Republic of the Philippines
House of Representatives
Quezon City
EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL No, 3359

INTRODUCED BY REPRESENTATIVE ANN K. HOFER

EXPLANATORY NOTE

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

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

a

b.

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

Susceptibility to arbitrage — The variations in tax rates and unequal tax treatment of
equivalent or comparable financial instruments give rise to arbitrage. Different tax
treatment among sectors, or between financial institutions and non-financial institutions
offering the same service and/or product, or between interests and dividends, open
window for arbitrage and leveraging. These disparities in tax treatment distort
investment decisions considering that tax impositions overshadow all other
considerations. Competitive advantage arises in favor of the financial sector favored by
the law’s tax treatment.

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


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

|. Inequitable distribution of tax burden —\nvestments in equity and some forms of long-

terms instruments are subject to lower tax rates. Hence, those who have more money to
place in these kinds of investment tend to pay lower taxes compared to working class
individuals who are content with placing their funds in short-term investments or
savings deposit with higher taxes.

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

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

. Not supportive of capital market development ~ There are a number of taxes on

financial transactions that hinder capital market development. Initial public offering
(IPO) tax, for instance, is essentially a tax on capital, and does not take into
consideration income generation. Such an imposition serves as a deterrent to public
listing. This results in the Philippine Stock Exchange (PSE) lagging behind other
ASEAN countries in terms of market capitalization.

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

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

a.

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

. Simplify what has become a complex tax system.

Improve equity across investors and savers.

|. Minimize arbitrage opportunities.

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


To achieve these, this bill proposes the following reforms:

a.

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

. Unification of tax rates for interests, dividends, and capital gains - Considering the

complicated tax system on capital income, a more unified rate of tax is imposed for
interests, dividends, and capital gains.

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

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

|. Removal or minimization of barriers to capital market development - IPO tax, which is

found to be detrimental to capital market development is removed.

Overall, the DST of the financial sector is being rationalized to promote capital
mobility.

. Adoption of a regionally competitive tax system - Considering that Philippine taxes on

capital income is the highest in the ASEAN region, measures are taken towards the
adoption of tax rates comparable to those of neighboring ASEAN nations and their best
practices. With the reform, the proposed rates would be at par with the rates imposed
in ASEAN to ensure competitiveness of the domestic capital market.

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

growth of the economy.

Al
2™ District, Zamboanga Sibugay


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

3359
HOUSE BILL NO.

Introduced by REP. ANN K. HOFER

AN ACT
AMENDING SECTIONS 22, 24, 25, 27, 28, 29, 30, 32, 34, 37, 38, 39, 42, 51, 52, 54, 56, 57,
73, 108, 121, 122, 123, 174, 176, 179, 181, 182, 183, 184, 185, 186, 187, 188, 189, 190, 191,
194, 195, 196, 197, 198, AND 199; AND REPEALING SECTIONS 127, 175, 177, 178, 180,
192, AND 193; ALL UNDER REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS
THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR
OTHER PURPOSES

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

SECTION. 1. Title. ~ This Act shall be known as the “Passive Income and Financial Intermediary
Taxation Act of 2019.”

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 following are the declared policies of
the State:

1. The State shall promote and develop a tax system that provides neutrality in the tax
treatment across financial institutions and financial instruments.

2. The State shall endeavor to simplify an otherwise complex tax system for easy compliance.

3. The State shall ensure that the taxation of passive income and financial transactions is
equitable across all stakeholders and discourages arbitrage opportunities.

4, The State shall promote capital market development and tax competitiveness within the
context of globalization, increased capital mobility, and financial inclusion.

SEC. 3. Section 22 of the National Internal Revenue Code of 1997, as amended, is hereby amended to
read as follows:

‘SEC. 22. Definitions - When used in this Title:
(A) xxx

(B) The term ‘corporation’ shall include partnerships, no matter how created or organized,
joint-stock companies, joint accounts (cuentas en participacion SUCH AS COLLECTIVE
INVESTMENT SCHEMES), associations, or insurance companies, but does not include
general professional partnerships and a joint venture or consortium formed for the purpose of
undertaking construction projects or engaging in petroleum, coal, geothermal and other energy
operations pursuant to an operating or consortium agreement under a service contract with the


Government. ‘General professional partnerships’ are partnerships formed by persons for the
sole purpose of exercising their common profession, no part of the income of which is derived
from engaging in any trade or business. A COLLECTIVE INVESTMENT SCHEME MAY
OR MAY NOT BE REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

XXX XXX XXX

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

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

XXX XXX XXX,

(T) The term ‘securities’ means [shares of stock in a corporation, and rights to subscribe for or
to receive such shares. The term includes bonds, debentures, notes or certificates, or other
evidence of indebtedness, issued by any corporation, including those issued by a government
or political subdivision thereof, with interest coupons or in registered form.] SHARES,
PARTICIPATION, OR INTERESTS IN A CORPORATION OR IN A COMMERCIAL
ENTERPRISE OR PROFIT-MAKING VENTURE AND EVIDENCED BY A
CERTIFICATE, CONTRACT, INSTRUMENTS, WHETHER WRITTEN OR
ELECTRONIC IN CHARACTER. IT INCLUDES:

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

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

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

(4) DERIVATIVES LIKE OPTIONS AND WARRANTS;
(8) CERTIFICATES OF ASSIGNMENTS, CERTIFICATES OF

PARTICIPATION, TRUST CERTIFICATES, VOTING TRUST
CERTIFICATES, OR SIMILAR INSTRUMENTS;

(6) PROPRIETARY OR —NON-PROPRIETARY = MEMBERSHIP
CERTIFICATES IN CORPORATIONS; AND


(1) OTHER INSTRUMENTS AS MAY IN THE FUTURE BE DETERMINED
BY THE SECURITIES AND EXCHANGE COMMISSION.

XXX XXX XXX,

(V) The term ‘bank’ [means every banking institution, as defined in Section 2 Republic Act
No. 337, as amended, otherwise known as the General Banking Act. A bank may either be, a
commercial bank, a thrift bank, a development bank, a rural bank, a specialized government
bank, or a cooperative bank] AS DEFINED IN SECTION 3 OF REPUBLIC ACT NO. 8791
OTHERWISE KNOWN AS THE GENERAL BANKING LAW OF 2000 SHALL REFER
TO ENTITIES ENGAGED IN THE LENDING OF FUNDS OBTAINED IN THE FORM
OF DEPOSITS. BANKS SHALL BE CLASSIFIED INTO UNIVERSAL BANKS,
COMMERCIAL BANKS, THRIFT BANKS COMPOSED OF: (A) SAVINGS AND
MORTGAGE BANKS; (B) STOCK SAVINGS AND LOAN ASSOCIATIONS; AND (C)
PRIVATE DEVELOPMENT BANKS, AS DEFINED IN REPUBLIC ACT NO. 7906,
(THRIFT BANKS ACT), RURAL BANKS, AS DEFINED IN REPUBLIC ACT NO. 7353
(RURAL BANKS ACT); COOPERATIVE BANKS, AS DEFINED IN REPUBLIC ACT
NO. 6938 (COOPERATIVE CODE), ISLAMIC BANKS AS DEFINED IN REPUBLIC
ACT NO. 6848, (CHARTER OF AL AMANAH ISLAMIC INVESTMENT BANK OF
THE PHILIPPINES), AND OTHER CLASSIFICATIONS OF BANKS AS
DETERMINED BY THE MONETARY BOARD OF THE BANGKO SENTRAL NG
PILIPINAS.

(W) The term ‘non-bank financial intermediary’ means PERSONS OR ENTITIES
ENGAGED IN THE BORROWING OF FUNDS, FOR THE BORROWER'S OWN
ACCOUNT, THROUGH THE ISSUANCE, ENDORSEMENT, OR ACCEPTANCE OF
DEBT INSTRUMENTS OF ANY KIND OTHER THAN DEPOSITS, OR THROUGH
THE ISSUANCE OF PARTICIPATIONS, CERTIFICATES OF ASSIGNMENT, OR
SIMILAR INSTRUMENTS WITH RECOURSE, TRUST CERTIFICATES, OR OF
REPURCHASE AGREEMENTS, FROM TWENTY (20) OR MORE LENDERS AT
ANY ONE TIME, FOR PURPOSES OF RELENDING OR PURCHASING OF
RECEIVABLES AND OTHER OBLIGATIONS, BUT DOES NOT INCLUDE
COMMERCIAL, INDUSTRIAL, AND OTHER NON-FINANCIAL COMPANIES,
WHICH BORROW FUNDS THROUGH ANY OF THESE MEANS FOR THE
LIMITED PURPOSE OF FINANCING THEIR OWN NEEDS OR THE NEEDS OF
THEIR AGENTS OR DEALERS, OR a financial intermediary, as defined in [Section
2(D)(c) of] Republic Act No. 337, as amended, otherwise known as the General Banking Act,
authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities.

(X) THE TERM ‘QUASI-BANK’ SHALL REFER TO ENTITIES ENGAGED IN THE
BORROWING OF FUNDS THROUGH THE ISSUANCE, ENDORSEMENT OR
ASSIGNMENT WITH RECOURSE OR ACCEPTANCE OF DEPOSIT SUBSTITUTES,
AS DEFINED IN SECTION 95 OF REPUBLIC ACT NO. 7653 (NEW CENTRAL
BANKING ACT) FOR PURPOSES OF RELENDING OR PURCHASING OF
RECEIVABLES AND OTHER OBLIGATIONS.

(Y) The term ‘quasi-banking activities’ means borrowing funds from twenty (20) or more
[personal] INDIVIDUAL or corporate lenders at any one time through the issuance,
endorsement, or acceptance of debt instruments of any kind other than deposits for the
borrower's own account, or through the issuance of certificates of assignment or similar
instruments, with recourse, or of repurchase agreements for purposes of relending or purchasing
receivables and other similar obligations: Provided, however, That commercial, industrial and
other non-financial companies, which borrow funds through any of these means for the limited
purpose of financing their own needs or the needs of their agents or dealers, shall not be
considered as performing quasi-banking functions. THE PHRASE “AT ANY ONE TIME”
SHALL BE COUNTED AT THE TIME OF ORIGINATION OR ISSUANCE OF THE
DEBT INSTRUMENT.


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

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

XXX XXX XX

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

XXX XXX XXX

(FF) The term [long-term deposit or investment certificate’ shall refer to certificate of time
deposit or investment in the form of savings, common or individual trust funds, deposit
substitutes, investment management accounts and other investments with a maturity period of
not less than five (5) years, the form of which shall be prescribed by the Bangko Sentral ng
Pilipinas (BSP) and issued by banks only (not by nonbank financial intermediaries and finance
companies) to individuals in denominations of Ten thousand pesos (P10,000) and other
denominations as may be prescribed by the BSP.|'FINANCIAL INSTITUTIONS’ OR
‘FINANCIAL INTERMEDIARIES’ SHALL MEAN PERSONS OR ENTITIES WHOSE
PRINCIPAL FUNCTIONS INCLUDE THE BUSINESS OF LENDING, FINANCING,
INVESTING, OR PLACEMENT OF FUNDS OR EVIDENCES OF INDEBTEDNESS
OR EQUITY DEPOSITED WITH THEM, ACQUIRED BY THEM, OR OTHERWISE
COURSED THROUGH THEM, EITHER FOR THEIR OWN ACCOUNT OR FOR THE
ACCOUNT OF OTHERS, AND ARE AUTHORIZED BY THE BANGKO SENTRAL
NG PILIPINAS OR BY THE SECURITIES AND EXCHANGE COMMISSION
DEPENDING ON THE GOVERNMENT AGENCY AUTHORIZED TO REGULATE
THEM. IT SHALL INCLUDE BANKS, QUASI-BANKS, TRUST ENTITIES,
PAWNSHOPS, FOREIGN EXCHANGE DEALERS, MONEY BROKERS, CREDIT
COOPERATIVES, FINANCING COMPANIES, FINANCE LEASING COMPANIES,
INVESTMENT COMPANIES, AND OTHER COLLECTIVE INVESTMENT
SCHEMES, INVESTMENT HOUSES, LENDING INVESTORS, AND OTHER TYPES
OF BUSINESSES THAT MAY BE CLASSIFIED BY THE BANGKO SENTRAL NG
PILIPINAS OR THE SECURITIES AND EXCHANGE COMMISSION AS
FINANCIAL INSTITUTION.

LIFE AND NON-LIFE INSURANCE COMPANIES, PRE-NEED COMPANIES AND
HEALTH MAINTENANCE ORGANIZATIONS ARE ALSO CONSIDERED


FINANCIAL INSTITUTIONS UNDER THE SUPERVISION OF THE INSURANCE
COMMISSION.

(GG) The term ‘statutory minimum wage’ x x x.
(HH) The term ‘minimum wage earner’ x x x.

(I) THE TERM ‘COLLECTIVE INVESTMENT SCHEMES’ OR ‘CIS’ SHALL MEAN
ANY ARRANGEMENT WHEREBY FUNDS ARE SOLICITED FROM THE
INVESTING PUBLIC AND POOLED TOGETHER FOR THE PURPOSE OF
INVESTING, RE-INVESTING, AND/OR TRADING IN SECURITIES OR OTHER
ASSETS OR DIFFERENT CLASSES THEREOF AS ALLOWED UNDER THE LAW,
WHICH MAY EITHER HAVE A CORPORATE STRUCTURE, SUCH AS AN
INVESTMENT COMPANY, OR A CONTRACTUAL STRUCTURE, SUCH AS A UNIT
INVESTMENT TRUST FUND OR SIMILAR SCHEME HELD BY A TRUST
CORPORATION OR A SEPARATE ACCOUNT FUND ESTABLISHED PURSUANT
TO A VARIABLE UNIT LINKED LIFE INSURANCE POLICY ISSUED BY AN
INSURANCE COMPANY, AND SUCH OTHER FORMS OF COLLECTIVE
INVESTMENT SCHEMES AS MAY BE DETERMINED BY THE APPROPRIATE
GOVERNMENT REGULATORY AGENCIES SUCH AS THE BANGKO SENTRAL
NG PILIPINAS, THE SECURITIES AND EXCHANGE COMMISSION AND THE
INSURANCE COMMISSION. A CIS MAY EITHER BE OPEN-END OR CLOSED-
END, DEFINED AS FOLLOWS:

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

‘CLOSED-END CIS’ MEANS A CIS WHERE A FIXED NUMBER OF
SECURITIES ARE OFFERED IN AN INITIAL PUBLIC OFFERING AND
THEREAFTER MAY BE TRADED IN AN ORGANIZED MARKETPLACE AS.
DETERMINED BY THE SECURITIES AND EXCHANGE COMMISSION,
BUT MAY NOT BE REDEEMED BY THE CIS. A CLOSED-END CIS SHALL
NOT BE ALLOWED TO INCREASE ITS NUMBER OF SECURITIES.

(JJ) THE TERM ‘UNIT LINKED INVESTMENT INSTRUMENT’ SHALL MEAN A
CONTRACTUAL CIS ORGANIZED PURSUANT TO A CONTRACT, SUCH AS
TRUST INDENTURE, OR AS AN INVESTMENT COMPONENT OF AN INSURANCE
CONTRACT, ENGAGED OR HOLDS ITSELF OUT AS BEING ENGAGED, OR
PROPOSES TO ENGAGE, IN THE BUSINESS OF INVESTING, REINVESTING,
AND/OR TRADING IN SECURITIES OR OTHER INVESTMENT ASSETS, AND
ISSUES UNITS OF PARTICIPATION, EACH OF WHICH REPRESENTS AN
UNDIVIDED INTEREST IN A POOL OF INVESTMENT ASSETS.

(KK) THE TERM ‘HOLDING COMPANY’ SHALL REFER TO ANY CORPORATION
ORGANIZED TO HOLD THE STOCK OF ANOTHER OR OTHER
CORPORATIONS, AND OTHER FORMS OF HOLDING COMPANIES AS MAY BE
DETERMINED BY APPROPRIATE GOVERNMENT REGULATORY AGENCIES.

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



(MM) THE TERM ‘ORGANIZED MARKETPLACE’ IS AN EXCHANGE, AN OVER-
THE-COUNTER MARKET, ALTERNATIVE TRADING SYSTEM, REGISTERED
AND LICENSED BY THE SECURITIES AND EXCHANGE COMMISSION AS AN
EXCHANGE UNDER REPUBLIC ACT NO. 8799, AS AMENDED, AND GOVERNED
BY, AMONG OTHERS, TRANSPARENT AND BINDING RULES AND MARKET
CONVENTIONS ON MEMBERSHIP, TRADING, PRICE TRANSPARENCY, TRADE
REPORTING, MARKET MONITORING AND ORDERLY CONDUCT/OPERATION
OF THE MARKET WHICH ARE ENFORCEABLE ON THE MEMBERS AND
PARTICIPANTS.

(NN) THE TERM ‘CLOSELY HELD CORPORATION’ MEANS ANY CORPORATION
WITH AT LEAST FIFTY PERCENT (50%) IN VALUE OF OUTSTANDING
CAPITAL STOCK OR AT LEAST FIFTY PERCENT (50%) OF THE TOTAL
COMBINED VOTING POWER OF ALL CLASSES OF STOCK ENTITLED TO VOTE
IS OWNED DIRECTLY OR INDIRECTLY BY OR FOR NOT MORE THAN TWENTY
(20) INDIVIDUALS.

FOR PURPOSES OF DETERMINING WHETHER THE CORPORATION IS A
CLOSELY HELD CORPORATION, INSOFAR AS SUCH DETERMINATION IS
BASED ON STOCK OWNERSHIP, THE FOLLOWING RULES SHALL BE
APPLIED:

(1) STOCK NOT OWNED BY INDIVIDUALS. - STOCK OWNED DIRECTLY
OR INDIRECTLY BY OR FOR A CORPORATION, PARTNERSHIP,
ESTATE OR TRUST SHALL BE CONSIDERED AS BEING OWNED
PROPORTIONATELY BY ITS SHAREHOLDERS, PARTNERS OR
BENEFICIARIES.

(2) FAMILY AND PARTNERSHIP OWNERSHIPS. - AN INDIVIDUAL
SHALL BE CONSIDERED AS OWNING THE STOCK OWNED, DIRECTLY
OR INDIRECTLY, BY OR FOR HIS FAMILY, OR BY OR FOR HIS
PARTNER. FOR PURPOSES OF THE PARAGRAPH, THE ‘FAMILY OF AN
INDIVIDUAL’ INCLUDES ONLY HIS BROTHERS AND SISTERS
(WHETHER BY WHOLE OR HALF-BLOOD), SPOUSE, ANCESTORS AND
LINEAL DESCENDANTS.

(3) OPTION. - IF ANY PERSON HAS AN OPTION TO ACQUIRE STOCK,
SUCH STOCK SHALL BE CONSIDERED AS OWNED BY SUCH PERSON.
FOR PURPOSES OF THIS PARAGRAPH, AN OPTION TO ACQUIRE SUCH
AN OPTION AND EACH ONE OF A SERIES OF OPTIONS SHALL BE
CONSIDERED AS AN OPTION TO ACQUIRE SUCH STOCK.

(4) CONSTRUCTIVE OWNERSHIP AS ACTUAL OWNERSHIP. ~ STOCK
CONSTRUCTIVELY OWNED BY REASON OF THE APPLICATION OF
PARAGRAPH (1) OR (3) HEREOF SHALL, FOR PURPOSES OF APPLYING
PARAGRAPH (1) OR (2), BE TREATED AS ACTUALLY OWNED BY SUCH
PERSON; BUT STOCK CONSTRUCTIVELY OWNED BY THE
INDIVIDUAL BY REASON OF THE APPLICATION OF PARAGRAPH (2)
HEREOF SHALL NOT BE TREATED AS OWNED BY HIM FOR PURPOSES
OF AGAIN APPLYING SUCH PARAGRAPH IN ORDER TO MAKE
ANOTHER THE CONSTRUCTIVE OWNER OF SUCH STOCK.

SEC. 4. Section 24 (B) and (C) of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

SEC. 24, Income Tax Rates. ~


(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien of the
Philippines. ~

XXX XXX XXX

(B) Rate of Tax on Certain Passive Income:

(1) Interests}, Royalties, Prizes, and Other Winnings.| ~ A final tax at the rate of [twenty
percent (20%)} FIFTEEN PERCENT (15%) is hereby imposed upon the amount of interest,
YIELD, OR ANY OTHER MONETARY BENEFIT EARNED OR RECEIVED FROM.
DEBT INSTRUMENT, BANK DEPOSIT, DEPOSIT SUBSTITUTE, AND ANY OTHER
FORM OF DEBT INSTRUMENT AND SIMILAR ARRANGEMENTS. [from any
currency bank deposit, and yield or any other monetary benefit from deposit substitutes, and
from trust funds and similar arrangements; royalties, except on books, as well as other literary
works and musical compositions, which shall be imposed a final tax of ten percent (10%); prizes
(except prizes amounting to Ten thousand pesos (P10,000) or less which shall be subject to tax
under Subsection (A) of Section 24); and other winnings (except winnings amounting to Ten
Thousand or less from Philippine Charity Sweepstakes and Lotto which shall be exempt),
derived from sources within the Philippines: Provided, however, That interest income received
by an individual taxpayer (except a nonresident individual) from a depository bank under the
expanded foreign currency deposit system shall be subject to a final income tax at the rate of
fifteen percent (15%) of such interest income: Provided, further, That interest income from
long-term deposit or investment in the form of savings, common or individual trust funds,
deposit substitutes, investment management accounts and other investments evidenced by
certificates in such form prescribed by the Bangko Sentral ng Pilipinas (BSP) shall be exempt
from the tax imposed under this Subsection: Provided, finally, That should the holder of the
certificate pre-terminate the deposit or investment before the fifth (5") year, a final tax shall be
imposed on the entire income and shall be deducted and withheld by the depository bank from
the proceeds of the long-term deposit or investment certificate based on the remaining maturity
thereof:

Four (4) years to less than five (5) years ~ 5%;
‘Three (3) years to less than (4) years ~ 12%; and
Less than three (3) years ~ 20%]

(2) Cash and/or Property Dividends. ~ A final tax at the RATE OF FIFTEEN PERCENT
(15%) [ten percent (10%)] shall be imposed upon the cash and/or property dividends actually
or constructively received by an individual from a domestic corporation or from a joint stock
company, insurance, for |mutual fund companies, COLLECTIVE INVESTMENT
SCHEMES, and regional operating headquarters of multinational companies, or on the share
of an individual in the distributable net income after tax of a partnership (except a general
professional partnership) of which he is a partner, or on the share of an individual in the net
income after tax of an association, a joint account, or a joint venture or consortium taxable as a
corporation of which he is a member or co-venturer.

PROVIDED, HOWEVER, THAT THE FIFTEEN PERCENT (15%) TAX ON
DIVIDENDS SHALL APPLY ONLY ON INCOME EARNED ON OR AFTER
JANUARY 1, 2020. INCOME FORMING PART OF RETAINED EARNINGS AS OF
DECEMBER 31, 2019, EVEN IF DECLARED OR DISTRIBUTED ON OR AFTER
JANUARY 1, 2020, SHALL BE SUBJECT TO TEN PERCENT (10%) TAX.

LIQUIDATING DIVIDEND SHALL BE SUBJECT TO SECTION 24(A) BASED ON
NET GAIN.


{(CI@) Capital Gains from THE Sale, EXCHANGE, BARTER, OR DISPOSITION of
Shares of Stock not Traded in the Stock Exchange OR ORGANIZED MARKETPLACE. ~ (The
provisions of Section 39(B) notwithstanding, a] A final tax at the rate[s prescribed below] OF
FIFTEEN PERCENT (15%) is hereby imposed upon the net capital gains realized during the
taxable year from the sale, barter, exchange or other disposition of shares of stock in a domestic
corporation, except shares sold, or disposed of through A LOCAL the stock exchange[.| OR
AN ORGANIZED MARKETPLAC!

[Not over P100,000. 25%

On any amount in excess of P100,000 ... -1 0%]

{(C\(4) PRESUMPTIVE CAPITAL GAINS FROM THE SALE, EXCHANGE, BARTER,
OR DISPOSITION OF SHARES OF STOCK TRADED IN THE STOCK EXCHANGE OR
AN ORGANIZED MARKETPLACE. - THERE SHALL BE LEVIED, ASSESSED AND
COLLECTED ON EVERY SALE, BARTER, EXCHANGE, OR OTHER
DISPOSITION OF SHARES OF STOCK LISTED AND TRADED THROUGH A
LOCAL STOCK EXCHANGE OR AN ORGANIZED MARKETPLACE, A FINAL TAX
AT THE RATE OF SIX-TENTH OF ONE PERCENT (6/10 OF 1%), AND SHALL BE
REDUCED ACCORDING TO THE FOLLOWING SCHEDULE:

JANUARY I, 2021: FIVE-TENTH OF ONE PERCENT (5/10 OF 1%),
JANUARY 1, 2022: FOUR-TENTH OF ONE PERCENT (4/10 OF 1%),
JANUARY 1, 2023: THREE-TENTH OF ONE PERCENT (3/10 OF 1%),
JANUARY 1, 2024: TWO-TENTH OF ONE PERCENT (2/10 OF 1%),
JANUARY 1, 2025: ONE-TENTH OF ONE PERCENT (1/10 OF 1%).

THE TAX SHALL BE BASED ON THE GROSS SELLING PRICE OR GROSS VALUE
IN MONEY OF THE SHARES OF STOCK SOLD, BARTERED, EXCHANGED, OR
OTHERWISE DISPOSED OF, TO BE PAID BY THE SELLER OR TRANSFEROR.

ANY GAIN EARNED FROM SHARES OF STOCK IN A DOMESTIC CORPORATION
TRADED IN A FOREIGN EXCHANGE, SHALL BE TAXED UNDER SECTION 24 (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 24(A) AS AN ORDINARY INCOME.

(5) CAPITAL GAINS FROM SALE, EXCHANGE, TRANSFER, BARTER, DISPOSITION
OF NON-LISTED AND NON-TRADED DEBT INSTRUMENTS AND OTHER
SECURITIES NOT INCLUDED IN SECTION 24(B)(3) AND (4). ANY GAIN EARNED
FROM DEBT INSTRUMENT AND OTHER SECURITIES NOT INCLUDED IN
SECTION 24(B)(3) AND (4), ISSUED BY A CITIZEN OR RESIDENT ALIEN, OR BY
A DOMESTIC CORPORATION, OR A RESIDENT FOREIGN CORPORATION, OR
BY THE GOVERNMENT OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES,
SHALL BE SUBJECT TO A FINAL TAX AT THE RATE OF FIFTEEN PERCENT
(15%) UPON THE NET CAPITAL GAINS REALIZED.


(©) PRESUMPTIVE CAPITAL GAINS ON LISTED AND TRADED DEBT
INSTRUMENTS AND OTHER SECURITIES NOT INCLUDED IN SECTION 24(B)(3)
AND (4) - THERE SHALL BE LEVIED, ASSESSED, AND COLLECTED ON EVERY
SALE, BARTER, EXCHANGE, OR OTHER DISPOSITION OF DEBT
INSTRUMENTS AND OTHER SECURITIES, LISTED AND TRADED THROUGH A
LOCAL STOCK EXCHANGE OR A LICENSED ORGANIZED MARKETPLACE, A
FINAL TAX AT THE RATE OF ONE-TENTH OF ONE PERCENT (1/10 OF 1%) OF
THE GROSS SELLING PRICE OR GROSS VALUE IN MONEY OF THE DEBT
INSTRUMENT OR SECURITIES SOLD, BARTERED, EXCHANGED, OR
OTHERWISE DISPOSED, WHICH SHALL BE PAID BY THE SELLER OR
TRANSFEROR. IF TRADED IN A FOREIGN EXCHANGE, THE GAIN SHALL BE
SUBJECT TO TAX UNDER SECTION 24 (A) HEREOF.

ANY GAIN REALIZED FROM THE SALE, EXCHANGE, BARTER OR
DISPOSITION OF DEBT INSTRUMENTS AND OTHER SECURITIES, LISTED OR
UNLISTED, BY A DEALER IN SECURITIES OR OTHER ENTITIES LICENSED BY
THE APPROPRIATE GOVERNMENT REGULATORY AGENCIES TO BUY AND
SELL IN DEBT INSTRUMENTS SECURITIES, WHETHER OR NOT UNDERTAKEN
AS A PRIMARY BUSINESS UNDERTAKING, FOR HIS OWN ACCOUNT, OR FOR
THE ACCOUNT OF OTHERS, OR DONE IN A FIDUCIARY CAPACITY, SHALL
NOT BE SUBJECT TO TAX UNDER THIS SUBSECTION BUT TO SECTION 24(A)
AS AN ORDINARY INCOME.

[@)|(7) Capital Gains from Sale of Real Property. —

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

(2) Exception. — The provisions of paragraph (1) of this Subsection to the contrary
notwithstanding, capital gains presumed to have been realized from the sale or disposition of
their principal residence by natural persons, the proceeds of which is fully utilized in acquiring
or constructing a new principal residence within eighteen (18) calendar months from the date
of sale or disposition, shall be exempt from the capital gains tax imposed under this Subsection:
Provided, That the historical cost or adjusted basis of the real property sold or disposed shall
be carried over to the new principal residence built or acquired: Provided, further, That the
Commissioner shall have been duly notified by the taxpayer within thirty (30) days from the
date of sale or disposition through a prescribed return of his intention to avail of the tax
exemption herein mentioned: Provided, still further, That the said tax exemption can only be
availed of once every ten (10) years: Provided, finally, That if there is no full utilization of the
proceeds of sale or disposition, the portion of the gain presumed to have been realized from the
sale or disposition shall be subject to capital gains tax. For this purpose, the gross selling price
or fair market value at the time of sale, whichever is higher, shall be multiplied by a fraction
which the unutilized amount bears to the gross selling price in order to determine the taxable
portion and the tax prescribed under paragraph (1) of this Subsection shall be imposed thereon.

(C) ROYALTIES, PRIZES, AND OTHER WINNINGS - A FINAL TAX AT THE RATE
OF TWENTY PERCENT (20%) IS HEREBY IMPOSED ON THE FOLLOWING
INCOME DERIVED FROM SOURCES WITHIN THE PHILIPPINES: (1)
ROYALTIES EARNED AS PASSIVE INCOME, EXCEPT ROYALTIES FROM


BOOKS, AS WELL AS OTHER LITERARY WORKS AND MUSICAL
COMPOSITIONS WHICH SHALL BE SUBJECT TO A FINAL TAX OF TEN
PERCENT (10%); (2) PRIZES (EXCEPT PRIZES AMOUNTING TO TEN
THOUSAND PESOS (P10,000) OR LESS) WHICH SHALL BE SUBJECT TO TAX
UNDER SECTION 24 (A); AND (3) OTHER WINNINGS (EXCEPT WINNINGS
AMOUNTING TO PHP10,000 OR LESS FROM PHILIPPINE CHARITY
SWEEPSTAKES AND LOTTO WHICH SHALL BE EXEMPT).

SEC. 5. Section 25 (A) and (B) of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

SEC. 25. Tax on Nonresident Alien Individual. —

(A) Nonresident Alien Engaged in Trade or Business Within the Philippines. - \(1) In
General, ~ \A nonresident alien individual engaged in trade or business in the Philippines shall
be subject to [an] income tax UNDER SECTION 24 OF THIS CODE{, in the same manner
as an individual citizen and a resident alien individual,] on taxable income received from all
sources within the Philippines. A nonresident alien individual who shall come to the Philippines
and stay therein for an aggregate period of more than one hundred eighty (180) days during any
calendar year shall be deemed a ‘nonresident alien doing business in the Philippines’, Section
22(G) of this Code notwithstanding,

[(2) Cash and/or Property Dividends from a Domestic Corporation or Joint Stock Company,
or Insurance or Mutual Fund Company or Regional Operating Headquarter or Multinational
Company, or Share in the Distributable Net Income of a Partnership (Except a General
Professional Partnership), Joint Account, Joint Venture Taxable as a Corporation or
Association, Interests, Royalties, Prizes, and Other Winnings. ~ Cash and/or property dividends
from a domestic corporation, or from a joint stock company, or from an insurance or mutual
fund company or from a regional operating headquarter of multinational company, or the share
of anonresident alien individual in the distributable net income after tax of a partnership (except
a general professional partnership) of which he is a partner, or the share of a nonresident alien
individual in the net income after tax of an association, a joint account), or a joint venture
taxable as a corporation of which he is a member or a co-venturer; royalties (in any form); and
prizes (except prizes amounting to Ten thousand pesos (P10,000) or less which shall be subject
to tax under Subsection (B)(1) of Section 24); and other winnings (except Philippine Charity
Sweepstakes and Lotto winnings), shall be subject to an income tax of twenty percent (20%)
on the total amount thereof: Provided, however, That royalties on books as well as other literary
works, and royalties on musical compositions shall be subject to a final tax of ten percent (10%)
on the total amount thereof: Provided, further, That cinematographic films and similar works
shall be subject to the tax provided under Section 28 of this Code: [Provided, furthermore, That
interest income from long-term deposit or investment in the form of savings, common or
individual trust funds, deposit substitutes, investment management accounts and other
investments evidenced by certificates in such form prescribed by the Bangko Sentral ng
Pilipinas (BSP) shall be exempt from the tax imposed under this Subsection: Provided, finally,
That should the holder of the certificate pre-terminate the deposit or investment before the fifth
(5) year, a final tax shall be imposed on the entire income and shall be deducted and withheld
by the depository bank from the proceeds of the long-term deposit or investment certificate
based on the remaining maturity thereof]

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

[Three (3) years to less than four (4) years ~ 12%; and]

[Less than three (3) years ~ 20%]

{@) Capital Gains. — Capital gains realized from sale, barter or exchange of shares of stock in

domestic corporations not traded through the local stock exchange, and real properties shall be
subject to the tax prescribed under Subsections (C) and (D) of Section 24.]


(B) Nonresident Alien Individual Not Engaged in Trade or Business Within the Philippines.
~ There shall be levied, collected and paid for each taxable year upon the entire income received
from all sources within the Philippines by every nonresident alien individual not engaged in
trade or business within the Philippines as [interest, cash and/or property dividends,} rents,
salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed
or determinable annual or periodic or casual gains, profits, and income,-[and capital gains, Ja
FINAL tax equal to twenty five percent (25%) of such income. Capital gains realized by a
nonresident alien individual not engaged in trade or business in the Philippines from the sale of
[shares of stock in any domestic corporation and] real property shall be subject to the income
tax prescribed under Subsection{s (C) and (D) | (B) (7) of Section 24.

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

XXX XXX XXX

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

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

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

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

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

[(2) Capital Gains from the Sale of Shares of Stock Not Traded in the Stock Exchange. ~ A
final tax at the rates prescribed below shall be imposed on net capital gains realized during the
taxable year from the sale, exchange or other disposition of shares of stock in a domestic
corporation except shares sold or disposed of through the stock exchange:}

[Not over P100,000...... 5%]

[Amount in excess of P100,000.........4+-+++++ 10%]

[@) Tax on Income Derived under the Expanded Foreign Currency Deposit System. ~
Income derived by a depository bank under the expanded foreign currency deposit system from
foreign currency transactions with nonresidents, offshore banking units in the Philippines, local
commercial banks, including branches of foreign banks that may be authorized by the Bangko
Sentral ng Pilipinas (BSP) to transact business with foreign currency depository system units


and other depository banks under the expanded foreign currency deposit system shall be exempt
from all taxes, except net income from such transactions as may be specified by the Secretary
of Finance, upon recommendation by the Monetary Board to be subject to the regular income
tax payable by banks: Provided, however, That interest income from foreign currency loans
granted by such depository banks under said expanded system to residents other than offshore
banking units in the Philippines or other depository banks under the expanded system, shall be
subject to a final tax at the rate of ten percent (10%) of such income.|

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

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

(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 DEBT INSTRUMENT,
BANK DEPOSIT, DEPOSIT SUBSTITUTE, AND SIMILAR ARRANGEMENTS.

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

LIQUIDATING DIVIDEND SHALL BE SUBJECT TO SECTION 27(A) 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
DISPOSITION OF SHARES OF STOCK IN A DOMESTIC CORPORATION, EXCEPT
SHARES SOLD, OR DISPOSED OF THROUGH A LOCAL STOCK EXCHANGE OR
AN ORGANIZED MARKETPLACE.

(4) PRESUMPTIVE CAPITAL GAINS FROM THE SALE, EXCHANGE, BARTER OR
DISPOSITION OF SHARES OF STOCK TRADED IN THE STOCK EXCHANGE OR AN
ORGANIZED MARKETPLACE. -THERE SHALL BE LEVIED, ASSESSED AND
COLLECTED ON EVERY SALE, BARTER, EXCHANGE, OR OTHER DISPOSITION
OF SHARES OF STOCK LISTED AND TRADED THROUGH A LOCAL STOCK
EXCHANGE OR AN ORGANIZED MARKETPLACE, A FINAL TAX AT THE RATE
OF SIX-TENTH OF ONE PERCENT (6/10 OF 1%), AND SHALL BE REDUCED
ACCORDING TO THE FOLLOWING SCHEDULE:

JANUARY 1, 2021: FIVE-TENTH OF ONE PERCENT (5/10 OF 1%),
JANUARY 1, 2022: FOUR-TENTH OF ONE PERCENT (4/10 OF 1%),
JANUARY 1, 2023: THREE-TENTH OF ONE PERCENT (3/10 OF 1%),
JANUARY 1, 2024: TWO-TENTH OF ONE PERCENT (2/10 OF 1%),

JANUARY 1, 2025: ONE-TENTH OF ONE PERCENT (1/10 OF 1%).


THE TAX SHALL BE BASED ON THE GROSS SELLING PRICE OR GROSS VALUE
IN MONEY OF THE SHARES OF STOCK SOLD, BARTERED, EXCHANGED, OR
OTHERWISE DISPOSED OF, TO BE PAID BY THE SELLER OR TRANSFEROR.

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

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

(5) CAPITAL GAINS FROM SALE, EXCHANGE, TRANSFER, BARTER, DISPOSITION
OF NON-LISTED AND NON-TRADED DEBT INSTRUMENTS AND OTHER
‘SECURITIES NOT INCLUDED IN SECTION 27(D)(3) AND (4). - ANY GAIN EARNED
FROM DEBT INSTRUMENT AND OTHER SECURITIES NOT INCLUDED IN
SECTION 27(D)(3) AND (4), ISSUED BY A CITIZEN OR RESIDENT ALIEN, OR BY
A DOMESTIC CORPORATION, OR A RESIDENT FOREIGN CORPORATION, OR
BY THE GOVERNMENT OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES,
SHALL BE SUBJECT TO A FINAL TAX AT THE RATE OF FIFTEEN PERCENT
(15%) UPON THE NET CAPITAL GAINS REALIZED.

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

ANY GAIN REALIZED FROM THE SALE, EXCHANGE, BARTER, OR
DISPOSITION OF DEBT INSTRUMENTS AND OTHER SECURITIES, LISTED OR
UNLISTED, BY A DEALER IN SECURITIES OR OTHER ENTITIES LICENSED BY
THE APPROPRIATE GOVERNMENT REGULATORY AGENCIES TO BUY AND
SELL IN DEBT INSTRUMENTS SECURITIES, WHETHER OR NOT UNDERTAKEN
AS A PRIMARY BUSINESS UNDERTAKING, FOR HIS OWN ACCOUNT, OR FOR
THE ACCOUNT OF OTHERS, OR DONE IN A FIDUCIARY CAPACITY, SHALL
NOT BE SUBJECT TO TAX UNDER THIS SUBSECTION BUT TO SECTION 27(A)
AS AN ORDINARY INCOME.

I@IC) Capital Gains Realized from the Sale, Exchange or Disposition of Lands and/or
Buildings. ~ A final tax of six percent (6%) is hereby imposed on the gain presumed to have
been realized on the sale, exchange or disposition of lands and/or buildings which are not
actually used in the business of a corporation and are treated as capital assets, based on the



gross selling price or fair market value as determined in accordance with Section 6(E) of this
Code, whichever is higher, of such lands and/or buildings.

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

[E|®) Minimum Corporate Income Tax on Domestic Corporations —
(1) Imposition of tax. — x x x

XXX XXX XXX

(4) Gross Income Defined. — xxx

XXX XXX XXX,

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

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

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

(1) In General. — Except as otherwise provided in this Code, a corporation organized,
authorized, or existing under the laws of any foreign country, engaged in trade or business
within the Philippines, shall be subject to [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 shall be thirty percent (30%)].

XXX XXX 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
2i(|EJF) of this Code, shall be imposed, under the same conditions, on a resident foreign
corporation taxable under paragraph (1) of this Subsection.

(3) International Carrier. — x x x

[(4) Offshore Banking Units. ~ The 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, shall be subject only to a final tax at the
rate of ten percent (10%).]

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

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

1(1(S) 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) Imerest from Deposits and Yield or any other Monetary Benefit from Deposit Substitutes,
Trust Funds and Similar Arrangements and Royalties - interest from any currency bank deposit
and yield or any other monetary benefit from deposit substitutes and from trust funds and
similar arrangements and royalties derived from sources within the Philippines shall be subject
to a final income tax at the rate of twenty percent (20%) of such interest.: Provided, however,
That interest income derived by a resident foreign corporation from a depository bank under
the expanded foreign currency deposit system shall be subject to a final income tax at the rate
of seven and one-half percent (7 1/2%) of such interest income.]

[(b) Income Derived under the Expanded Foreign Currency Deposit System - Income derived
by a depository bank under the expanded foreign currency deposit system from foreign
currency transactions with nonresidents, offshore banking units in the Philippines, local
commercial banks including branches of foreign banks that may be authorized by the Bangko
Sentral ng Pilipinas (BSP) to transact business with foreign currency deposit system units and
other depository banks under the expanded foreign currency deposit system shall be exempt
from all taxes, except net income from such transactions as may be specified by the Secretary
of Finance, upon recommendation by the Monetary Board to be subject to the regular income
tax payable by banks: Provided, however That interest income from foreign currency loans
granted by such depository banks under the said expanded system to residents other than
offshore banking units in the Philippines or other depository banks under the expanded system
shall be subject to a final tax at the rate of ten percent (10%)]

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

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

{Not over P100,000........

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

5%)

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


(B) Tax on Nonresident Foreign Corporation. —

(1) In General. ~ Except as otherwise provided in this Code, a foreign corporation not engaged
in trade or business in the Philippines shall pay a tax equal to thirty five percent (35%) of the
‘gross income received during each taxable year from all sources within the Philippines, such as
interests, dividends,} rents, royalties, salaries, premiums (except reinsurance premiums),
annuities, emoluments or other fixed or determinable annual, periodic or casual gains, profits
and income, and capital gains, except capital gains subject to tax under subparagraph 5{(c)|:
Provided, That effective January 1, 2009, the rate of income tax shall be thirty percent (30%).

XXX XXX XXX
(8) Tax on Certain Incomes Received by a Nonresident Foreign Corporation.

[(a) Interest on Foreign Loans. A final withholding tax at the rate of twenty percent (20%)
is hereby imposed on the amount of interest on foreign loans contracted on or after August 1,
1986;

{(b) Intercorporate Dividends. - A final withholding tax at the rate of fifteen percent (15%) is
hereby imposed on the amount of cash and/or property dividends received from a domestic
corporation, which shall be collected and paid as provided in Section 57(A) of this Code, subject
to the condition that the country in which the nonresident foreign corporation is domiciled, shall
allow a credit against the tax due from the nonresident foreign corporation taxes deemed to
have been paid in the Philippines equivalent to twenty percent (20%), which represents the
difference between the regular income tax of thirty-five percent (35%) and the fifteen percent
(15%) tax on dividends as provided in this subparagraph; Provided, That effective January 1,
2009, the credit against the tax due shall be equivalent to fifteen percent (15%), which
represents the difference between the regular income tax of thirty percent (30%) and the fifteen
percent (15%) tax on dividends:]

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

[Not over 100,000... 5%]

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

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

CASH AND/OR PROPERTY DIVIDENDS RECEIVED FROM A DOMESTIC
CORPORATION SHALL BE SUBJECT TO A FINAL TAX OF FIFTEEN PERCENT
(15%) OR TO THE PROVISIONS OF THE APPLICABLE TAX TREATY.

SEC. 8, Section 29(A), (B) AND (C) of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC. 29. Imposition of Improperly Accumulated Earnings Tax. —

(A) In General ~ In addition to other taxes imposed by this Title, there is hereby imposed for
each taxable year on the improperly accumulated taxable income of each corporation described


in Subsection B hereof, an improperly accumulated earnings tax equal to [ten] FIFTEEN
percent [(10)] (15%) of the improperly accumulated taxable income.

(B) Tax on Corporations Subject to Improperly Accumulated Earnings Tax. —

(1) In General. ~ The improperly accumulated earnings tax imposed in the preceding Section
shall apply to every corporation formed or availed for the purpose of avoiding the income tax
with respect to its shareholders or the shareholders of any other corporation, by permitting
earnings and profits to accumulate instead of being divided or distributed.

(2) Exceptions. ~ The improperly accumulated earnings tax as provided for under this Section
shail not apply to:

(a) Publicly-held corporations;

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

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

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

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

[(2) Evidence Determinative of Purpose. ~ The fact that the earnings or profits of a corporation
are permitted to accumulate beyond the reasonable needs of the business shall be determinative
of the purpose to avoid the tax upon its shareholders or members unless the corporation, by the
clear preponderance of evidence, shall prove to the contrary.]

THE FACT THAT THE EARNINGS OR PROFITS OF A CORPORATION ARE
PERMITTED TO ACCUMULATE BEYOND THE REASONABLE NEEDS OF THE
BUSINESS SHALL BE DETERMINATIVE OF THE PURPOSE TO AVOID THE TAX
UPON ITS SHAREHOLDERS OR MEMBERS UNLESS THE CORPORATION, BY
THE CLEAR PREPONDERANCE OF EVIDENCE, SHALL PROVE TO THE
CONTRARY.

XXX XXX XXX

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

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

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

[(B) Mutual savings bank not having a capital stock represented by shares, and cooperative
bank without capital stock organized and operated for mutual purposes and without profits}

{(C)) A beneficiary society, order or association, operating for the exclusive benefit of the
members such as a fraternal organization operating under the lodge system, or a mutual aid
association or a nonstock corporation organized by employees providing for the payment of


life, sickness, accident, or other benefits exclusively to the members of such society, order, or
association, or nonstock corporation or their dependents;

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

{(E)|@D) Nonstock corporation or association organized and operated exclusively for religious,
charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part
of its net income or asset shall belong to or inure to the benefit of any member, organizer,
officer or any specific person;

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

{(G)|C) Civie league or organization not organized for profit but operated exclusively for the
promotion of social welfare;

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

{@)]@) Farmers’ or other mutual typhoon or fire insurance company, mutual ditch or irrigation
‘company, mutual or cooperative telephone company, or like organization of a purely local
character, the income of which consists solely of assessments, dues, and fees collected from
members for the sole purpose of meeting its expenses; and

[(K)|() Farmers’, fruit growers’, or like association organized and operated as a sales agent for
the purpose of marketing the products of its members and turning back to them the proceeds of
sales, less the necessary selling expenses on the basis of the quantity of produce finished by
them;

Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and
character of the foregoing organizations from any of their properties, real or personal, or from
any of their activities conducted for profit regardless of the disposition made of such income,
shall be subject to tax imposed under this Code.

SEC. 10. Section 32(B7)(g) and (h) of the National Intemal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

SEC. 32. Gross Income. ~ xxx

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

XXX XXX XXX,
(7) Miscellaneous Items. —
XXX XXX 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 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 [in a mutual fund) OR UNITS OF PARTICIPATION IN A
COLLECTIVE INVESTMENT SCHEME as defined [in] UNDER Section 22 [BB] (II) of
this Code.

XXX XXX NXK

SEC. 11. Section 34(A), (B), (C) and (E) of the National Internal Revenue Code of 1997, as amended,
is hereby further amended to read as follows:

SEC. 34. Deductions from Gross Income. — Except for taxpayers earning compensation
income arising from personal services rendered under an employer-employee relationship
where no deductions shall be allowed under this Section, in computing taxable income subject
to income tax under Sections 24(A); 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 XXX XXX

(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 or -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.

(D) EXPENSES RELATED TO OR IN CONNECTION WITH INCOME NOT
SUBJECT TO REGULAR TAX UNDER SECTIONS 24(A), 25(A), 27(A) AND
(B), AND 28(A) SHALL NOT BE ALLOWED AS DEDUCTIONS UNDER
SUBSECTION (A) HEREOF. EXPENSES THAT CANNOT BE
SPECIFICALLY IDENTIFIED OR ARE COMMON SHALL BE ALLOCATED
BASED ON A REASONABLE METHOD OF MEASUREMENT AS
PROVIDED IN A REGULATION ISSUED BY THE SECRETARY OF
FINANCE: PROVIDED, THAT INTEREST EXPENSES SUBJECTED TO THE
LIMITATION UNDER SECTION 34(B)(1) SHALL BE EXCLUDED FROM
THIS SECTION.


XXX XXX XXX
(B) Interest. —

(1) In General. ~ The amount of interest paid or incurred within a taxable year on
indebtedness in connection with the taxpayer’s profession, trade or business shall be allowed
as deduction from gross income: Provided, however, That the taxpayer's otherwise allowable
deduction for interest expense shall be reduced by forty-two percent (42%) of the interest
income subjected to final tax: Provided, That effective January 1, 2009, the percentage shall be
thirty-three percent (33%). PROVIDED FURTHER, THAT EFFECTIVE JANUARY 1,
2020, THE PERCENTAGE SHALL BE FIFTY PERCENT (50%).

ANY DIVIDEND DISGUISED AS INTEREST AND CLAIMED AS A DEDUCTION
UNDER THIS SUBSECTION SHALL NOT BE ALLOWED AS A DEDUCTIBLE
INTEREST EXPENSE.

(2) Exceptions. — No deduction shall be allowed in respect of interest under the succeeding
subparagraphs:

(a) If within the taxable year an individual taxpayer reporting income on the cash basis incurs
an indebtedness on which an interest is paid in advance through discount or otherwise:
Provided, That such interest shall be allowed as a deduction in the year the indebtedness is paid:
Provided, further, That if the indebtedness is payable in periodic amortizations, the amount of
interest which corresponds to the amount of the principal amortized or paid during the year
shall be allowed as deduction in such taxable year;

(b) If both the taxpayer and the person to whom the payment has been made or is to be made
are persons specified under Section 36(B); or

[(c) If the indebtedness is incurred to finance petroleum exploration. ]

(3) {Optional| Treatment of Interest Expense RELATED TO ACQUISITION OF ASSET. ~
[At the option of the taxpayer, IiJnterest EXPENSE incurred to acquire property used in trade,
business or exercise of a profession THAT WILL BENEFIT THE BUSINESS LONGER
THAN ONE YEAR SHALL |may| BE CAPITALIZED AND THEREAFTER
AMORTIZED OR DEPRECIATED AS PART OF THE COST OF THE ASSET.

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

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

XXX XXX XAX


SEC. 12. Section 37(B) of the National Internal Revenue Code of 1997, as amended,
to read as follows:

hereby amended

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

(A) Special Deductions Allowed to Insurance Companies. — xxx

(B) Mutual Insurance Companies. - In the case of MUTUAL LIFE, mutual fire and mutual
employers’ liability and mutual workmen’s compensation and mutual casualty insurance
companies requiring their members to make premium deposits to provide for losses and
expenses, said companies shall not INCLUDE [return] as income any portion of the premium
deposits returned to their policyholders, but shall INCLUDE [return] as taxable income all
income received by them from all other sources plus such portion of the premium deposits as
are retained by the companies for purposes other than the payment of losses and expenses and
reinsurance reserves.

XXX XXX XXX

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

SEC. 38. Losses from Wash Sales of Stock or Securities. ~

(A) In the case of any loss claimed to have been sustained from any sale or other disposition of
shares of stock or securities where it appears that within a period beginning thirty (30) days
before the date of such sale or disposition and ending thirty (30) days after such date, the
taxpayer has acquired (by purchase or by exchange upon which the entire amount of gain or
loss was recognized by law), or has entered into a contract or option so AS to acquire,
substantially identical stock or securities, then no deduction for the loss shall be allowed under
Section 34 unless the claim is made by a dealer in stock or securities, OR BY ANY ENTITY
OR A FINANCIAL INTERMEDIARY DULY LICENSED BY THE APPROPRIATE
GOVERNMENT REGULATORY AGENCIES TO BUY AND SELL IN SECURITIES
EITHER FOR HIS OWN ACCOUNT OR FOR THE ACCOUNT OF OTHERS and with
respect to a transaction made in the ordinary course of the business of such dealer.

XXX XXX XXX,

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


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

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

[(1) One hundred percent (100%) 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;}

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

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

[EO Retirement of Bonds, etc. —x x x

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

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

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

SEC. 15. Section 42(A)(1), (2) and (B)(2) of the National Internal Revenue Code of 1997, as amended,
is hereby amended to read as follows:

SEC. 42. Income from Sources Within the Philippines.

(A) Gross Income From Sources Within the Philippines. — The following items of gross
income shall be treated as gross income from sources within the Philippines:

(1) Interests. - Interests AND YIELD [derived from sources within the Philippines, and
interests]) FROM DEBT INSTRUMENTS, BANK DEPOSITS, DEPOSIT
SUBSTITUTES, 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 MORE than fifty percent (50%) of the
gross income of such foreign corporation for the three-year period ending with the close of its
taxable year preceding the declaration of such dividends (or for such part of such period as the
corporation has been in existence) was derived from sources within the Philippines as
determined under the provisions of this Section; but only in an amount which bears the same
ratio to such dividends as the gross income of the corporation for such period derived from
sources within the Philippines bears to its gross income from all sources;

XXX AX XXX
(B) Taxable Income From Sources Within the Philippines. —
(1) General Rule. —

XXX XNK XXX

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

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

SEC. 51. Individual Return, ~

(A) Requirements. —x x x

XXX XXX ARK

(C) When to File. ~

XXX XXX XK

(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 a local [stock] exchange OR AN ORGANIZED
MARKETPLACE as prescribed under SectionS 24{(C)|(B) (3) and {(4)] (5), AND 25(A)
AND (B), shall file a return within thirty (30) days after each transaction. [and a final
consolidated return on or before April 15 of each year covering all stock transactions of the
preceding taxable year; and]

(B) FROM THE SALE, EXCHANGE, OR BARTER OF SHARES OF STOCK OR
DEBT INSTRUMENTS AND OTHER SECURITIES TRADED THRU 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 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 HE IS A MEMBER, A TRUE AND
COMPLETE RETURN WHICH SHALL CONTAIN A DECLARATION OF ALL THE
TRANSACTIONS EFFECTED THROUGH HIM DURING THE PRECEDING WEEK
AND OF TAXES COLLECTED BY HIM AND TURNED OVER TO THE BUREAU OF
INTERNAL REVENUE.

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

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

SEC. 52. Corporation Returns. —

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

(1) Corporate profile and information;

(2) Gross sales, receipts or income from services rendered, or conduct of trade or business,
except income subject to final tax as provided under this Code;

3) Allowable deductions under this Code;

(4) Taxable income as defined in Section 31 of this Code; and

(5) Income tax due and payable.

Provided, That the foregoing provisions shall not affect the implementation of Republic Act
No. 10708 or TIMTA.

XXX XXX XXX

(D) Return on Capital Gains Realized from Sale of Shares of Stock, DEBT INSTRUMENT,
AND OTHER SECURITIES not Traded in the Local \Stock| Exchange OR AN
ORGANIZED MARKETPLACE. - Every corporation deriving capital gains from the sale
or exchange of shares of stock, DEBT INSTRUMENTS AND OTHER SECURITIES not
traded thru a local [stock] exchange OR AN ORGANIZED MARKETPLACE as prescribed
under SECTIONS 27(D)3), AND (5), AND 28 [Sections 24(C), 25(A)(3), 27(E)(2),
28(A\8Xe) and 28(B)(5)(c),] shall file a return within thirty (30) days after each transaction. |
and a final consolidated return of all transactions during the taxable year on or before the
fifteenth (15%) day of the fourth (4%) month following the close of the taxable quarter.]

(E) RETURN ON CAPITAL GAINS REALIZED FROM SALE OF SHARES OF STOCK,
DEBT INSTRUMENTS, AND OTHER SECURITIES TRADED IN THE LOCAL
EXCHANGE OR AN ORGANIZED MARKETPLACE. ~ 1T SHALL BE THE DUTY OF
EVERY BROKER WHO EFFECTED THE SALE SUBJECT TO THE TAX IMPOSED
UNDER SECTION 27(D)(4) AND (6), AND 28 TO COLLECT THE TAX DUE AND
REMIT THE SAME TO THE BUREAU OF INTERNAL REVENUE WITHIN FIVE (5)
BANKING DAYS FROM THE DATE OF COLLECTION THEREOF AND TO
SUBMIT ON MONDAYS OF EACH WEEK TO THE SECRETARY OF THE LOCAL
EXCHANGE OR ORGANIZED MARKETPLACE, OF WHICH HE IS A MEMBER, A


‘TRUE AND COMPLETE RETURN WHICH SHALL CONTAIN A DECLARATION
OF ALL THE TRANSACTIONS EFFECTED THROUGH HIM DURING THE
PRECEDING WEEK AND OF TAXES COLLECTED BY HIM AND TURNED OVER
TO THE BUREAU OF INTERNAL REVENUE.

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

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

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

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

SEC. 56. Payment and Assessment of Income Tax for Individuals and Corporations. ~
(A) Payment of Tax. ~

XXX XXK XXX

(3) Payment of Capital Gains Tax. ~

A. IN GENERAL - The total amount of tax imposed and prescribed under SectionS
24{(C)]}(BY(3), 241(D)}(BYS), 24(B)(7), 25, 271(EY(2)|(D)B), 275), 27(D)(7), 28(A)I(8X)]
and 28(B\5)|(c)] shall be paid on the date the return prescribed therefor is filed by the person
liable thereto: Provided, That if the seller submits proof of his intention to avail himself of the
benefit of exemption of capital gains under existing special laws OR TAX TREATY, no such
payments shall be required: Provided, further, That in case of failure to qualify for exemption
under such special laws, TAX TREATY and implementing rules and regulations, the tax due
cn the gains realized from the original transaction shall immediately become due and payable,


and subject to the penalties prescribed under applicable provisions of this Code: Provided,
finally, That if the seller, having paid the tax, submits such proof of intent within six (6) months
from the registration of the document transferring the real property, he shall be entitled to a
refund of such tax upon verification of his compliance with the requirements for such
exemption,

XXX

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

SEC. 57. Withholding of Tax at Source. —

(A) Withholding of Final Tax on Certain Incomes. ~ Subject to rules and regulations the
Secretary of Finance may promulgate, upon the recommendation of the Commissioner,
requiring the filing of income tax return by certain income payees , the tax imposed or
prescribed by UNDER Sections 24(B), 24(C), 25(A), 25(B), 27(D), 27(E), 28(A) AND
28(B\(5) [(2), 25(A)3) AND 25(B), 25(C), 25(D), 25(E); 27D\(1), 27(D)2), 27(D)3),
21(DX(5); 28(AX4), 28(ANS), 28(AX7Xa), 28(AX7X(b), 28(AX7\(c), 28(BX1), 28(B\(2),
28(BY3), 28(BX4), 28(BXS\a), 28(B\5)(b), 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.

[(C) 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 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. 21. 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 earnings 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), as the case may be.

(B) Stock Dividend. — x x x

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


SEC. 108, Value-added Tax on Sale of Services and Use or Lease of Properties. ~
(A) Rate and Base of Tax. - 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 or real; warehousing services;
lessors or distributors of cinematographic films; persons engaged in milling, processing,
manufacturing or repacking goods for others; proprietors, operators or keepers of hotels,
motels, resthouses, pension houses, inns, resorts; proprietors or operators of restaurants,
refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in
securities; [lending investors ;] transportation contractors on their transport of goods or cargoes,
including persons who transport goods or cargoes for hire and other domestic common carriers
by land relative to their transport of goods or cargoes; common carriers by air and sea relative
to their transport of passengers, goods or cargoes from one place in the Philippines to another
place in the Philippines; sales of electricity by generation companies, transmission, by any
entity and distribution companies, including electric cooperatives; services of franchise
grantees of electric utilities, telephone and telegraph, radio and television broadcasting and all
other franchise grantees except those under Section 119 of this Code and non-life insurance
companies (except their crop insurances), including surety, fidelity, indemnity and bonding
companies ; and similar services regardless of whether or not the performance thereof calls for
the exercise or use of the physical or mental faculties. The phrase ‘sale or exchange of services’
shall likewise include:

XXX XXX XXX

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

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


EQUITY SHARES AND NET INCOME OF SUBSIDIARIES WHICH SHALL BE
SUBJECT TO ZERO PERCENT (0%). [in accordance with the following schedule:]

[(a) On interest, commissions and
financial leasing, on the basis of rem:
are derived:]

wunts from lending activities as well as income from
ing maturities of instruments from which such receipts,

[Maturity period is five years or less .. S%I

[Maturity period is more than five years 1%)

1(b) On dividends and equity shares and net income of subsidiaries ... 0%

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

(a) On net trading gains within the taxable year of foreign currency, debt securities, derivatives,
and other similar financial instruments... . M%l

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

Provided, That FOR PURPOSES OF COMPUTING THE GROSS RECEIPTS, the
generally accepted accounting principles OF RECORDING INCOME AS ADOPTED BY
THE BANK SHALL BE FOLLOWED. BANKS ON ACCRUAL BASIS OF FINANCIAL
REPORTING SHALL USE THE ACCRUAL METHOD IN COMPUTING THE GROSS
RECEIPTS, PROVIDED THAT, ONCE ADOPTED, IT SHALL BE CONSISTENT
FROM YEAR TO YEAR. PROVIDED FURTHER THAT FOR PURPOSES OF
DETERMINING THE GROSS RECEIPTS, NO DEDUCTION SHALL BE MADE ON
THE INCOME EXCEPT IN THE CASE OF GAINS FROM DEALINGS IN
PROPERTY AND TRADING GAINS, WHERE NET LOSS WITHIN THE SAME
BUSINESS ACTIVITY CAN BE OFFSET TO DETERMINE THE NET GAIN
SUBJECT TO THIS TAX. PROVIDED, FURTHER, THAT SUCH OFFSETTING
SHALL BE ON A QUARTERLY BASIS, AND ANY NET LOSS INCURRED IN A
QUARTER CAN BE CARRIED OVER AS DEDUCTION IN THE SUCCEEDING
QUARTERS. PROVIDED FINALLY, THAT NET LOSS INCURRED IN A TAXABLE
YEAR CANNOT BE CARRIED OVER TO THE SUCCEEDING TAXABLE YEAR.

{as may be prescribed by the Bangko Sentral ng Pilipinas for the bank or non-bank financial
intermediary performing quasi-banking functions shall likewise be the basis for the calculation
of gross receipts.

XXX XXX XXX

SEC. 24. Section 122 of the National Internal Revenue Code of 1997, as amended, is hereby amended
to read as follows:

SEC. 122. Tax on Other Non-Bank Financial Intermediaries. — There shall be collected a tax
of five percent (5%) on the gross receipts derived by other non-bank financial intermediaries
doing business in the Philippines, from interest, commissions AND discounts FROM
LENDING ACTIVITIES, AS WELL AS INCOME FROM FINANCIAL LEASING,
ROYALTIES, RENTALS OF PROPERTY, REAL OR PERSONAL, PROFITS FROM
SALE OR EXCHANGE INCLUDING GAINS DERIVED FROM SALE OR TRANSFER
OF REAL PROPERTIES, NET TRADING GAINS WITHIN THE TAXABLE YEAR
OF FOREIGN CURRENCY, DEBT SECURITIES, DERIVATIVES, AND OTHER
SIMILAR FINANCIAL INSTRUMENTS, UNDERWRITING FEES, SERVICE


INCOME, AND ALL OTHER ITEMS TREATED AS GROSS INCOME UNDER
SECTION 32 OF THIS CODE EXCEPT DIVIDENDS AND EQUITY SHARES AND
NET INCOME OF SUBSIDIARIES WHICH SHALL BE SUBJECT TO ZERO
PERCENT (0%). [and all other items treated as gross income under this Code. [. : Provided,
That interests, commissions and discounts from lending activities, as well as income from
financial leasing, shall be taxed on the basis of the remaining maturities of the instruments from
which such receipts are derived, in accordance with the following schedule: |

[Maturity is five years of less .........00+ 5%]

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

[Provided, however, That in case the maturity period is shortened thru pretermination, then the
maturity period shall be reckoned to end as of the date of pretermination for purposes of
classifying the transaction and the correct rate of tax shall be applied accordingly.

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

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

COLLECTIVE INVESTMENT SCHEMES SUCH AS MUTUAL FUNDS, UNIT
LINKED INVESTMENT TRUST FUNDS, UNIT LINKED VARIABLE INSURANCE,
AND OTHER COLLECTIVE INVESTMENT SCHEMES AS MAY BE DETERMINED
BY APPROPRIATE GOVERNMENT REGULATORY AGENCIES SHALL NOT BE
SUBJECT TO GROSS RECEIPTS TAX AND OTHER PERCENTAGE TAXES
IMPOSED UNDER TITLE V AND TO VALUE ADDED TAX IMPOSED UNDER
TITLE IV OF THIS CODE. FOR PURPOSES OF THIS EXEMPTION, A CIS SHALL
HAVE AT LEAST ONE THOUSAND (1,000) OWNERS, INVESTORS OR
PARTICIPANTS, AND THAT THE MINIMUM PUBLIC OWNERSHIP AS MAY BE
REQUIRED BY APPROPRIATE GOVERNMENT REGULATORY AGENCIES
SHALL BE COMPLIED WITH.

IF A PERSON OR COMPANY NOT LICENSED TO DO FINANCIAL
INTERMEDIATION BUT ENGAGES IN FINANCIAL INTERMEDIATION
SERVICES AS AN INCIDENT TO ITS MAIN BUSINESS ACTIVITY, AND
RECEIVING INCOME THEREFROM, SUCH INCOME FROM FINANCIAL
INTERMEDIATION SHALL BE SUBJECT TO THE TAX IMPOSED ON ITS
PRINCIPAL ACTIVITY. TO BE CONSIDERED INCIDENTAL, THE INCOME
FROM INTERMEDIATION SERVICES SHALL NOT EXCEED FIFTY PERCENT
(50%) OF ITS TOTAL ANNUAL INCOME. IF MORE THAN FIFTY PERCENT (50%),
WITH AT LEAST SIX (6) TRANSACTIONS ENTERED INTO DURING THE YEAR,
THE TOTAL INCOME FROM FINANCIAL INTERMEDIATION SHALL BE
SUBJECT TO TAX UNDER THIS SUBSECTION.

IN-HOUSE LENDING OR SELLER FINANCING SHALL NOT BE SUBJECT TO TAX
UNDER THIS SUBSECTION. ANY INCOME EARNED OR RECEIVED FROM IN-
HOUSE LENDING OR SELLER FINANCING SHALL BE SUBJECT TO THE SAME
TAX APPLICABLE TO THE PRINCIPAL BUSINESS ACTIVITY OR
TRANSACTION.


HOLDING COMPANIES SHALL BE SUBJECT TO EITHER VALUE ADDED TAX
OR GROSS RECEIPTS TAX DEPENDING ON THE NATURE OF ITS BUSINESS
ACTIVITIES. IF DOING FINANCING AND OTHER SIMILAR ACTIVITIES, IT IS
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 performing similar [financing] FINANCIAL INTERMEDIATION
activities,

SEC. 25. Section 123 of the National Internal Revenue Code of 1997, as amended, is hereby amended
to read as follows:

SEC. 123. Tax on Life Insurance AND REINSURANCE Premiums|, . ~ There shall be
collected from every person, company or corporation, (except purely cooperative companies or
associations) doing life insurance business of any sort in the Philippines A PREMIUM TAX
AT THE FOLLOWING RATES:

(A) FOR LIFE INSURANCE INCLUDING HEALTH INSURANCE AS A
RIDER TO LIFE INSURANCE POLICY, a tax of two percent (2%) of the total
premium collected, whether such premiums are paid in money, notes, credits or any
substitute for money; but premiums refunded within six (6) months after payment on
account of rejection of risk or returned for other reason to a person insured shall not be
included in the taxable receipts; nor shall any tax be paid upon reinsurance by a
company IF THE TAX [that] has already BEEN paid [the tax] ON THE DIRECT
PREMIUM; nor upon premiums collected or received by any branch of a domestic
corporation, firm or association doing business outside the Philippines on account of
any life insurance of the insured who is a nonresident, if any tax on such premium is
imposed by the foreign country where the branch is established; nor upon premiums
collected or received on account of any reinsurance, if the insured, in case of personal
insurance, resides outside the Philippines, if any tax on such premiums is imposed by
the foreign country where the original insurance has been issued or perfected; nor upon
that portion of the premiums collected or received by the insurance companies on
variable contracts IN A COLLECTIVE INVESTMENT SCHEME in excess of the
amounts necessary to insure the lives of the variable contract owners. PROVIDED
THAT THE CIS SHALL HAVE AT LEAST ONE THOUSAND (1,000)
OWNERS, INVESTORS OR PARTICIPANTS, AND THAT ANY MINIMUM
PUBLIC OWNERSHIP AS MAY BE REQUIRED BY APPROPRIATE
GOVERNMENT REGULATORY AGENCIES SHALL BE COMPLIED WITH.

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


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

LIFE REINSURANCE COMPANIES SHALL BE SUBJECT TO PREMIUM TAX ON
PREMIUMS COLLECTED UNDER SUBSECTION (A) HEREOF. HOWEVER,
PREMIUMS COLLECTED WHERE THE TAX ON THE DIRECT PREMIUM HAS
ALREADY BEEN PAID BY THE DIRECT INSURER SHALL BE EXCLUDED FROM
THE GROSS PREMIUM SUBJECT TO PREMIUM TAX.

NON-LIFE REINSURANCE COMPANIES SHALL BE SUBJECT TO VALUE ADDED
TAX ON PREMIUMS COLLECTED UNDER SECTION 108 OF THIS CODE.
HOWEVER, PREMIUMS COLLECTED WHERE THE TAX ON THE DIRECT
PREMIUM HAS ALREADY BEEN PAID BY THE DIRECT INSURER SHALL BE
EXCLUDED FROM THE GROSS PREMIUM SUBJECT TO VALUE ADDED TAX.

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

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

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

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

{SEC. 127. Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded through
the Local Stock Exchange or through Initial Public Offering. —|

[(A) Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded through the
Local Stock Exchange. ~ There shall be levied, assessed and collected on every sale, barter,
exchange, or other disposition of shares of stock listed and traded through the local stock
exchange other than the sale by a dealer in securities, a tax at the rate of one-half of one percent



(A of 1%) of the gross selling price or gross value in money of the shares of stock sold, bartered,
exchanged or otherwise disposed which shall be paid by the seller or transferor.

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

4%

[Up to twenty-five percent (25%) .....

{Over twenty-five percent (25%) but not over thirty-three and one third percent (33 4%)
- seseeeeeee 2%]

{Over thirty-three and one third percent (33 4%) ... 1%

The tax herein imposed shall be paid by the issuing corporation in primary offering or by the
seller in secondary offering. |

[For purposes of this Section, the term ‘closely held corporation’ means any corporation at
least fifty percent (50%) in value of outstanding capital stock or at least fifty percent (50%) of
the total combined voting power of all classes of stock entitled to vote is owned directly or
indirectly by or for not more than twenty (20) individuals. |

[For purposes of determining whether the corporation is a closely held corporation, insofar as
such determination is based on stock ownership, the following rules shall be applied: |

[() Stock Not Owned by Individuals. ~ Stock owned directly or indirectly by or for a
corporation, partnership, estate or trust shall be considered as being owned proportionately by
its shareholders, partners or beneficiaries. |

[@) Family and Partnership Ownerships. ~ An individual shall be considered as owning the
stock owned directly or indirectly, by or for his family, or by or for his partner. For purposes
of the paragraph, the ‘family of an individual’ includes only his brothers and sisters (whether
by whole or half-blood), spouse, ancestors and lineal descendants. |

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

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

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

{() Return on Capital Gains Realized from Sale of Shares of Stock Listed and Traded in the
Local Stock Exchange. ~\t shall be the duty of every stock broker who effected the sale subject
to the tax imposed herein to collect the tax and remit the same to the Bureau of Internal Revenue
within five (5) banking days from the date of collection thereof and to submit on Mondays of
each week to the secretary of the stock exchange, of which he is a member, a true and complete
return which shall contain a declaration of all the transactions effected through him during the


preceding week and of taxes collected by him and turned over to the Bureau of Internal
Revenue.]

[@) Return on Public Offerings of Shares of Stock. ~ \n case of primary offering, the corporate
issuer shall file the return and pay the corresponding tax within thirty (30) days from the date
of listing of the shares of stock in the local stock exchange. In the case of secondary offering,
the provision of Subsection (C1) of this Section shall apply as to the time and manner of the
payment of the tax.]

[(D) Common Provisions. ~ Any gain derived from the sale, barter, exchange or other
disposition of shares of stock under this Section shall be exempt from the tax imposed in
Sections 24(C), 27(DX2), 28(AX8Xe), and 28(BX5\c) of this Code and from the regular
idual or corporate income tax. Tax paid under this Section shall not be deductible for
income tax purposes.)

SEC. 27. Sections 174, 175, 176, 177, 178, 179, 180, 181, 182, 183, 184, 185, 186, 187, 188, 189, 190,
191, 192, 193, 194, 195, 196, 197, 198, and 199 of the National Internal Revenue Code of 1997, as
amended, is hereby amended to read as follows:

SEC. 174, Stamp Tax on Original Issue of Shares of Stock. On every original issue, whether
‘on organization, reorganization or for any lawful purpose, of shares of stock by any association,
company, or corporation, INCLUDING SHARES OF STOCK OR UNITS OF
PARTICIPATION IN A COLLECTIVE INVESTMENT SCHEME, there shall be
collected a documentary stamp tax OF SEVENTY-FIVE PERCENT OF ONE PERCENT
(0.75%) OF THE PAR VALUE [Two pesos (P2.00) on each Two hundred pesos (P200), or
fractional part thereof, of the par value, Jof such shares of stock: Provided, That in the case of
the original issue of shares of stock without par value, the amount of the documentary stamp
tax herein prescribed shall be based upon the actual consideration for the issuance of such shares
of stock: Provided, further, That in the case of stock dividends, on the actual value represented
by each share; PROVIDED, FINALLY, THAT IN THE CASE OF COLLECTIVE
INVESTMENT SCHEMES WITHOUT PAR VALUE, THE DOCUMENTARY STAMP
‘TAX SHALL BE BASED ON THE INITIAL NET ASSET VALUE PER UNIT.

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

SEC 17[65. Stamp Tax on Bonds, Debentures, Certificates of Stock or Indebtedness Issued
in Foreign Countries. — On all bonds, debentures, certificates of stock, or certificates of
indebtedness issued in any foreign country, there shall be collected from the person selling or
transferring the same in the Philippines, A DOCUMENTARY STAMP TAX OF SEVENTY-
FIVE PERCENT OF ONE PERCENT (0.75%) OF THE VALUE OF THE
‘TRANSACTION. [such tax as is required by law on similar instruments when issued, sold or
transferred in the Philippines.]

[SEC. 177. Stamp Tax on Certificates of Profits or Interest in Property or Accumulations. ~
Onall certificates of profits, or any certificate or memorandum showing interest in the property


or accumulations of any association, company or corporation, and on all transfers of such
certificates or memoranda, there shall be collected a documentary stamp tax of One peso
(P1.00) on each Two hundred pesos (P200), or fractional part thereof, of the face value of such
certificates or memorandum. |

[SEC. 178. Stamp Tax on Bank Checks, Drafts, Certificates of Deposit not Bearing Interest,
and Other Instruments. ~ On each bank check, draft, or certificate of deposit not drawing
interest, or order for the payment of any sum of money drawn upon or issued by any bank, trust
company, or any person or persons, companies or corporations, at sight or on demand, there
shall be collected a documentary stamp tax of Three pesos (P3.00).]

SEC. 17{9]6. Stamp Tax on All Debt Instruments, - On every original issue of debt
instruments, there shall be collected a documentary stamp tax OF SEVENTY-FIVE
PERCENT OF ONE PERCENT (0.75%) [One peso and fifty centavos (P1.50) on each Two
hundred pesos (P200), or fractional part thereof, of the issue price of any such debt instruments:
Provided, That for such debt instruments with terms of less than one (1) year, the documentary
stamp tax to be collected shall be of a proportional amount in accordance with the ratio of its
term in number of days to three hundred sixty-five (365) days: Provided, further, That only one
documentary stamp tax shall be imposed on either loan agreement, or promissory notes issued
to secure such loan

For purposes of this section, the term debt instrument shall mean instruments representing
borrowing and lending transactions including but not limited to debentures, certificates of
indebtedness, due bills, bonds, loan agreements, including those signed abroad wherein the
‘object of contract is located or used in the Philippines, instruments and securities issued by the
government or any of its instrumentalities, deposit substitute debt instruments, certificates or
other evidences of deposits that are either drawing interest significantly higher the regular
savings deposit taking into consideration the size of the deposit and the risks involved or
‘drawing interest and having a specific maturity date, [orders for payment of any sum of money
otherwise than at sight or on demand,] promissory notes, whether negotiable or non-negotiable,
except bank notes issued for circulation.

[SEC. 180. Stamp Tax on All Bills of Exchange or Drafts. — On all bills of exchange
(between points within the Philippines) or drafts, there shall be collected a documentary stamp
tax of Sixty centavos (P0.60) on each Two hundred pesos (P200) or fractional part thereof, of
the face value of any such bill of exchange or draft.]

SEC. 1[81]77. Stamp Tax Upon Acceptance of Bills of Exchange and Others.~ Upon any
acceptance or payment of any bill of exchange or order for the payment of money purporting
to be drawn in a foreign country but payable in the Philippines, there shall be collected a
documentary stamp tax OF THIRTY PERCENT OF ONE PERCENT (0.30%) [Sixty
centavos (P0.60) on each Two hundred pesos (P200), or fractional part thereof,| of the face
value of any such bill of exchange, or order, or the Philippine equivalent of such value, if
expressed in foreign currency.

SEC. 1[82]78. Stamp Tax on Foreign Bills of Exchange and Letters of Credit. - On all foreign
bills of exchange and letter of credit (including orders, by telegraph or otherwise, for the
payment of money issued by express or steamship companies or by any person or persons)
drawn in but payable out of the Philippines in a set of three (3) or more according to the custom
of merchants and bankers, there shall be collected a documentary stamp tax OF THIRTY
PERCENT OF ONE PERCENT (0.30%) [Sixty centavos (P0.60) on each Two hundred
pesos (P200), or fractional part thereof,] of the face value of any such bill of exchange or letter
of credit, or the Philippine equivalent of such face value, if expressed in foreign currency.

PROVIDED THAT IN THE CASE OF A LETTER OF CREDIT ON WHICH THE
DOCUMENTARY STAMP TAX IMPOSED UNDER THIS SECTION IS PAID UPON
OPENING, THE SAME SHALL NOT BE SUBJECT AGAIN TO SECTION 195 UPON


AVAILMENT OF THE TRUST RECEIPT LINE WHERE THE PROPERTY SUBJECT
OF THE LETTER OF CREDIT IS MADE A SECURITY FOR PAYMENT.

SEC. 1[83]79. Stamp Tax on Life AND HEALTH Insurance Policies. — On all policies of
insurance or other instruments by whatever name the same may be called, whereby any
insurance shall be made or renewed upon any life or lives AND HEALTH OF PERSONS,
there shall be collected a one-time documentary stamp tax at the following rates:

If the amount of insurance does not exceed P100,000 — - Exempt
If the amount of insurance exceeds P100,000

but does not exceed P300,000 = P20.00
If the amount of insurance exceeds P300,000

but does not exceed P500,000 ~P50.00
If the amount of insurance exceeds P500,000

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

but does not exceed P1,000,000 ~P150.00
If the amount of insurance exceeds 1,000,000 = P200.00

SEC. 18[4]0. Stamp Tax on Policies of Insurance Upon Property. - On all policies of
insurance or other instruments by whatever name the same may be called, by which insurance
shall be made or renewed upon property of any description, including rents or profits, against
peril by sea or on inland waters, or by fire or lightning, there shall be collected a documentary
stamp tax OF TWELVE AND ONE-HALF PERCENT (12.5%) [Fifty centavos (P0.50) on
each Four pesos (P4,00), or fractional part thereof,] of the amount of premium charged:
Provided, however, That no documentary stamp tax shall be collected on reinsurance contracts
or on any instrument by which cession or acceptance of insurance risks under any reinsurance
agreement is effected or recorded, PROVIDED FURTHER THAT SUCH RATE SHALL
BE REDUCED ACCORDING TO THE FOLLOWING SCHEDULE:

JANUARY 1, 2021: ELEVEN AND ONE-HALF PERCENT (11.5%),
JANUARY 1, 2022: TEN AND ONE-HALF PERCENT (10.5%),
JANUARY 1, 2023: NINE AND ONE-HALF PERCENT (9.5%),

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

JANUARY 1, 2025: SEVEN AND ONE-HALF PERCENT (7.

SEC. 18[5]1. 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 guaranteeing any mercantile credits, which may be made or renewed
by any such person, company or corporation, there shall be collected a documentary stamp tax
OF TWELVE AND ONE-HALF PERCENT (12.5%) [Fifty centavos (P0.50) on each Four
pesos (P4.00), or fractional part thereof,} of the premium charged. PROVIDED FURTHER
THAT SUCH RATE SHALL BE REDUCED ACCORDING TO THE FOLLOWING
SCHEDULE:

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


JANUARY 1, 2022: TEN AND ONE-HALF PERCENT (10.5%),

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.18[6]2. Stamp Tax on Policies of Annuities and Pre-Need Plans. — On all policies of
annuities, or other instruments by whatever name the same may be called, whereby an annuity
may be made, transferred or redeemed, there shall be collected a documentary stamp tax OF
ONE-HALF OF ONE PERCENT (0.5%) [One peso (P1.00) on each Two hundred pesos
(P200), or fractional part thereof,] of the premium or installment payment on contract price,
OR CONTRIBUTION {collected | CHARGED. On pre-need plans, OR OTHER
INSTRUMENTS BY WHATEVER NAME THE SAME MAY BE CALLED,
WHEREBY AN ANNUITY MAY BE MADE, TRANSFERRED OR REDEEMED,
THERE SHALL BE COLLECTED A DOCUMENTARY STAMP TAX OF TWENTY
PERCENT OF ONE PERCENT (0.2%) OF THE PREMIUM OR INSTALLMENT
PAYMENT ON CONTRACT PRICE, OR CONTRIBUTION CHARGED. [Forty
centavos (P0.40) on each Two hundred pesos (P200), or fractional part thereof, of the premium
or contribution collected.]

SEC. 18[7|3. Stamp Tax on Indemnity Bonds. — On all bonds for indemnifying any person,
firm or corporation who shall become bound or engaged as surety for the payment of any sum
‘of money or for the due execution or performance of the duties of any office or position or to
account for money received by virtue thereof, and on all other bonds of any description, except
such as may be required in legal proceedings, or are otherwise provided for herein, there shall
be collected a documentary stamp tax of [Thirty centavos (P0.30) on each Four pesos (P4.00),
or fractional part thereof, | SEVEN AND ONE-HALF PERCENT (7.5%) OF THE
PREMIUM CHARGED.

SEC. 18[8]4. Stamp Tax on Certificates. — On each certificate of damage or otherwise, and on
every other certificate or document issued by any customs officer, marine surveyor, or other
person acting as such, and on each certificate issued by a notary public, and on each certificate
of any description required by law or by rules or regulations of a public office, or which is
issued for the purpose of giving information, or establishing proof of a fact, and not otherwise
specified herein, there shall be collected a documentary stamp tax of [Thirty] FORTY pesos
(P{3}40.00)

SEC. 18[9]5. Stamp Tax on Warehouse Receipts. — xxx

SEC. 1[90]86. Stamp Tax on Jai-alai, Horse Race Tickets, Lotto or Other Authorized
Numbers Games, ~ xxx

SEC. 1[91]87. Stamp Tax on Bills of Lading or Receipts. ~ xxx

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

[SEC. 193. Stamp Tax on Powers of Attorney. — On each power of attomey to perform any act
whatsoever, except acts connected with the collection of claims due from or accruing to the
Government of the Republic of the Philippines, or the government of any province, city or
‘municipality, there shall be collected a documentary stamp tax of Ten pesos (P10.00).)

SEC. 1[94]88. Stamp Tax on Leases and Other Hiring Agreements. ~ xxx


SEC. 1[95]89. Stamp Tax on Mortgages, Pledges and Deeds of Trust. ~ On every mortgage
or pledge of lands, estate, or property, real or personal, heritable or movable, whatsoever, where
the same shall be made as a security for the payment of any definite and certain sum of money
lent at the time or previously due and owing or forborne to be paid, being payable, and on any
conveyance of land, estate, or property whatsoever, in trust or to be sold, or otherwise converted
into money which shall be and intended only as security, either by express stipulation or
otherwise, there shall be collected a documentary stamp tax OF THIRTY PERCENT OF
ONE PERCENT (0.3%) OF THE AMOUNT SECURED. [at the following rates:]

[(@)__ When the amount secured does not exceed Five thousand pesos (P5,000), Forty pesos
(P40.00).|

[(b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of Five
thousand pesos (P5,000), an additional tax of Twenty pesos (P20.00).]

XXX XXX XXX

SEC. 1[96]90. Stamp Tax on Deeds of Sale, Conveyances and Donation of Real Property. —
XXX

SEC. 19[7|1. Stamp Tax on Charter Parties and Similar Instruments. — xxx

SEC. 19[8]2. 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 EXTENDING THE TERM OR MATURITY BY altering or otherwise,
there shall be levied, collected and paid a documentary stamp tax, at the same rate as that
imposed on the original instrument.

SEC. 19[9]3. 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.

XXX XXX XXX

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

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

SEC. 28. Prospectivity Clause. - The changes introduced under this Act shall take effect on income
and transactions beginning January 1, 2020. Any tax exemption on interest income and gains granted
to long-term instruments and securities prior to the effectivity of this Act shall remain exempt.

SEC. 29. Implementing Rules and Regulations. — The Department of Finance, in consultation with the
Securities and Exchange Commission, Bangko Sentral ng Pilipinas, Insurance Commission, the Bureau


of the Treasury, and the Bureau of Internal Revenue, shall issue the implementing rules and regulations
for the effective implementation of this Act.

SEC. 30. Separability Clause. — \f, for any reason any article or provision of this Act, or any portion
thereof, or application of such article, provision, or portion thereof to any person, group, or circumstance
is declared invalid or unconstitutional, the remainder of this Act shall not be affected by such decision
or declaration.

SEC. 31. Repealing Clause. — The following laws or provisions of laws are hereby repealed or modified
accordingly and the persons and/or transactions affected herein are hereby made subject to applicable
taxes on interest income, dividends, and capital gains, gross receipts tax, premium tax, and documentary
stamp tax under the National Internal Revenue Code of 1997, as amended:

(a) SECTION 9, INSOFAR AS THE TAX EXEMPTION ON THE ISSUANCE OF
BONDS AND SECURITIES IS CONCERNED, OF PRESIDENTIAL DECREE 1648,
KNOWN AS “REORGANIZING THE NATIONAL DEVELOPMENT COMPANY
AND ESTABLISHING A REVISED CHARTER THEREFOR”;

(b) SECTIONS 6, 7, AND 8, INSOFAR AS TAX EXEMPTION ON INTEREST
INCOME, CAPITAL GAINS, AND DOCUMENTARY STAMP TAX IS CONCERNED,
OF EXECUTIVE ORDER 603, ENTITLED “CREATING A LIGHT RAIL TRANSIT
AUTHORITY, VESTING THE SAME WITH AUTHORITY TO CONSTRUCT AND
OPERATE THE LIGHT RAIL TRANSIT (LRT) PROJECT AND PROVIDING FUNDS
THEREFOR”;

(©) 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”;

(a) _ SECTION 12, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, AND DOCUMENTARY STAMP TAX IS CONCERNED, OF
REPUBLIC ACT 4850, ENTITLED “AN ACT CREATING THE LAGUNA LAKE
DEVELOPMENT AUTHORITY, PRESCRIBING ITS POWERS, FUNCTIONS AND
DUTIES, PROVIDING FUNDS THEREFOR, AND FOR OTHER PURPOSES”;

(©) NUMBER 8, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, AND DOCUMENTARY STAMP TAX IS CONCERNED, OF
PRESIDENTIAL DECREE 37, ENTITLED “CREATING THE NAYONG PILIPINO
FOUNDATION”

( SECTION 12, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, AND DOCUMENTARY STAMP TAX IS CONCERNED, OF
PRESIDENTIAL DECREE 205, ENTITLED “CREATING AND ESTABLISHING THE
DEVELOPMENT ACADEMY OF THE PHILIPPINES, DEFINING ITS POWERS,
FUNCTIONS, AND RESPONSIBILITIES, AND FOR OTHER PURPOSES”;

(g) ARTICLE 202, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, DOCUMENTARY STAMP TAX, AND PREMIUM TAX IS
CONCERNED, OF PRESIDENTIAL DECREE 442 AS AMENDED BY
PRESIDENTIAL DECREE 626, ENTITLED “LABOR CODE OF THE
PHILIPPINES”;

(bh) SECTION 10, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, AND DOCUMENTARY STAMP TAX OF SUBSIDIARIES OF
PHILIPPINE AEROSPACE DEVELOPMENT CORPORATION IS CONCERNED, OF


PRESIDENTIAL DECREE 696, ENTITLED “REVISING PRESIDENTIAL DECREE
NO. 286, DATED SEPTEMBER 5, 1973, AS AMENDED, OTHERWISE KNOWN AS
THE CHARTER OF THE PHILIPPINE AEROSPACE DEVELOPMENT
CORPORATION AND FOR OTHER PURPOSES”;

(i) SECTION 2(G), INSOFAR AS TAX EXEMPTION ON INTEREST INCOME IS
CONCERNED, OF REPUBLIC ACT 85, AS AMENDED BY REPUBLIC ACT 2081,
ENTITLED “AN ACT CREATING THE REHABILITATION FINANCE
CORPORATION”;

@__ SECTIONS 76, 77 AND 98, INSOFAR AS TAX EXEMPTION ON INTEREST
INCOME, DIVIDENDS, CAPITAL GAINS, AND DOCUMENTARY STAMP TAX ON
BONDS IS CONCERNED, OF REPUBLIC ACT 3844 OR THE AGRICULTURAL
LAND REFORM CODE;

(Kk) _ SECTION 37, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, GROSS RECEIPTS TAX, AND DOCUMENTARY STAMP TAX IS
CONCERNED, OF REPUBLIC ACT 6848 OR THE CHARTER OF THE AL-AMANAH
ISLAMIC INVESTMENT BANK OF THE PHILIPPINES;

() _ SECTIONS 10, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME IS
CONCERNED, OF REPUBLIC ACT 3591, AS AMENDED BY REPUBLIC ACT 9576
OR AN ACT INCREASING THE MAXIMUM DEPOSIT INSURANCE COVERAGE,
AND IN CONNECTION THEREWITH, TO STRENGTHEN THE REGULATORY
AND ADMINISTRATIVE AUTHORITY, AND FINANCIAL CAPABILITY OF THE
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC), AMENDING FOR
THIS PURPOSE REPUBLIC ACT NUMBERED THREE THOUSAND FIVE
HUNDRED NINETY-ONE, AS AMENDED, OTHERWISE KNOWN AS THE PDIC
CHARTER, AND FOR OTHER PURPOSES;

(m) SECTION 12, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, AND DOCUMENTARY STAMP TAX IS CONCERNED, OF
EXECUTIVE ORDER 1037, ENTITLED “AN ACT CREATING THE PHILIPPINE
RETIREMENT PARK SYSTEM, PROVIDING FUNDS THEREFOR AND FOR
OTHER PURPOSES”;

(2) SECTION 19, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME AND
DOCUMENTARY STAMP TAX IS CONCERNED, OF REPUBLIC ACT 8763 OR
HOME GUARANTY CORPORATION ACT OF 2000;

(0) _ SECTION 19, INSOFAR AS TAX EXEMPTION ON DOCUMENTARY STAMP
TAX IS CONCERNED, OF REPUBLIC ACT 7279 OR THE URBAN DEVELOPMENT
AND HOUSING ACT OF 1992;

(p) _ SECTION 8(A), INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, AND DOCUMENTARY STAMP TAX OF BONDS IS
CONCERNED, AS PROVIDED UNDER SECTION 1 OF REPUBLIC ACT 6395 OR AN
ACT REVISING THE CHARTER OF THE NATIONAL POWER CORPORATION;

(q)__ SECTION 15, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, AND DOCUMENTARY STAMP TAX IS CONCERNED, OF PD
334, ENTITLED “CREATING THE PHILIPPINE NATIONAL OIL COMPANY,
DEFINING ITS POWERS AND FUNCTIONS, PROVIDING FUNDS THEREFORE,
AND FOR OTHER PURPOSES”;

(®) SECTION 16, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, AND DOCUMENTARY STAMP TAX IS CONCERNED, OF
PRESIDENTIAL DECREE 1467, ENTITLED “AN ACT CREATING THE


PHILIPPINE CROP INSURANCE CORPORATION, PRESCRIBING ITS POWERS
AND ACTIVITIES, PROVIDING FOR ITS CAPITALIZATION AND FOR THE
REQUIRED GOVERNMENT PREMIUM SUBSIDY, AND FOR OTHER PURPOSES”;

(8) _ SECTION 3, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, AND DOCUMENTARY STAMP TAX OF BONDS IS
CONCERNED, OF REPUBLIC ACT 3601, ENTITLED “AN ACT GRANTING THE
NATIONAL IRRIGATION ADMINISTRATION”;

() SECTION 6 (A, XVIII (2)), IN SO FAR AS TAX EXEMPTION ON INTEREST
INCOME AND DOCUMENTARY STAMP TAX IS CONCERNED, OF PD 1485, AS
AMENDED BY PD 1770, ENTITLED “RECONSTITUTING THE NATIONAL
GRAINS AUTHORITY TO THE NATIONAL FOOD AUTHORITY, BROADENING
ITS FUNCTIONS AND POWERS AND FOR OTHER PURPOSES”;

(u) SECTION 5 (E), INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, AND DOCUMENTARY STAMP TAX ON BONDS IS
CONCERNED, OF REPUBLIC ACT 6260, ENTITLED “AN ACT INSTITUTING A
COCONUT INVESTMENT FUND AND CREATING A COCONUT INVESTMENT
COMPANY FOR THE ADMINISTRATION THEREOF”;

(vy) SECTION 9, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, AND DOCUMENTARY STAMP TAX ON BONDS IS
CONCERNED, OF REPUBLIC ACT 10744 OR CREDIT SURETY FUND ACT OF
2014;

(w) _ SECTION 20, INSOFAR AS TAX ON INTEREST INCOME, CAPITAL GAINS
AND DOCUMENTARY STAMP TAX IS CONCERNED, OF REPUBLIC ACT 10693,
ENTITLED “AN ACT STRENGTHENING NONGOVERNMENT ORGANIZATIONS
(NGOS) ENGAGED IN MICROFINANCE OPERATIONS FOR THE POOR”;

(x) _ SECTION 7, INSOFAR AS TAX EXEMPTION ON DOCUMENTARY STAMP
TAX AND PREMIUM TAX IS CONCERNED, OF REPUBLIC ACT 7111, ENTITLED
“AN ACT ESTABLISHING THE OVERSEAS WORKERS’ INVESTMENT FUND TO.
PROVIDE INCENTIVES TO OVERSEAS WORKERS, REDUCE THE FOREIGN
DEBT BURDEN AND FOR OTHER PURPOSES”;

(y) _ SECTION 56, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, AND DOCUMENTARY STAMP TAX IS CONCERNED, OF
REPUBLIC ACT 10801, ENTITLED “AN ACT GOVERNING THE OPERATIONS
AND ADMINISTRATION OF THE OVERSEAS WORKERS WELFARE
ADMINISTRATION”;

(®) _ SECTION 5, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME IS
CONCERNED, OF REPUBLIC ACT 8367, ENTITLED “AN ACT PROVIDING FOR
THE REGULATION OF THE ORGANIZATION AND OPERATION OF NON-STOCK
SAVINGS AND LOAN ASSOCIATIONS”;

(aa) SECTION 28, INSOFAR AS TAX EXEMPTION ON CAPITAL GAINS ON
SHARES OF STOCK AND DOCUMENTARY STAMP TAX IS CONCERNED, OF
REPUBLIC ACT 9267 OR THE SECURITIZATION ACT OF 2004”;

(bb) SECTION 17, INSOFAR AS TAX EXEMPTION ON INTEREST INCOME,
CAPITAL GAINS, GROSS RECEIPTS TAX AND DOCUMENTARY STAMP TAX IS
CONCERNED, OF REPUBLIC ACT 7906, ENTITLED “AN ACT PROVIDING FOR
THE REGULATION OF THE ORGANIZATION AND OPERATIONS OF THRIFT
BANKS, AND FOR OTHER PURPOSES”;


(cc) SECTION 15, INSOFAR AS TAX EXEMPTION ON CAPITAL GAINS AND
DOCUMENTARY STAMP TAX IS CONCERNED, OF REPUBLIC ACT 9182, AS
AMENDED BY REPUBLIC ACT 9343, ENTITLED “AN ACT GRANTING TAX
EXEMPTIONS AND FEE PRIVILEGES TO SPECIAL PURPOSE VEHICLES
WHICH ACQUIRE OR INVEST IN NON-PERFORMING ASSETS, SETTING THE
REGULATORY FRAMEWORK THEREFOR, AND FOR OTHER PURPOS

(dd) SECTIONS 13 AND 14, INSOFAR AS TAX EXEMPTION ON DST AND
DIVIDENDS IS CONCERNED, OF R.A. 9856 OR THE REAL ESTATE INVESTMENT
ACT OF 2009; AND

(ee) SECTION 23, INSOFAR AS NO DEDUCTION FROM GROSS INCOME
SHALL BE ALLOWED IN RESPECT OF ANY INTEREST IF THE INDEBTEDNESS
IS INCURRED TO FINANCE PETROLEUM EXPLORATION IS CONCERNED, OF
P.D. 87, ENTITLED AMENDING PRESIDENTIAL DECREE NO. 8 ISSUED ON
OCTOBER 2, 1972, AND PROMULGATING AN AMENDED ACT TO PROMOTE
THE DISCOVERY AND PRODUCTION OF INDIGENOUS PETROLEUM AND
APPROPRIATE FUNDS THEREFOR.

SEC. 32. Effectivity Clause. - This Act shall take effect on January 1, 2020, or fifteen (15) days after
its complete publication in the Official Gazette or in at least two (2) newspaper of general circulation,

whichever comes earlier.

Approved,