Professional Documents
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National Internal Revenue Code
National Internal Revenue Code
Section 4. The Secretary of Finance shall, upon recommendation of the Commissioner of Internal
Revenue, promulgate and publish the necessary rules and regulations for the effective
implementation of this Act.
Section 5. Transitory Provisions - Deferment of the Effectivity of the Imposition of VAT on Certain
Services. - The effectivity of the imposition of the value-added tax on services as prescribed in
Section 17(a) and (b) of Republic Act No. 7616, as amended by Republic Act. 8241, is hereby
further deferred until December 31, 1999, unless Congress deems otherwise: Provided, That the
said services shall continue to pay the applicable tax prescribed under the present provisions of the
National Internal Revenue Code, as amended.
Section 6. Separability Clause. - If any provision of this Act is subsequently declared
unconstitutional, the validity of the remaining provisions hereof shall remain in full force and effect.
Section 7. Repealing Clauses. -(A) The provision of Section 17 of Republic Act No. 7906,
otherwise known as the "Thrift Banks Acts of 1995" shall continue to be in force and effect only
until December 31, 1999.
Effective January 1, 2000, all thrift banks, whether in operation as of that date or thereafter, shall no
longer enjoy tax exemption as provided under Section 17 of R.A. No. 7906, thereby subjecting all
thrift banks to taxes, fees and charges in the same manner and at the same rate as banks and other
financial intermediaries.
(B) The provisions of the National Internal Revenue Code, as amended, and all other laws,
including charters of government-owned or controlled corporations, decrees, orders, or
regulations or parts thereof, that are inconsistent with this Act are hereby repealed or
amended accordingly.
Section 8. Effectivity - This Act shall take effect on January 1, 1998.
TITLE I
ORGANIZATION AND FUNCTION OF THE BUREAU OF INTERNAL REVENUE
Section 1. Title of the Code. - This Code shall be known as the National Internal Revenue Code of
1997.
Section 2. Powers and duties of the Bureau of Internal Revenue. - The Bureau of Internal Revenue
shall be under the supervision and control of the Department of Finance and its powers and duties
shall comprehend the assessment and collection of all national internal revenue taxes, fees, and
charges, and the enforcement of all forfeitures, penalties, and fines connected therewith, including
the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the
ordinary courts. The Bureau shall give effect to and administer the supervisory and police powers
conferred to it by this Code or other laws.
Section 3. Chief Officials of the Bureau of Internal Revenue. - The Bureau of Internal Revenue shall
have a chief to be known as Commissioner of Internal Revenue, hereinafter referred to as the
Commissioner and four (4) assistant chiefs to be known as Deputy Commissioners.
Section 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power
to interpret the provisions of this Code and other tax laws shall be under the exclusive and original
jurisdiction of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under this Code or other laws or
portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner,
subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.
Section 5. Power of the Commissioner to Obtain Information, and to Summon, Examine, and Take
Testimony of Persons. - In ascertaining the correctness of any return, or in making a return when
none has been made, or in determining the liability of any person for any internal revenue tax, or in
collecting any such liability, or in evaluating tax compliance, the Commissioner is authorized:
(A) To examine any book, paper, record, or other data which may be relevant or material to
such inquiry;
(B) To Obtain on a regular basis from any person other than the person whose internal
revenue tax liability is subject to audit or investigation, or from any office or officer of the
national and local governments, government agencies and instrumentalities, including the
Bangko Sentral ng Pilipinas and government-owned or -controlled corporations, any
information such as, but not limited to, costs and volume of production, receipts or sales and
gross incomes of taxpayers, and the names, addresses, and financial statements of
corporations, mutual fund companies, insurance companies, regional operating headquarters
of multinational companies, joint accounts, associations, joint ventures of consortia and
registered partnerships, and their members;
(C) To summon the person liable for tax or required to file a return, or any officer or
employee of such person, or any person having possession, custody, or care of the books of
accounts and other accounting records containing entries relating to the business of the
person liable for tax, or any other person, to appear before the Commissioner or his duly
authorized representative at a time and place specified in the summons and to produce such
books, papers, records, or other data, and to give testimony;
(D) To take such testimony of the person concerned, under oath, as may be relevant or
material to such inquiry; and
(E) To cause revenue officers and employees to make a canvass from time to time of any
revenue district or region and inquire after and concerning all persons therein who may be
liable to pay any internal revenue tax, and all persons owning or having the care,
management or possession of any object with respect to which a tax is imposed.
The provisions of the foregoing paragraphs notwithstanding, nothing in this Section shall be
construed as granting the Commissioner the authority to inquire into bank deposits other than as
provided for in Section 6(F) of this Code.
Section 6. Power of the Commissioner to Make assessments and Prescribe additional Requirements
for Tax Administration and Enforcement. -
(A) Examination of Returns and Determination of Tax Due. - After a return has been filed as
required under the provisions of this Code, the Commissioner or his duly authorized
representative may authorize the examination of any taxpayer and the assessment of the
correct amount of tax: Provided, however; That failure to file a return shall not prevent the
Commissioner from authorizing the examination of any taxpayer.
The tax or any deficiency tax so assessed shall be paid upon notice and demand from the
Commissioner or from his duly authorized representative.
Any return, statement of declaration filed in any office authorized to receive the same shall
not be withdrawn: Provided, That within three (3) years from the date of such filing , the
same may be modified, changed, or amended: Provided, further, That no notice for audit or
investigation of such return, statement or declaration has in the meantime been actually
served upon the taxpayer.
(B) Failure to Submit Required Returns, Statements, Reports and other Documents. - When
a report required by law as a basis for the assessment of any national internal revenue tax
shall not be forthcoming within the time fixed by laws or rules and regulations or when there
is reason to believe that any such report is false, incomplete or erroneous, the Commissioner
shall assess the proper tax on the best evidence obtainable.
In case a person fails to file a required return or other document at the time prescribed by
law, or willfully or otherwise files a false or fraudulent return or other document, the
Commissioner shall make or amend the return from his own knowledge and from such
information as he can obtain through testimony or otherwise, which shall be prima facie
correct and sufficient for all legal purposes.
(C) Authority to Conduct Inventory-taking, surveillance and to Prescribe Presumptive Gross
Sales and Receipts. - The Commissioner may, at any time during the taxable year, order
inventory-taking of goods of any taxpayer as a basis for determining his internal revenue tax
liabilities, or may place the business operations of any person, natural or juridical, under
observation or surveillance if there is reason to believe that such person is not declaring his
correct income, sales or receipts for internal revenue tax purposes. The findings may be used
as the basis for assessing the taxes for the other months or quarters of the same or different
taxable years and such assessment shall be deemed prima facie correct.
When it is found that a person has failed to issue receipts and invoices in violation of the
requirements of Sections 113 and 237 of this Code, or when there is reason to believe that
the books of accounts or other records do not correctly reflect the declarations made or to be
made in a return required to be filed under the provisions of this Code, the Commissioner,
after taking into account the sales, receipts, income or other taxable base of other persons
engaged in similar businesses under similar situations or circumstances or after considering
other relevant information may prescribe a minimum amount of such gross receipts, sales
and taxable base, and such amount so prescribed shall be prima facie correct for purposes of
determining the internal revenue tax liabilities of such person.
(D) Authority to Terminate Taxable Period. _ When it shall come to the knowledge of the
Commissioner that a taxpayer is retiring from business subject to tax, or is intending to leave
the Philippines or to remove his property therefrom or to hide or conceal his property, or is
performing any act tending to obstruct the proceedings for the collection of the tax for the
past or current quarter or year or to render the same totally or partly ineffective unless such
proceedings are begun immediately, the Commissioner shall declare the tax period of such
taxpayer terminated at any time and shall send the taxpayer a notice of such decision,
together with a request for the immediate payment of the tax for the period so declared
terminated and the tax for the preceding year or quarter, or such portion thereof as may be
unpaid, and said taxes shall be due and payable immediately and shall be subject to all the
penalties hereafter prescribed, unless paid within the time fixed in the demand made by the
Commissioner.
(E) Authority of the Commissioner to Prescribe Real Property Values. - The Commissioner
is hereby authorized to divide the Philippines into different zones or areas and shall, upon
consultation with competent appraisers both from the private and public sectors, determine
the fair market value of real properties located in each zone or area. For purposes of
computing any internal revenue tax, the value of the property shall be, whichever is the
higher of;
(1) the fair market value as determined by the Commissioner, or
(2) the fair market value as shown in the schedule of values of the Provincial and
City Assessors.
(F) Authority of the Commissioner to inquire into Bank Deposit Accounts. -
Notwithstanding any contrary provision of Republic Act No. 1405 and other general or
special laws, the Commissioner is hereby authorized to inquire into the bank deposits of:
(1) a decedent to determine his gross estate; and
(2) any taxpayer who has filed an application for compromise of his tax liability
under Sec. 204 (A) (2) of this Code by reason of financial incapacity to pay his tax
liability.
In case a taxpayer files an application to compromise the payment of his tax liabilities on his
claim that his financial position demonstrates a clear inability to pay the tax assessed, his
application shall not be considered unless and until he waives in writing his privilege under
Republic act NO. 1405 or under other general or special laws, and such waiver shall
constitute the authority of the Commissioner to inquire into the bank deposits of the
taxpayer.
(G) Authority to Accredit and Register Tax Agents. - The Commissioner shall accredit and
register, based on their professional competence, integrity and moral fitness, individuals and
general professional partnerships and their representatives who prepare and file tax returns,
statements, reports, protests, and other papers with or who appear before, the Bureau for
taxpayers. Within one hundred twenty (120) days from January 1, 1998, the Commissioner
shall create national and regional accreditation boards, the members of which shall serve for
three (3) years, and shall designate from among the senior officials of the Bureau, one (1)
chairman and two (2) members for each board, subject to such rules and regulations as the
Secretary of Finance shall promulgate upon the recommendation of the Commissioner.
Individuals and general professional partnerships and their representatives who are denied
accreditation by the Commissioner and/or the national and regional accreditation boards
may appeal such denial to the Secretary of Finance, who shall rule on the appeal within sixty
(60) days from receipt of such appeal. Failure of the Secretary of Finance to rule on the
Appeal within the prescribed period shall be deemed as approval of the application for
accreditation of the appellant.
(H) Authority of the Commissioner to Prescribe Additional Procedural or Documentary
Requirements. - The Commissioner may prescribe the manner of compliance with any
documentary or procedural requirement in connection with the submission or preparation of
financial statements accompanying the tax returns.
Section 7. Authority of the Commissioner to Delegate Power. - The Commissioner may delegate the
powers vested in him under the pertinent provisions of this Code to any or such subordinate
officials with the rank equivalent to a division chief or higher, subject to such limitations and
restrictions as may be imposed under rules and regulations to be promulgated by the Secretary of
finance, upon recommendation of the Commissioner: Provided, However, That the following
powers of the Commissioner shall not be delegated:
(a) The power to recommend the promulgation of rules and regulations by the Secretary of
Finance;
(b) The power to issue rulings of first impression or to reverse, revoke or modify any
existing ruling of the Bureau;
(c) The power to compromise or abate, under Sec. 204 (A) and (B) of this Code, any tax
liability: Provided, however, That assessments issued by the regional offices involving basic
deficiency taxes of Five hundred thousand pesos (P500,000) or less, and minor criminal
violations, as may be determined by rules and regulations to be promulgated by the
Secretary of finance, upon recommendation of the Commissioner, discovered by regional
and district officials, may be compromised by a regional evaluation board which shall be
composed of the Regional Director as Chairman, the Assistant Regional Director, the heads
of the Legal, Assessment and Collection Divisions and the Revenue District Officer having
jurisdiction over the taxpayer, as members; and
(d) The power to assign or reassign internal revenue officers to establishments where articles
subject to excise tax are produced or kept.
Section 8. Duty of the Commissioner to Ensure the Provision and Distribution of forms, Receipts,
Certificates, and Appliances, and the Acknowledgment of Payment of Taxes.-
(A) Provision and Distribution to Proper Officials. - It shall be the duty of the
Commissioner, among other things, to prescribe, provide, and distribute to the proper
officials the requisite licenses internal revenue stamps, labels all other forms, certificates,
bonds, records, invoices, books, receipts, instruments, appliances and apparatus used in
administering the laws falling within the jurisdiction of the Bureau. For this purpose,
internal revenue stamps, strip stamps and labels shall be caused by the Commissioner to be
printed with adequate security features.
Internal revenue stamps, whether of a bar code or fuson design, shall be firmly and
conspicuously affixed on each pack of cigars and cigarettes subject to excise tax in the
manner and form as prescribed by the Commissioner, upon approval of the Secretary of
Finance.
(B) Receipts for Payment Made. - It shall be the duty of the Commissioner or his duly
authorized representative or an authorized agent bank to whom any payment of any tax is
made under the provision of this Code to acknowledge the payment of such tax, expressing
the amount paid and the particular account for which such payment was made in a form and
manner prescribed therefor by the Commissioner.
Section 9. Internal Revenue Districts. - With the approval of the Secretary of Finance, the
Commissioner shall divide the Philippines into such number of revenue districts as may form time
to time be required for administrative purposes. Each of these districts shall be under the
supervision of a Revenue District Officer.
Section 10. Revenue Regional Director. - Under rules and regulations, policies and standards
formulated by the Commissioner, with the approval of the Secretary of Finance, the Revenue
Regional director shall, within the region and district offices under his jurisdiction, among others:
(a) Implement laws, policies, plans, programs, rules and regulations of the department or
agencies in the regional area;
(b) Administer and enforce internal revenue laws, and rules and regulations, including the
assessment and collection of all internal revenue taxes, charges and fees.
(c) Issue Letters of authority for the examination of taxpayers within the region;
(d) Provide economical, efficient and effective service to the people in the area;
(e) Coordinate with regional offices or other departments, bureaus and agencies in the area;
(f) Coordinate with local government units in the area;
(g) Exercise control and supervision over the officers and employees within the region; and
(h) Perform such other functions as may be provided by law and as may be delegated by the
Commissioner.
Section 11. Duties of Revenue District Officers and Other Internal Revenue Officers. - It shall be
the duty of every Revenue District Officer or other internal revenue officers and employees to
ensure that all laws, and rules and regulations affecting national internal revenue are faithfully
executed and complied with, and to aid in the prevention, detection and punishment of frauds of
delinquencies in connection therewith.
It shall be the duty of every Revenue District Officer to examine the efficiency of all officers and
employees of the Bureau of Internal Revenue under his supervision, and to report in writing to the
Commissioner, through the Regional Director, any neglect of duty, incompetency, delinquency, or
malfeasance in office of any internal revenue officer of which he may obtain knowledge, with a
statement of all the facts and any evidence sustaining each case.
Section 12. Agents and Deputies for Collection of National Internal Revenue Taxes. - The following
are hereby constituted agents of the Commissioner:
(a) The Commissioner of Customs and his subordinates with respect to the collection of
national internal revenue taxes on imported goods;
(b) The head of the appropriate government office and his subordinates with respect to the
collection of energy tax; and
(c) Banks duly accredited by the Commissioner with respect to receipt of payments internal
revenue taxes authorized to be made thru bank.
Any officer or employee of an authorized agent bank assigned to receive internal revenue tax
payments and transmit tax returns or documents to the Bureau of Internal Revenue shall be subject
to the same sanctions and penalties prescribed in Sections 269 and 270 of this Code.
Section 13. Authority of a Revenue Offices. - subject to the rules and regulations to be prescribed by
the Secretary of Finance, upon recommendation of the Commissioner, a Revenue Officer assigned
to perform assessment functions in any district may, pursuant to a Letter of Authority issued by the
Revenue Regional Director, examine taxpayers within the jurisdiction of the district in order to
collect the correct amount of tax, or to recommend the assessment of any deficiency tax due in the
same manner that the said acts could have been performed by the Revenue Regional Director
himself.
Section 14. Authority of Officers to Administer Oaths and Take Testimony. - The Commissioner,
Deputy Commissioners, Service Chiefs, Assistant Service Chiefs, Revenue Regional Directors,
Assistant Revenue Regional Directors, Chiefs and Assistant Chiefs of Divisions, Revenue District
Officers, special deputies of the Commissioner, internal revenue officers and any other employee of
the Bureau thereunto especially deputized by the Commissioner shall have the power to administer
oaths and to take testimony in any official matter or investigation conducted by them regarding
matters within the jurisdiction of the Bureau.
Section 15. Authority of Internal Revenue Officers to Make Arrests and Seizures. - The
Commissioner, the Deputy Commissioners, the Revenue Regional Directors, the Revenue District
Officers and other internal revenue officers shall have authority to make arrests and seizures for the
violation of any penal law, rule or regulation administered by the Bureau of Internal Revenue. Any
person so arrested shall be forthwith brought before a court, there to be dealt with according to law.
Section 16. Assignment of Internal Revenue Officers Involved in Excise Tax Functions to
Establishments Where Articles subject to Excise Tax are Produced or Kept. - The Commissioner
shall employ, assign, or reassign internal revenue officers involved in excise tax functions, as often
as the exigencies of the revenue service may require, to establishments or places where articles
subject to excise tax are produced or kept: Provided, That an internal revenue officer assigned to
any such establishment shall in no case stay in his assignment for more than two (2) years, subject
to rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the
Commissioner.
Section 17. Assignment of Internal Revenue Officers and Other Employees to Other Duties. - The
Commissioner may, subject to the provisions of Section 16 and the laws on civil service, as well as
the rules and regulations to be prescribed by the Secretary of Finance upon the recommendation of
the Commissioner, assign or reassign internal revenue officers and employees of the Bureau of
Internal Revenue, without change in their official rank and salary, to other or special duties
connected with the enforcement or administration of the revenue laws as the exigencies of the
service may require: Provided, That internal revenue officers assigned to perform assessment or
collection function shall not remain in the same assignment for more than three (3) years; Provided,
further, That assignment of internal revenue officers and employees of the Bureau to special duties
shall not exceed one (1) year.
Section 18. Reports of violation of Laws. - When an internal revenue officer discovers evidence of a
violation of this Code or of any law, rule or regulations administered by the Bureau of Internal
Revenue of such character as to warrant the institution of criminal proceedings, he shall
immediately report the facts to the Commissioner through his immediate superior, giving the name
and address of the offender and the names of the witnesses if possible: Provided, That in urgent
cases, the Revenue Regional director or Revenue District Officer, as the case may be, may send the
report to the corresponding prosecuting officer in the latter case, a copy of his report shall be sent to
the Commissioner.
Section 19. Contents of Commissioner's Annual Report. - The annual Report of the Commissioner
shall contain detailed statements of the collections of the Bureau with specifications of the sources
of revenue by type of tax, by manner of payment, by revenue region and by industry group and its
disbursements by classes of expenditures.
In case the actual collection exceeds or falls short of target as set in the annual national budget by
fifteen percent (15%) or more, the Commissioner shall explain the reason for such excess or
shortfall.
Section 20. Submission of Report and Pertinent Information by the Commissioner.
(A) Submission of Pertinent Information to Congress. - The provision of Section 270 of this
Code to the contrary notwithstanding, the Commissioner shall, upon request of Congress
and in aid of legislation, furnish its appropriate Committee pertinent information including
but not limited to: industry audits, collection performance data, status reports in criminal
actions initiated against persons and taxpayer's returns: Provided, however, That any return
or return information which can be associated with, or otherwise identify, directly or
indirectly, a particular taxpayer shall be furnished the appropriate Committee of Congress
only when sitting in Executive Session Unless such taxpayer otherwise consents in writing
to such disclosure.
(B) Report to Oversight Committee. - The Commissioner shall, with reference to Section
204 of this Code, submit to the Oversight Committee referred to in Section 290 hereof,
through the Chairmen of the Committee on Ways and Means of the Senate and House of
Representatives, a report on the exercise of his powers pursuant to the said section, every six
(6) months of each calendar year.
Section 21. Sources of Revenue. - The following taxes, fees and charges are deemed to be national
internal revenue taxes:
(a) Income tax;
(b) Estate and donor's taxes;
(c) Value-added tax;
(d) Other percentage taxes;
(e) Excise taxes;
(f) Documentary stamp taxes; and
(g) Such other taxes as are or hereafter may be imposed and collected by the Bureau of
Internal Revenue.
TITLE II
TAX ON INCOME
CHAPTER I - DEFINITIONS
Section 22. Definitions - When used in this Title:
(A) The term 'person' means an individual, a trust, estate or corporation.
(B) The term 'corporation' shall include partnerships, no matter how created or organized,
joint-stock companies, joint accounts (cuentas en participacion), association, 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
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.
(C) The term 'domestic,' when applied to a corporation, means created or organized in the
Philippines or under its laws.
(D) The term 'foreign,' when applied to a corporation, means a corporation which is not
domestic.
(E) The term 'nonresident citizen' means:
(1) A citizen of the Philippines who establishes to the satisfaction of the
Commissioner the fact of his physical presence abroad with a definite intention to
reside therein.
(2) A citizen of the Philippines who leaves the Philippines during the taxable year to
reside abroad, either as an immigrant or for employment on a permanent basis.
(3) A citizen of the Philippines who works and derives income from abroad and
whose employment thereat requires him to be physically present abroad most of the
time during the taxable year.
(4) A citizen who has been previously considered as nonresident citizen and who
arrives in the Philippines at any time during the taxable year to reside permanently in
the Philippines shall likewise be treated as a nonresident citizen for the taxable year
in which he arrives in the Philippines with respect to his income derived from
sources abroad until the date of his arrival in the Philippines.
(5) The taxpayer shall submit proof to the Commissioner to show his intention of
leaving the Philippines to reside permanently abroad or to return to and reside in the
Philippines as the case may be for purpose of this Section.
(F) The term 'resident alien' means an individual whose residence is within the Philippines
and who is not a citizen thereof.
(G) The term 'nonresident alien' means an individual whose residence is not within the
Philippines and who is not a citizen thereof.
(H) The term 'resident foreign corporation' applies to a foreign corporation engaged in trade
or business within the Philippines.
(I) The term 'nonresident foreign corporation' applies to a foreign corporation not engaged in
trade or business within the Philippines.
(J) The term 'fiduciary' means a guardian, trustee, executor, administrator, receiver,
conservator or any person acting in any fiduciary capacity for any person.
(K) The term 'withholding agent' means any person required to deduct and withhold any tax
under the provisions of Section 57.
(L) The term 'shares of stock' shall include shares of stock of a corporation, warrants and/or
options to purchase shares of stock, as well as units of participation in a partnership (except
general professional partnerships), joint stock companies, joint accounts, joint ventures
taxable as corporations, associations and recreation or amusement clubs (such as golf, polo
or similar clubs), and mutual fund certificates.
(M) The term 'shareholder' shall include holders of a share/s of stock, warrant/s and/or
option/s to purchase shares of stock of a corporation, as well as a holder of a unit of
participation in a partnership (except general professional partnerships) in a joint stock
company, a joint account, a 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.
(N) The term 'taxpayer' means any person subject to tax imposed by this Title.
(O) The terms 'including' and 'includes', when used in a definition contained in this Title,
shall not be deemed to exclude other things otherwise within the meaning of the term
defined.
(P) The term 'taxable year' means the calendar year, or the fiscal year ending during such
calendar year, upon the basis of which the net income is computed under this Title. 'Taxable
year' includes, in the case of a return made for a fractional part of a year under the provisions
of this Title or under rules and regulations prescribed by the Secretary of Finance, upon
recommendation of the commissioner, the period for which such return is made.
(Q) The term 'fiscal year' means an accounting period of twelve (12) months ending on the
last day of any month other than December.
(R) The terms 'paid or incurred' and 'paid or accrued' shall be construed according to the
method of accounting upon the basis of which the net income is computed under this Title.
(S) The term 'trade or business' includes the performance of the functions of a public office.
(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 or indebtedness, issued by any corporation, including those issued by a
government or political subdivision thereof, with interest coupons or in registered form.
(U) The term 'dealer in securities' means a merchant of stocks or securities, whether an
individual, partnership or corporation, with an established place of business, regularly
engaged in the purchase of securities and the resale thereof to customers; that is, one who, as
a merchant, buys securities and re-sells them to customers with a view to the gains and
profits that may be derived therefrom.
(V) The term 'bank' means every banking institution, as defined in Section 2 of 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 or specialized government
bank.
(W) The term 'non-bank financial intermediary' means 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-banking activities' means borrowing funds from twenty (20) or more
personal 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.
(Y) The term 'deposit substitutes' shall mean an alternative from 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 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: Provided, however, That debt instruments issued for interbank call loans with
maturity of not more than five (5) days to cover deficiency in reserves against deposit
liabilities, including those between or among banks and quasi-banks, shall not be considered
as deposit substitute debt instruments.
(Z) The term 'ordinary income' includes any gain from the sale or exchange of property
which is not a capital asset or property described in Section 39(A)(1). Any gain from the sale
or exchange of property which is treated or considered, under other provisions of this Title,
as 'ordinary income' shall be treated as gain from the sale or exchange of property which is
not a capital asset as defined in Section 39(A)(1). The term 'ordinary loss' includes any loss
from the sale or exchange of property which is not a capital asset. Any loss from the sale or
exchange of property which is treated or considered, under other provisions of this Title, as
'ordinary loss' shall be treated as loss from the sale or exchange of property which is not a
capital asset.
(AA) The term 'rank and file employees' shall mean all employees who are holding neither
managerial nor supervisory position as defined under existing provisions of the Labor Code
of the Philippines, as amended.
(BB) The term 'mutual fund company' shall mean an open-end and close-end investment
company as defined under the Investment Company Act.
(CC) The term 'trade, business or profession' shall not include performance of services by
the taxpayer as an employee.
(DD) The term 'regional or area headquarters' shall mean a branch established in the
Philippines by multinational companies and which headquarters do not earn or derive
income from the Philippines and which act as supervisory, communications and coordinating
center for their affiliates, subsidiaries, or branches in the Asia-Pacific Region and other
foreign markets.
(EE) The term 'regional operating headquarters' shall mean a branch established in the
Philippines by multinational companies which are engaged in any of the following services:
general administration and planning; business planning and coordination; sourcing and
procurement of raw materials and components; corporate finance advisory services;
marketing control and sales promotion; training and personnel management; logistic
services; research and development services and product development; technical support and
maintenance; data processing and communications; and business development.
(FF) The term 'long-term deposit or investment certificates' 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.
CHAPTER II - GENERAL PRINCIPLES
Section 23. General Principles of Income Taxation in the Philippines. - Except when otherwise
provided in this Code:
(A) A citizen of the Philippines residing therein is taxable on all income derived from
sources within and without the Philippines;
(B) A nonresident citizen is taxable only on income derived from sources within the
Philippines;
(C) An individual citizen of the Philippines who is working and deriving income from
abroad as an overseas contract worker is taxable only on income derived from sources
within the Philippines: Provided, That a seaman who is a citizen of the Philippines and who
receives compensation for services rendered abroad as a member of the complement of a
vessel engaged exclusively in international trade shall be treated as an overseas contract
worker;
(D) An alien individual, whether a resident or not of the Philippines, is taxable only on
income derived from sources within the Philippines;
(E) A domestic corporation is taxable on all income derived from sources within and without
the Philippines; and
(F) A foreign corporation, whether engaged or not in trade or business in the Philippines, is
taxable only on income derived from sources within the Philippines.
CHAPTER III - TAX ON INDIVIDUALS
Section 24. Income Tax Rates.
(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien of the
Philippines.
(1) An income tax is hereby imposed:
(a) On the taxable income defined in Section 31 of this Code, other than
income subject to tax under Subsections (B), (C) and (D) of this Section,
derived for each taxable year from all sources within and without the
Philippines be every individual citizen of the Philippines residing therein;
(b) On the taxable income defined in Section 31 of this Code, other than
income subject to tax under Subsections (B), (C) and (D) of this Section,
derived for each taxable year from all sources within the Philippines by an
individual citizen of the Philippines who is residing outside of the Philippines
including overseas contract workers referred to in Subsection(C) of Section
23 hereof; and
(c) On the taxable income defined in Section 31 of this Code, other than
income subject to tax under Subsections (b), (C) and (D) of this Section,
derived for each taxable year from all sources within the Philippines by an
individual alien who is a resident of the Philippines.
The tax shall be computed in accordance with and at the rates established in the
following schedule:
Not over P10,000 5%
Over P10,000 but not over P30,000 P500+10% of the excess over P10,000
Over P30,000 but not over P70,000 P2,500+15% of the excess over P30,000
Over P70,000 but not over P140,000 P8,500+20% of the excess over P70,000
Over P140,000 but not over P250,000 P22,500+25% of the excess over P140,000
Over P250,000 but not over P500,000 P50,000+30% of the excess over P250,000
Provided, That effective January 1, 1999, the top marginal rate shall be thirty-three
percent (33%) and effective January 1, 2000, the said rate shall be thirty-two percent
(32%).
For married individuals, the husband and wife, subject to the provision of Section 51
(D) hereof, shall compute separately their individual income tax based on their
respective total taxable income: Provided, That if any income cannot be definitely
attributed to or identified as income exclusively earned or realized by either of the
spouses, the same shall be divided equally between the spouses for the purpose of
determining their respective taxable income.
(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%) is hereby imposed upon the amount of interest 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 Philippine Charity Sweepstakes and Lotto winnings), 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 seven and one-half percent (7 1/2%) 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 (5th) 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 following rates shall be
imposed upon the cash and/or property dividends actually or constructively received
by an individual from a domestic corporation or from a joint stock company,
insurance or mutual fund companies 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:
Six percent (6%) beginning January 1, 1998;
Eight percent (8%) beginning January 1, 1999;
Ten percent (10% beginning January 1, 2000.
Provided, however, That the tax on dividends shall apply only on income earned on
or after January 1, 1998. Income forming part of retained earnings as of December
31, 1997 shall not, even if declared or distributed on or after January 1, 1998, be
subject to this tax.
(C) Capital Gains from Sale of Shares of Stock not Traded in the Stock Exchange. - The
provisions of Section 39(B) notwithstanding, 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 5%
P100,000
Three (3) years to less than four (4) years - 12%; and
(3) Capital Gains. - Capital gains realized from sale, barter or exchange of shares of
stock in domestic corporations not traded through the local stock exchange, and real
properties shall be subject to the tax prescribed under Subsections (C) and (D) of
Section 24.
(B) Nonresident Alien Individual Not Engaged in Trade or Business Within the Philippines.
- There shall be levied, collected and paid for each taxable year upon the entire income
received from all sources within the Philippines by every nonresident alien individual not
engaged in trade or business within the Philippines as 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, a 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 Subsections (C) and (D) of Section 24.
(C) Alien Individual Employed by Regional or Area Headquarters and Regional Operating
Headquarters of Multinational Companies. - There shall be levied, collected and paid for
each taxable year upon the gross income received by every alien individual employed by
regional or area headquarters and regional operating headquarters established in the
Philippines by multinational companies as salaries, wages, annuities, compensation,
remuneration and other emoluments, such as honoraria and allowances, from such regional
or area headquarters and regional operating headquarters, a tax equal to fifteen percent
(15%) of such gross income: Provided, however, That the same tax treatment shall apply to
Filipinos employed and occupying the same position as those of aliens employed by these
multinational companies. For purposes of this Chapter, the term 'multinational company'
means a foreign firm or entity engaged in international trade with affiliates or subsidiaries or
branch offices in the Asia-Pacific Region and other foreign markets.
(D) Alien Individual Employed by Offshore Banking Units. - There shall be levied, collected
and paid for each taxable year upon the gross income received by every alien individual
employed by offshore banking units established in the Philippines as salaries, wages,
annuities, compensation, remuneration and other emoluments, such as honoraria and
allowances, from such off-shore banking units, a tax equal to fifteen percent (15%) of such
gross income: Provided, however, That the same tax treatment shall apply to Filipinos
employed and occupying the same positions as those of aliens employed by these offshore
banking units.
(E) Alien Individual Employed by Petroleum Service Contractor and Subcontractor. - An
Alien individual who is a permanent resident of a foreign country but who is employed and
assigned in the Philippines by a foreign service contractor or by a foreign service
subcontractor engaged in petroleum operations in the Philippines shall be liable to a tax of
fifteen percent (15%) of the salaries, wages, annuities, compensation, remuneration and
other emoluments, such as honoraria and allowances, received from such contractor or
subcontractor: Provided, however, That the same tax treatment shall apply to a Filipino
employed and occupying the same position as an alien employed by petroleum service
contractor and subcontractor.
Any income earned from all other sources within the Philippines by the alien employees referred to
under Subsections (C), (D) and (E) hereof shall be subject to the pertinent income tax, as the case
may be, imposed under this Code.
Section 26. Tax Liability of Members of General Professional Partnerships. - A general
professional partnership as such shall not be subject to the income tax imposed under this Chapter.
Persons engaging in business as partners in a general professional partnership shall be liable for
income tax only in their separate and individual capacities.1avvphil.et
For purposes of computing the distributive share of the partners, the net income of the partnership
shall be computed in the same manner as a corporation.
Each partner shall report as gross income his distributive share, actually or constructively received,
in the net income of the partnership.
CHAPTER IV - TAX ON CORPORATIONS
Section 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, 1998, the rate
of income tax shall be thirty-four percent (34%); effective January 1, 1999, the rate shall be
thirty-three percent (33%); and effective January 1, 2000 and thereafter, the rate shall be
thirty-two percent (32%).
In the case of corporations adopting the fiscal-year accounting period, the taxable income
shall be computed without regard to the specific date when specific sales, purchases and
other transactions occur. Their income and expenses for the fiscal year shall be deemed to
have been earned and spent equally for each month of the period.
The reduced corporate income tax rates shall be applied on the amount computed by
multiplying the number of months covered by the new rates within the fiscal year by the
taxable income of the corporation for the period, divided by twelve.
Provided, further, That the President, upon the recommendation of the Secretary of Finance,
may effective January 1, 2000, allow corporations the option to be taxed at fifteen percent
(15%) of gross income as defined herein, after the following conditions have been satisfied:
(1) A tax effort ratio of twenty percent (20%) of Gross National Product (GNP);
(2) A ratio of forty percent (40%) of income tax collection to total tax revenues;
(3) A VAT tax effort of four percent (4%) of GNP; and
(4) A 0.9 percent (0.9%) ratio of the Consolidated Public Sector Financial Position
(CPSFP) to GNP.
The option to be taxed based on gross income shall be available only to firms whose ratio of
cost of sales to gross sales or receipts from all sources does not exceed fifty-five percent
(55%).
The election of the gross income tax option by the corporation shall be irrevocable for three
(3) consecutive taxable years during which the corporation is qualified under the scheme.
For purposes of this Section, the term 'gross income' derived from business shall be
equivalent to gross sales less sales returns, discounts and allowances and cost of goods sold.
"Cost of goods sold' shall include all business expenses directly incurred to produce the
merchandise to bring them to their present location and use.
For a trading or merchandising concern, 'cost of goods' sold shall include the invoice cost of
the goods sold, plus import duties, freight in transporting the goods to the place where the
goods are actually sold, including insurance while the goods are in transit.
For a manufacturing concern, 'cost of goods manufactured and sold' shall include all costs of
production of finished goods, such as raw materials used, direct labor and manufacturing
overhead, freight cost, insurance premiums and other costs incurred to bring the raw
materials to the factory or warehouse.
In the case of taxpayers engaged in the sale of service, 'gross income' means gross receipts
less sales returns, allowances and discounts.
(B) Proprietary Educational Institutions and Hospitals. - Proprietary educational institutions
and hospitals which are nonprofit shall pay a tax of ten percent (10%) on their taxable
income except those covered by Subsection (D) hereof: Provided, that if the gross income
from unrelated trade, business or other activity exceeds fifty percent (50%) of the total gross
income derived by such educational institutions or hospitals from all sources, the tax
prescribed in Subsection (A) hereof shall be imposed on the entire taxable income. For
purposes of this Subsection, the term 'unrelated trade, business or other activity' means any
trade, business or other activity, the conduct of which is not substantially related to the
exercise or performance by such educational institution or hospital of its primary purpose or
function. A 'Proprietary educational institution' is any private school maintained and
administered by private individuals or groups with an issued permit to operate from the
Department of Education, Culture and Sports (DECS), or the Commission on Higher
Education (CHED), or the Technical Education and Skills Development Authority
(TESDA), as the case may be, in accordance with existing laws and regulations.
(C) Government-owned or Controlled-Corporations, Agencies or Instrumentalities. - The
provisions of existing special or general laws to the contrary notwithstanding, all
corporations, agencies, or instrumentalities owned or controlled by the Government, except
the Government Service Insurance System (GSIS), the Social Security System (SSS), the
Philippine Health Insurance Corporation (PHIC), the Philippine Charity Sweepstakes Office
(PCSO) and the Philippine Amusement and Gaming Corporation (PAGCOR), shall pay such
rate of tax upon their taxable income as are imposed by this Section upon corporations or
associations engaged in s similar business, industry, or activity.
(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 seven and one-half percent (7 1/2%) 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%
(3) Tax on Income Derived under the Expanded Foreign Currency Deposit System. -
Income derived by a depository bank under the expanded foreign currency deposit
system from foreign currency transactions with 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, including
interest income from foreign currency loans granted by such depository banks under
said expanded foreign currency deposit system to residents, shall be subject to a final
income 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.
(5) 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 of fair market value as determined in
accordance with Section 6(E) of this Code, whichever is higher, of such lands and/or
buildings.
(E) Minimum Corporate Income Tax on Domestic Corporations. -
(1) Imposition of Tax. - A minimum corporate income tax of two percent (2%0 of the
gross income as of the end of the taxable year, as defined herein, is hereby imposed
on a corporation taxable under this Title, beginning on the fourth taxable year
immediately following the year in which such corporation commenced its business
operations, when the minimum income tax is greater than the tax computed under
Subsection (A) of this Section for the taxable year.
(2) Carry Froward of Excess Minimum Tax. - Any excess of the minimum corporate
income tax over the normal income tax as computed under Subsection (A) of this
Section shall be carried forward and credited against the normal income tax for the
three (3) immediately succeeding taxable years.
(3) Relief from the Minimum Corporate Income Tax Under Certain Conditions. - The
Secretary of Finance is hereby authorized to suspend the imposition of the minimum
corporate income tax on any corporation which suffers losses on account of
prolonged labor dispute, or because of force majeure, or because of legitimate
business reverses.
The Secretary of Finance is hereby authorized to promulgate, upon recommendation
of the Commissioner, the necessary rules and regulation that shall define the terms
and conditions under which he may suspend the imposition of the minimum
corporate income tax in a meritorious case.
(4) Gross Income Defined. - For purposes of applying the minimum corporate
income tax provided under Subsection (E) hereof, the term 'gross income' shall mean
gross sales less sales returns, discounts and allowances and cost of goods sold. "Cost
of goods sold' shall include all business expenses directly incurred to produce the
merchandise to bring them to their present location and use.
For a trading or merchandising concern, 'cost of goods sold' shall include the invoice cost of
the goods sold, plus import duties, freight in transporting the goods to the place where the
goods are actually sold including insurance while the goods are in transit.
For a manufacturing concern, cost of 'goods manufactured and sold' shall include all costs of
production of finished goods, such as raw materials used, direct labor and manufacturing
overhead, freight cost, insurance premiums and other costs incurred to bring the raw
materials to the factory or warehouse.
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, 'cost of services' shall include interest
expense.
Section 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 equivalent to thirty-
five percent (35%) of the taxable income derived in the preceding taxable year from
all sources within the Philippines: provided, That effective January 1, 1998, the rate
of income tax shall be thirty-four percent (34%); effective January 1, 1999, the rate
shall be thirty-three percent (33%), and effective January 1, 2000 and thereafter, the
rate shall be thirty-two percent (32%).
In the case of corporations adopting the fiscal-year accounting period, the taxable
income shall be computed without regard to the specific date when sales, purchases
and other transactions occur. Their income and expenses for the fiscal year shall be
deemed to have been earned and spent equally for each month of the period.
The reduced corporate income tax rates shall be applied on the amount computed by
multiplying the number of months covered by the new rates within the fiscal year by
the taxable income of the corporation for the period, divided by twelve.
Provided, however, That a resident foreign corporation shall be granted the option to
be taxed at fifteen percent (15%) on gross income under the same conditions, as
provided in Section 27 (A).
(2) Minimum Corporate Income Tax on Resident Foreign Corporations. - A
minimum corporate income tax of two percent (2%) of gross income, as prescribed
under Section 27 (E) 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. - An international carrier doing business in the Philippines
shall pay a tax of two and one-half percent (2 1/2%) on its 'Gross Philippine Billings'
as defined hereunder:
(a) International Air Carrier. - 'Gross Philippine Billings' refers to the amount
of gross revenue derived from carriage of persons, excess baggage, cargo and
mail originating from the Philippines in a continuous and uninterrupted flight,
irrespective of the place of sale or issue and the place of payment of the ticket
or passage document: Provided, That tickets revalidated, exchanged and/or
indorsed to another international airline form part of the Gross Philippine
Billings if the passenger boards a plane in a port or point in the Philippines:
Provided, further, That for a flight which originates from the Philippines, but
transshipment of passenger takes place at any port outside the Philippines on
another airline, only the aliquot portion of the cost of the ticket corresponding
to the leg flown from the Philippines to the point of transshipment shall form
part of Gross Philippine Billings.
(b) International Shipping. - 'Gross Philippine Billings' means gross revenue
whether for passenger, cargo or mail originating from the Philippines up to
final destination, regardless of the place of sale or payments of the passage or
freight documents.
(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) to transact business with offshore banking units, including
any interest income derived from foreign currency loans granted to residents, shall be
subject to a final income tax at the rate of ten percent (10%) of such income.
Any income of nonresidents, whether individuals or corporations, from transactions
with said offshore banking units shall be exempt from income tax.
(5) Tax on Branch Profits Remittances. - Any profit remitted by a branch to its head
office shall be subject to a tax of fifteen (15%) which shall be based on the total
profits applied or earmarked for remittance without any deduction for the tax
component thereof (except those activities which are registered with the Philippine
Economic Zone Authority). The tax shall be collected and paid in the same manner
as provided in Sections 57 and 58 of this Code: provided, that interests, dividends,
rents, royalties, including remuneration for technical services, salaries, wages
premiums, annuities, emoluments or other fixed or determinable annual, periodic or
casual gains, profits, income and capital gains received by a foreign corporation
during each taxable year from all sources within the Philippines shall not be treated
as branch profits unless the same are effectively connected with the conduct of its
trade or business in the Philippines.
(6) Regional or Area Headquarters and Regional Operating Headquarters of
Multinational Companies. -
(a) Regional or area headquarters as defined in Section 22(DD) shall not be
subject to income tax.
(b) Regional operating headquarters as defined in Section 22(EE) shall pay a
tax of ten percent (10%) of their taxable income.
(7) Tax on Certain Incomes Received by a Resident Foreign Corporation. -
(a) Interest from Deposits and Yield or any other Monetary Benefit from
Deposit Substitutes, Trust Funds and Similar Arrangements and Royalties. -
Interest from any currency bank deposit and yield or any other monetary
benefit from deposit substitutes and from trust funds and similar
arrangements and royalties derived from sources within the Philippines shall
be subject to a final income tax at the rate of twenty percent (20%) of such
interest: Provided, however, That interest income derived by a resident
foreign corporation from a depository bank under the expanded foreign
currency deposit system shall be subject to a final income tax at the rate of
seven and one-half percent (7 1/2%) of such interest income.
(b) Income Derived under the Expanded Foreign Currency Deposit System. -
Income derived by a depository bank under the expanded foreign currency
deposit system from foreign currency transactions with 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, including interest income from foreign currency loans
granted by such depository banks under said expanded foreign currency
deposit system to residents, shall be subject to a final income 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.
(c) Capital Gains from Sale of Shares of Stock Not Traded in the Stock
Exchange. - A final tax at the rates prescribed below is hereby imposed upon
the net capital gains realized during the taxable year from the sale, barter,
exchange or other disposition of shares of stock in a domestic corporation
except shares sold or disposed of through the stock exchange:
Not over P100,000 5%
2. Provincial 1,200
Taxis -
2. Provincial 2,400
The rates of tax imposed under this Section shall be increased by twelve percent (12%) on January
1, 2000.
New brands shall be classified according to their current 'net retail price'.
For the above purpose, 'net retail price' shall mean the price at which the distilled spirit is sold on
retail in ten (10) major supermarkets in Metro Manila, excluding the amount intended to cover the
applicable excise tax and the value-added tax as of October 1, 1996.
The classification of each brand of distilled spirits based on the average net retail price as of
October 1, 1996, as set forth in Annex 'A', shall remain in force until revised by Congress.
Section 142. Wines, - On wines, there shall be collected per liter of volume capacity, the following
taxes:
(a) Sparkling wines/champagnes regardless of proof, if the net retail price per bottle
(excluding the excise tax and value-added tax) is:
(1) Five hundred pesos (P500) or less - One hundred pesos (P100); and
(2) More than Five hundred pesos (P500) - Three hundred pesos (P300).
(b) Still wines containing fourteen percent (14%) of alcohol by volume or less, Twelve pesos
(P12.00); and
(c) Still wines containing more than fourteen percent (14%) but not more than twenty-five
percent (25%) of alcohol by volume, Twenty-four pesos (P24.00).
Fortified wines containing more than twenty-five percent of alcohol by volume shall be taxed as
distilled spirits. 'Fortified wines' shall mean natural wines to which distilled spirits are added to
increase their alcoholic strength.
The rates of tax imposed under this Section shall be increased by twelve percent (12%) on January
1, 2000.
New brands shall be classified according to their current net retail price.
For the above purpose, 'net retail price' shall mean the price at which wine is sold on retail in ten
(10) major supermarkets in Metro Manila, excluding the amount intended to cover the applicable
excise tax and the value- added tax as of October 1, 1996.
The classification of each brand of wines based on its average net retail price as of October 1, 1996,
as set forth in Annex 'B', shall remain in force until revised by Congress.
Section 143. Fermented Liquor. - There shall be levied, assessed and collected an excise tax on
beer, lager beer, ale, porter and other fermented liquors except tuba, basi, tapuy and similar
domestic fermented liquors in accordance with the following schedule:
(a) If the net retail price (excluding the excise tax and value-added tax) per liter of volume
capacity is less than Fourteen pesos and fifty centavos (P14.50), the tax shall be Six pesos
and fifteen centavos (P6.15) per liter;
(b) If the net retail price (excluding the excise tax and the value-added tax) the per liter of
volume capacity is Fourteen pesos and fifty centavos (P14.50) up to Twenty-two pesos
(P22.00), the tax shall be Nine pesos and fifteen centavos (P9.15) per liter;
(c) If the net retail price (excluding the excise tax and the value-added tax) per liter of
volume capacity is more than Twenty-two pesos (P22.00), the tax shall be Twelve pesos and
fifteen centavos (P12.15) per liter.
Variants of existing brands which are introduced in the domestic market after the effectivity of
Republic Act No. 8240 shall be taxed under the highest classification of any variant of that brand.
Fermented liquor which are brewed and sold at micro-breweries or small establishments such as
pubs and restaurants shall be subject to the rate in paragraph (c) hereof.
The excise tax from any brand of fermented liquor within the next three (3) years from the
effectivity of Republic Act No. 8240 shall not be lower than the tax which was due from each brand
on October 1, 1996.
The rates of excise tax on fermented liquor under paragraphs (a), (b) and (c) hereof shall be
increased by twelve percent (12%) on January 1, 2000.
New brands shall be classified according to their current net retail price.
For the above purpose, 'net retail price' shall mean the price at which the fermented liquor is sold on
retail in twenty (20) major supermarkets in Metro Manila (for brands of fermented liquor marketed
nationally) excluding the amount intended to cover the applicable excise tax and the value-added
tax. For brands which are marketed only outside the Metro Manila, the 'net retail price' shall mean
the price at the which the fermented liquor is sold in five (5) major supermarkets in the region
excluding the amount intended to cover the applicable excise tax and the value-added tax.
The classification of each brand of fermented liquor based on its average net retail price as of
October 1, 1996, as set forth in Annex 'C', shall remain in force until revised by Congress.
'A variant of brand' shall refer to a brand on which a modifier is prefixed and/or suffixed to the root
name of the brand and/or a different brand which carries the same logo or design of the existing
brand.
Every brewer or importer of fermented liquor shall, within thirty (30) days from the effectivity of
R.A. No. 8240, and within the first five (5) days of every month thereafter, submit to the
Commissioner a sworn statement of the volume of sales for each particular brand of fermented
liquor sold at his establishment for the three-month period immediately preceding.
Any brewer or importer who, in violation of this Section, knowingly misdeclares or misrepresents
in his or its sworn statement herein required any pertinent data or information shall be penalized by
a summary cancellation or withdrawal of his or its permit to engage in business as brewer of
importer of fermented liquor.
Any corporation, association of partnership liable for any of the acts or omissions in violation of
this Section shall be fined treble the amount of deficiency taxes, surcharge, and interest which may
be assessed pursuant to this Section.
Any person liable for any of the acts or omissions prohibited under this Section shall be criminally
liable and penalized under Section 254 of this Code. Any person who willfully aids or abets in the
commission of any such act or omission shall be criminally liable in the same manner as the
principal.
If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the
sentence, without further proceedings for deportation.
CHAPTER IV - EXCISE TAX ON TOBACCO PRODUCTS
Section 144. Tobacco Products. - There shall be collected a tax of seventy-five centavos (P0.75) on
each kilogram of the following products of tobacco:
(a) Tobacco twisted by hand or reduced into a condition to be consumed in any manner other
than the ordinary mode of drying and curing;
(b) Tobacco prepared or partially prepared with or without the use of nay machine or
instruments or without being pressed or sweetened; and
(c) Fine-cut shorts and refuse, scraps, clippings, cuttings, stems and sweepings of tobacco.
Fine-cut shorts and refuse, scraps, clippings, cuttings, stems and sweepings of tobacco resulting
from the handling or stripping of whole leaf tobacco may be transferred, disposed of, or otherwise
sold, without prepayment of the excise tax herein provided for under such conditions as may be
prescribed in the rules and regulations promulgated by the Secretary of Finance, upon
recommendation of the Commissioner, if the same are to be exported or to be used in the
manufacture of other tobacco products on which the excise tax will eventually be paid on the
finished product.
On tobacco specially prepared for chewing so as to be unsuitable for use in any other manner, on
each kilogram, Sixty centavos (P0.60).
Section 145. Cigars and Cigarettes. -
(A) Cigars. - There shall be levied, assessed and collected on cigars a tax of One peso
(P1.00) per cigar.
(B) Cigarettes Packed by Hand. - There shall be levied, assessed and collected on cigarettes
packed by hand a tax of Forty centavos (P0.40) per pack.
(C) Cigarettes Packed by Machine.- There shall be levied, assessed and collected on
cigarettes packed by machine a tax at the rates prescribed below:
(1) If the net retail price (excluding the excise tax and the value-added tax) is above
Ten pesos (P10.00) per pack, the tax shall be Twelve pesos (P12.00) per pack;
(2) If the net retail price (excluding the excise tax and the value-added tax) exceeds
Six pesos and fifty centavos (P6.50) but does not exceed Ten pesos (P10.00) per
pack, the tax shall be Eight pesos (8.00) per pack;
(3) If the net retail price (excluding the excise tax and the value-added tax) is Five
pesos (P5.00) but does not exceed Six pesos and fifty centavos (P6.50) per pack, the
tax shall be Five pesos (P5.00) per pack;
(4) If the net retail price (excluding the excise tax and the value-added tax is below
Five pesos (P5.00) per pack, the tax shall be One peso (P1.00) per pack;
Variants of existing brands of cigarettes which are introduced in the domestic market after the
effectivity of R.A. No. 8240 shall be taxed under the highest classification of any variant of that
brand.
The excise tax from any brand of cigarettes within the next three (3) years from the effectivity of
R.A. No. 8240 shall not be lower than the tax, which is due from each brand on October 1, 1996:
Provided, however, That in cases where the excise tax rates imposed in paragraphs (1), (2), (3) and
(4) hereinabove will result in an increase in excise tax of more than seventy percent (70%); for a
brand of cigarette, the increase shall take effect in two tranches: fifty percent (50%) of the increase
shall be effective in 1997 and one hundred percent (100%) of the increase shall be effective in 1998.
Duly registered or existing brands of cigarettes or new brands thereof packed by machine shall only
be packed in twenties.
The rates of excise tax on cigars and cigarettes under paragraphs (1), (2), (3) and (4) hereof, shall be
increased by twelve percent (12%) on January 1, 2000.
New brands shall be classified according to their current net retail price.
For the above purpose, 'net retail price' shall mean the price at which the cigarette is sold on retail in
twenty (20) major supermarkets in Metro Manila (for brands of cigarettes marketed nationally),
excluding the amount intended to cover the applicable excise tax and the value-added tax. For
brands which are marketed only outside Metro Manila, the 'net retail price' shall mean the price at
which the cigarette is sold in five (5) major supermarkets in the region excluding the amount
intended to cover the applicable excise tax and the value-added tax.
The classification of each brand of cigarettes based on its average net retail price as of October 1,
1996, as set forth in Annex 'D', shall remain in force until revised by Congress.
Variant of a brand' shall refer to a brand on which a modifier is prefixed and/or suffixed to the root
name of the brand and/or a different brand which carries the same logo or design of the existing
brand.
Manufactures and importers of cigars and cigarettes shall, within thirty (30) days from the
effectivity of R. A. No. 8240 and within the first five (5) days of every month thereafter submit to
the Commissioner a sworn statement of the volume of sales for each particular brand of cigars
and/or cigarettes sold at his establishment for the three-month period immediately preceding.
Any manufacturer or importer who, in violation of this Section, knowingly misdeclares or
misrepresents in his or its sworn statement herein required any pertinent data or information shall,
upon discovery, be penalized by a summary cancellation or withdrawal of his or its permit to
engage in business as manufacturer or importer of cigars or cigarettes.
Any corporation, association or partnership liable for any of the acts or omissions in violation of
this Section shall be fined treble the amount of deficiency taxes, surcharges and interest which may
be assessed pursuant to this Section.
Any person liable for any of the acts or omissions prohibited under this Section shall be criminally
liable and penalized under Section 254 of this Code. Any person who willfully aids or abets in the
commission of any such act or omission shall be criminally liable in the same manner as the
principal.
If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the
sentence without further proceedings for deportation.
Section 146. Inspection Fee. - For inspection made in accordance with this Chapter, there shall be
collected a fee of Fifty centavos (P0.50) for each thousand cigars or fraction thereof; Ten centavos
(P0.10) for each thousand cigarettes of fraction thereof; Two centavos (P0.02) for each kilogram of
leaf tobacco or fraction thereof; and Three centavos (P0.03) for each kilogram or fraction thereof, of
scrap and other manufactured tobacco.
The inspection fee on leaf tobacco, scrap, cigars, cigarettes and other tobacco products as defined in
Section 147 of this Code shall be paid by the wholesaler, manufacturer, producer, owner or operator
of redrying plant, as the case may be, immediately before removal there of from the establishment
of the wholesaler, manufacturer, owner or operator of the redrying plant. In case of imported leaf
tobacco and products thereof, the inspection fee shall be paid by the importer before removal from
customs' custody.
Fifty percent (50%) of the tobacco inspection fee shall accrue to the Tobacco Inspection Fund
created by Section 12 of Act No. 2613, as amended by Act No. 3179, and fifty percent (50%) shall
accrue to the Cultural Center of the Philippines.
Section 147. Definition of Terms. - When used herein and in statements or official forms prescribed
hereunder, the following terms shall have the meaning indicated:
(a) 'Cigars' mean all rolls of tobacco or any substitute thereof, wrapped in leaf tobacco.
(b) 'Cigarettes' mean all rolls of finely-cut leaf tobacco, or any substitute therefor, wrapped
in paper or in any other material.
(c) 'Wholesale price' shall mean the amount of money or price paid for cigars or cigarettes
purchased for the purpose of resale, regardless of quantity.
(d) 'Retail price' shall mean the amount of money or price which an ultimate consumer or
end-user pays for cigars or cigarettes purchased.
CHAPTER V - EXCISE TAX ON PETROLEUM PRODUCTS
Section 148. Manufactured Oils and Other Fuels. - There shall be collected on refined and
manufactured mineral oils and motor fuels, the following excise taxes which shall attach to the
goods hereunder enumerated as soon as they are in existence as such:
(a) Lubricating oils and greases, including but not limited to, basestock for lube oils and
greases, high vacuum distillates, aromatic extracts, and other similar preparations, and
additives for lubricating oils and greases, whether such additives are petroleum based or not,
per liter and kilogram respectively, of volume capacity or weight, Four pesos and fifty
centavos (P4.50): Provided, however, That the excise taxes paid on the purchased feedstock
(bunker) used in the manufacture of excisable articles and forming part thereof shall be
credited against the excise tax due therefrom: Provided, further, That lubricating oils and
greases produced from basestocks and additives on which the excise tax has already been
paid shall no longer be subject to excise tax: Provided, finally, That locally produced or
imported oils previously taxed as such but are subsequently reprocessed, rerefined or
recycled shall likewise be subject to the tax imposed under this Section.
(b) Processed gas, per liter of volume capacity, Five centavos (P0.05);
(c) Waxes and petrolatum, per kilogram, Three pesos and fifty centavos (P3.50);
(d) On denatured alcohol to be used for motive power, per liter of volume capacity, Five
centavos (P0.05): Provided, That unless otherwise provided by special laws, if the denatured
alcohol is mixed with gasoline, the excise tax on which has already been paid, only the
alcohol content shall be subject to the tax herein prescribed. For purposes of this Subsection,
the removal of denatured alcohol of not less than one hundred eighty degrees (180o ) proof
(ninety percent (90%) absolute alcohol) shall be deemed to have been removed for motive
power, unless shown otherwise;
(e) Naphtha, regular gasoline and other similar products of distillation, per liter of volume
capacity, Four pesos and eighty centavos (P4.80): Provided, however, That naphtha, when
used as a raw material in the production of petrochemical products or as replacement fuel for
natural-gas-fired-combined cycle power plant, in lieu of locally-extracted natural gas during
the non-availability thereof, subject to the rules and regulations to be promulgated by the
Secretary of Energy, in consultation with the Secretary of Finance, per liter of volume
capacity, Zero (P0.00): Provided, further, That the by-product including fuel oil, diesel fuel,
kerosene, pyrolysis gasoline, liquefied petroleum gases and similar oils having more or less
the same generating power, which are produced in the processing of naphtha into
petrochemical products shall be subject to the applicable excise tax specified in this Section,
except when such by-products are transferred to any of the local oil refineries through sale,
barter or exchange, for the purpose of further processing or blending into finished products
which are subject to excise tax under this Section;
(f) Leaded premium gasoline, per liter of volume capacity, Five pesos and thirty-five
centavos (P5.35); unleaded premium gasoline, per liter of volume capacity, Four pesos and
thirty-five centavos (P4.35);
(g) Aviation turbo jet fuel, per liter of volume capacity, Three pesos and sixty-seven
centavos (P3.67);
(h) Kerosene, per liter of volume capacity, Sixty centavos (0.60): Provided, That kerosene,
when used as aviation fuel, shall be subject to the same tax on aviation turbo jet fuel under
the preceding paragraph (g), such tax to be assessed on the user thereof;
(i) Diesel fuel oil, an on similar fuel oils having more or less the same generating power, per
liter of volume capacity, One peso and sixty-three centavos (P1.63);
(j) Liquefied petroleum gas, per liter, Zero (P0.00): Provided, That liquefied petroleum gas
used for motive power shall be taxed at the equivalent rate as the excise tax on diesel fuel
oil;
(k) Asphalts, per kilogram, Fifty-six centavos (P0.56); and
(l) Bunker fuel oil, and on similar fuel oils having more or less the same generating power,
per liter of volume capacity, Thirty centavos (P0.30).
CHAPTER VI - EXCISE TAX ON MISCELLANEOUS ARTICLES
Section 149. Automobiles. - There shall be levied, assessed and collected an ad valorem tax on
automobiles based on the manufacturer's or importer's selling price, net of excise and value-added
tax, in accordance with the following schedule:
Engine Displacement (in cc.)
Gasoline Diesel Tax Rate
Up to 1600 Up to 1800 15%
1601 to 2000 1801 to 2300 35%
2001 to 2700 2301 to 3000 50%
2701 or over 3001 to over 100%
Provided, That in the case of imported automobiles not for sale, the tax imposed herein shall be
based on the total value used by the Bureau of Customs in determining tariff and customs duties,
including customs duty and all other charges, plus ten percent (10%) of the total thereof.
Automobiles acquired for use by persons or entities operating within the freeport zone shall be
exempt from excise tax: provided, That utility vehicles of registered zone enterprises, which are
indispensable in the conduct and operations of their business, such as delivery trucks and cargo vans
with gross vehicle weight above three (3) metric tons may be allowed unrestricted use outside the
freeport zone: Provided, further, That vehicles owned by tourist-oriented enterprises, such as tourist
buses and cars with yellow plates, color-coded, and utilized exclusively for the purpose of
transporting tourists in tourism-related activities, and service vehicles of freeport registered
enterprises and executives, such as company service cars and expatriates' and investors' automobiles
brought in the name of such enterprises, may be used outside the freeport zone for such periods as
may be prescribed by the Departments of Finance, and Trade and Industry, the Bureau of Customs
and the Freeport authorities concerned, which in no case shall exceed fourteen (14) days per month.
In case such tourist buses and cars, service vehicles of registered freeport enterprises and company
service cars are used for more than an aggregate period of fourteen (14) days per month outside of
the freeport zone, the owner or importer shall pay the corresponding customs duties, taxes and
charges.
In the case of personally-owned vehicles of residents, including leaseholders of residences inside
the freeport zone, the use of such vehicles outside of the freeport zone shall be deemed an
introduction into the Philippine customs territory, and such introduction shall be deemed an
importation into the Philippines and shall subject such vehicles to Customs duties taxes and
charges, including excise tax due on such vehicle.
The Secretaries of Finance, and Trade and Industry, together with the Commissioner of Customs
and the administrators of the freeports concerned, shall promulgate rules and regulations for the
proper identification and control of said automobiles.
Section 150. Non-essential Goods. - There shall be levied, assessed and collected a tax equivalent
to twenty-percent (20%) based on the wholesale price or the value of importation used by the
Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added tax,
of the following goods:
(a) All goods commonly or commercially known as jewelry, whether real or imitation,
pearls, precious and semi-precious stones and imitations thereof; goods made of, or
ornamented, mounted or fitted with, precious metals or imitations thereof or ivory (not
including surgical and dental instruments, silver-plated wares, frames or mountings for
spectacles or eyeglasses, and dental gold or gold alloys and other precious metals used in
filling, mounting or fitting the teeth); opera glasses and lorgnettes. The term 'precious
metals' shall include platinum, gold, silver and other metals of similar or greater value. The
term 'imitations thereof shall include platings and alloys of such metals;
(b) Perfumes and toilet waters;
(c) Yachts and other vessels intended for pleasure or sports.
CHAPTER VII - EXCISE TAX ON MINERAL PRODUCTS
Section 151. Mineral Products. -
(A) Rates of Tax. - There shall be levied, assessed and collected on minerals, mineral
products and quarry resources, excise tax as follows:
(1) On coal and coke, a tax of Ten pesos (P10.00) per metric ton;
(2) On all nonmetallic minerals and quarry resources, a tax of two percent (2%)
based on the actual market value of the gross output thereof at the time of removal, in
the case of those locally extracted or produced; or the value used by the Bureau of
Customs in determining tariff and customs duties, net of excise tax and value-added
tax, in the case of importation.
Notwithstanding the provision of paragraph (4) of Subsection (A) of Section 151,
locally extracted natural gas and liquefied natural gas shall be taxed at the rate of two
percent (2%);
(3) On all metallic minerals, a tax based on the actual market value of the gross
output thereof at the time of removal, in the case of those locally extracted or
produced; or the value used by the Bureau of Customs in determining tariff and
customs duties, net of excise tax and value-added tax, in the case of importation, in
accordance with the following schedule;
(a) Copper and other metallic minerals;
(i) On the first three (3) years upon the effectivity of Republic Act No.
7729, one percent (1%);
(ii) On the fourth and the fifth years, one and a half percent (1 %);
and
(iii) On the sixth year and thereafter, two percent (2%);
(b) Gold and chromite, two percent (2%).
(4) On indigenous petroleum, a tax of three percent (3%) of the fair international
market price thereof, on the first taxable sale, barter, exchange or such similar
transaction, such tax to be paid by the buyer or purchaser before removal from the
place of production. The phrase 'first taxable sale, barter, exchange or similar
transaction' means the transfer of indigenous petroleum in its original state to a first
taxable transferee. The fair international market price shall be determined in
consultation with an appropriate government agency.
For the purpose of this Subsection, 'indigenous petroleum' shall include locally-
extracted mineral oil, hydrocarbon gas, bitumen, crude asphalt, mineral gas and all
other similar or naturally associated substances with the exception of coal, peat,
bituminous shale and/or stratified mineral deposits.
(B) For purposes of this Section, the term -
(1) 'Gross output' shall be interpreted as the actual market value of minerals or
mineral products or of bullion from each mine or mineral land operated as a separate
entity, without any deduction from mining, milling, refining (including all expenses
incurred to prepare the said minerals or mineral products in a marketable state), as
well as transporting, handling, marketing or any other expenses: Provided, That if the
minerals or mineral products are sold or consigned abroad by the lessee or owner of
the mine under C.I.F. terms, the actual cost of ocean freight and insurance shall be
deducted: provided, however, That in the case of mineral concentrate, not traded in
commodity exchanges in the Philippines or abroad, such as copper concentrate, the
actual market value shall be the world price quotations of the refined mineral
products content thereof prevailing in the said commodity exchanges, after deducting
the smelting, refining and other charges incurred in the process of converting the
mineral concentrates into refined metal traded in those commodity exchanges.
(2) 'Minerals' shall mean all naturally occurring inorganic substances (found in
nature) whether in solid, liquid, gaseous or any intermediate state.
(3) 'Mineral products' shall mean things produced and prepared in a marketable state
by simple treatment processes such as washing or drying, but without undergoing
any chemical change or process or manufacturing by the lessee, concessionaire or
owner of mineral lands.
(4) 'Quarry resources' shall mean any common stone or other common mineral
substances as the Director of the Bureau of Mines and Geo-Sciences may declare to
be quarry resources such as, but not restricted to, marl, marble, granite, volcanic
cinders, basalt, tuff and rock phosphate: Provided, That they contain no metal or
other valuable minerals in economically workable quantities.
CHAPTER VIII - ADMINISTRATIVE PROVISIONS REGULATING BUSINESS OF
PERSONS DEALING IN ARTICLES SUBJECT TO EXCISE TAX
Section 152. Extent of Supervision Over Establishments Producing Taxable Output. - The Bureau of
Internal Revenue has authority to supervise establishments where articles subject to excise tax are
made or kept. The Secretary of Finance shall prescribe rules and regulations as to the mode in
which the process of production shall be conducted insofar as may be necessary to secure a sanitary
output and to safeguard the revenue.
Section 153. Records to be Kept by Manufacturers; Assessment Based Thereon. - Manufacturers of
articles subject to excise tax shall keep such records as required by rules and regulations
recommended by the Commissioner and approved by the Secretary of Finance, and such records,
whether of raw materials received into the factory or of articles produced therein, shall be deemed
public and official documents for all purposes.
The records of raw materials kept by such manufacturers may be used as evidence by which to
determine the amount of excise taxes due from them, and whenever the amounts of raw material
received into any factory exceeds the amount of manufactured or partially manufactured products
on hand and lawfully removed from the factory, plus waste removed or destroyed, and a reasonable
allowance for unavoidable loss in manufacture, the Commissioner may assess and collect the tax
due on the products which should have been produced from the excess.
The excise tax due on the products as determined and assessed in accordance with this Section shall
be payable upon demand or within the period specified therein.
Section 154. Premises Subject to Approval by Commissioner. - No person shall engage in business
as a manufacturer of or dealer in articles subject to excise tax unless the premises upon which the
business is to conducted shall have been approved by the Commissioner.
Section 155. Manufacturers to Provide Themselves with Counting or Metering Devices to
Determine Production. - Manufacturers of cigarettes, alcoholic products, oil products and other
articles subject to excise tax that can be similarly measured shall provide themselves with such
necessary number of suitable counting or metering devices to determine as accurately as possible
the volume, quantity or number of the articles produced by them under rules and regulations
promulgated by the Secretary of Finance, upon recommendation of the Commissioner.
This requirement shall be complied with before commencement of operations.
Section 156. Labels and Form of Packages. - All articles of domestic manufacture subject to excise
tax and all leaf tobacco shall be put up and prepared by the manufacturer or producer, when
removed for sale or consumption, in such packages only and bearing such marks or brand as shall
be prescribed in the rules and regulations promulgated by the Secretary of Finance; and goods of
similar character imported into the Philippines shall likewise be packed and marked in such a
manner as may be required.
Section 157. Removal of Articles After the Payment of Tax. - When the tax has been paid on articles
or products subject to excise tax, the same shall not thereafter be stored or permitted to remain in
the distillery, distillery warehouse, bonded warehouse, or other factory or place where produced.
However, upon prior permit from the Commissioner, oil refineries and/or companies may store or
deposit tax-paid petroleum products and commingle the same with its own manufactured products
not yet subjected to excise tax. Imported petroleum products may be allowed to be withdrawn from
customs custody without the prepayment of excise tax, which products may be commingled with
the tax-paid or bonded products of the importer himself after securing a prior permit from the
Commissioner: Provided, That withdrawals shall be taxed and accounted for on a 'first-in, first-out'
basis.
Section 158. Storage of Goods in Internal-revenue Bonded Warehouses. - An internal-revenue
bonded warehouse may be maintained in any port of entry for the storing of imported or
manufactured goods which are subject to excise tax. The taxes on such goods shall be payable only
upon removal from such warehouse and a reasonable charge shall be made for their storage therein.
The Commissioner, may, in his discretion, exact a bond to secure the payment of the tax on any
goods so stored.
Section 159. Proof of Exportation; Exporter's Bond. - Exporters of goods that would be subject to
excise tax, if sold or removed for consumption in the Philippines, shall submit proof of exportation
satisfactory to the Commissioner, and , when the same is deemed necessary, shall be required to
give a bond prior to the removal of the goods for shipment, conditioned upon the exportation of the
same in good faith.
Section 160. Manufacturers' and Importers' Bond. - Manufacturers and importers of articles subject
to excise tax shall post a bond subject to the following conditions:
(A) Initial Bond. - In case of initial bond, the amount shall be equal to One Hundred
thousand pesos (P100,000): Provided, That if after six (6) months of operation, the amount
of initial bond is less than the amount of the total excise tax paid during the period, the
amount of the bond shall be adjusted to twice the tax actually paid for the period.
(B) Bond for the Succeeding Years of Operation. - The bonds for the succeeding years of
operation shall be based on the actual total excise tax paid during the period the year
immediately preceding the year of operation.
Such bond shall be conditioned upon faithful compliance, during the time such business is
followed, with laws and rules and regulations relating to such business and for the satisfaction of all
fines and penalties imposed by this Code.
Section 161. Records to be Kept by Wholesale Dealers. - Wholesale dealers shall keep records of
their purchases and sales or deliveries of articles subject to excise tax, in such form as shall be
prescribed in the rules and regulations by the Secretary of Finance. These records and the entire
stock of goods subject to tax shall be subject at all times to inspection of internal revenue officers.
Section 162. Records to be Kept by Dealers in Leaf Tobacco. - Dealers in leaf tobacco shall keep
records of the products sold or delivered by them to other persons in such manner as may be
prescribed in the rules and regulations by the Secretary of Finance, such records to be at all times
subject to inspection of internal revenue officers.
Section 163. Preservation of Invoices and Stamps. - All dealers whosoever shall preserve, for the
period prescribed in Section 235, all official invoices received by them from other dealers or from
manufacturers, together with the fractional parts of stamps affixed thereto, if any, and upon demand,
shall deliver or transmit the same to any interval revenue officer.
Section 164. Information to be Given by Manufacturers, Importers, Indentors, and Wholesalers of
any Apparatus or Mechanical Contrivance Specially for the Manufacture of Articles Subject to
Excise Tax and Importers, Indentors, Manufacturers or Sellers of Cigarette Paper in Bobbins,
Cigarette Tipping Paper or Cigarette Filter Tips. - Manufacturers, indentors, wholesalers and
importers of any apparatus or mechanical contrivance specially for the manufacture of articles
subject to tax shall, before any such apparatus or mechanical contrivance is removed from the place
of manufacture or from the customs house, give written information to the Commissioner as to the
nature and capacity of the same, the time when it is to be removed, and the place for which it is
destined, as well as the name of the person by whom it is to be used; and such apparatus or
mechanical contrivance shall not be set up nor dismantled or transferred without a permit in writing
from the Commissioner.
A written permit from the Commissioner for importing, manufacturing or selling of cigarette paper
in bobbins or rolls, cigarette tipping paper or cigarette filter tips is required before any person shall
engage in the importation, manufacture or sale of the said articles. No permit to sell said articles
shall be granted unless the name and address of the prospective buyer is first submitted to the
Commissioner and approved by him. Records, showing the stock of the said articles and the
disposal thereof by sale of persons with their respective addresses as approved by the
Commissioner, shall be kept by the seller, and records, showing stock of said articles and
consumption thereof, shall be kept by the buyer, subject to inspection by internal revenue officers.
Section 165. Establishment of Distillery Warehouse. - Every distiller, when so required by the
Commissioner, shall provide at his own expense a warehouse, and shall be situated in and constitute
a part of his distillery premises and to be used only for the storage of distilled spirits of his own
manufacture until the tax thereon shall have been paid; but no dwelling house shall be used for such
purpose. Such warehouse, when approved by the Commissioner, is declared to be a bonded
warehouse, and shall be known as a distillery warehouse.
Section 166. Custody of Distillery or Distillery Warehouse. - Every distillery or distillery
warehouse shall be in the joint custody of the revenue inspector, if one is assigned thereto, and of
the proprietor thereof. It shall be kept securely locked, and shall at no time be unlocked or opened
or remain unlocked or opened unless in the presence of such revenue inspector or other person who
may be designated to act for him as provided by law.
Section 167. Limitation on Quantity of Spirits Removed from Warehouse. - No distilled spirits shall
be removed from any distillery, distillery warehouse, or bonded warehouse in quantities of less than
fifteen (15) gauge liters at any one time, except bottled goods, which may be removed by the case
of not less than twelve (12) bottles.
Section 168. Denaturing Within Premises. - For purposes of this Title, the process of denaturing
alcohol shall be effected only within the distillery premises where the alcohol to be denatured is
produced in accordance with formulas duly approved by the Bureau of Internal Revenue and only in
the presence of duly designated representatives of said Bureau.
Section 169. Recovery of Alcohol for Use in Arts and Industries. - Manufacturers employing
processes in which denatured alcohol used in arts and industries is expressed or evaporated from the
articles manufactured may, under rules and regulations to be prescribed by the Secretary of Finance,
upon recommendation of the Commissioner, be permitted to recover the alcohol so used and restore
it again to a condition suitable solely for use in manufacturing processes.
Section 170. Requirements Governing Rectification and Compounding of Liquors. - Persons
engaged in the rectification or compounding of liquors shall, as to the mode of conducting their
business and supervision over the same, be subject to all the requirements of law applicable to
distilleries: Provided, That where a rectifier makes use of spirits upon which the excise tax has been
paid, no further tax shall be collected on any rectified spirits produced exclusively therefrom:
Provided, further, That compounders in the manufacture of any intoxicating beverage whatever,
shall not be allowed to make use of spirits upon which the excise tax has not been previously paid.
Section 171. Authority of Internal Revenue Officer in Searching for Taxable Articles. - Any internal
revenue officer may, in the discharge of his official duties, enter any house, building or place where
articles subject to tax under this Title are produced or kept, or are believed by him upon reasonable
grounds to be produced or kept, so far as may be necessary to examine, discover or seize the same.
He may also stop and search any vehicle or other means of transportation when upon reasonable
grounds he believes that the same carries any article on which the excise tax has not been paid.
Section 172. Detention of Package Containing Taxable Articles. - Any revenue officer may detain
any package containing or supposed to contain articles subject to excise tax when he has good
reason to believe that the lawful tax has not been paid or that the package has been or is being
removed in violation of law, and every such package shall be held by such officer in a safe place
until it shall be determined whether the property so detained is liable by law to be proceeded against
for forfeiture; but such summary detention shall not continue in any case longer than seven (7) days
without due process of law or intervention of the officer to whom such detention is to be reported.
TITLE VII
DOCUMENTARY STAMP TAX
Section 173. Stamp Taxes Upon Documents, Loan Agreements, Instruments and Papers. - Upon
documents, instruments, loan agreements and papers, and upon acceptances, assignments, sales and
transfers of the obligation, right or property incident thereto, there shall be levied, collected and
paid for, and in respect of the transaction so had or accomplished, the corresponding documentary
stamp taxes prescribed in the following Sections of this Title, by the person making, signing,
issuing, accepting, or transferring the same wherever the document is made, signed, issued,
accepted or transferred when the obligation or right arises from Philippine sources or the property is
situated in the Philippines, and the same time such act is done or transaction had: Provided, That
whenever one party to the taxable document enjoys exemption from the tax herein imposed, the
other party who is not exempt shall be the one directly liable for the tax.
Section 174. Stamp Tax on Debentures and Certificates of Indebtedness. - On all debentures and
certificates of indebtedness issued by any association, company or corporation, 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 face value of such documents.
Section 175. 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, there shall be collected a documentary stamp tax of Two pesos (P2.00) on
each Two hundred pesos (P200), or fractional part thereof, of the par value, of such shares of stock:
Provided, That in the case of the original issue of shares of stock without par value the amount of
the documentary stamp tax herein prescribed shall be based upon the actual consideration for the
issuance of such shares of stock: provided, further, That in the case of stock dividends, on the actual
value represented by each share.
Section 176. Stamp Tax on Sales, Agreements to Sell, Memoranda of Sales, Deliveries or Transfer
of Due-bills, Certificates of Obligation, or Shares of Certificates of Stock. - On all sales, or
agreements to sell, or memoranda of sale, or deliveries, or transfer of due-bills, certificates of
obligation, or shares of 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 due-bills, certificates of obligation or stock, or to secure the future payment of
money, or for the future transfer of any due-bill, certificate of obligation or 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 due-bill, certificate of obligation or
stock; Provided, That only one tax shall be collected on each sale or transfer of stock or securities
from one person to another, regardless of whether or not a certificate of stock or obligation 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 documentary stamp tax herein prescribed shall be
equivalent to twenty-five percent (25%) of the documentary stamp tax paid upon the original issue
of said stock.
Section 177. Stamp Tax on Bonds, Debentures, Certificate 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, such as tax as is required by law on similar instruments when issued, sold
or transferred in the Philippines.
Section 178. Stamp Tax on Certificates of Profits or Interest in Property or Accumulations. - On all
certificates of profits, or any certificate or memorandum showing interest in the property or
accumulations of any association, company or corporation, and on all transfers of such certificates
or memoranda, there shall be collected a documentary stamp tax of Fifty centavos (P0.50) on each
Two hundred pesos (P200), or fractional part thereof, of the face value of such certificate or
memorandum.
Section 179. 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 One peso and fifty centavos (P1.50).
Section 180. Stamp Tax on All Bonds, Loan Agreements, promissory Notes, Bills of Exchange,
Drafts, Instruments and Securities Issued by the Government or Any of its Instrumentalities,
Deposit Substitute Debt Instruments, Certificates of Deposits Bearing Interest and Others Not
Payable on Sight or Demand. - On all bonds, loan agreements, including those signed abroad,
wherein the object of the contract is located or used in the Philippines, bills of exchange (between
points within the Philippines), drafts, instruments and securities issued by the Government or any of
its instrumentalities, deposit substitute debt instruments, certificates of deposits drawing interest,
orders for the payment of any sum of money otherwise than at sight or on demand, on all
promissory notes, whether negotiable or non-negotiable, except bank notes issued for circulation,
and on each renewal of any such note, there shall be collected a documentary stamp tax of Thirty
centavos (P0.30) on each Two hundred pesos (P200), or fractional part thereof, of the face value of
any such agreement, bill of exchange, draft, certificate of deposit, or note: Provided, That only one
documentary stamp tax shall be imposed on either loan agreement, or promissory notes issued to
secure such loan, whichever will yield a higher tax: Provided, however, That loan agreements or
promissory notes the aggregate of which does not exceed Two hundred fifty thousand pesos
(P250,000) executed by an individual for his purchase on installment for his personal use or that of
his family and not for business, resale, barter or hire of a house, lot, motor vehicle, appliance or
furniture shall be exempt from the payment of the documentary stamp tax provided under this
Section.
Section 181. Stamp Tax Upon Acceptance of Bills of Exchange and Others. - Upon any acceptance
or payment of any bill of exchange or order for the payment of money purporting to be drawn in a
foreign country but payable in the Philippines, there shall be collected a documentary stamp tax of
Thirty centavos (P0.30) 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 to such value, if expressed
in foreign currency.
Section 182. Stamp Tax on Foreign Bills of Exchange and Letters of Credit. - On all foreign bills of
exchange and letters 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 centavos (P0.30) 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.
Section 183. Stamp Tax on Life 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, there shall be collected a documentary stamp tax of Fifty centavos
(P0.50) on each Two hundred pesos (P200), or fractional part thereof, of the amount insured by any
such policy.
Section 184. Stamp Tax on Policies of Insurance Upon Property. - On all policies of insurance or
other instruments by whatever name the same may be called, by which insurance shall be made or
renewed upon property of any description, including rents or profits, against peril by sea or on
inland waters, or by fire or lightning, there shall be collected a documentary stamp tax of Fifty
centavos (P0.50) on each Four pesos (P4.00), or fractional part thereof, 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.
Section 185. Stamp Tax on Fidelity Bonds and Other Insurance Policies. - On all policies of
insurance or bonds or obligations of the nature of indemnity for loss, damage or liability made or
renewed by any person, association, company or corporation transacting the business of accident,
fidelity, employer's liability, plate, glass, steam, boiler, burglar, elevator, automatic sprinkler, or
other branch of insurance (except life, marine, inland, and fire insurance), and all bonds,
undertakings, or recognizances, conditioned for the performance of the duties of any office or
position, for the doing or not doing of anything therein specified, and on all obligations
guaranteeing the validity or legality of any bond or other obligations issued by any province, city,
municipality, or other public body or organization, and on all obligations guaranteeing the title to
any real estate, or 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 Fifty centavos
(P0.50) on each Four pesos (P4.00), or fractional part thereof, of the premium charged.
Section 186. Stamp Tax on Policies of Annuities and Pre-Need Plans. - On all policies of annuities,
or other instruments by whatever name the same may be called, whereby an annuity may be made,
transferred or redeemed, there shall be collected a documentary stamp tax of One peso and fifty
centavos (P1.50) on each Two hundred pesos (P200) or fractional part thereof, of the capital of the
annuity, or should this be unknown, then on each Two hundred (P200) pesos, or fractional part
thereof, of thirty-three and one-third (33 1/3) times the annual income. On pre-need plans, the
documentary stamp tax shall be Fifty centavos (P0.50) on each Five hundred pesos (P500), or
fractional part thereof, of the value or amount of the plan.
Section 187. Stamp Tax on Indemnity Bonds. - On all bonds for indemnifying any person, firm or
corporation who shall become bound or engaged as surety for the payment of any sum of money or
for the due execution or performance of the duties of any office or position or to account for money
received by virtue thereof, and on all other bonds of any description, except such as may be
required in legal proceedings, or are otherwise provided for herein, there shall be collected a
documentary stamp tax of Thirty centavos (P0.30) on each Four pesos (P4.00), or fractional part
thereof, of the premium charged.
Section 188. Stamp Tax on Certificates. - On each certificate of damages or otherwise, and on every
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 Fifteen pesos (P15.00).
Section 189. Stamp Tax on Warehouse Receipts. - On each warehouse receipt for property held in
storage in a public or private warehouse or yard for any person other than the proprietor of such
warehouse or yard, there shall be collected a documentary stamp tax of Fifteen pesos (P15.00):
Provided, That no tax shall be collected on each warehouse receipt issued to any one person in any
one calendar month covering property the value of which does not exceed Two hundred pesos
(P200).
Section 190. Stamp Tax on Jai-Alai, Horse Racing Tickets, lotto or Other Authorized Numbers
Games. - On each jai-alai, horse race ticket, lotto, or other authorized number games, there shall be
collected a documentary stamp tax of Ten centavos (P0.10): Provided, That if the cost of the ticket
exceeds One peso (P1.00), an additional tax of Ten centavos (P0.10) on every One peso (P1.00, or
fractional part thereof, shall be collected.
Section 191. Stamp Tax on Bills of Lading or Receipts. - On each set of bills of lading or receipts
(except charter party) for any goods, merchandise or effects shipped from one port or place in the
Philippines to another port or place in the Philippines (except on ferries across rivers), or to any
foreign port, there shall be collected documentary stamp tax of One peso (P1.00), if the value of
such goods exceeds One hundred pesos (P100) and does not exceed One Thousand pesos (P1,000);
Ten pesos (P10), if the value exceeds One thousand pesos (P1,000): Provided, however, That freight
tickets covering goods, merchandise or effects carried as accompanied baggage of passengers on
land and water carriers primarily engaged in the transportation of passengers are hereby exempt.
Section 192. Stamp Tax on Proxies. - On each proxy for voting at any election for 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 Fifteen pesos (P15.00).
Section 193. Stamp Tax on Powers of Attorney. - On each power of attorney 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 Five pesos (P5.00).
Section 194. Stamp tax on Leases and Other Hiring Agreements. - On each lease, agreement,
memorandum, or contract for hire, use or rent of any lands or tenements, or portions thereof, there
shall be collected a documentary stamp tax of Three pesos (P3.00) for the first Two thousand pesos
(P2,000), or fractional part thereof, and an additional One peso (P1.00) for every One Thousand
pesos (P1,000) or fractional part thereof, in excess of the first Two thousand pesos (P2,000) for each
year of the term of said contract or agreement.
Section 195. 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 of 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 at the following rates:
(a) When the amount secured does not exceed Five thousand pesos (P5,000), Twenty pesos
(P20.00).
(b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of Five
thousand pesos (P5,000), an additional tax of Ten pesos (P10.00).
On any mortgage, pledge, or deed of trust, where the same shall be made as a security for the
payment of a fluctuating account or future advances without fixed limit, the documentary stamp tax
on such mortgage, pledge or deed of trust shall be computed on the amount actually loaned or given
at the time of the execution of the mortgage, pledge or deed of trust, additional documentary stamp
tax shall be paid which shall be computed on the basis of the amount advanced or loaned at the rates
specified above: Provided, however, That if the full amount of the loan or credit, granted under the
mortgage, pledge or deed of trust shall be computed on the amount actually loaned or given at the
time of the execution of the mortgage, pledge or deed of trust. However, if subsequent advances are
made on such mortgage, pledge or deed of trust, additional documentary stamp tax shall be paid
which shall be computed on the basis of the amount advanced or loaned at the rates specified above:
Provided, however, That if the full amount of the loan or credit, granted under the mortgage, pledge
or deed of trust is specified in such mortgage, pledge or deed of trust, the documentary stamp tax
prescribed in this Section shall be paid and computed on the full amount of the loan or credit
granted.
Section 196. Stamp tax on Deeds of Sale and Conveyances of Real Property. - On all conveyances,
deeds, instruments, or writings, other than grants, patents or original certificates of adjudication
issued by the Government, whereby any land, tenement, or other realty sold shall be granted,
assigned, transferred or otherwise conveyed to the purchaser, or purchasers, or to any other person
or persons designated by such purchaser or purchasers, there shall be collected a documentary
stamp tax, at the rates herein below prescribed, based on the consideration contracted to be paid for
such realty or on its fair market value determined in accordance with Section 6(E) of this Code,
whichever is higher: Provided, That when one of the contracting parties is the Government the tax
herein imposed shall be based on the actual consideration.
(a) When the consideration, or value received or contracted to be paid for such realty after
making proper allowance of any encumbrance, does not exceed One thousand pesos
(P1,000) fifteen pesos (P15.00).
(b) For each additional One thousand Pesos (P1,000), or fractional part thereof in excess of
One thousand pesos (P1,000) of such consideration or value, Fifteen pesos (P15.00).
When it appears that the amount of the documentary stamp tax payable hereunder has been reduced
by an incorrect statement of the consideration in any conveyance, deed, instrument or writing
subject to such tax the Commissioner, provincial or city Treasurer, or other revenue officer shall,
from the assessment rolls or other reliable source of information, assess the property of its true
market value and collect the proper tax thereon.
Section 197. Stamp Tax on Charter Parties and Similar Instruments. - On every charter party,
contract or agreement for the charter of any ship, vessel or steamer, or any letter or memorandum or
other writing between the captain, master or owner, or other person acting as agent of any ship,
vessel or steamer, and any other person or persons for or relating to the charter of any such ship,
vessel or steamer, and on any renewal or transfer of such charter, contract, agreement, letter or
memorandum, there shall be collected a documentary stamp tax at the following rates:
(a) If the registered gross tonnage of the ship, vessel or steamer does not exceed one
thousand (1,000) tons, and the duration of the charter or contract does not exceed six (6)
months, Five hundred pesos (P500); and for each month or fraction of a month in excess of
six (6) months, an additional tax of Fifty pesos (P50.00) shall be paid.
(b) If the registered gross tonnage exceeds one thousand (1,000) tons and does not exceed
ten thousand (10,000) tons, and the duration of the charter or contract does not exceed six
(6) months, One thousand pesos (P1,000); and for each month or fraction of a month in
excess of six (6) months, an additional tax of One hundred pesos (P100) shall be paid.
(c) If the registered gross tonnage exceeds ten thousand (10,000) tons and the duration of the
charter or contract does not exceed six (6) months, One thousand five hundred pesos
(P1,500); and for each month or fraction of a month in excess of six (6) months, an
additional tax of One hundred fifty pesos (P150) shall be paid.
Section 198. Stamp Tax on Assignments and Renewals of Certain Instruments. - Upon each and
every assignment or transfer of any mortgage, lease or policy of insurance, or the renewal or
continuance of any agreement, contract, charter, or any evidence of obligation or indebtedness by
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.
Section 199. Documents and Papers Not Subject to Stamp Tax. - The provisions of Section 173 to
the contrary notwithstanding, the following instruments, documents and papers shall be exempt
from the documentary stamp tax:
(a) Policies of insurance or annuities made or granted by a fraternal or beneficiary society,
order, association or cooperative company, operated on the lodge system or local
cooperation plan and organized and conducted solely by the members thereof for the
exclusive benefit of each member and not for profit.
(b) Certificates of oaths administered to any government official in his official capacity or of
acknowledgment by any government official in the performance of his official duties,
written appearance in any court by any government official, in his official capacity;
certificates of the administration of oaths to any person as to the authenticity of any paper
required to be filed in court by any person or party thereto, whether the proceedings be civil
or criminal; papers and documents filed in courts by or for the national, provincial, city or
municipal governments; affidavits of poor persons for the purpose of proving poverty;
statements and other compulsory information required of persons or corporations by the
rules and regulations of the national, provincial, city or municipal governments exclusively
for statistical purposes and which are wholly for the use of the bureau or office in which
they are filed, and not at the instance or for the use or benefit of the person filing them;
certified copies and other certificates placed upon documents, instruments and papers for the
national, provincial, city, or municipal governments, made at the instance and for the sole
use of some other branch of the national, provincial, city or municipal governments; and
certificates of the assessed value of lands, not exceeding Two hundred pesos (P200) in value
assessed, furnished by the provincial, city or municipal Treasurer to applicants for
registration of title to land.
Section 200. Payment of Documentary Stamp Tax. -
(A) In General. - The provisions of Presidential Decree No. 1045 notwithstanding, any
person liable to pay documentary stamp tax upon any document subject to tax under Title
VII of this Code shall file a tax return and pay the tax in accordance with the rules and
regulations to be prescribed by the Secretary of Finance, upon recommendation of the
Commissioner.
(B) Time for Filing and Payment of the Tax. - Except as provided by rules and regulations
promulgated by the Secretary of Finance, upon recommendation of the Commissioner, the
tax return prescribed in this Section shall be filed within ten (10) days after the close of the
month when the taxable document was made, signed, issued, accepted, or transferred, and
the tax thereon shall be paid at the same time the aforesaid return is filed.
(C) Where to File. - Except in cases where the Commissioner otherwise permits, the
aforesaid tax return shall be filed with and the tax due shall be paid through the authorized
agent bank within the territorial jurisdiction of the Revenue District Office which has
jurisdiction over the residence or principal place of business of the taxpayer. In places where
there is no authorized agent bank, the return shall be filed with the Revenue District Officer,
collection agent, or duly authorized Treasurer of the city or municipality in which the
taxpayer has his legal residence or principal place of business.
(D) Exception. - In lieu of the foregoing provisions of this Section, the tax may be paid
either through purchase and actual affixture; or by imprinting the stamps through a
documentary stamp metering machine, on the taxable document, in the manner as may be
prescribed by rules and regulations to be promulgated by the Secretary of Finance, upon
recommendation of the Commissioner.
Section 201. Effect of Failure to Stamp Taxable Document. - An instrument, document or paper
which is required by law to be stamped and which has been signed, issued, accepted or transferred
without being duly stamped, shall not be recorded, nor shall it or any copy thereof or any record of
transfer of the same be admitted or used in evidence in any court until the requisite stamp or stamps
are affixed thereto and cancelled.
TITLE VIII
REMEDIES
CHAPTER I - REMEDIES IN GENERAL
Section 202. Final Deed to Purchaser. - In case the taxpayer shall not redeem the property as herein
provided the Revenue District Officer shall, as grantor, execute a deed conveying to the purchaser
so much of the property as has been sold, free from all liens of any kind whatsoever, and the deed
shall succintly recite all the proceedings upon which the validity of the sale depends.
Section 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section
222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by
law for the filing of the return, and no proceeding in court without assessment for the collection of
such taxes shall be begun after the expiration of such period: Provided, That in a case where a
return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from
the day the return was filed. For purposes of this Section, a return filed before the last day
prescribed by law for the filing thereof shall be considered as filed on such last day.
Section 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. -
The Commissioner may -
(A) Compromise the payment of any internal revenue tax, when:
(1) A reasonable doubt as to the validity of the claim against the taxpayer exists; or
(2) The financial position of the taxpayer demonstrates a clear inability to pay the
assessed tax.
The compromise settlement of any tax liability shall be subject to the following
minimum amounts:
For cases of financial incapacity, a minimum compromise rate equivalent to ten
percent (10%) of the basic assessed tax; and
For other cases, a minimum compromise rate equivalent to forty percent (40%) of the
basic assessed tax.
Where the basic tax involved exceeds One million pesos (P1,000.000) or where the
settlement offered is less than the prescribed minimum rates, the compromise shall be
subject to the approval of the Evaluation Board which shall be composed of the
Commissioner and the four (4) Deputy Commissioners.
(B) Abate or cancel a tax liability, when:
(1) The tax or any portion thereof appears to be unjustly or excessively assessed; or
(2) The administration and collection costs involved do not justify the collection of
the amount due.
All criminal violations may be compromised except: (a) those already filed in court,
or (b) those involving fraud.
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without
authority, refund the value of internal revenue stamps when they are returned in good
condition by the purchaser, and, in his discretion, redeem or change unused stamps that have
been rendered unfit for use and refund their value upon proof of destruction. No credit or
refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the
Commissioner a claim for credit or refund within two (2) years after the payment of the tax
or penalty: Provided, however, That a return filed showing an overpayment shall be
considered as a written claim for credit or refund.
A Tax Credit Certificate validly issued under the provisions of this Code may be applied
against any internal revenue tax, excluding withholding taxes, for which the taxpayer is
directly liable. Any request for conversion into refund of unutilized tax credits may be
allowed, subject to the provisions of Section 230 of this Code: Provided, That the original
copy of the Tax Credit Certificate showing a creditable balance is surrendered to the
appropriate revenue officer for verification and cancellation: Provided, further, That in no
case shall a tax refund be given resulting from availment of incentives granted pursuant to
special laws for which no actual payment was made.
The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of
both the Senate and House of Representatives, every six (6) months, a report on the exercise
of his powers under this Section, stating therein the following facts and information, among
others: names and addresses of taxpayers whose cases have been the subject of abatement or
compromise; amount involved; amount compromised or abated; and reasons for the exercise
of power: Provided, That the said report shall be presented to the Oversight Committee in
Congress that shall be constituted to determine that said powers are reasonably exercised
and that the government is not unduly deprived of revenues.
CHAPTER II - CIVIL REMEDIES FOR COLLECTION OF TAXES
Section 205. Remedies for the Collection of Delinquent Taxes. - The civil remedies for the
collection of internal revenue taxes, fees or charges, and any increment thereto resulting from
delinquency shall be:
(a) By distraint of goods, chattels, or effects, and other personal property of whatever
character, including stocks and other securities, debts, credits, bank accounts and interest in
and rights to personal property, and by levy upon real property and interest in rights to real
property; and
(b) By civil or criminal action.
Either of these remedies or both simultaneously may be pursued in the discretion of the authorities
charged with the collection of such taxes: Provided, however, That the remedies of distraint and
levy shall not be availed of where the amount of tax involve is not more than One hundred pesos
(P100).
The judgment in the criminal case shall not only impose the penalty but shall also order payment of
the taxes subject of the criminal case as finally decided by the Commissioner.
The Bureau of Internal Revenue shall advance the amounts needed to defray costs of collection by
means of civil or criminal action, including the preservation or transportation of personal property
distrained and the advertisement and sale thereof, as well as of real property and improvements
thereon.
Section 206. Constructive Distraint of the Property of A Taxpayer. - To safeguard the interest of the
Government, the Commissioner may place under constructive distraint the property of a delinquent
taxpayer or any taxpayer who, in his opinion, is retiring from any business subject to tax, or is
intending to leave the Philippines or to remove his property therefrom or to hide or conceal his
property or to perform any act tending to obstruct the proceedings for collecting the tax due or
which may be due from him.
The constructive distraint of personal property shall be affected by requiring the taxpayer or any
person having possession or control of such property to sign a receipt covering the property
distrained and obligate himself to preserve the same intact and unaltered and not to dispose of the
same ;in any manner whatever, without the express authority of the Commissioner.
In case the taxpayer or the person having the possession and control of the property sought to be
placed under constructive distraint refuses or fails to sign the receipt herein referred to, the revenue
officer effecting the constructive distraint shall proceed to prepare a list of such property and, in the
presence of two (2) witnessed, leave a copy thereof in the premises where the property distrained is
located, after which the said property shall be deemed to have been placed under constructive
distraint.
Section 207. Summary Remedies. -
(A) Distraint of Personal Property. - Upon the failure of the person owing any delinquent tax
or delinquent revenue to pay the same at the time required, the Commissioner or his duly
authorized representative, if the amount involved is in excess of One million pesos
(P1,000,000), or the Revenue District Officer, if the amount involved is One million pesos
(P1,000,000) or less, shall seize and distraint any goods, chattels or effects, and the personal
property, including stocks and other securities, debts, credits, bank accounts, and interests in
and rights to personal property of such persons ;in sufficient quantity to satisfy the tax, or
charge, together with any increment thereto incident to delinquency, and the expenses of the
distraint and the cost of the subsequent sale.
A report on the distraint shall, within ten (10) days from receipt of the warrant, be submitted
by the distraining officer to the Revenue District Officer, and to the Revenue Regional
Director: Provided, That the Commissioner or his duly authorized representative shall,
subject to rules and regulations promulgated by the Secretary of Finance, upon
recommendation of the Commissioner, have the power to lift such order of distraint:
Provided, further, That a consolidated report by the Revenue Regional Director may be
required by the Commissioner as often as necessary.
(B) Levy on Real Property. - After the expiration of the time required to pay the delinquent
tax or delinquent revenue as prescribed in this Section, real property may be levied upon,
before simultaneously or after the distraint of personal property belonging to the delinquent.
To this end, any internal revenue officer designated by the Commissioner or his duly
authorized representative shall prepare a duly authenticated certificate showing the name of
the taxpayer and the amounts of the tax and penalty due from him. Said certificate shall
operate with the force of a legal execution throughout the Philippines.
Levy shall be affected by writing upon said certificate a description of the property upon
which levy is made. At the same time, written notice of the levy shall be mailed to or served
upon the Register of Deeds for the province or city where the property is located and upon
the delinquent taxpayer, or if he be absent from the Philippines, to his agent or the manager
of the business in respect to which the liability arose, or if there be none, to the occupant of
the property in question.
In case the warrant of levy on real property is not issued before or simultaneously with the
warrant of distraint on personal property, and the personal property of the taxpayer is not
sufficient to satisfy his tax delinquency, the Commissioner or his duly authorized
representative shall, within thirty (30) days after execution of the distraint, proceed with the
levy on the taxpayer's real property.
Within ten (10) days after receipt of the warrant, a report on any levy shall be submitted by
the levying officer to the Commissioner or his duly authorized representative: Provided,
however, That a consolidated report by the Revenue Regional Director may be required by
the Commissioner as often as necessary: Provided, further, That the Commissioner or his
duly authorized representative, subject to rules and regulations promulgated by the Secretary
of Finance, upon recommendation of the Commissioner, shall have the authority to lift
warrants of levy issued in accordance with the provisions hereof.
Section 208. Procedure for Distraint and Garnishment. - The officer serving the warrant of distraint
shall make or cause to be made an account of the goods, chattels, effects or other personal property
distrained, a copy of which, signed by himself, shall be left either with the owner or person from
whose possession such goods, chattels, or effects or other personal property were taken, or at the
dwelling or place of business of such person and with someone of suitable age and discretion, to
which list shall be added a statement of the sum demanded and note of the time and place of sale.
Stocks and other securities shall be distrained by serving a copy of the warrant of distraint upon the
taxpayer and upon the president, manager, treasurer or other responsible officer of the corporation,
company or association, which issued the said stocks or securities.
Debts and credits shall be distrained by leaving with the person owing the debts or having in his
possession or under his control such credits, or with his agent, a copy of the warrant of distraint.
The warrant of distraint shall be sufficient authority to the person owning the debts or having in his
possession or under his control any credits belonging to the taxpayer to pay to the Commissioner
the amount of such debts or credits.
Bank accounts shall be garnished by serving a warrant of garnishment upon the taxpayer and upon
the president, manager, treasurer or other responsible officer of the bank. Upon receipt of the
warrant of garnishment, the bank shall tun over to the Commissioner so much of the bank accounts
as may be sufficient to satisfy the claim of the Government.
Section 209. Sale of Property Distrained and Disposition of Proceeds. - The Revenue District
Officer or his duly authorized representative, other than the officer referred to in Section 208 of this
Code shall, according to rules and regulations prescribed by the Secretary of Finance, upon
recommendation of the Commissioner, forthwith cause a notification to be exhibited in not less than
two (2) public places in the municipality or city where the distraint is made, specifying; the time
and place of sale and the articles distrained. The time of sale shall not be less than twenty (20) days
after notice. One place for the posting of such notice shall be at the Office of the Mayor of the city
or municipality in which the property is distrained.
At the time and place fixed in such notice, the said revenue officer shall sell the goods, chattels, or
effects, or other personal property, including stocks and other securities so distrained, at public
auction, to the highest bidder for cash, or with the approval of the Commissioner, through duly
licensed commodity or stock exchanges.
In the case of Stocks and other securities, the officer making the sale shall execute a bill of sale
which he shall deliver to the buyer, and a copy thereof furnished the corporation, company or
association which issued the stocks or other securities. Upon receipt of the copy of the bill of sale,
the corporation, company or association shall make the corresponding entry in its books, transfer
the stocks or other securities sold in the name of the buyer, and issue, if required to do so, the
corresponding certificates of stock or other securities.
Any residue over and above what is required to pay the entire claim, including expenses, shall be
returned to the owner of the property sold. The expenses chargeable upon each seizure and sale
shall embrace only the actual expenses of seizure and preservation of the property pending ;the sale,
and no charge shall be imposed for the services of the local internal revenue officer or his deputy.
Section 210. Release of Distrained Property Upon Payment Prior to Sale. - If at any time prior to
the consummation of the sale all proper charges are paid to the officer conducting the sale, the
goods or effects distrained shall be restored to the owner.
Section 211. Report of Sale to Bureau of Internal Revenue. - Within two (2) days after the sale, the
officer making the same shall make a report of his proceedings in writing to the Commissioner and
shall himself preserve a copy of such report as an official record.
Section 212. Purchase by Government at Sale Upon Distraint. - When the amount bid for the
property under distraint is not equal to the amount of the tax or is very much less than the actual
market value of the articles offered for sale, the Commissioner or his deputy may purchase the same
in behalf of the national Government for the amount of taxes, penalties and costs due thereon.
Property so purchased may be resold by the Commissioner or his deputy, subject to the rules and
regulations prescribed by the Secretary of Finance, the net proceeds therefrom shall be remitted to
the National Treasury and accounted for as internal revenue.
Section 213. Advertisement and Sale. - Within twenty (20) days after levy, the officer conducting
the proceedings shall proceed to advertise the property or a usable portion thereof as may be
necessary to satisfy the claim and cost of sale; and such advertisement shall cover a period of a least
thirty (30) days. It shall be effectuated by posting a notice at the main entrance of the municipal
building or city hall and in public and conspicuous place in the barrio or district in which the real
estate lies and ;by publication once a week for three (3) weeks in a newspaper of general circulation
in the municipality or city where the property is located. The advertisement shall contain a
statement of the amount of taxes and penalties so due and the time and place of sale, the name of
the taxpayer against whom taxes are levied, and a short description of the property to be sold. At
any time before the day fixed for the sale, the taxpayer may discontinue all proceedings by paying
the taxes, penalties and interest. If he does not do so, the sale shall proceed and shall be held either
at the main entrance of the municipal building or city hall, or on the premises to be sold, as the
officer conducting the proceedings shall determine and as the notice of sale shall specify.
Within five (5) days after the sale, a return by the distraining or levying officer of the proceedings
shall be entered upon the records of the Revenue Collection Officer, the Revenue District officer
and the Revenue Regional Director. The Revenue Collection Officer, in consultation with the
Revenue district Officer, shall then make out and deliver to the purchaser a certificate from his
records, showing the proceedings of the sale, describing the property sold stating the name of the
purchaser and setting out the exact amount of all taxes, penalties and interest: Provided, however,
That in case the proceeds of the sale exceeds the claim and cost of sale, the excess shall be turned
over to the owner of the property.
The Revenue Collection Officer, upon approval by the Revenue District Officer may, out of his
collection, advance an amount sufficient to defray the costs of collection by means of the summary
remedies provided for in this Code, including ;the preservation or transportation in case of personal
property, and the advertisement and subsequent sale, both in cases of personal and real property
including improvements found on the latter. In his monthly collection reports, such advances shall
be reflected and supported by receipts.
Section 214. Redemption of Property Sold. - Within one (1) year from the date of sale, the
delinquent taxpayer, or any one for him, shall have the right of paying to the Revenue District
Officer the amount of the public taxes, penalties, and interest thereon from the date of delinquency
to the date of sale, together with interest on said purchase price at the rate of fifteen percent (15%)
per annum from the date of purchase to the date of redemption, and such payment shall entitle the
person paying to the delivery of the certificate issued to the purchaser and a certificate from the said
Revenue District Officer that he has thus redeemed the property, and the Revenue District Officer
shall forthwith pay over to the purchaser the amount by which such property has thus been
redeemed, and said property thereafter shall be free form the lien of such taxes and penalties.
The owner shall not, however, be deprived of the possession of the said property and shall be
entitled to the rents and other income thereof until the expiration of the time allowed for its
redemption.
Section 215. Forfeiture to Government for Want of Bidder. - In case there is no bidder for real
property exposed for sale as herein above provided or if the highest bid is for an amount insufficient
to pay the taxes, penalties and costs, the Internal Revenue Officer conducting the sale shall declare
the property forfeited to the Government in satisfaction of the claim in question and within two (2)
days thereafter, shall make a return of his proceedings and the forfeiture which shall be spread upon
the records of his office. It shall be the duty of the Register of Deeds concerned, upon registration
with his office of any such declaration of forfeiture, to transfer the title of the property forfeited to
the Government without the necessity of an order from a competent court.
Within one (1) year from the date of such forfeiture, the taxpayer, or any one for him may redeem
said property by paying to the Commissioner or the latter's Revenue Collection Officer the full
amount of the taxes and penalties, together with interest thereon and the costs of sale, but if the
property be not thus redeemed, the forfeiture shall become absolute.
Section 216. Resale of Real Estate Taken for Taxes. - The Commissioner shall have charge of any
real estate obtained by the Government of the Philippines in payment or satisfaction of taxes,
penalties or costs arising under this Code or in compromise or adjustment of any claim therefore,
and said Commissioner may, upon the giving of not less than twenty (20) days notice, sell and
dispose of the same of public auction or with prior approval of the Secretary of Finance, dispose of
the same at private sale. In either case, the proceeds of the sale shall be deposited with the National
Treasury, and an accounting of the same shall rendered to the Chairman of the Commission on
Audit.
Section 217. Further Distraint or Levy. - The remedy by distraint of personal property and levy on
realty may be repeated if necessary until the full amount due, including all expenses, is collected.
Section 218. Injunction not Available to Restrain Collection of Tax. - No court shall have the
authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or
charge imposed by this Code.
Section 219. Nature and Extent of Tax Lien. - If any person, corporation, partnership, joint-account
(cuentas en participacion), association or insurance company liable to pay an internal revenue tax,
neglects or refuses to pay the same after demand, the amount shall be a lien in favor of the
Government of the Philippines from the time when the assessment was made by the Commissioner
until paid, with interests, penalties, and costs that may accrue in addition thereto upon all property
and rights to property belonging to the taxpayer: Provided, That this lien shall not be valid against
any mortgagee purchaser or judgment creditor until notice of such lien shall be filed by the
Commissioner in the office of the Register of Deeds of the province or city where the property of
the taxpayer is situated or located.
Section 220. Form and Mode of Proceeding in Actions Arising under this Code. - Civil and criminal
actions and proceedings instituted in behalf of the Government under the authority of this Code or
other law enforced by the Bureau of Internal Revenue shall be brought in the name of the
Government of the Philippines and shall be conducted by legal officers of the Bureau of Internal
Revenue but no civil or criminal action for the recovery of taxes or the enforcement of any fine,
penalty or forfeiture under this Code shall be filed in court without the approval of the
Commissioner.
Section 221. Remedy for Enforcement of Statutory Penal Provisions. - The remedy for enforcement
of statutory penalties of all sorts shall be by criminal or civil action, as the particular situation may
require, subject to the approval of the Commissioner.
Section 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.
(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a
return, the tax may be assessed, or a preceeding in court for the collection of such tax may
be filed without assessment, at any time within ten (10) years after the discovery of the
falsity, fraud or omission: Provided, That in a fraud assessment which has become final and
executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal
action for the collection thereof.
(b) If before the expiration of the time prescribed in Section 203 for the assessment of the
tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after
such time, the tax may be assessed within the period agreed upon. The period so agreed
upon may be extended by subsequent written agreement made before the expiration of the
period previously agreed upon.
(c) Any internal revenue tax which has been assessed within the period of limitation as
prescribed in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in
court within five (5) years following the assessment of the tax.
(d) Any internal revenue tax, which has been assessed within the period agreed upon as
provided in paragraph (b) hereinabove, may be collected by distraint or levy or by a
proceeding in court within the period agreed upon in writing before the expiration of the five
(5) -year period. The period so agreed upon may be extended by subsequent written
agreements made before the expiration of the period previously agreed upon.
(e) Provided, however, That nothing in the immediately preceding and paragraph (a) hereof
shall be construed to authorize the examination and investigation or inquiry into any tax
return filed in accordance with the provisions of any tax amnesty law or decree.
Section 223. Suspension of Running of Statute of Limitations. - The running of the Statute of
Limitations provided in Sections 203 and 222 on the making of assessment and the beginning of
distraint or levy a proceeding in court for collection, in respect of any deficiency, shall be suspended
for the period during which the Commissioner is prohibited from making the assessment or
beginning distraint or levy or a proceeding in court and for sixty (60) days thereafter; when the
taxpayer requests for a reinvestigation which is granted by the Commissioner; when the taxpayer
cannot be located in the address given by him in the return filed upon which a tax is being assessed
or collected: Provided, that, if the taxpayer informs the Commissioner of any change in address, the
running of the Statute of Limitations will not be suspended; when the warrant of distraint or levy is
duly served upon the taxpayer, his authorized representative, or a member of his household with
sufficient discretion, and no property could be located; and when the taxpayer is out of the
Philippines.
Section 224. Remedy for Enforcement of Forfeitures. - The forfeiture of chattels and removable
fixtures of any sort shall be enforced by the seizure and sale, or destruction, of the specific forfeited
property. The forfeiture of real property shall be enforced by a judgment of condemnation and sale
in a legal action or proceeding, civil or criminal, as the case may require.
Section 225. When Property to be Sold or Destroyed. - Sales of forfeited chattels and removable
fixtures shall be effected, so far as practicable, in the same manner and under the same conditions as
the public notice and the time and manner of sale as are prescribed for sales of personal property
distrained for the non-payment of taxes.
Distilled spirits, liquors, cigars, cigarettes, other manufactured products of tobacco, and all
apparatus used I or about the illicit production of such articles may, upon forfeiture, be destroyed by
order of the Commissioner, when the sale of the same for consumption or use would be injurious to
public health or prejudicial to the enforcement of the law.
All other articles subject to excise tax, which have been manufactured or removed in violation of
this Code, as well as dies for the printing or making of internal revenue stamps and labels which are
in imitation of or purport to be lawful stamps, or labels may, upon forfeiture, be sold or destroyed in
the discretion of the Commissioner.
Forfeited property shall not be destroyed until at least twenty (20) days after seizure.
Section 226. Disposition of funds Recovered in Legal Proceedings or Obtained from Forfeitures. -
all judgments and monies recovered and received for taxes, costs, forfeitures, fines and penalties
shall be paid to the Commissioner or his authorized deputies as the taxes themselves are required to
be paid, and except as specially provided, shall be accounted for and dealt with the same way.
Section 227. Satisfaction of Judgment Recovered Against any Internal Revenue Officer. - When an
action is brought against any Internal Revenue officer to recover damages by reason of any act done
in the performance of official duty, and the Commissioner is notified of such action in time to make
defense against the same, through the Solicitor General, any judgment, damages or costs recovered
in such action shall be satisfied by the Commissioner, upon approval of the Secretary of Finance, or
if the same be paid by the person used shall be repaid or reimbursed to him.
No such judgment, damages, or costs shall be paid or reimbursed in behalf of a person who has
acted negligently or in bad faith, or with willful oppression.
CHAPTER III - PROTESTING AN ASSESSMENT, REFUND, ETC.
Section 228. Protesting of Assessment. - When the Commissioner or his duly authorized
representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his
findings: provided, however, That a preassessment notice shall not be required in the following
cases:
(a) When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have carried over and automatically
applied the same amount claimed against the estimated tax liabilities for the taxable quarter
or quarters of the succeeding taxable year; or
(d) When the excise tax due on exciseable articles has not been paid; or
(e) When the article locally purchased or imported by an exempt person, such as, but not
limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or
transferred to non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on which the assessment is
made; otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be
required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly
authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or
reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as
may be prescribed by implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been
submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180)
days from submission of documents, the taxpayer adversely affected by the decision or inaction
may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or
from the lapse of one hundred eighty (180)-day period; otherwise, the decision shall become final,
executory and demandable.
Section 229. Recovery of Tax Erroneously or Illegally Collected. - no suit or proceeding shall be
maintained in any court for the recovery of any national internal revenue tax hereafter alleged to
have been erroneously or illegally assessed or collected, or of any penalty claimed to have been
collected without authority, of any sum alleged to have been excessively or in any manner
wrongfully collected without authority, or of any sum alleged to have been excessively or in any
manner wrongfully collected, until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or
sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the
date of payment of the tax or penalty regardless of any supervening cause that may arise after
payment: Provided, however, That the Commissioner may, even without a written claim therefor,
refund or credit any tax, where on the face of the return upon which payment was made, such
payment appears clearly to have been erroneously paid.
Section 230. Forfeiture of Cash Refund and of Tax Credit. -
(A) Forfeiture of Refund. - A refund check or warrant issued in accordance with the pertinent
provisions of this Code, which shall remain unclaimed or uncashed within five (5) years
from the date the said warrant or check was mailed or delivered, shall be forfeited in favor of
the Government and the amount thereof shall revert to the general fund.
(B) Forfeiture of Tax Credit. - A tax credit certificate issued in accordance with the pertinent
provisions of this Code, which shall remain unutilized after five (5) years from the date of
issue, shall, unless revalidated, be considered invalid, and shall not be allowed as payment
for internal revenue tax liabilities of the taxpayer, and the amount covered by the certificate
shall revert to the general fund.
(C) Transitory Provision. - For purposes of the preceding Subsection, a tax credit certificate
issued by the Commissioner or his duly authorized representative prior to January 1, 1998,
which remains unutilized or has a creditable balance as of said date, shall be presented for
revalidation with the Commissioner or his duly authorized representative or on before June
30, 1998.
Section 231. Action to Contest Forfeiture of Chattel. - In case of the seizure of personal property
under claim of forfeiture, the owner desiring to contest the validity of the forfeiture may, at any time
before sale or destruction of the property, bring an action against the person seizing the property or
having possession thereof to recover the same, and upon giving proper bond, may enjoin the sale; or
after the sale and within six (6) months, he may bring an action to recover the net proceeds realized
at the sale.
TITLE IX
COMPLIANCE REQUIREMENTS
CHAPTER I - KEEPING OF BOOKS OF ACCOUNTS AND RECORDS
Section 232. Keeping of Books of Accounts. -
(A) Corporations, Companies, Partnerships or Persons Required to Keep Books of Accounts.
- All corporations, companies, partnerships or persons required by law to pay internal
revenue taxes shall keep a journal and a ledger or their equivalents: Provided, however, That
those whose quarterly sales, earnings, receipts, or output do not exceed Fifty thousand pesos
(P50,000) shall keep and use simplified set of bookkeeping records duly authorized by the
Secretary of Finance where in all transactions and results of operations are shown and from
which all taxes due the Government may readily and accurately be ascertained and
determined any time of the year: Provided, further, That corporations, companies,
partnerships or persons whose gross quarterly sales, earnings, receipts or output exceed One
hundred fifty thousand pesos (P150,000) shall have their books of accounts audited and
examined yearly by independent Certified Public Accountants and their income tax returns
accompanied with a duly accomplished Account Information Form (AIF) which shall
contain, among others, information lifted from certified balance sheets, profit and loss
statements, schedules listing income-producing properties and the corresponding income
therefrom and other relevant statements.
(B) Independent Certified Public Accountant Defined. - The term 'Independent Certified
Public Accountant', as used in the preceding paragraph, means an accountant who possesses
the independence as defined in the rules and regulations of the Board of Accountancy
promulgated pursuant to Presidential Decree No. 692, otherwise known as the Revised
Accountancy Law.
Section 233. Subsidiary Books. - All corporations, companies, partnerships or persons keeping the
books of accounts mentioned in the preceding Section may, at their option, keep subsidiary books as
the needs of their business may require: Provided, That were such subsidiaries are kept, they shall
form part of the accounting system of the taxpayer and shall be subject to the same rules and
regulations as to their keeping, translation, production and inspection as are applicable to the journal
and the ledger.
Section 234. Language in which Books are to be Kept; Translation. - All such corporations,
companies, partnerships or persons shall keep the books or records mentioned in Section 232 hereof
in native language, English or Spanish: Provided, however, That if in addition to said books or
records the taxpayer keeps other books or records in a language other than a native language,
English or Spanish, he shall make a true and complete translation of all the entries in suck other
books or records into a native language; English or Spanish, and the said translation must be made
by the bookkeeper, or such taxpayer, or in his absence, by his manager and must be certified under
oath as to its correctness by the said bookkeeper or manager, and shall form an integral part of the
aforesaid books of accounts. The keeping of such books or records in any language other than a
native language, English or Spanish, is hereby prohibited.
Section 235. Preservation of Books and Accounts and Other Accounting Records. - All the books of
accounts, including the subsidiary books and other accounting records of corporations, partnerships,
or persons, shall be preserved by them for a period beginning from the last entry in each book until
the last day prescribed by Section 203 within which the Commissioner is authorized to make an
assessment. The said books and records shall be subject to examination and inspection by internal
revenue officers: Provided, That for income tax purposes, such examination and inspection shall be
made only once in a taxable year, except in the following cases:
(a) Fraud, irregularity or mistakes, as determined by the Commissioner;
(b) The taxpayer requests reinvestigation;
(c) Verification of compliance with withholding tax laws and regulations;
(d) Verification of capital gains tax liabilities; and
(e) In the exercise of the Commissioner's power under Section 5(B) to obtain information
from other persons in which case, another or separate examination and inspection may be
made. Examination and inspection of books of accounts and other accounting records shall
be done in the taxpayer's office or place of business or in the office of the Bureau of Internal
Revenue. All corporations, partnerships or persons that retire from business shall, within ten
(10) days from the date of retirement or within such period of time as may be allowed by the
Commissioner in special cases, submit their books of accounts, including the subsidiary
books and other accounting records to the Commissioner or any of his deputies for
examination, after which they shall be returned. Corporations and partnerships
contemplating dissolution must notify the Commissioner and shall not be dissolved until
cleared of any tax liability.
Any provision of existing general or special law to the contrary notwithstanding, the books of
accounts and other pertinent records of tax-exempt organizations or grantees of tax incentives shall
be subject to examination by the Bureau of Internal Revenue for purposes of ascertaining
compliance with the conditions under which they have been granted tax exemptions or tax
incentives, and their tax liability, if any.
CHAPTER II - ADMINISTRATIVE PROVISIONS
Section 236. Registration Requirements. -
(A) Requirements. - Every person subject to any internal revenue tax shall register once with
the appropriate Revenue District Officer:
(1) Within ten (10) days from date of employment, or
(2) On or before the commencement of business,or
(3) Before payment of any tax due, or
(4) Upon filing of a return, statement or declaration as required in this Code.
The registration shall contain the taxpayer's name, style, place of residence, business
and such other information as may be required by the Commissioner in the form
prescribed therefor.
A person maintaining a head office, branch or facility shall register with the Revenue
District Officer having jurisdiction over the head office, brand or facility. For
purposes of this Section, the term 'facility' may include but not be limited to sales
outlets, places of production, warehouses or storage places.
(B) Annual Registration Fee. - An annual registration fee in the amount of Five hundred
pesos (P500) for every separate or distinct establishment or place of business, including
facility types where sales transactions occur, shall be paid upon registration and every year
thereafter on or before the last day of January: Provided, however, That cooperatives,
individuals earning purely compensation income, whether locally or abroad, and overseas
workers are not liable to the registration fee herein imposed.
The registration fee shall be paid to an authorized agent bank located within the revenue
district, or to the Revenue Collection Officer, or duly authorized Treasurer of the city of
municipality where each place of business or branch is registered.
(C) Registration of Each Type of Internal Revenue Tax. - Every person who is required to
register with the Bureau of Internal Revenue under Subsection (A) hereof, shall register each
type of internal revenue tax for which he is obligated, shall file a return and shall pay such
taxes, and shall updates such registration of any changes in accordance with Subsection (E)
hereof.
(D) Transfer of Registration. - In case a registered person decides to transfer his place of
business or his head office or branches, it shall be his duty to update his registration status
by filing an application for registration information update in the form prescribed therefor.
(E) Other Updates. - Any person registered in accordance with this Section shall, whenever
applicable, update his registration information with the Revenue District Office where he is
registered, specifying therein any change in type and other taxpayer details.
(F) Cancellation of Registration. - The registration of any person who ceases to be liable to a
tax type shall be cancelled upon filing with the Revenue District Office where he is
registered an application for registration information update in a form prescribed therefor.
(G) Persons Commencing Business. - Any person, who expects to realize gross sales or
receipts subject to value-added tax in excess of the amount prescribed under Section 109(z)
of this Code for the next 12-month period from the commencement of the business, shall
register with the Revenue District Office which has jurisdiction over the head office or
branch and shall pay the annual registration fee prescribed in Subsection (B) hereof.
(H) Persons Becoming Liable to the Value-added Tax. - Any person, whose gross sales or
receipts in any 12-month period exceeds the amount prescribed under Subsection 109(z) of
this Code for exemption from the value-added tax shall register in accordance with
Subsection (A) hereof, and shall pay the annual registration fee prescribed within ten (10)
days after the end of the last month of that period, and shall be liable to the value-added tax
commencing from the first day of the month following his registration.
(I) Optional Registration of Exempt Person. - Any person whose transactions are exempt
from value-added tax under Section 109(z) of this Code; or any person whose transactions
are exempt from the value-added tax under Section 109(a), (b), (c), and (d) of this Code,
who opts to register as a VAT taxpayer with respect to his export sales only, may update his
registration information in accordance with Subsection (E) hereof, not later than ten (10)
days before the beginning of the taxable quarter and shall pay the annual registration fee
prescribed in Subsection (B) hereof.
In any case, the Commissioner may, for administrative reasons, deny any application for
registration including updates prescribed under Subsection (E) hereof.
For purposes of Title IV of this Code, any person who has registered value-added tax as a
tax type in accordance with the provisions of Subsection (C) hereof shall be referred to as
VAT-registered person who shall be assigned only one Taxpayer Identification Number.
(J) Supplying of Taxpayer Identification Number (TIN). - Any person required under the
authority of this Code to make, render or file a return, statement or other document shall be
supplied with or assigned a Taxpayer Identification Number (TIN) which he shall indicate in
such return, statement or document filed with the Bureau of Internal Revenue for his proper
identification for tax purposes, and which he shall indicate in certain documents, such as, but
not limited to the following:
(1) Sugar quedans, refined sugar release order or similar instruments;
(2) Domestic bills of lading;
(3) Documents to be registered with the Register of Deeds of Assessor's Office;
(4) Registration certificate of transportation equipment by land, sea or air;
(5) Documents to be registered with the Securities and Exchange Commission;
(6) Building construction permits;
(7) Application for loan with banks, financial institutions, or other financial
intermediaries;
(8) Application for mayor's permit;
(9) Application for business license with the Department of Trade & Industry; and
(10) Such other documents which may hereafter be required under rules and
regulations to be promulgated by the Secretary of Finance, upon recommendation of
the Commissioner.
In cases where a registered taxpayer dies, the administrator or executor shall register the
estate of the decedent in accordance with Subsection (A) hereof and a new Taxpayer
Identification Number (TIN) shall be supplied in accordance with the provisions of this
Section.
In the case of a nonresident decedent, the executor or administrator of the estate shall
register the estate with the Revenue District Office where he is registered: Provided,
however, That in case such executor or administrator is not registered, registration of the
estate shall be made with the Taxpayer Identification Number (TIN) supplied by the
Revenue District Office having jurisdiction over his legal residence.
Only one Taxpayer identification Number (TIN) shall be assigned to a taxpayer. Any person
who shall secure more than one Taxpayer Identification Number shall be criminally liable
under the provision of Section 275 on 'Violation of Other Provisions of this Code or
Regulations in General'.
Section 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an
internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at
Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices,
prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of
merchandise or nature of service: Provided, however, That in the case of sales, receipts or transfers
in the amount of One hundred pesos (P100.00) or more, or regardless of the amount, where the sale
or transfer is made by a person liable to value-added tax to another person also liable to value-added
tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations
or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and
address of the purchaser, customer or client: Provided, further, That where the purchaser is a VAT-
registered person, in addition to the information herein required, the invoice or receipt shall further
show the Taxpayer Identification Number (TIN) of the purchaser.
The original of each receipt or invoice shall be issued to the purchaser, customer or client at the
time the transaction is effected, who, if engaged in business or in the exercise of profession, shall
keep and preserve the same in his place of business for a period of three (3) years from the close of
the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and
preserved by the issuer, also in his place of business, for a like period.
The Commissioner may, in meritorious cases, exempt any person subject to internal revenue tax
from compliance with the provisions of this Section.
Section 238. Printing of Receipts or Sales or Commercial Invoices. - All persons who are engaged
in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales
or commercial invoices before a printer can print the same.
No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or
invoices to be printed are serially numbered and shall show, among other things, the name, business
style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the
same, and such other information that may be required by rules and regulations to be promulgated
by the Secretary of Finance, upon recommendation of the Commissioner.
All persons who print receipt or sales or commercial invoices shall maintain a logbook/register of
taxpayers who availed of their printing services. The logbook/register shall contain the following
information:
(1) Names, Taxpayer Identification Numbers of the persons or entities for whom the receipts
or sales or commercial invoices were printed; and
(2) Number of booklets, number of sets per booklet, number of copies per set and the serial
numbers of the receipts or invoices in each booklet.
Section 239. Sign to be Exhibited by Distiller, Rectifier, Compounder, Repacker and Wholesale
Liquor Dealer. - Every person engaged in distilling or rectifying spirits, compounding liquors,
repacking wines or distilled spirits, and every wholesale liquor dealer shall keep conspicuously on
the outside of his place of business a sign exhibiting, in letters not less than six centimeters (6 cms.)
high, his name or firm style, with the words 'Registered Distiller,' 'Rectifier of Spirits,' 'Compounder
of Liquors,' 'Repacker of Wines or Distilled Spirits,' or 'Wholesale Liquor Dealer,' as the case may
be, and his assessment number.
Section 240. Sign to be exhibited by manufacturer of Products of Tobacco. - Every manufacturer of
cigars, cigarettes or tobacco, and every wholesale dealer in leaf tobacco or manufactured products
of tobacco shall place and keep on outside of the building wherein his business is carried on, so that
it can be distinctly seen, a sign stating his full name and business in letters not less than six
centimeters (6 cms.) high and also giving his assessment number.
Section 241. Exhibition of Certificate of Payment at Place of Business. - The certificate or receipts
showing payment of taxes issued to a person engaged in a business subject to an annual registration
fee shall be kept conspicuously exhibited in plain view in or at the place where the business is
conducted; and in case of a peddler or other persons not having a fixed place of business, shall be
kept in the possession of the holder thereof, subject to production upon demand of any internal
revenue officer.
Section 242. Continuation of Business of Deceased Person. - When any individual who has paid the
annual registration fee dies, and the same business is continued by the person or persons interested
in his estate, no additional payment shall be required for the residue of the term which the tax was
paid: Provided, however, That the person or persons interested in the estate should, within thirty
(30) days from the death of the decedent, submit to the Bureau of Internal Revenue or the regional
or revenue District Office inventories of goods or stocks had at the time of such death.
The requirement under this Section shall also be applicable in the case of transfer of ownership or
change of name of the business establishment.
Section 243. Removal of Business to Other Location. - Any business for which the annual
registration fee has been paid may, subject to the rules and regulations prescribed by the Secretary
of Finance, upon recommendation of the Commissioner, be removed and continued in any other
place without the payment of additional tax during the term for which the payment was made.
CHAPTER III - RULES AND REGULATIONS
Section 244. Authority of Secretary of Finance to Promulgate Rules and Regulations. - The
Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful
rules and regulations for the effective enforcement of the provisions of this Code.
Section 245. Specific Provisions to be Contained in Rules and Regulations. - The rules and
regulations of the Bureau of Internal Revenue shall, among other thins, contain provisions
specifying, prescribing or defining:
(a) The time and manner in which Revenue Regional Director shall canvass their respective
Revenue Regions for the purpose of discovering persons and property liable to national
internal revenue taxes, and the manner in which their lists and records of taxable persons and
taxable objects shall be made and kept;
(b) The forms of labels, brands or marks to be required on goods subject to an excise tax,
and the manner in which the labelling, branding or marking shall be effected;
(c) The conditions under which and the manner in which goods intended for export, which if
not exported would be subject to an excise tax, shall be labelled, branded or marked;
(d) The conditions to be observed by revenue officers respecting the institutions and conduct
of legal actions and proceedings;
(e) The conditions under which goods intended for storage in bonded warehouses shall be
conveyed thither, their manner of storage and the method of keeping the entries and records
in connection therewith, also the books to be kept by Revenue Inspectors and the reports to
be made by them in connection with their supervision of such houses;
(f) The conditions under which denatured alcohol may be removed and dealt in, the
character and quantity of the denaturing material to be used, the manner in which the process
of denaturing shall be effected, so as to render the alcohol suitably denatured and unfit for
oral intake, the bonds to be given, the books and records to be kept, the entries to be made
therein, the reports to be made to the Commissioner, and the signs to be displayed in the
business ort by the person for whom such denaturing is done or by whom, such alcohol is
dealt in;
(g) The manner in which revenue shall be collected and paid, the instrument, document or
object to which revenue stamps shall be affixed, the mode of cancellation of the same, the
manner in which the proper books, records, invoices and other papers shall be kept and
entries therein made by the person subject to the tax, as well as the manner in which licenses
and stamps shall be gathered up and returned after serving their purposes;
(h) The conditions to be observed by revenue officers respecting the enforcement of Title III
imposing a tax on estate of a decedent, and other transfers mortis causa, as well as on gifts
and such other rules and regulations which the Commissioner may consider suitable for the
enforcement of the said Title III;
(i) The manner in which tax returns, information and reports shall be prepared and reported
and the tax collected and paid, as well as the conditions under which evidence of payment
shall be furnished the taxpayer, and the preparation and publication of tax statistics;
(j) The manner in which internal revenue taxes, such as income tax, including withholding
tax, estate and donor's taxes, value-added tax, other percentage taxes, excise taxes and
documentary stamp taxes shall be paid through the collection officers of the Bureau of
Internal Revenue or through duly authorized agent banks which are hereby deputized to
receive payments of such taxes and the returns, papers and statements that may be filed by
the taxpayers in connection with the payment of the tax: Provided, however, That
notwithstanding the other provisions of this Code prescribing the place of filing of returns
and payment of taxes, the Commissioner may, by rules and regulations, require that the tax
returns, papers and statements that may be filed by the taxpayers in connection with the
payment of the tax. Provided, however, That notwithstanding the other provisions of this
Code prescribing the place of filing of returns and payment of taxes, the Commissioner may,
by rules and regulations require that the tax returns, papers and statements and taxes of large
taxpayers be filed and paid, respectively, through collection officers or through duly
authorized agent banks: Provided, further, That the Commissioner can exercise this power
within six (6) years from the approval of Republic Act No. 7646 or the completion of its
comprehensive computerization program, whichever comes earlier: Provided, finally, That
separate venues for the Luzon, Visayas and Mindanao areas may be designated for the filing
of tax returns and payment of taxes by said large taxpayers.
For the purpose of this Section, 'large taxpayer' means a taxpayer who satisfies any of the
following criteria;
(1) Value-Added Tax (VAT) - Business establishment with VAT paid or payable of at
least One hundred thousand pesos (P100,000) for any quarter of the preceding
taxable year;
(2) Excise tax - Business establishment with excise tax paid or payable of at least
One million pesos (P1,000,000) for the preceding taxable year;
(3) Corporate Income Tax - Business establishment with annual income tax paid or
payable of at least One million pesos (P1,000,000) for the preceding taxable year;
and
(4) Withholding tax - Business establishment with withholding tax payment or
remittance of at least One million pesos (P1,000,000) for the preceding taxable year.
Provided, however, That the Secretary of Finance, upon recommendation of the
Commissioner, may modify or add to the above criteria for determining a large taxpayer
after considering such factors as inflation, volume of business, wage and employment levels,
and similar economic factors.
The penalties prescribed under Section 248 of this Code shall be imposed on any violation
of the rules and regulations issued by the Secretary of Finance, upon recommendation of the
Commissioner, prescribing the place of filing of returns and payments of taxes by large
taxpayers.
Section 246. Non- Retroactivity of Rulings. - Any revocation, modification or reversal of any of the
rules and regulations promulgated in accordance with the preceding Sections or any of the rulings
or circulars promulgated by the Commissioner shall not be given retroactive application if the
revocation, modification or reversal will be prejudicial to the taxpayers, except in the following
cases:
(a) Where the taxpayer deliberately misstates or omits material facts from his return or any
document required of him by the Bureau of Internal Revenue;
(b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially
different from the facts on which the ruling is based; or
(c) Where the taxpayer acted in bad faith.
TITLE X
STATUTORY OFFENSES AND PENALTIES
CHAPTER I - ADDITIONS TO THE TAX
Section 247. General Provisions. -
(a) The additions to the tax or deficiency tax prescribed in this Chapter shall apply to all
taxes, fees and charges imposed in this Code. The Amount so added to the tax shall be
collected at the same time, in the same manner and as part of the tax.
(b) If the withholding agent is the Government or any of its agencies, political subdivisions
or instrumentalities, or a government-owned or controlled corporation, the employee thereof
responsible for the withholding and remittance of the tax shall be personally liable for the
additions to the tax prescribed herein.
(c) the term 'person', as used in this Chapter, includes an officer or employee of a
corporation who as such officer, employee or member is under a duty to perform the act in
respect of which the violation occurs.
Section 248. Civil Penalties. -
(A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to
twenty-five percent (25%) of the amount due, in the following cases:
(1) Failure to file any return and pay the tax due thereon as required under the
provisions of this Code or rules and regulations on the date prescribed; or
(2) Unless otherwise authorized by the Commissioner, filing a return with an internal
revenue officer other than those with whom the return is required to be filed; or
(3) Failure to pay the deficiency tax within the time prescribed for its payment in the
notice of assessment; or
(4) Failure to pay the full or part of the amount of tax shown on any return required
to be filed under the provisions of this Code or rules and regulations, or the full
amount of tax due for which no return is required to be filed, on or before the date
prescribed for its payment.
(B) In case of willful neglect to file the return within the period prescribed by this Code or
by rules and regulations, or in case a false or fraudulent return is willfully made, the penalty
to be imposed shall be fifty percent (50%) of the tax or of the deficiency tax, in case, any
payment has been made on the basis of such return before the discovery of the falsity or
fraud: Provided, That a substantial underdeclaration of taxable sales, receipts or income, or a
substantial overstatement of deductions, as determined by the Commissioner pursuant to the
rules and regulations to be promulgated by the Secretary of Finance, shall constitute prima
facie evidence of a false or fraudulent return: Provided, further, That failure to report sales,
receipts or income in an amount exceeding thirty percent (30%) of that declared per return,
and a claim of deductions in an amount exceeding (30%) of actual deductions, shall render
the taxpayer liable for substantial underdeclaration of sales, receipts or income or for
overstatement of deductions, as mentioned herein.
Section 249. Interest. -
(A) In General. - There shall be assessed and collected on any unpaid amount of tax, interest
at the rate of twenty percent (20%) per annum, or such higher rate as may be prescribed by
rules and regulations, from the date prescribed for payment until the amount is fully paid.
(B) Deficiency Interest. - Any deficiency in the tax due, as the term is defined in this Code,
shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be
assessed and collected from the date prescribed for its payment until the full payment
thereof.
(C) Delinquency Interest. - In case of failure to pay:
(1) The amount of the tax due on any return to be filed, or
(2) The amount of the tax due for which no return is required, or
(3) A deficiency tax, or any surcharge or interest thereon on the due date appearing in
the notice and demand of the Commissioner, there shall be assessed and collected on
the unpaid amount, interest at the rate prescribed in Subsection (A) hereof until the
amount is fully paid, which interest shall form part of the tax.
(D) Interest on Extended Payment. - If any person required to pay the tax is qualified and
elects to pay the tax on installment under the provisions of this Code, but fails to pay the tax
or any installment hereof, or any part of such amount or installment on or before the date
prescribed for its payment, or where the Commissioner has authorized an extension of time
within which to pay a tax or a deficiency tax or any part thereof, there shall be assessed and
collected interest at the rate hereinabove prescribed on the tax or deficiency tax or any part
thereof unpaid from the date of notice and demand until it is paid.
Section 250. Failure to File Certain Information Returns. - In the case of each failure to file an
information return, statement or list, or keep any record, or supply any information required by this
Code or by the Commissioner on the date prescribed therefor, unless it is shown that such failure is
due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the
Commisssioner, be paid by the person failing to file, keep or supply the same, One thousand pesos
(1,000) for each failure: Provided, however, That the aggregate amount to be imposed for all such
failures during a calendar year shall not exceed Twenty-five thousand pesos (P25,000).
Section 251. Failure of a Withholding Agent to Collect and Remit Tax. - Any person required to
withhold, account for, and remit any tax imposed by this Code or who willfully fails to withhold
such tax, or account for and remit such tax, or aids or abets in any manner to evade any such tax or
the payment thereof, shall, in addition to other penalties provided for under this Chapter, be liable
upon conviction to a penalty equal to the total amount of the tax not withheld, or not accounted for
and remitted.
Section 252. Failure of a Withholding Agent to refund Excess Withholding Tax. - Any
employer/withholding agent who fails or refuses to refund excess withholding tax shall, in addition
to the penalties provided in this Title, be liable to a penalty to the total amount of refunds which was
not refunded to the employee resulting from any excess of the amount withheld over the tax actually
due on their return.
CHAPTER II - CRIMES, OTHER OFFENSES AND FORFEITURES
Section 253. General Provisions. -
(a) Any person convicted of a crime penalized by this Code shall, in addition to being liable
for the payment of the tax, be subject to the penalties imposed herein: Provided, That
payment of the tax due after apprehension shall not constitute a valid defense in any
prosecution for violation of any provision of this Code or in any action for the forfeiture of
untaxed articles.
(b) Any person who willfully aids or abets in the commission of a crime penalized herein or
who causes the commission of any such offense by another shall be liable in the same
manner as the principal.
(c) If the offender is not a citizen of the Philippines, he shall be deported immediately after
serving the sentence without further proceedings for deportation. If he is a public officer or
employee, the maximum penalty prescribed for the offense shall be imposed and, in
addition, he shall be dismissed from the public service and perpetually disqualified from
holding any public office, to vote and to participate in any election. If the offender is a
Certified Public Accountant, his certificate as a Certified Public Accountant shall, upon
conviction, be automatically revoked or cancelled.
(d) In the case of associations, partnerships or corporations, the penalty shall be imposed on
the partner, president, general manager, branch manager, treasurer, officer-in-charge, and the
employees responsible for the violation.
(e) The fines to be imposed for any violation of the provisions of this Code shall not be
lower than the fines imposed herein or twice the amount of taxes, interest and surcharges
due from the taxpayer, whichever is higher.
Section 254. Attempt to Evade or Defeat Tax. - Any person who willfully attempts in any manner to
evade or defeat any tax imposed under this Code or the payment thereof shall, in addition to other
penalties provided by law, upon conviction thereof, be punished by a fine not less than Thirty
thousand (P30,000) but not more than One hunderd thousand pesos (P100,000) and suffer
imprisonment of not less than two (2) years but not more than four (4) years: Provided, That the
conviction or acquittal obtained under this Section shall not be a bar to the filing of a civil suit for
the collection of taxes.
Section 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax Withhold
and Remit Tax and Refund Excess Taxes Withheld on Compensation. - Any person required under
this Code or by rules and regulations promulgated thereunder to pay any tax make a return, keep
any record, or supply correct the accurate information, who willfully fails to pay such tax, make
such return, keep such record, or supply correct and accurate information, or withhold or remit taxes
withheld, or refund excess taxes withheld on compensation, at the time or times required by law or
rules and regulations shall, in addition to other penalties provided by law, upon conviction thereof,
be punished by a fine of not less than Ten thousand pesos (P10,000) and suffer imprisonment of not
less than one (1) year but not more than ten (10) years.
Any person who attempts to make it appear for any reason that he or another has in fact filed a
return or statement, or actually files a return or statement and subsequently withdraws the same
return or statement after securing the official receiving seal or stamp of receipt of internal revenue
office wherein the same was actually filed shall, upon conviction therefor, be punished by a fine of
not less than Ten thousand pesos (P10,000) but not more than Twenty thousand pesos (P20,000) and
suffer imprisonment of not less than one (1) year but not more than three (3) years.
Section 256. Penal Liability of Corporations. - Any corporation, association or general co-
partnership liable for any of the acts or omissions penalized under this Code, in addition to the
penalties imposed herein upon the responsible corporate officers, partners, or employees shall, upon
conviction for each act or omission, be punished by a fine of not less than Fifty thousand pesos
(P50,000) but not more than One hundred thousand pesos (P100,000).
Section 257. Penal Liability for Making False Entries, Records or Reports, or Using Falsified or
Fake Accountable Forms. -
(A) Any financial officer or independent Certified Public Accountant engaged to examine
and audit books of accounts of taxpayers under Section 232 (A) and any person under his
direction who:
(1) Willfully falsifies any report or statement bearing on any examination or audit, or
renders a report, including exhibits, statements, schedules or other forms of
accountancy work which has not been verified by him personally or under his
supervision or by a member of his firm or by a member of his staff in accordance
with sound auditing practices; or
(2) Certifies financial statements of a business enterprise containing an essential
misstatement of facts or omission in respect of the transactions, taxable income,
deduction and exemption of his client; or
(B) Any person who:
(1) Not being an independent Certified Public Accountant according to Section
232(B) or a financial officer, examines and audits books of accounts of taxpayers; or
(2) Offers to sign and certify financial statements without audit; or
(3) Offers any taxpayer the use of accounting bookkeeping records for internal
revenue purposes not in conformity with the requirements prescribed in this Code or
rules and regulations promulgated thereunder; or
(4) Knowingly makes any false entry or enters any false or fictitious name in the
books of accounts or record mentioned in the preceding paragraphs; or
(5) Keeps two (2) or more sets of such records or books of accounts; or
(6) In any way commits an act or omission, in violation of the provisions of this
Section; or
(7) Fails to keep the books of accounts or records mentioned in Section 232 in a
native language, English or Spanish, or to make a true and complete translation as
required in Section 234 of this Code, or whose books of accounts or records kept in a
native language, English or Spanish, and found to be at material variance with books
or records kept by him in another language; or
(8) Willfully attempts in any manner to evade or defeat any tax imposed under this
Code, or knowingly uses fake or falsified revenue official receipts, Letters of
Authority, certificates authorizing registration, Tax Credit Certificates, Tax Debit
Memoranda and other accountable forms shall, upon conviction for each act or
omission, be punished by a fine not less than Fifty thousand pesos (P50,000) but not
more than One hundred pesos (P100,000) and suffer imprisonment of not less than
two (2) years but not more than six (6) years.
If the offender is a Certified Public Accountant, his certificate as a Certified Public
Accountant shall be automatically revoked or cancelled upon conviction.
In the case of foreigners, conviction under this Code shall result in his immediate
deportation after serving sentence, without further proceedings for deportation.
Section 258. Unlawful Pursuit of Business. - Any person who carries on any business for which an
annual registration fee is imposed without paying the tax as required by law shall, upon conviction
for each act or omission, be punished by a fine of not less than Five thousand pesos (P5,000) but not
more than Twenty thousand pesos (P20,000) and suffer imprisonment of not less than six (6)
months but not more than two (2) years: Provided, That in the case of a person engaged in the
business of distilling, rectifying, repacking, compounding or manufacturing any article subject to
excise tax, he shall, upon conviction for each act or omission, be punished by a fine of not less than
Thirty thousand pesos (P30,000) but not more than Fifty thousand pesos (P50,000) and suffer
imprisonment of not less than two (2) years but not more than four (4) years.
Section 259. Illegal Collection of Foreign Payments. - Any person who knowingly undertakes the
collection of foreign payments as provided under Section 67 of this Code without having obtained a
license therefor, or without complying with its implementing rules and regulations, shall, upon
conviction for each act or omission, be punished by a fine of not less than Twenty thousand pesos
(P20,000) but not more than Fifty thousand pesos (P50,000) and suffer imprisonment of not less
than one (1) year but not more than two (2) years.
Section 260. Unlawful Possession of Cigarette Paper in Bobbins or Rolls, Etc. - It shall be unlawful
for any person to have in his possession cigarette paper in bobbins or rolls, cigarette tipping paper
or cigarette filter tips, without the corresponding authority therefor issued by the Commissioner.
Any person, importer, manufacturer of cigar and cigarettes, who has been found guilty under this
Section, shall, upon conviction for each act or omission, be punished by a fine of not less than
Twenty thousand pesos (P20,000) but not more than One hundred thousand pesos (P1000,000) and
suffer imprisonment for a term of not less than six (6) years and one (1) day but not more than
twelve (12) years.
Section 261. Unlawful Use of Denatured Alcohol. - Any person who for the purpose of
manufacturing any beverage, uses denatured alcohol or alcohol specially denatured to be used for
motive power or withdrawn under bond for industrial uses or alcohol knowingly misrepresented to
be denatured to be unfit for oral intake or who knowingly sells or offers for sale any beverage made
in whole or in part from such alcohol or who uses such alcohol for the manufacture of liquid
medicinal preparations taken internally, or knowingly sells or offers for sale such preparations
containing as an ingredient such alcohol, shall upon conviction for each act or omission be punished
by a fine of not less than Twenty thousand pesos (P20,000) but not more than One hundred
thousand pesos (P100,000) and suffer imprisonment for a term of not less than six (6) years and one
(1) day but not more than twelve (12) years.
Any person who shall unlawfully recover or attempt to recover by distillation or other process any
denatured alcohol or who knowingly sells or offers for sale, conceals or otherwise disposes of
alcohol so recovered or redistilled shall be subject to the same penalties imposed under this Section.
Section 262. Shipment or Removal of Liquor or Tobacco Products under False Name or Brand or
as an Imitation of any Existing or Otherwise Known Product Name or Brand. - Any person who
ships, transports or removes spirituous, compounded or fermented liquors, wines or any
manufactured products of tobacco under any other than the proper name or brand known to the
trade as designating the kind and quality of the contents of the cask, bottle or package containing
the same or as an imitation of any existing or otherwise known product name or brand or causes
such act to be done, shall, upon conviction for each act or omission, be punished by a fine of not
less than Twenty thousand pesos (P20,000) but not more than One hundred thousand pesos
(P1000,000) and suffer imprisonment of not less than six (6) years and one (1) day but not more
than twelve (12) years.
Section 263. Unlawful Possession or Removal of Articles Subject to Excise Tax without Payment
of the Tax. - Any person who owns and/or is found in possession of imported articles subject to
excise tax, the tax on which has not been paid in accordance with law, or any person who owns
and/or is found in possession of imported tax-exempt articles other than those to whom they are
legally issued shall be punished by:
(a) A fine of not less than One thousand pesos (P1,000) nor more than Two thousand pesos
(P2,000) and suffer imprisonment of not less than sixty (60) days but not more than one
hundred (100) days, if the appraised value, to be determined in the manner prescribed in the
Tariff and Customs Code, including duties and taxes, of the articles does not exceed One
thousand pesos (P1,000).
(b) A fine of not less than Ten thousand pesos (P10,000) but not more than Twenty thousand
pesos (P20,000) and suffer imprisonment of not less than two (2) years but not more than
four (4) years, if the appraised value, to be determined in the manner prescribed in the Tariff
and Customs Code, including duties and taxes, of the articles exceeds One thousand pesos
(P1,000) but does not exceed Fifty thousand pesos (P50,000);
(c) A fine of not less than Thirty thousand pesos (P30,000) but not more than Sixty thousand
pesos (P60,000) and suffer imprisonment of not less than four (4) years but not more than
six (6) years, if the appraised value, to be determined in the manner prescribed in the Tariff
and Customs Code, including duties and taxes of the articles is more than Fifty thousand
pesos (P50,000) but does not exceed One hundred fifty thousand pesos (P150,000); or
(d) A fine of not less than Fifty thousand pesos (P50,000) but not more than One hundred
thousand pesos (P100,000) and suffer imprisonment of not less than ten (10) years but not
more than twelve (12) years, if the appraised value, to be determined in the manner
prescribed in the Tariff and Customs Code, including duties and taxes, of the articles
exceeds One hundred fifty thousand pesos (P150,000).
Any person who is found in possession of locally manufactured articles subject to excise tax, the tax
on which has not been paid in accordance with law, or any person who is found in possession of
such articles which are exempt from excise tax other than those to whom the same is lawfully
issued shall be punished with a fine of not less than (10) times the amount of excise tax due on the
articles found but not less than Five hundred pesos (P500) and suffer imprisonment of not less than
two (2) years but not more than four (4) years.
Any manufacturer, owner or person in charge of any article subject to excise tax who removes or
allows or causes the unlawful removal of any such articles from the place of production or bonded
warehouse, upon which the excise tax has not been paid at the time and in the manner required, and
any person who knowingly aids or abets in the removal of such articles as aforesaid, or conceals the
same after illegal removal shall, for the first offense, be punished with a fine of not less than ten
(10) times the amount of excise tax due on the articles but not less than One thousand pesos
(P1,000) and suffer imprisonment of not less than one (1) year but not more than two (2) years.
The mere unexplained possession of articles subject to excise tax, the tax on which has not been
paid in accordance with law, shall be punishable under this Section.
Section 264. Failure or refusal to Issue Receipts or Sales or Commercial Invoices, Violations
related to the Printing of such Receipts or Invoices and Other Violations. -
(a) Any person who, being required under Section 237 to issue receipts or sales or
commercial invoices, fails or refuses to issue such receipts of invoices, issues receipts or
invoices that do not truly reflect and/or contain all the information required to be shown
therein, or uses multiple or double receipts or invoices, shall, upon conviction for each act or
omission, be punished by a fine of not less than One thousand pesos (P1,000) but not more
than Fifty thousand pesos (P50,000) and suffer imprisonment of not less than two (2) years
but not more than four (4) years.
(b) Any person who commits any of the acts enumerated hereunder shall be penalized in the
same manner and to the same extent as provided for in this Section:
(1) Printing of receipts or sales or commercial invoices without authority from the
Bureau of Internal Revenue; or
(2) Printing of double or multiple sets of invoices or receipts; or
(3) Printing of unnumbered receipts or sales or commercial invoices, not bearing the
name, business style, Taxpayer Identification Number, and business address of the
person or entity.
Section 265. Offenses Relating to Stamps. - Any person who commits any of the acts enumerated
hereunder shall, upon conviction thereof, be punished by a fine of not less than Twenty thousand
pesos (P20,000) but not more than Fifty thousand pesos (P50,000) and suffer imprisonment of not
less than four (4) years but not more than eight (8) years:
(a) making, importing, selling, using or possessing without express authority from the
Commissioner, any die for printing or making stamps, labels, tags or playing cards;
(b) Erasing the cancellation marks of any stamp previously used, or altering the written
figures or letters or cancellation marks on internal revenue stamps;
(c) Possessing false, counterfeit, restored or altered stamps, labels or tags or causing the
commission of any such offense by another;
(d) Selling or offering for sale any box or package containing articles subject to excise tax
with false, spurious or counterfeit stamps or labels or selling from any such fraudulent box,
package or container as aforementioned; or
(e) Giving away or accepting from another, or selling, buying or using containers on which
the stamps are not completely destroyed.
Section 266. Failure to Obey Summons. - Any person who, being duly summoned to appear to
testify, or to appear and produce books of accounts, records, memoranda or other papers, or to
furnish information as required under the pertinent provisions of this Code, neglects to appear or to
produce such books of accounts, records, memoranda or other papers, or to furnish such
information, shall, upon conviction, be punished by a fine of not less than Five thousand pesos
(P5,000) but not more than ten thousand pesos (P10,000) and suffer imprisonment of not less than
one (1) year but not more than two (2) years.
Section 267. Declaration under Penalties of Perjury. - Any declaration, return and other statement
required under this Code, shall, in lieu of an oath, contain a written statement that they are made
under the penalties of perjury. Any person who willfully files a declaration, return or statement
containing information which is not true and correct as to every material matter shall, upon
conviction, be subject to the penalties prescribed for perjury under the Revised Penal Code.
Section 268. Other Crimes and Offenses. -
(A) Misdeclaration or Misrepresentation of Manufacturers Subject to Excise Tax. - Any
manufacturer who, in violation of the provisions of Title VI of this Code, misdeclares in the
sworn statement required therein or in the sales invoice, any pertinent data or information
shall be punished by a summary cancellation or withdrawal of the permit to engage in
business as a manufacturer of articles subject to excise tax.
(B) Forfeiture of Property Used in Unlicensed Business or Dies Used for Printing False
Stamps, Etc. - All chattels, machinery, and removable fixtures of any sort used in the
unlicensed production of articles subject to excise tax shall be forfeited. Dies and other
equipment used for the printing or making of any internal revenue stamp, label or tag which
is in imitation of or purports to be a lawful stamp, label or tag shall also be forfeited.
(C) Forfeiture of Goods Illegally Stored or Removed. - Unless otherwise specifically
authorized by the Commissioner, all articles subject to excise tax should not be stored or
allowed to remain in the distillery warehouse, bonded warehouse or other place where made,
after the tax thereon has been paid; otherwise, all such articles shall be forfeited. Articles
withdrawn from any such place or from customs custody or imported into the country
without the payment of the required tax shall likewise be forfeited.
CHAPTER III - PENALTIES IMPOSED ON PUBLIC OFFICERS
Section 269. Violations Committed by Government Enforcement Officers. - Every official, agent, or
employee of the Bureau of Internal Revenue or any other agency of the Government charged with
the enforcement of the provisions of this Code, who is guilty of any of the offenses herein below
specified shall, upon conviction for each act or omission, be punished by a fine of not less than
Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000) and
suffer imprisonment of not less than ten (10) years but not more than fifteen (15) years and shall
likewise suffer an additional penalty of perpetual disqualification to hold public office, to vote, and
to participate in any public election:
(a) Extortion or willful oppression through the use of his office or willful oppression and
harassment of a taxpayer who refused, declined, turned down or rejected any of his offers
specified in paragraph (d) hereof;
(b) Knowingly demanding or receiving any fee, other or greater sums that are authorized by
law or receiving any fee, compensation or reward, except as by law prescribed, for the
performance of any duty;
(c) Willfully neglecting to give receipts, as by law required, for any sum collected in the
performance of duty or willfully neglecting to perform any other duties enjoined by law;
(d) Offering or undertaking to accomplish, file or submit a report or assessment on a
taxpayer without the appropriate examination of the books of accounts or tax liability, or
offering or undertaking to submit a report or assessment less than the amount due the
Government for any consideration or compensation, or conspiring or colluding with another
or others to defraud the revenues or otherwise violate the provisions of this Code;
(e) Neglecting or by design permitting the violation of the law by any other person;
(f) Making or signing any false entry or entries in any book, or making or signing any false
certificate or return;
(g) Allowing or conspiring or colluding with another to allow the unauthorized retrieval,
withdrawal or recall of any return, statement or declaration after the same has been officially
received by the Bureau of Internal Revenue;
(h) Having knowledge or information of any violation of this Code or of any fraud
committed on the revenues collectible by the Bureau of Internal Revenue, failure to report
such knowledge or information to their superior officer, or failure to report as otherwise
required by law; and
(i) Without the authority of law, demanding or accepting or attempting to collect, directly or
indirectly, as payment or otherwise any sum of money or other thing of value for the
compromise, adjustment or settlement of any charge or complaint for any violation or
alleged violation of this Code.
Provided, That the provisions of the foregoing paragraph notwithstanding, any internal revenue
officer for which a prima facie case of grave misconduct has been established shall, after due notice
and hearing of the administrative case and subject to Civil Service Laws, be dismissed from the
revenue service: Provided, further, That the term 'grave misconduct', as defined in Civil Service
Law, shall include the issuance of fake letters of authority and receipts, forgery of signature,
unsurpation of authority and habitual issuance of unreasonable assessments.
Section 270. Unlawful Divulgence of Trade Secrets. - Except as provided in Section 71 of this Code
and Section 26 of Republic Act No. 6388, any officer or employee of the Bureau of Internal
Revenue who divulges to any person or makes known in any other manner than may be provided by
law information regarding the business, income or estate of any taxpayer, the secrets, operation,
style or work, or apparatus of any manufacturer or producer, or confidential information regarding
the business of any taxpayer, knowledge of which was acquired by him in the discharge of his
official duties, shall upon conviction for each act or omission, be punished by a fine of not less than
Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000), or
suffer imprisonment of not less than two (2) years but not more than five (5) years, or both.
Section 271. Unlawful Interest of Revenue Law Enforcers in Business. - Any internal revenue
officer who is or shall become interested, directly or indirectly, in the manufacture, sale or
importation of any article subject to excise tax under Title VI of this Code or in the manufacture or
repair or sale, of any die for printing, or making of stamps, or labels shall upon conviction for each
act or omission, be punished by a fine of not less than Five thousand pesos (P5,000) but not more
than Ten thousand pesos (P10,000), or suffer imprisonment of not less than two (2) years and one
(1) day but not more than four (4) years, or both.
Section 272. Violation of Withholding Tax Provision. - Every officer or employee of the
Government of the Republic of the Philippines or any of its agencies and instrumentalities, its
political subdivisions, as well as government-owned or controlled corporations, including the
Bangko Sentral ng Pilipinas (BSP), who, under the provisions of this Code or rules and regulations
promulgated thereunder, is charged with the duty to deduct and withhold any internal revenue tax
and to remit the same in accordance with the provisions of this Code and other laws is guilty of any
offense herein below specified shall, upon conviction for each act or omission be punished by a fine
of not less than Five thousand pesos (P5,000) but not more than Fifty thousand pesos (P50,000) or
suffer imprisonment of not less than six (6) months and one (1) day but not more than two (2) years,
or both:
(a) Failing or causing the failure to deduct and withhold any internal revenue tax under any
of the withholding tax laws and implementing rules and regulations;
(b) Failing or causing the failure to remit taxes deducted and withheld within the time
prescribed by law, and implementing rules and regulations; and
(c) Failing or causing the failure to file return or statement within the time prescribed, or
rendering or furnishing a false or fraudulent return or statement required under the
withholding tax laws and rules and regulations.
Section 273. Penalty for Failure to Issue and Execute Warrant. - Any official who fails to issue or
execute the warrant of distraint or levy within thirty (30) days after the expiration of the time
prescribed in Section 207 or who is found guilty of abusing the exercise thereof by competent
authority shall be automatically dismissed from the service after due notice and hearing.
CHAPTER IV - OTHER PENAL PROVISIONS
Section 274. Penalty for Second and Subsequent Offenses. - In the case of reincidence, the
maximum of the penalty prescribed for the offense shall be imposed.
Section 275. Violation of Other Provisions of this Code or Rules and Regulations in General. - Any
person who violates any provision of this Code or any rule or regulation promulgated by the
Department of Finance, for which no specific penalty is provided by law, shall, upon conviction for
each act or omission, be punished by a fine of not more than One thousand pesos (P1,000) or suffer
imprisonment of not more than six (6) months, or both.
Section 276. Penalty for Selling, Transferring, Encumbering or in any way Disposing of Property
Placed under Constructive Distraint. - Any taxpayer, whose property has been placed under
constructive distraint, who sells, transfers, encumbers or in any way disposes of said property, or
any part thereof, without the knowledge and consent of the Commissioner, shall, upon conviction
for each act or omission, be punished by a fine of not less than twice the value of the property so
sold, encumbered or disposed of but not less than Five Thousand pesos (P5,000), or suffer
imprisonment of not less than two (2) years and one (1) day but not more than four (4) years, of
both.
Section 277. Failure to Surrender Property Placed under Distraint and Levy. - Any person having
in his possession or under his control any property or rights to property, upon which a warrant of
constructive distraint, or actual distraint and levy has been issued shall, upon demand by the
Commissioner or any of his deputies executing such warrant, surrender such property or right to
property to the Commissioner or any of his deputies, unless such property or right is, at the time of
such demand, subject to an attachment or execution under any judicial process. Any person who
fails or refuses to surrender any of such property or right shall be liable in his own person and estate
to the Government in a sum equal to the value of the property or rights not so surrendered but not
exceeding the amount of the taxes (including penalties and interest) for the collection of which such
warrant had been issued, together with cost and interest if any, from the date of such warrant. In
addition, such person shall, upon conviction for each act or omission, be punished by a fine of not
less than Five thousand pesos (P5,000), or suffer imprisonment of not less than six (6) months and
one (1) day but not more than two (2) years, or both.
Section 278. Procuring Unlawful Divulgence of Trade Secrets. - Any person who causes or
procures an officer or employee of the Bureau of Internal Revenue to divulge any confidential
information regarding the business, income or inheritance of any taxpayer, knowledge of which was
acquired by him in the discharge of his official duties, and which it is unlawful for him to reveal,
and any person who publishes or prints in any manner whatever, not provided by law, any income,
profit, loss or expenditure appearing in any income tax return, shall be punished by a fine of not
more than Two thousand pesos (P2,000), or suffer imprisonment of not less than six (6) months nor
more than five (5) years, or both.
Section 279. Confiscation and Forfeiture of the Proceeds or Instruments of Crime. - In addition to
the penalty Imposed for the violation of the provisions of Title X of this Code, the same shall carry
with it the confiscation and forfeiture in favor of the government of the proceeds of the crime or
value of the goods, and the instruments or tools with which the crime was committed: Provided,
however, That if in the course of the proceedings, it is established that the instruments or tools used
in the illicit act belong to a third person, the same shall be confiscated and forfeited after due notice
and hearing in a separate proceeding in favor of the Government if such third person leased, let,
chartered or otherwise entrusted the same to the offender: Provided, further, That in case the lessee
subleased, or the borrower, charterer, or trustee allowed the use of the instruments or tools to the
offender, such instruments or tools shall, likewise, be confiscated and forfeited: Provided, finally,
That property of common carriers shall not be subject to forfeiture when used in the transaction of
their business as such common carrier, unless the owner or operator of said common carrier was, at
the time of the illegal act, a consenting party or privy thereto, without prejudice to the owner's right
of recovery against the offender in a civil or criminal action. Articles which are not subject of lawful
commerce shall be destroyed.
Section 280. Subsidiary Penalty. - If the person convicted for violation of any of the provisions of
this Code has no property with which to meet the fine imposed upon him by the court, or is unable
to pay such fine, he shall be subject to a subsidiary personal liability at the rate of one (1) day for
each Eight pesos and fifty centavos (P8.50) subject to the rules established in Article 39 of the
Revised Penal Code.
Section 281. Prescription for Violations of any Provision of this Code. - All violations of any
provision of this Code shall prescribe after Five (5) years.
Prescription shall begin to run from the day of the commission of the violation of the law, and if the
same be not known at the time, from the discovery thereof and the institution of judicial
proceedings for its investigation and punishment.
The prescription shall be interrupted when proceedings are instituted against the guilty persons and
shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy.
The term of prescription shall not run when the offender is absent from the Philippines.
Section 282. Informer's Reward to Persons Instrumental in the Discovery of Violations of the
National Internal Revenue Code and in the Discovery and Seizure of Smuggled Goods. -
(A) For Violations of the National Internal Revenue Code. Any person, except an internal revenue
official or employee, or other public official or employee, or his relative within the sixth degree of
consanguinity, who voluntarily gives definite and sworn information, not yet in the possession of
the Bureau of Internal Revenue, leading to the discovery of frauds upon the internal revenue laws or
violations of any of the provisions thereof, thereby resulting in the recovery of revenues, surcharges
and fees and/or the conviction of the guilty party and/or the imposition of any of the fine or penalty,
shall be rewarded in a sum equivalent to ten percent (10%) of the revenues, surcharges or fees
recovered and/or fine or penalty imposed and collected or One Million Pesos (P1,000,000) per case,
whichever is lower. The same amount of reward shall also be given to an informer where the
offender has offered to compromise the violation of law committed by him and his offer has been
accepted by the Commissioner and collected from the offender: Provided, That should no revenue,
surcharges or fees be actually recovered or collected, such person shall not be entitled to a reward:
Provided, further, That the information mentioned herein shall not refer to a case already pending or
previously investigated or examined by the Commissioner or any of his deputies, agents or
examiners, or the Secretary of Finance or any of his deputies or agents: Provided, finally, That the
reward provided herein shall be paid under rules and regulations issued by the Secretary of Finance,
upon recommendation of the Commissioner.
(B) For Discovery and Seizure of Smuggled Goods. To encourage the public to extend full
cooperation in eradicating smuggling, a cash reward equivalent to ten percent (10%) of the fair
market value of the smuggled and confiscated goods or One Million Pesos (P1,000,000) per case,
whichever is lower, shall be given to persons instrumental in the discovery and seizure of such
smuggled goods.
The cash rewards of informers shall be subject to income tax, collected as a final withholding tax, at
a rate of ten percent (10%).
The Provisions of the foregoing Subsections notwithstanding, all public officials, whether
incumbent or retired, who acquired the information in the course of the performance of their duties
during their incumbency, are prohibited from claiming informer's reward.
TITLE XI
ALLOTMENT OF INTERNAL REVENUE
CHAPTER 1 - DISPOSITION AND ALLOTMENT OF NATIONAL INTERNAL REVENUE
IN GENERAL
Section 283. Disposition of National Internal Revenue. - National Internal revenue collected and
not applied as herein above provided or otherwise specially disposed of by law shall accrue to the
National Treasury and shall be available for the general purposes of the Government, with the
exception of the amounts set apart by way of allotment as provided for under Republic Act No.
7160, otherwise known as the Local Government Code of 1991.
In addition to the internal revenue allotment as provided for in the preceding paragraph, fifty
percent (50%) of the national taxes collected under Sections 106, 108 and 116 of this Code in
excess of the increase in collections for the immediately preceding year shall be distributed as
follows:
(a) Twenty percent (20%) shall accrue to the city or municipality where such taxes are
collected and shall be allocated in accordance with Section 150 of Republic Act No. 7160,
otherwise known as the Local Government Code of 1991; and
(b) Eighty percent (80%) shall accrue to the National Government.
Section 284. Allotment for the Commission on Audit. - One-half of one percent (1/2 of 1%) of the
collections from the national internal revenue taxes not otherwise accruing to special accounts in the
general fund of the national government shall accrue to the Commission on Audit as a fee for
auditing services rendered to local government units, excluding maintenance, equipment, and other
operating expenses as provided for in Section 21 of Presidential Decree No. 898.
The Secretary of Finance is hereby authorized to deduct from the monthly internal revenue tax
collections an amount equivalent to the percentage as herein fixed, and to remit the same directly to
the Commission on Audit under such rules and regulations as may be promulgated by the Secretary
of Finance and the Chairman of the Commission on Audit.
Section 285. Allotment for the Bureau of Internal Revenue. - An amount equivalent to five percent
(5%) of the excess of actual collections of national internal revenue taxes over the collection goal
shall accrue to the special fund of the Bureau of Internal Revenue and shall be treated as receipts
automatically appropriated. Said amount shall be utilized as incentive bonus for revenue personnel,
purchase of necessary equipment and facilities for the improvement of tax administration, as
approved by the Commissioner: Provided, That the President may, upon recommendation of the
Commissioner, direct that the excess be credited to a Special Account in the National Treasury to be
held in the reserve available for distribution as incentive bonus in the subsequent years.
The Secretary of Finance is hereby authorized to transfer from the Treasury an amount equivalent to
the percentage as herein fixed and to remit the same directly to the Bureau of Internal Revenue
under such rules and regulations as may be promulgated by the Secretary of Finance.
CHAPTER II - SPECIAL DISPOSITION OF CERTAIN NATIONAL INTERNAL
REVENUE TAXES
Section 286. Disposition of Proceeds of insurance Premium Tax. - Twenty-five percent (25%) of the
premium tax collected under Section 123 of this Code shall accrue to the Insurance Fund as
contemplated in Section 418 of Presidential Decree No. 612 which shall be used for the purpose of
defraying the expenses of the Insurance Commission. The Commissioner shall turn over and deliver
the said Insurance Fund to the Insurance Commissioner as soon as the collection is made.
Section 287. Shares of Local Government Units in the Proceeds from the Development and
Utilization of the National Wealth. - Local Government units shall have an equitable share in the
proceeds derived from the utilization and development of the national wealth, within their
respective areas, including sharing the same with the inhabitants by way of direct benefits.
(A) Amount of Share of Local Government Units. - Local government units shall, in
addition to the internal revenue allotment, have a share of forty percent (40%) of the gross
collection derived by the national government from the preceding fiscal year from excise
taxes on mineral products, royalties, and such other taxes, fees or charges, including related
surcharges, interests or fines, and from its share in any co-production, joint venture or
production sharing agreement in the utilization and development of the national wealth
within their territorial jurisdiction.
(B) Share of the Local Governments from Any Government Agency or Government-owned
or - Controlled Corporation. - Local Government Units shall have a share, based on the
preceding fiscal year, from the proceeds derived by any government agency or government-
owned or controlled corporation engaged in the utilization and development of the national
wealth based on the following formula, whichever will produce a higher share for the local
government unit:
(1) One percent (1%) of the gross sales or receipts of the preceding calendar year, or
(2) Forty percent (40%) of the excise taxes on mineral products, royalties, and such
other taxes, fees or charges, including related surcharges, interests or fines the
government agency or government-owned or -controlled corporations would have
paid if it were not otherwise exempt.
(C) Allocation of Shares. - The share in the preceding Section shall be distributed in the
following manner:
(1) Where the natural resources are located in the province:
(a) Province - twenty percent (20%)
(b) Component city/municipality - forty-five percent (45%); and
(c) Barangay - thirty-five percent (35%)
Provided, however, That where the natural resources are located in two (2) or
more cities, the allocation of shares shall be based on the formula on
population and land area as specified in subsection (C)(1) hereof.
(2) Where the natural resources are located in a highly urbanized or independent
component city:
(a) City - sixty - five percent (65%); and
(b) Barangay - thirty - five percent (35%)
Provided, however, That where the natural resources are located in two (2) or
more cities, the allocation of shares shall be based on the formula on
population and land area as specified in subsection (c)(1) hereof.
Section 288. Disposition of Incremental Revenues. -
(A) Incremental Revenues from Republic Act No. 7660. - The incremental revenues from
the increase in the documentary stamp taxes under R.A. No. 7660 shall be set aside for the
following purposes:
(1) In 1994 and 1995, twenty five percent (25%) thereof respectively, shall accrue to
the Unified Home-Lending Program under Executive Order No. 90 particularly for
mass socialized housing program to be allocated as follows: fifty percent (50%) for
mass-socialized housing; thirty percent (30%) for the community mortgage program;
and twenty percent (20%) for land banking and development to be administered by
the National Housing Authority: Provided, That no more than one percent (1%) of
the respective allocations hereof shall be used for administrative expenses;
(2) In 1996, twenty five percent (25%) thereof to be utilized for the National Health
Insurance Program that hereafter may be mandated by law;
(3) In 1994 and every year thereafter, twenty five percent (25%) thereof shall accrue
to a Special Education Fund to be Administered by the Department of Education,
Culture and Sports for the construction and repair of school facilities, training or
teachers, and procurement or production of instructional materials and teaching aids;
and
(4) In 1994 and every year thereafter, fifty percent (50%) thereof shall accrue to a
Special Infrastructure Fund for the Construction and repair of roads, bridges, dams
and irrigation, seaports and hydroelectric and other indigenous power projects:
Provided, however, That for the years 1994 and 1995, thirty percent (30%), and for
the years 1996, 1997 and 1998, twenty percent (20%), of this fund shall be allocated
for depressed provinces as declared by the President as of the time of the effectivity
of R.A. No. 7660: Provided, further, That availments under this fund shall be
determined by the President on the basis of equity.
Provided, finally, That in paragraphs (2), (3), and (4) of this Section, not more one percent
(1%) of the allocated funds thereof shall be used for administrative expenses by the
implementing agencies.
(B) Incremental Revenues from Republic Act No. 8240. - Fifteen percent (15%) of the
incremental revenue collected from the excise tax on tobacco products under R.A. No. 8240
shall be allocated and divided among the provinces producing burley and native tobacco in
accordance with the volume of tobacco leaf production. The fund shall be exclusively
utilized for programs in pursuit of the following objectives:
(1) Cooperative projects that will enhance better quality of agricultural products and
increase income and productivity of farmers;
(2) Livelihood projects, particularly the development of alternative farming system to
enhance farmer's income; and
(3) Agro-industrial projects that will enable tobacco farmers to be involved in the
management and subsequent ownership of projects, such as post-harvest and
secondary processing like cigarette manufacturing and by-product utilization.
The Department of Budget and Management, in consultation with the Oversight Committee
created under said R.A. No. 8240, shall issue the corresponding rules and regulations
governing the allocation and disbursement of this fund.
Section 289. Special Financial Support to Beneficiary Provinces Producing Virginia Tobacco. - The
financial support given by the National Government for the beneficiary provinces shall be
constituted and collected from the proceeds of fifteen percent (15%) of the excise taxes on locally
manufactured Virginia-type of cigarettes.
The funds allotted shall be divided among the beneficiary provinces pro-rata according to the
volume of Virginia tobacco production.
Production producing Virginia tobacco shall be the beneficiary provinces under Republic Act No.
7171. Provided, however, that to qualify as beneficiary under R.A. No. 7171, a province must have
an average annual production of Virginia leaf tobacco in an amount not less than one million kilos:
Provided, further, that the Department of Budget and Management (DBM) shall each year
determine the beneficiary provinces and their computed share of the funds under R.A. No. 7171,
referring to the National Tobacco Administration (NTA) records of tobacco acceptances, at the
tobacco trading centers for the immediate past year.
The Secretary of Budget and Management is hereby directed to retain annually the said funds
equivalent to fifteen percent (15%) of excise taxes on locally manufactured Virginia type cigarettes
to be remitted to the beneficiary provinces qualified under R.A. No. 7171.
The provision of existing laws to the contrary notwithstanding, the fifteen percent (15%) share from
government revenues mentioned in R.A. No. 7171 and due to the Virginia tobacco-producing
provinces shall be directly remitted to the provinces concerned.
Provided, That this Section shall be implemented in accordance with the guidelines of
Memorandum Circular No. 61-A dated November 28, 1993, which amended Memorandum Circular
No. 61, entitled "Prescribing Guidelines for Implementing Republic Act No. 7171", dated January
1, 1992.
Provided, further, That in addition to the local government units mentioned in the above circular,
the concerned officials in the province shall be consulted as regards the identification of projects to
be financed.
TITLE XII
OVERSIGHT COMMITTEE
Section 290. Congressional Oversight Committee. -
A Congressional Oversight Committee, hereinafter referred to as the Committee, is hereby
constituted in accordance with the provisions of this Code. The Committee shall be composed of the
Chairmen of the Committee on Ways and Means of the Senate and House Representatives and four
(4) additional members from each house, to be designated by the Speaker of the House of
Representatives and the Senate President, respectively.
The Committee shall, among others, in aid of legislation:
(1) Monitor and ensure the proper implementation of Republic Act No. 8240;
(2) Determine that the power of the Commissioner to compromise and abate is reasonably
exercised;
(3) Review the collection performance of the Bureau of Internal Revenue; and
(4) Review the implementation of the programs of the Bureau of Internal Revenue.
In furtherance of the hereinabove cited objectives, the Committee is empowered to require of the
Bureau of Internal Revenue, submission of all pertinent information, including but not limited to:
industry audits; collection performance data; status report on criminal actions initiated against
persons; and submission of taxpayer returns: Provided, however, That any return or return
information which can be associated with, or otherwise identify, directly or indirectly, a particular
taxpayer shall be furnished the Committee only when sitting in Executive Session unless such
taxpayer otherwise consents in writing to such disclosure
TITLE XIII
REPEALING PROVISIONS
Section 291. In General. - All laws, decrees, executive orders, rules and regulations or parts thereof
which are contrary to or inconsistent with this Code are hereby repealed, amended or modified
accordingly.
TITLE XIV
FINAL PROVISIONS
Section 292. Separability Clause. - If any clause, sentence, paragraph or part of this Code shall be
adjudged by any Court of competent jurisdiction to be invalid, such judgment shall not affect,
impair or invalidate the remainder of said Code, but shall be confined in its operation to the clause,
sentence, paragraph or part thereof directly involved in the controversy.