An Act Amending Sections Twenty-Four Twenty-Six, Twenty-Nine, Thirty-Two, Forty-Nine, Fifty-Three, Fifty-Four and Eighty-Four (B) of the National Internal Revenue Code, as Amended

REPUBLIC ACT No. 5431

An Act Amending Sections Twenty-Four Twenty-Six, Twenty-Nine, Thirty-Two, Forty-Nine, Fifty-Three, Fifty-Four and Eighty-Four (B) of the National Internal Revenue Code, as Amended

Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled:

Section 1. Section twenty-four of Commonwealth Act Numbered Four hundred sixty-six, as amended, otherwise known as the National Internal Revenue Code, is further amended to read as follows:

Section 2. Section twenty-six of the same Act is hereby further amended to read as follows:

Section 3. Section twenty-nine of the same Act is hereby amended by adding new subsection to read as follows:

Section 4. Section thirty-two of the same Act is hereby amended to read as follows:

Section 5. Section forty-nine of the same Act is hereby amended to read as follows:

Section 6. Section fifty-three of the same Act is hereby amended to read as follows:

Section 7. Section fifty-four of the same Act is hereby amended to read as follows:

Section 8. Subsection (b) of Section eighty-four of the same Act is hereby amended to read as follows:

Section 9. All special laws, acts and parts thereof, which are inconsistent with the provisions of this Act are hereby amended or repealed.

Section 10. The provisions of this Act shall apply to income for taxable years beginning after June thirty, nineteen hundred sixty-eight.

Approved: June 15, 1968.

"Sec. 24. Rates of tax on corporations.— (a) Tax on domestic corporations. A tax is hereby imposed upon the taxable net income received during each taxable year from all sources by every corporation organized in, or existing under the laws of the Philippines, no matter how created or organized, but not including duly registered general co-partnership (companias colectivas) general professional partnerships, private educational institutions, and building and loan associations, in accordance with the following:

"Twenty-five per cent upon the amount by which the taxable net income does not exceed one hundred thousand pesos; and

"Thirty-five per cent upon the amount by which the taxable net income exceeds one hundred thousand pesos.

"Private educational institutions other than those exempt under Section twenty-seven (e) of this Code shall pay a tax of ten per cent of their taxable net income.

"Building and loan associations operating in accordance with the General Banking Act shall pay a tax of twelve per cent of their taxable net income.

"(b) Tax on foreign corporations. (1) Non-resident corporations. A foreign corporation not engaged in trade or business in the Philippines including a foreign life insurance company not engaged in the life insurance business in the Philippines shall pay a tax equal to thirty-five per cent of the gross income received during each taxable year from all sources within the Philippines, as interests, dividends, rents, royalties, salaries, wages, premiums, annuities, compensations, remunerations for technical services or otherwise, emoluments or other fixed or determinable annual, periodical or casual gains, profits, and income, and capital gains: Provided, However, That premiums shall not include reinsurance premiums.

"(2) Resident corporations. A foreign corporation engaged in trade or business within the Philippines shall be taxable as provided in subsection (a) of this section.

"(c) Rates of tax on life insurance companies. Life insurance companies shall be taxable as provided in this subsection or under subsections (a) or (b), as the case may be, whichever will result in a higher tax.

"Sec. 26. Tax liability of members of duly registered general co-partnerships or of general professional partnerships.— Persons carrying on business in general co-partnership (compania colectiva) duly registered in the mercantile registry, or those exercising a common profession in general partnership, shall be liable for income tax only in their individual capacity, and the share in the profits of the registered general co-partnership (compania colectiva) or in the general professional partnership to which any taxable partner would be entitled, whether distributed or otherwise, shall be returned for taxation and the tax paid in accordance with the provisions of this Title."

"Sec. 29. Gross Income…

"Sec. 32. Special provisions regarding income and deductions of insurance companies, whether domestic or foreign.— (a) Special deductions allowed to insurance companies. In the case of insurance companies, whether domestic or foreign, doing business in the Philippines, the net additions, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year from their gross income: Provided, However, That the released reserve be treated as income for the year of release: Provided, further, That domestic life insurance companies and resident foreign life insurance companies shall pay the tax imposed under Section twenty-four (a) to be entitled to the special deductions allowed under this paragraph.

"Sec. 49. Returns of duly registered general co-partnerships or general professional partnerships.— Every duly registered general co-partnership (compania colectiva) or general professional partnership shall file, in duplicate, a return of its income, except income exempt under Section twenty-nine (b) of this Title, setting forth the items of the gross income and the deductions allowed by this Title, and the names and addresses and shares of the partners."

"Sec. 53. Withholding of tax at source.— (a) Tax-free covenant bonds. (1) Requirement of withholding. In any case where bonds, mortgages, deeds of trust, or other similar obligations of domestic or resident foreign corporations, contain a contract or provision by which the obligor agrees to pay any portion of the tax imposed in this Title upon the obligee or to reimburse the obligee for any portion of the tax or to pay the interest without deduction for any tax which the obligor may be required or permitted to pay thereon or to retain therefrom under any law of the Philippines, or of any state or country, the obligor shall deduct and withhold a tax equal to twenty-five per cent of the interest or other payments upon those bonds, mortgages, deeds of trust, or other obligations, whether the interest or other payments are payable annually or at shorter or longer periods, and whether the bonds, securities, or obligations had been or will be issued or marketed, and the interest or other payment thereon paid, within or outside the Philippines, if the interest or other payment is payable to a nonresident alien or to a citizen or resident of the Philippines.

"(2) Benefit of exemptions against net income. The deduction and withholding required in subsection (a) (1) of this section shall not be required in the case of a citizen, resident alien, or nonresident alien engaged in trade or business in the Philippines, entitled to receive the interest or other payment, if that individual shall file with the withholding agent, on or before February first, a signed notice in writing claiming the benefit of the exemption provided in Section twenty-three of this Title.

"(b) Nonresident aliens and foreign corporations. (1) Nonresident aliens. Every individual, corporation, partnership, or association, in whatever capacity acting, including a lessee or mortgagor of real or personal property, trustee acting in any trust capacity, executor, administrator, receiver, conservator, fiduciary, employer, and every officer or employee of the Government of the Republic of the Philippines having the control, receipt, custody, disposal, or payment of interest, dividends, rents, royalties, salaries, wages, premiums, annuities, compensation, remunerations, emoluments, or other fixed or determinable annual, periodical, or casual gains, profits, and income, and capital gains, of any nonresident alien not engaged in trade or business within the Philippines, shall (except in the cases provided in subsection (a) (1) of this section) deduct and withhold from the annual, periodical, or casual gains, profits, and income, and capital gains, a tax equal to twenty-five per cent thereof. This deduction and withholding shall not be required in the case of dividends paid by a foreign corporation unless (1) the corporation is engaged in trade or business within the Philippines, and (2) more than eighty-five per cent of the gross income of the corporation for the three-year period ending with the close of its taxable year preceding the declaration of the dividends (or for such part of the period as the corporation has been in existence) was derived from sources within the Philippines as determined under the provisions of Section thirty-seven. The Commissioner of Internal Revenue may authorize the tax to be deducted and withheld from the interest or other income upon any security or obligation the owners of which are not known to the withholding agent.

"(2) Nonresident foreign corporations. In the case of foreign corporations subject to tax under this Title not engaged in trade or business within the Philippines, there shall be deducted and withheld at the source in the same manner and upon the same items as is provided in subsection (b) (1) of this section, as well on remunerations for technical services or otherwise, a tax equal to thirty-five per cent thereof. This tax shall be returned and paid in the same manner and subject to the same conditions as provided in Section fifty-four. This deduction and withholding shall not be required in the case of reinsurance premiums ceded to foreign insurance corporations not engaged in trade or business in the Philippines."

"Sec. 54. Returns and payment of taxes withheld at source.— (a) Quarterly return and payment of taxes withheld. Taxes deducted and withheld under Section fifty-three shall be covered by a return and paid to the Commissioner of Internal Revenue or to his collection agent in the province, city, or municipality where the withholding agent has his legal residence or principal place of business, or where the withholding agent is a corporation, where the principal office is located. The taxes deducted and withheld by the withholding agent shall be held as a special fund in trust for the Government until paid to the collecting officers. The Commissioner of Internal Revenue may, with the approval of the Secretary of Finance, require these withholding agents to pay or deposit the taxes deducted and withheld at more frequent intervals when necessary to protect the interest of the Government. The return shall be filed and the payment made within twenty-five days from the close of each calendar quarter.

"Sec. 84. Definitions.— When used in this Title…