwise known as The Charter of The Philippine Aerospace
Development Corporation and for Other Purposes”;

(i) Section 2(g), insofar as the tax exemptions on interest income and on
the issuance of bonds are concerned. of Republic Act 85. as amended by Republic Act
2081. entitled "An Act Creating the Rehabilitation Finance Corporation”;

Gj) Sections 76, 77 and 98. insofar as tax exemption on interest income,
dividends, capital gains, and documentary stamp tax on bonds is concemed. of Republic
Act 3844 or The Agricultural Land Reform Code;

{k) Section 37, insofar as the 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:

0) Sections 19, insofar as the tax exemptions on interest income and
issuance of bonds are concerned. of Republic Act 3591, as amended by Republic Act
9576 or An Act Increasing the Maximum Deposit Insurance Coverage, and in
Connection Therewith. 10 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

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Nincty-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 and the issuance of bonds are concerned. of Executive
Order 1037, entitled “An Act Creating the Philippine Retirement Park System,
Providing Funds Therefor and for Other Purposes”:

(n) Sections 5 and 19, insofar as the tax exemptions on the issuance of
bonds, interest income and documentary stanip tax are concemed, of Republic Act 8763
or Home Guaranty Corporation Act of 2000;

(0) Sections 19 and 25. 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 concemed. as provided under Section | of
Republic Act 6395 or An Act Revising the Charter of the National Power Corporation;

(q) Sections 9 and 15. insofar as the tax exemptions on the issuance of
bonds, interest income, capital gains, and documentary stamp tax are concemed, of PD
334, entitled “Creating the Philippine National Oi! Company. Defining its Powers and
Functions, Providing Funds Therefore, and for Other Purposes”;

i) Section 16, insofar as tax exemption on interest income. capital gains,
and documentary stamp tax is concerned, of Presidential Decree 1467. entitled “An Act
Creating the Philippine Crop Insurance Corporation. Prescribing Its Powers and
Activities, Providing For Its Capitalization and for the Required Government Premium
Subsidy, and for Other Purposes”;

(s) Section 3. insofar as the tax exemption on interest income, capital gains,
and documentary stamp tax of bonds is concemed. of Republic Act 3601, entitled “An
Act Granting the National Irrigation Admi

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

(u) Section 5 (¢). insofar as tax exemption on interest income. capital gains,
and documentary stamp tax on bonds is concerned, of Republic Act 6260. entitled "An

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‘Act Instituting a Coconut Investment Fund and Creating a Coconut Investment
Company for the Administration Thereof:

wv) Section 9, insofar as tax exemption on interest income, capital gains. and
documentary stamp tax on bonds is concerned. of Republic Act 10744 Or Credit Surety
Fund Act of 2014;

(w) Section 20, insofar as tax on interest income, capital gains and
documentary stamp tax is concemed, of Republic Act 10693, entitled “An Act
Strengthening Nongovemment Organizations (NGOs) Engaged in Microfinance
Operations for the Poor”:

(x) Section 7, insofar as tax exemption on documentary stamp tax and
premium tax is concemed, 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”:

(y) Section 56, insofar as tax exemption on interest income, capita] gains.
and documentary stamp tax is concemed, 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 ineome 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 concemed. of Republic Act 9267 or The Securitization
Act of 2004";

(bb) Section 17, insofar as tax exemption on interest income. capital gains,
gross reccipis tax and documentary stamp tax is concemed, 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 Republi¢ 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 DST and dividends is
concerned. of R.A. 9856 or The Real Estate Investment Act of 2009;

(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 concemed, of P.D. 87, entitled Amending Presidential Decree No. 8 issued on
October 2. 1972. and Promulgating an Amended Act to Promote the Discovery and
Production of Indigenous Petroleum and Appropriate Funds Therefor,

(f) Section 6, insofar as tax exemption on interest income, dividends and
capital gains are concerned. of RA 6426 or the Foreign Currency Deposit Act of the
Philippines. as amended; and

(ee) Section 32, insofar as the tax exemptions on capital gains. interest
income and DST and issuance of bonds are concerned, of RA 6424 or the Philippine
Export Credit Insurance and Guarantee Corporation Act.

SEC. 40. Effectiviry - This Act shall take effect on January 1, 2020, or fifteen (15) days

afier its complete publication in at least two (2) newspapers of general circulation.

Approved.

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