Republic Act No. 8424 NIRC of 1997

Republic Act No.
8424
October 24, 2012
Re public o f t he Philippine s
Co ngre ss o f t he Philippine s
Me t ro Manila
T enth Congress
December 11, 1997
Republic Act No. 8424
AN ACT AMENDING T HE NAT IONAL INT ERNAL REVENUE CODE, AS AMENDED, AND FOR
OT HER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled::
Section 1. Short Title. T his Act shall be cit ed as t he Tax Reform Act of 1997.
Section 2. State Policy. It is hereby declared t he policy of t he St at e t o promot e sust ainable
economic growt h t hrough t he rat ionalizat ion of t he Philippine int ernal revenue t ax syst em, including
t ax administ rat ion; t o provide, as much as possible, an equit able relief t o a great er number of
t axpayers in order t o improve levels of disposable income and increase economic act ivit y; and t o
creat e a robust environment f or business t o enable f irms t o compet e bet t er in t he regional as well as
t he global market , at t he same t ime t hat t he St at e ensures t hat Government is able t o provide f or
t he needs of t hose under it s jurisdict ion and care.
Section 3. President ial Decree No. 1158, as amended by, among ot hers, President ial Decree No. 1994
and Execut ive Order No. 273, ot herwise known as t he Nat ional Int ernal Revenue Code, is hereby
f urt her amended.
Section 4. T he Secret ary of Finance shall, upon recommendat ion of t he Commissioner of Int ernal
Revenue, promulgat e and publish t he necessary rules and regulat ions f or t he ef f ect ive
implement at ion of t his Act .
Section 5. Transitory Provisions Def erment of t he Ef f ect ivit y of t he Imposit ion of VAT on Cert ain
Services. T he ef f ect ivit y of t he imposit ion of t he value-added t ax on services as prescribed in
Sect ion 17(a) and (b) of Republic Act No. 7616, as amended by Republic Act . 8241, is hereby f urt her
def erred unt il December 31, 1999, unless Congress deems ot herwise: Provided, T hat t he said
services shall cont inue t o pay t he applicable t ax prescribed under t he present provisions of t he
Nat ional Int ernal Revenue Code, as amended.
Section 6. Separability Clause. If any provision of t his Act is subsequent ly declared unconst it ut ional,
t he validit y of t he remaining provisions hereof shall remain in f ull f orce and ef f ect .
Section 7. Repealing Clauses. -(A) T he provision of Sect ion 17 of Republic Act No. 7906, ot herwise
known as t he T hrif t Banks Act s of 1995 shall cont inue t o be in f orce and ef f ect only unt il December
31, 1999.
Ef f ect ive January 1, 2000, all t hrif t banks, whet her in operat ion as of t hat dat e or t hereaf t er, shall no
longer enjoy t ax exempt ion as provided under Sect ion 17 of R.A. No. 7906, t hereby subject ing all t hrif t
banks t o t axes, f ees and charges in t he same manner and at t he same rat e as banks and ot her
f inancial int ermediaries.
(B) T he provisions of t he Nat ional Int ernal Revenue Code, as amended, and all ot her laws, including
chart ers of government -owned or cont rolled corporat ions, decrees, orders, or regulat ions or part s
t hereof , t hat are inconsist ent wit h t his Act are hereby repealed or amended accordingly.
Section 8. Effectivity T his Act shall t ake ef f ect on January 1, 1998.
T IT LE I
ORGANIZ AT ION AND FUNCT ION OF T HE BUREAU OF INT ERNAL REVENUE
Section 1. Title of the Code. T his Code shall be known as t he Nat ional Int ernal Revenue Code of
1997.
Section 2. Powers and duties of the Bureau of Internal Revenue. T he Bureau of Int ernal Revenue shall
be under t he supervision and cont rol of t he Depart ment of Finance and it s powers and dut ies shall
comprehend t he assessment and collect ion of all nat ional int ernal revenue t axes, f ees, and charges,
and t he enf orcement of all f orf eit ures, penalt ies, and f ines connect ed t herewit h, including t he
execut ion of judgment s in all cases decided in it s f avor by t he Court of T ax Appeals and t he ordinary
court s. T he Bureau shall give ef f ect t o and administ er t he supervisory and police powers conf erred t o
it by t his Code or ot her laws.
Section 3. Chief Officials of the Bureau of Internal Revenue. T he Bureau of Int ernal Revenue shall have
a chief t o be known as Commissioner of Int ernal Revenue, hereinaf t er ref erred t o as t he
Commissioner and f our (4) assist ant chief s t o be known as Deput y Commissioners.
Section 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. T he power t o
int erpret t he provisions of t his Code and ot her t ax laws shall be under t he exclusive and original
jurisdict ion of t he Commissioner, subject t o review by t he Secret ary of Finance.
T he power t o decide disput ed assessment s, ref unds of int ernal revenue t axes, f ees or ot her
charges, penalt ies imposed in relat ion t heret o, or ot her mat t ers arising under t his Code or ot her laws
or port ions t hereof administ ered by t he Bureau of Int ernal Revenue is vest ed in t he Commissioner,
subject t o t he exclusive appellat e jurisdict ion of t he Court of T ax Appeals.
Section 5. Power of the Commissioner to Obtain Information, and to Summon, Examine, and Take
Testimony of Persons. In ascert aining t he correct ness of any ret urn, or in making a ret urn when none
has been made, or in det ermining t he liabilit y of any person f or any int ernal revenue t ax, or in
collect ing any such liabilit y, or in evaluat ing t ax compliance, t he Commissioner is aut horized:
(A) T o examine any book, paper, record, or ot her dat a which may be relevant or mat erial t o such
inquiry;
(B) T o Obt ain on a regular basis f rom any person ot her t han t he person whose int ernal revenue t ax
liabilit y is subject t o audit or invest igat ion, or f rom any of f ice or of f icer of t he nat ional and local
government s, government agencies and inst rument alit ies, including t he Bangko Sent ral ng Pilipinas
and government -owned or -cont rolled corporat ions, any inf ormat ion such as, but not limit ed t o, cost s
and volume of product ion, receipt s or sales and gross incomes of t axpayers, and t he names,
addresses, and f inancial st at ement s of corporat ions, mut ual f und companies, insurance companies,
regional operat ing headquart ers of mult inat ional companies, joint account s, associat ions, joint
vent ures of consort ia and regist ered part nerships, and t heir members;
(C) T o summon t he person liable f or t ax or required t o f ile a ret urn, or any of f icer or employee of such
person, or any person having possession, cust ody, or care of t he books of account s and ot her
account ing records cont aining ent ries relat ing t o t he business of t he person liable f or t ax, or any
ot her person, t o appear bef ore t he Commissioner or his duly aut horized represent at ive at a t ime and
place specif ied in t he summons and t o produce such books, papers, records, or ot her dat a, and t o
give t est imony;
(D) T o t ake such t est imony of t he person concerned, under oat h, as may be relevant or mat erial t o
such inquiry; and
(E) T o cause revenue of f icers and employees t o make a canvass f rom t ime t o t ime of any revenue
dist rict or region and inquire af t er and concerning all persons t herein who may be liable t o pay any
int ernal revenue t ax, and all persons owning or having t he care, management or possession of any
object wit h respect t o which a t ax is imposed.
T he provisions of t he f oregoing paragraphs not wit hst anding, not hing in t his Sect ion shall be
const rued as grant ing t he Commissioner t he aut horit y t o inquire int o bank deposit s ot her t han as
provided f or in Sect ion 6(F) of t his 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. Af t er a ret urn has been f iled as required
under t he provisions of t his Code, t he Commissioner or his duly aut horized represent at ive may
aut horize t he examinat ion of any t axpayer and t he assessment of t he correct amount of t ax:
Provided, however; T hat f ailure t o f ile a ret urn shall not prevent t he Commissioner f rom aut horizing
t he examinat ion of any t axpayer.
T he t ax or any def iciency t ax so assessed shall be paid upon not ice and demand f rom t he
Commissioner or f rom his duly aut horized represent at ive.
Any ret urn, st at ement of declarat ion f iled in any of f ice aut horized t o receive t he same shall not be
wit hdrawn: Provided, T hat wit hin t hree (3) years f rom t he dat e of such f iling, t he same may be
modif ied, changed, or amended: Provided, f urt her, T hat no not ice f or audit or invest igat ion of such
ret urn, st at ement or declarat ion has in t he meant ime been act ually served upon t he t axpayer.
(B) Failure to Submit Required Returns, Statements, Reports and other Documents. When a report
required by law as a basis f or t he assessment of any nat ional int ernal revenue t ax shall not be
f ort hcoming wit hin t he t ime f ixed by laws or rules and regulat ions or when t here is reason t o believe
t hat any such report is f alse, incomplet e or erroneous, t he Commissioner shall assess t he proper t ax
on t he best evidence obt ainable.
In case a person f ails t o f ile a required ret urn or ot her document at t he t ime prescribed by law, or
willf ully or ot herwise f iles a f alse or f raudulent ret urn or ot her document , t he Commissioner shall make
or amend t he ret urn f rom his own knowledge and f rom such inf ormat ion as he can obt ain t hrough
t est imony or ot herwise, which shall be prima f acie correct and suf f icient f or all legal purposes.
(C) Authority to Conduct Inventory-taking, surveillance and to Prescribe Presumptive Gross Sales and
Receipts. T he Commissioner may, at any t ime during t he t axable year, order invent ory-t aking of
goods of any t axpayer as a basis f or det ermining his int ernal revenue t ax liabilit ies, or may place t he
business operat ions of any person, nat ural or juridical, under observat ion or surveillance if t here is
reason t o believe t hat such person is not declaring his correct income, sales or receipt s f or int ernal
revenue t ax purposes. T he f indings may be used as t he basis f or assessing t he t axes f or t he ot her
mont hs or quart ers of t he same or dif f erent t axable years and such assessment shall be deemed
prima f acie correct .
When it is f ound t hat a person has f ailed t o issue receipt s and invoices in violat ion of t he
requirement s of Sect ions 113 and 237 of t his Code, or when t here is reason t o believe t hat t he books
of account s or ot her records do not correct ly ref lect t he declarat ions made or t o be made in a ret urn
required t o be f iled under t he provisions of t his Code, t he Commissioner, af t er t aking int o account t he
sales, receipt s, income or ot her t axable base of ot her persons engaged in similar businesses under
similar sit uat ions or circumst ances or af t er considering ot her relevant inf ormat ion may prescribe a
minimum amount of such gross receipt s, sales and t axable base, and such amount so prescribed
shall be prima f acie correct f or purposes of det ermining t he int ernal revenue t ax liabilit ies of such
person.
(D) Authority to Terminate Taxable Period. _ When it shall come t o t he knowledge of t he Commissioner
t hat a t axpayer is ret iring f rom business subject t o t ax, or is int ending t o leave t he Philippines or t o
remove his propert y t heref rom or t o hide or conceal his propert y, or is perf orming any act t ending t o
obst ruct t he proceedings f or t he collect ion of t he t ax f or t he past or current quart er or year or t o
render t he same t ot ally or part ly inef f ect ive unless such proceedings are begun immediat ely, t he
Commissioner shall declare t he t ax period of such t axpayer t erminat ed at any t ime and shall send
t he t axpayer a not ice of such decision, t oget her wit h a request f or t he immediat e payment of t he t ax
f or t he period so declared t erminat ed and t he t ax f or t he preceding year or quart er, or such port ion
t hereof as may be unpaid, and said t axes shall be due and payable immediat ely and shall be subject
t o all t he penalt ies hereaf t er prescribed, unless paid wit hin t he t ime f ixed in t he demand made by t he
Commissioner.
(E) Authority of the Commissioner to Prescribe Real Property Values. T he Commissioner is hereby
aut horized t o divide t he Philippines int o dif f erent zones or areas and shall, upon consult at ion wit h
compet ent appraisers bot h f rom t he privat e and public sect ors, det ermine t he f air market value of
real propert ies locat ed in each zone or area. For purposes of comput ing any int ernal revenue t ax, t he
value of t he propert y shall be, whichever is t he higher of ;
(1) t he f air market value as det ermined by t he Commissioner, or
(2) t he f air market value as shown in t he schedule of values of t he Provincial and Cit y Assessors.
(F) Aut horit y of t he Commissioner t o inquire int o Bank Deposit Account s. Not wit hst anding any
cont rary provision of Republic Act No. 1405 and ot her general or special laws, t he Commissioner is
hereby aut horized t o inquire int o t he bank deposit s of :
(1) a decedent t o det ermine his gross est at e; and
(2) any t axpayer who has f iled an applicat ion f or compromise of his t ax liabilit y under Sec. 204 (A) (2)
of t his Code by reason of f inancial incapacit y t o pay his t ax liabilit y.
In case a t axpayer f iles an applicat ion t o compromise t he payment of his t ax liabilit ies on his claim
t hat his f inancial posit ion demonst rat es a clear inabilit y t o pay t he t ax assessed, his applicat ion shall
not be considered unless and unt il he waives in writ ing his privilege under Republic act NO. 1405 or
under ot her general or special laws, and such waiver shall const it ut e t he aut horit y of t he
Commissioner t o inquire int o t he bank deposit s of t he t axpayer.
(G) Aut horit y t o Accredit and Regist er T ax Agent s. T he Commissioner shall accredit and regist er,
based on t heir prof essional compet ence, int egrit y and moral f it ness, individuals and general
prof essional part nerships and t heir represent at ives who prepare and f ile t ax ret urns, st at ement s,
report s, prot est s, and ot her papers wit h or who appear bef ore, t he Bureau f or t axpayers. Wit hin one
hundred t went y (120) days f rom January 1, 1998, t he Commissioner shall creat e nat ional and regional
accredit at ion boards, t he members of which shall serve f or t hree (3) years, and shall designat e f rom
among t he senior of f icials of t he Bureau, one (1) chairman and t wo (2) members f or each board,
subject t o such rules and regulat ions as t he Secret ary of Finance shall promulgat e upon t he
recommendat ion of t he Commissioner.
Individuals and general prof essional part nerships and t heir represent at ives who are denied
accredit at ion by t he Commissioner and/or t he nat ional and regional accredit at ion boards may appeal
such denial t o t he Secret ary of Finance, who shall rule on t he appeal wit hin sixt y (60) days f rom
receipt of such appeal. Failure of t he Secret ary of Finance t o rule on t he Appeal wit hin t he prescribed
period shall be deemed as approval of t he applicat ion f or accredit at ion of t he appellant .
(H) Aut horit y of t he Commissioner t o Prescribe Addit ional Procedural or Document ary Requirement s.
T he Commissioner may prescribe t he manner of compliance wit h any document ary or procedural
requirement in connect ion wit h t he submission or preparat ion of f inancial st at ement s accompanying
t he t ax ret urns.
Section 7. Authority of the Commissioner to Delegate Power. T he Commissioner may delegat e t he

powers vest ed in him under t he pert inent provisions of t his Code t o any or such subordinat e of f icials
wit h t he rank equivalent t o a division chief or higher, subject t o such limit at ions and rest rict ions as
may be imposed under rules and regulat ions t o be promulgat ed by t he Secret ary of f inance, upon
recommendat ion of t he Commissioner: Provided, However, T hat t he f ollowing powers of t he
Commissioner shall not be delegat ed:
(a) T he power t o recommend t he promulgat ion of rules and regulat ions by t he Secret ary of Finance;
(b) T he power t o issue rulings of f irst impression or t o reverse, revoke or modif y any exist ing ruling of
t he Bureau;
(c) T he power t o compromise or abat e, under Sec. 204 (A) and (B) of t his Code, any t ax liabilit y:
Provided, however, T hat assessment s issued by t he regional of f ices involving basic def iciency t axes
of Five hundred t housand pesos (P500,000) or less, and minor criminal violat ions, as may be
det ermined by rules and regulat ions t o be promulgat ed by t he Secret ary of f inance, upon
recommendat ion of t he Commissioner, discovered by regional and dist rict of f icials, may be
compromised by a regional evaluat ion board which shall be composed of t he Regional Direct or as
Chairman, t he Assist ant Regional Direct or, t he heads of t he Legal, Assessment and Collect ion
Divisions and t he Revenue Dist rict Of f icer having jurisdict ion over t he t axpayer, as members; and
(d) T he power t o assign or reassign int ernal revenue of f icers t o est ablishment s where art icles subject
t o excise t ax are produced or kept .
Section 8. Dut y of t he Commissioner t o Ensure t he Provision and Dist ribut ion of f orms, Receipt s,
Cert if icat es, and Appliances, and t he Acknowledgment of Payment of T axes.(A) Provision and Dist ribut ion t o Proper Of f icials. It shall be t he dut y of t he Commissioner, among
ot her t hings, t o prescribe, provide, and dist ribut e t o t he proper of f icials t he requisit e licenses int ernal
revenue st amps, labels all ot her f orms, cert if icat es, bonds, records, invoices, books, receipt s,
inst rument s, appliances and apparat us used in administ ering t he laws f alling wit hin t he jurisdict ion of
t he Bureau. For t his purpose, int ernal revenue st amps, st rip st amps and labels shall be caused by t he
Commissioner t o be print ed wit h adequat e securit y f eat ures.
Int ernal revenue st amps, whet her of a bar code or f uson design, shall be f irmly and conspicuously
af f ixed on each pack of cigars and cigaret t es subject t o excise t ax in t he manner and f orm as
prescribed by t he Commissioner, upon approval of t he Secret ary of Finance.
(B) Receipt s f or Payment Made. It shall be t he dut y of t he Commissioner or his duly aut horized
represent at ive or an aut horized agent bank t o whom any payment of any t ax is made under t he
provision of t his Code t o acknowledge t he payment of such t ax, expressing t he amount paid and t he
part icular account f or which such payment was made in a f orm and manner prescribed t heref or by t he
Commissioner.
Section 9. Internal Revenue Districts. Wit h t he approval of t he Secret ary of Finance, t he
Commissioner shall divide t he Philippines int o such number of revenue dist rict s as may f orm t ime t o
t ime be required f or administ rat ive purposes. Each of t hese dist rict s shall be under t he supervision of
a Revenue Dist rict Of f icer.
Section 10. Revenue Regional Director. Under rules and regulat ions, policies and st andards
f ormulat ed by t he Commissioner, wit h t he approval of t he Secret ary of Finance, t he Revenue
Regional direct or shall, wit hin t he region and dist rict of f ices under his jurisdict ion, among ot hers:
(a) Implement laws, policies, plans, programs, rules and regulat ions of t he depart ment or agencies in
t he regional area;
(b) Administ er and enf orce int ernal revenue laws, and rules and regulat ions, including t he assessment
and collect ion of all int ernal revenue t axes, charges and f ees.
(c) Issue Let t ers of aut horit y f or t he examinat ion of t axpayers wit hin t he region;
(d) Provide economical, ef f icient and ef f ect ive service t o t he people in t he area;
(e) Coordinat e wit h regional of f ices or ot her depart ment s, bureaus and agencies in t he area;
(f ) Coordinat e wit h local government unit s in t he area;
(g) Exercise cont rol and supervision over t he of f icers and employees wit hin t he region; and
(h) Perf orm such ot her f unct ions as may be provided by law and as may be delegat ed by t he
Commissioner.
Section 11. Duties of Revenue District Officers and Other Internal Revenue Officers. It shall be t he dut y
of every Revenue Dist rict Of f icer or ot her int ernal revenue of f icers and employees t o ensure t hat all
laws, and rules and regulat ions af f ect ing nat ional int ernal revenue are f ait hf ully execut ed and
complied wit h, and t o aid in t he prevent ion, det ect ion and punishment of f rauds of delinquencies in
connect ion t herewit h.
It shall be t he dut y of every Revenue Dist rict Of f icer t o examine t he ef f iciency of all of f icers and
employees of t he Bureau of Int ernal Revenue under his supervision, and t o report in writ ing t o t he
Commissioner, t hrough t he Regional Direct or, any neglect of dut y, incompet ency, delinquency, or
malf easance in of f ice of any int ernal revenue of f icer of which he may obt ain knowledge, wit h a
st at ement of all t he f act s and any evidence sust aining each case.
Section 12. Agents and Deputies for Collection of National Internal Revenue Taxes. T he f ollowing are
hereby const it ut ed agent s of t he Commissioner:
(a) T he Commissioner of Cust oms and his subordinat es wit h respect t o t he collect ion of nat ional
int ernal revenue t axes on import ed goods;
(b) T he head of t he appropriat e government of f ice and his subordinat es wit h respect t o t he
collect ion of energy t ax; and
(c) Banks duly accredit ed by t he Commissioner wit h respect t o receipt of payment s int ernal revenue
t axes aut horized t o be made t hru bank.
Any of f icer or employee of an aut horized agent bank assigned t o receive int ernal revenue t ax
payment s and t ransmit t ax ret urns or document s t o t he Bureau of Int ernal Revenue shall be subject
t o t he same sanct ions and penalt ies prescribed in Sect ions 269 and 270 of t his Code.
Section 13. Authority of a Revenue Offices. subject t o t he rules and regulat ions t o be prescribed by
t he Secret ary of Finance, upon recommendat ion of t he Commissioner, a Revenue Of f icer assigned t o
perf orm assessment f unct ions in any dist rict may, pursuant t o a Let t er of Aut horit y issued by t he
Revenue Regional Direct or, examine t axpayers wit hin t he jurisdict ion of t he dist rict in order t o collect
t he correct amount of t ax, or t o recommend t he assessment of any def iciency t ax due in t he same
manner t hat t he said act s could have been perf ormed by t he Revenue Regional Direct or himself .
Section 14. Authority of Officers to Administer Oaths and Take Testimony. T he Commissioner, Deput y
Commissioners, Service Chief s, Assist ant Service Chief s, Revenue Regional Direct ors, Assist ant
Revenue Regional Direct ors, Chief s and Assist ant Chief s of Divisions, Revenue Dist rict Of f icers,
special deput ies of t he Commissioner, int ernal revenue of f icers and any ot her employee of t he
Bureau t hereunt o especially deput ized by t he Commissioner shall have t he power t o administ er oat hs
and t o t ake t est imony in any of f icial mat t er or invest igat ion conduct ed by t hem regarding mat t ers
wit hin t he jurisdict ion of t he Bureau.
Section 15. Authority of Internal Revenue Officers to Make Arrests and Seizures. T he Commissioner,
t he Deput y Commissioners, t he Revenue Regional Direct ors, t he Revenue Dist rict Of f icers and ot her
int ernal revenue of f icers shall have aut horit y t o make arrest s and seizures f or t he violat ion of any
penal law, rule or regulat ion administ ered by t he Bureau of Int ernal Revenue. Any person so arrest ed
shall be f ort hwit h brought bef ore a court , t here t o be dealt wit h according t o 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. T he Commissioner shall employ, assign, or
reassign int ernal revenue of f icers involved in excise t ax f unct ions, as of t en as t he exigencies of t he
revenue service may require, t o est ablishment s or places where art icles subject t o excise t ax are
produced or kept : Provided, T hat an int ernal revenue of f icer assigned t o any such est ablishment shall
in no case st ay in his assignment f or more t han t wo (2) years, subject t o rules and regulat ions t o be
prescribed by t he Secret ary of Finance, upon recommendat ion of t he Commissioner.
Section 17. Assignment of Internal Revenue Officers and Other Employees to Other Duties. T he
Commissioner may, subject t o t he provisions of Sect ion 16 and t he laws on civil service, as well as t he
rules and regulat ions t o be prescribed by t he Secret ary of Finance upon t he recommendat ion of t he
Commissioner, assign or reassign int ernal revenue of f icers and employees of t he Bureau of Int ernal
Revenue, wit hout change in t heir of f icial rank and salary, t o ot her or special dut ies connect ed wit h t he
enf orcement or administ rat ion of t he revenue laws as t he exigencies of t he service may require:
Provided, T hat int ernal revenue of f icers assigned t o perf orm assessment or collect ion f unct ion shall
not remain in t he same assignment f or more t han t hree (3) years; Provided, f urt her, T hat assignment
of int ernal revenue of f icers and employees of t he Bureau t o special dut ies shall not exceed one (1)
year.
Section 18. Reports of violation of Laws. When an int ernal revenue of f icer discovers evidence of a
violat ion of t his Code or of any law, rule or regulat ions administ ered by t he Bureau of Int ernal
Revenue of such charact er as t o warrant t he inst it ut ion of criminal proceedings, he shall immediat ely
report t he f act s t o t he Commissioner t hrough his immediat e superior, giving t he name and address of
t he of f ender and t he names of t he wit nesses if possible: Provided, T hat in urgent cases, t he
Revenue Regional direct or or Revenue Dist rict Of f icer, as t he case may be, may send t he report t o
t he corresponding prosecut ing of f icer in t he lat t er case, a copy of his report shall be sent t o t he
Commissioner.
Section 19. Contents of Commissioners Annual Report. T he annual Report of t he Commissioner shall
cont ain det ailed st at ement s of t he collect ions of t he Bureau wit h specif icat ions of t he sources of
revenue by t ype of t ax, by manner of payment , by revenue region and by indust ry group and it s
disbursement s by classes of expendit ures.
In case t he act ual collect ion exceeds or f alls short of t arget as set in t he annual nat ional budget by
f if t een percent (15%) or more, t he Commissioner shall explain t he reason f or such excess or short f all.
Section 20. Submission of Report and Pertinent Information by the Commissioner.
(A) Submission of Pert inent Inf ormat ion t o Congress. T he provision of Sect ion 270 of t his Code t o
t he cont rary not wit hst anding, t he Commissioner shall, upon request of Congress and in aid of
legislat ion, f urnish it s appropriat e Commit t ee pert inent inf ormat ion including but not limit ed t o:
indust ry audit s, collect ion perf ormance dat a, st at us report s in criminal act ions init iat ed against
persons and t axpayers ret urns: Provided, however, T hat any ret urn or ret urn inf ormat ion which can
be associat ed wit h, or ot herwise ident if y, direct ly or indirect ly, a part icular t axpayer shall be f urnished
t he appropriat e Commit t ee of Congress only when sit t ing in Execut ive Session Unless such t axpayer
ot herwise consent s in writ ing t o such disclosure.
(B) Report t o Oversight Commit t ee. T he Commissioner shall, wit h ref erence t o Sect ion 204 of t his
Code, submit t o t he Oversight Commit t ee ref erred t o in Sect ion 290 hereof , t hrough t he Chairmen of
t he Commit t ee on Ways and Means of t he Senat e and House of Represent at ives, a report on t he
exercise of his powers pursuant t o t he said sect ion, every six (6) mont hs of each calendar year.
Section 21. Sources of Revenue. T he f ollowing t axes, f ees and charges are deemed t o be nat ional
int ernal revenue t axes:
int ernal revenue t axes:

(a) Income t ax;
(b) Est at e and donors t axes;
(c) Value-added t ax;
(d) Ot her percent age t axes;
(e) Excise t axes;
(f ) Document ary st amp t axes; and
(g) Such ot her t axes as are or hereaf t er may be imposed and collect ed by t he Bureau of Int ernal
Revenue.
T IT LE II
T AX ON INCOME
CHAPT ER I DEFINIT IONS
Section 22. Definitions When used in t his T it le:
(A) T he t erm person means an individual, a t rust , est at e or corporat ion.
(B) T he t erm corporat ion shall include part nerships, no mat t er how creat ed or organized, joint -st ock
companies, joint account s (cuent as en part icipacion), associat ion, or insurance companies, but does
not include general prof essional part nerships and a joint vent ure or consort ium f ormed f or t he
purpose of undert aking const ruct ion project s or engaging in pet roleum, coal, geot hermal and ot her
energy operat ions pursuant t o an operat ing consort ium agreement under a service cont ract wit h t he
Government . General prof essional part nerships are part nerships f ormed by persons f or t he sole
purpose of exercising t heir common prof ession, no part of t he income of which is derived f rom
engaging in any t rade or business.
(C) T he t erm domest ic, when applied t o a corporat ion, means creat ed or organized in t he Philippines
or under it s laws.
(D) T he t erm f oreign, when applied t o a corporat ion, means a corporat ion which is not domest ic.
(E) T he t erm nonresident cit izen means:
(1) A cit izen of t he Philippines who est ablishes t o t he sat isf act ion of t he Commissioner t he f act of his
physical presence abroad wit h a def init e int ent ion t o reside t herein.
(2) A cit izen of t he Philippines who leaves t he Philippines during t he t axable year t o reside abroad,
eit her as an immigrant or f or employment on a permanent basis.
(3) A cit izen of t he Philippines who works and derives income f rom abroad and whose employment
t hereat requires him t o be physically present abroad most of t he t ime during t he t axable year.
(4) A cit izen who has been previously considered as nonresident cit izen and who arrives in t he
Philippines at any t ime during t he t axable year t o reside permanent ly in t he Philippines shall likewise
be t reat ed as a nonresident cit izen f or t he t axable year in which he arrives in t he Philippines wit h
respect t o his income derived f rom sources abroad unt il t he dat e of his arrival in t he Philippines.
(5) T he t axpayer shall submit proof t o t he Commissioner t o show his int ent ion of leaving t he
Philippines t o reside permanent ly abroad or t o ret urn t o and reside in t he Philippines as t he case may
be f or purpose of t his Sect ion.
(F) T he t erm resident alien means an individual whose residence is wit hin t he Philippines and who is
not a cit izen t hereof .
(G) T he t erm nonresident alien means an individual whose residence is not wit hin t he Philippines and
who is not a cit izen t hereof .
(H) T he t erm resident f oreign corporat ion applies t o a f oreign corporat ion engaged in t rade or
business wit hin t he Philippines.
(I) T he t erm nonresident f oreign corporat ion applies t o a f oreign corporat ion not engaged in t rade or
business wit hin t he Philippines.
(J) T he t erm f iduciary means a guardian, t rust ee, execut or, administ rat or, receiver, conservat or or
any person act ing in any f iduciary capacit y f or any person.
(K) T he t erm wit hholding agent means any person required t o deduct and wit hhold any t ax under t he
provisions of Sect ion 57.
(L) T he t erm shares of st ock shall include shares of st ock of a corporat ion, warrant s and/or opt ions
t o purchase shares of st ock, as well as unit s of part icipat ion in a part nership (except general
prof essional part nerships), joint st ock companies, joint account s, joint vent ures t axable as
corporat ions, associat ions and recreat ion or amusement clubs (such as golf , polo or similar clubs),
and mut ual f und cert if icat es.
(M) T he t erm shareholder shall include holders of a share/s of st ock, warrant /s and/or opt ion/s t o
purchase shares of st ock of a corporat ion, as well as a holder of a unit of part icipat ion in a
part nership (except general prof essional part nerships) in a joint st ock company, a joint account , a
t axable joint vent ure, a member of an associat ion, recreat ion or amusement club (such as golf , polo
or similar clubs) and a holder of a mut ual f und cert if icat e, a member in an associat ion, joint -st ock
company, or insurance company.
(N) T he t erm t axpayer means any person subject t o t ax imposed by t his T it le.
(O) T he t erms including and includes, when used in a def init ion cont ained in t his T it le, shall not be
deemed t o exclude ot her t hings ot herwise wit hin t he meaning of t he t erm def ined.
(P) T he t erm t axable year means t he calendar year, or t he f iscal year ending during such calendar
year, upon t he basis of which t he net income is comput ed under t his T it le. T axable year includes, in
t he case of a ret urn made f or a f ract ional part of a year under t he provisions of t his T it le or under
rules and regulat ions prescribed by t he Secret ary of Finance, upon recommendat ion of t he
commissioner, t he period f or which such ret urn is made.
(Q) T he t erm f iscal year means an account ing period of t welve (12) mont hs ending on t he last day of
any mont h ot her t han December.
(R) T he t erms paid or incurred and paid or accrued shall be const rued according t o t he met hod of
account ing upon t he basis of which t he net income is comput ed under t his T it le.
(S) T he t erm t rade or business includes t he perf ormance of t he f unct ions of a public of f ice.
(T ) T he t erm securit ies means shares of st ock in a corporat ion and right s t o subscribe f or or t o
receive such shares. T he t erm includes bonds, debent ures, not es or cert if icat es, or ot her evidence or
indebt edness, issued by any corporat ion, including t hose issued by a government or polit ical
subdivision t hereof , wit h int erest coupons or in regist ered f orm.
(U) T he t erm dealer in securit ies means a merchant of st ocks or securit ies, whet her an individual,
part nership or corporat ion, wit h an est ablished place of business, regularly engaged in t he purchase
of securit ies and t he resale t hereof t o cust omers; t hat is, one who, as a merchant , buys securit ies
and re-sells t hem t o cust omers wit h a view t o t he gains and prof it s t hat may be derived t heref rom.
(V) T he t erm bank means every banking inst it ut ion, as def ined in Sect ion 2 of Republic Act No. 337,
as amended, ot herwise known as t he General banking Act . A bank may eit her be a commercial bank, a
t hrif t bank, a development bank, a rural bank or specialized government bank.
(W) T he t erm non-bank f inancial int ermediary means a f inancial int ermediary, as def ined in Sect ion
2(D)(C) of Republic Act No. 337, as amended, ot herwise known as t he General Banking Act , aut horized
by t he Bangko Sent ral ng Pilipinas (BSP) t o perf orm quasi-banking act ivit ies.
(X) T he t erm quasi-banking act ivit ies means borrowing f unds f rom t went y (20) or more personal or
corporat e lenders at any one t ime, t hrough t he issuance, endorsement , or accept ance of debt
inst rument s of any kind ot her t han deposit s f or t he borrowers own account , or t hrough t he issuance
of cert if icat es of assignment or similar inst rument s, wit h recourse, or of repurchase agreement s f or
purposes of relending or purchasing receivables and ot her similar obligat ions: Provided, however,
T hat commercial, indust rial and ot her non-f inancial companies, which borrow f unds t hrough any of
t hese means f or t he limit ed purpose of f inancing t heir own needs or t he needs of t heir agent s or
dealers, shall not be considered as perf orming quasi-banking f unct ions.
(Y) T he t erm deposit subst it ut es shall mean an alt ernat ive f rom of obt aining f unds f rom t he public
(t he t erm public means borrowing f rom t went y (20) or more individual or corporat e lenders at any one
t ime) ot her t han deposit s, t hrough t he issuance, endorsement , or accept ance of debt inst rument s f or
t he borrowers own account , f or t he purpose of relending or purchasing of receivables and ot her
obligat ions, or f inancing t heir own needs or t he needs of t heir agent or dealer. T hese inst rument s may
include, but need not be limit ed t o bankers accept ances, promissory not es, repurchase agreement s,
including reverse repurchase agreement s ent ered int o by and bet ween t he Bangko Sent ral ng
Pilipinas (BSP) and any aut horized agent bank, cert if icat es of assignment or part icipat ion and similar
inst rument s wit h recourse: Provided, however, T hat debt inst rument s issued f or int erbank call loans
wit h mat urit y of not more t han f ive (5) days t o cover def iciency in reserves against deposit liabilit ies,
including t hose bet ween or among banks and quasi-banks, shall not be considered as deposit
subst it ut e debt inst rument s.
(Z) T he t erm ordinary income includes any gain f rom t he sale or exchange of propert y which is not a
capit al asset or propert y described in Sect ion 39(A)(1). Any gain f rom t he sale or exchange of
propert y which is t reat ed or considered, under ot her provisions of t his T it le, as ordinary income shall
be t reat ed as gain f rom t he sale or exchange of propert y which is not a capit al asset as def ined in
Sect ion 39(A)(1). T he t erm ordinary loss includes any loss f rom t he sale or exchange of propert y
which is not a capit al asset . Any loss f rom t he sale or exchange of propert y which is t reat ed or
considered, under ot her provisions of t his T it le, as ordinary loss shall be t reat ed as loss f rom t he
sale or exchange of propert y which is not a capit al asset .
(AA) T he t erm rank and f ile employees shall mean all employees who are holding neit her managerial
nor supervisory posit ion as def ined under exist ing provisions of t he Labor Code of t he Philippines, as
amended.
(BB) T he t erm mut ual f und company shall mean an open-end and close-end invest ment company as
def ined under t he Invest ment Company Act .
(CC) T he t erm t rade, business or prof ession shall not include perf ormance of services by t he
t axpayer as an employee.
(DD) T he t erm regional or area headquart ers shall mean a branch est ablished in t he Philippines by
mult inat ional companies and which headquart ers do not earn or derive income f rom t he Philippines
and which act as supervisory, communicat ions and coordinat ing cent er f or t heir af f iliat es,
subsidiaries, or branches in t he Asia-Pacif ic Region and ot her f oreign market s.
(EE) T he t erm regional operat ing headquart ers shall mean a branch est ablished in t he Philippines by
mult inat ional companies which are engaged in any of t he f ollowing services: general administ rat ion
and planning; business planning and coordinat ion; sourcing and procurement of raw mat erials and
component s; corporat e f inance advisory services; market ing cont rol and sales promot ion; t raining
and personnel management ; logist ic services; research and development services and product
development ; t echnical support and maint enance; dat a processing and communicat ions; and
business development .
(FF) T he t erm long-t erm deposit or invest ment cert if icat es shall ref er t o cert if icat e of t ime deposit
or invest ment in t he f orm of savings, common or individual t rust f unds, deposit subst it ut es,
invest ment management account s and ot her invest ment s wit h a mat urit y period of not less t han f ive
(5) years, t he f orm of which shall be prescribed by t he Bangko Sent ral ng Pilipinas (BSP) and issued
by banks only (not by nonbank f inancial int ermediaries and f inance companies) t o individuals in
denominat ions of T en t housand pesos (P10,000) and ot her denominat ions as may be prescribed by
t he BSP.
CHAPT ER II GENERAL PRINCIPLES
Section 23. General Principles of Income Taxation in the Philippines. Except when ot herwise provided
in t his Code:
(A) A cit izen of t he Philippines residing t herein is t axable on all income derived f rom sources wit hin and
wit hout t he Philippines;
(B) A nonresident cit izen is t axable only on income derived f rom sources wit hin t he Philippines;
(C) An individual cit izen of t he Philippines who is working and deriving income f rom abroad as an
overseas cont ract worker is t axable only on income derived f rom sources wit hin t he Philippines:
Provided, T hat a seaman who is a cit izen of t he Philippines and who receives compensat ion f or
services rendered abroad as a member of t he complement of a vessel engaged exclusively in
int ernat ional t rade shall be t reat ed as an overseas cont ract worker;
(D) An alien individual, whet her a resident or not of t he Philippines, is t axable only on income derived
f rom sources wit hin t he Philippines;
(E) A domest ic corporat ion is t axable on all income derived f rom sources wit hin and wit hout t he
Philippines; and
(F) A f oreign corporat ion, whet her engaged or not in t rade or business in t he Philippines, is t axable
only on income derived f rom sources wit hin t he Philippines.
CHAPT ER III T AX ON INDIVIDUALS
Section 24. Income Tax Rates.
(A) Rat es of Income T ax on Individual Cit izen and Individual Resident Alien of t he Philippines.
(1) An income t ax is hereby imposed:
(a) On t he t axable income def ined in Sect ion 31 of t his Code, ot her t han income subject t o t ax under
Subsect ions (B), (C) and (D) of t his Sect ion, derived f or each t axable year f rom all sources wit hin and
wit hout t he Philippines be every individual cit izen of t he Philippines residing t herein;
(b) On t he t axable income def ined in Sect ion 31 of t his Code, ot her t han income subject t o t ax under
Subsect ions (B), (C) and (D) of t his Sect ion, derived f or each t axable year f rom all sources wit hin t he
Philippines by an individual cit izen of t he Philippines who is residing out side of t he Philippines including
overseas cont ract workers ref erred t o in Subsect ion(C) of Sect ion 23 hereof ; and
(c) On t he t axable income def ined in Sect ion 31 of t his Code, ot her t han income subject t o t ax under
Subsect ions (b), (C) and (D) of t his Sect ion, derived f or each t axable year f rom all sources wit hin t he
Philippines by an individual alien who is a resident of t he Philippines.
T he t ax shall be comput ed in accordance wit h and at t he rat es est ablished in t he f ollowing schedule:
Not over
P10,000
5%
Over P10,000 but not over

P30,000
P500+10% of t he excess over P10,000

P70,000
P2,500+15% of t he excess over P30,000

P140,000

P250,000

P500,000
Over P500,000

in 1998.
Provided, T hat ef f ect ive January 1, 1999, t he t op marginal rat e shall be t hirt y-t hree percent (33%)
and ef f ect ive January 1, 2000, t he said rat e shall be t hirt y-t wo percent (32%).
For married individuals, t he husband and wif e, subject t o t he provision of Sect ion 51 (D) hereof , shall
comput e separat ely t heir individual income t ax based on t heir respect ive t ot al t axable income:
Provided, T hat if any income cannot be def init ely at t ribut ed t o or ident if ied as income exclusively
earned or realized by eit her of t he spouses, t he same shall be divided equally bet ween t he spouses
f or t he purpose of det ermining t heir respect ive t axable income.
(B) Rat e of T ax on Cert ain Passive Income.
(1) Int erest s, Royalt ies, Prizes, and Ot her Winnings. A f inal t ax at t he rat e of t went y percent (20%) is
hereby imposed upon t he amount of int erest f rom any currency bank deposit and yield or any ot her
monet ary benef it f rom deposit subst it ut es and f rom t rust f unds and similar arrangement s; royalt ies,
except on books, as well as ot her lit erary works and musical composit ions, which shall be imposed a
f inal t ax of t en percent (10%); prizes (except prizes amount ing t o T en t housand pesos (P10,000) or
less which shall be subject t o t ax under Subsect ion (A) of Sect ion 24; and ot her winnings (except
Philippine Charit y Sweepst akes and Lot t o winnings), derived f rom sources wit hin t he Philippines:
Provided, however, T hat int erest income received by an individual t axpayer (except a nonresident
individual) f rom a deposit ory bank under t he expanded f oreign currency deposit syst em shall be
subject t o a f inal income t ax at t he rat e of seven and one-half percent (7 1/2%) of such int erest
income: Provided, f urt her, T hat int erest income f rom long-t erm deposit or invest ment in t he f orm of
savings, common or individual t rust f unds, deposit subst it ut es, invest ment management account s
and ot her invest ment s evidenced by cert if icat es in such f orm prescribed by t he Bangko Sent ral ng
Pilipinas (BSP) shall be exempt f rom t he t ax imposed under t his Subsect ion: Provided, f inally, T hat
should t he holder of t he cert if icat e pre-t erminat e t he deposit or invest ment bef ore t he f if t h (5t h)
year, a f inal t ax shall be imposed on t he ent ire income and shall be deduct ed and wit hheld by t he
deposit ory bank f rom t he proceeds of t he long-t erm deposit or invest ment cert if icat e based on t he
remaining mat urit y t hereof :
Four (4) years t o less t han f ive (5) years 5%;
T hree (3) years t o less t han (4) years 12%; and
Less t han t hree (3) years 20%

(2) Cash and/or Propert y Dividends A f inal t ax at t he f ollowing rat es shall be imposed upon t he cash
and/or propert y dividends act ually or const ruct ively received by an individual f rom a domest ic
corporat ion or f rom a joint st ock company, insurance or mut ual f und companies and regional
operat ing headquart ers of mult inat ional companies, or on t he share of an individual in t he
dist ribut able net income af t er t ax of a part nership (except a general prof essional part nership) of
which he is a part ner, or on t he share of an individual in t he net income af t er t ax of an associat ion, a
joint account , or a joint vent ure or consort ium t axable as a corporat ion of which he is a member or covent urer:
Six percent (6%) beginning January 1, 1998;
Eight percent (8%) beginning January 1, 1999;
T en percent (10% beginning January 1, 2000.
Provided, however, T hat t he t ax on dividends shall apply only on income earned on or af t er January 1,
1998. Income f orming part of ret ained earnings as of December 31, 1997 shall not , even if declared or
dist ribut ed on or af t er January 1, 1998, be subject t o t his t ax.
(C) Capit al Gains f rom Sale of Shares of St ock not T raded in t he St ock Exchange. T he provisions
of Sect ion 39(B) not wit hst anding, a f inal t ax at t he rat es prescribed below is hereby imposed upon
t he net capit al gains realized during t he t axable year f rom t he sale, bart er, exchange or ot her
disposit ion of shares of st ock in a domest ic corporat ion, except shares sold, or disposed of t hrough
t he st ock exchange.
Not over
P100,000
5%
On any amount in excess of

P100,000
10%
(D) Capit al Gains f romSaleof Real Propert y. (1) In General. T he provisions of Sect ion 39(B) not wit hst anding, a f inal t ax of six percent (6%) based
on t he gross selling price or current f air market value as det ermined in accordance wit h Sect ion 6(E)
of t his Code, whichever is higher, is hereby imposed upon capit al gains presumed t o have been
realized f rom t he sale, exchange, or ot her disposit ion of real propert y locat ed in t he Philippines,
classif ied as capit al asset s, including pact o de ret ro sales and ot her f orms of condit ional sales, by
individuals, including est at es and t rust s: Provided, T hat t he t ax liabilit y, if any, on gains f rom sales or
ot her disposit ions of real propert y t o t he government or any of it s polit ical subdivisions or agencies or
t o government -owned or cont rolled corporat ions shall be det ermined eit her under Sect ion 24 (A) or
under t his Subsect ion, at t he opt ion of t he t axpayer.
(2) Exception. T he provisions of paragraph (1) of t his Subsect ion t o t he cont rary not wit hst anding,
capit al gains presumed t o have been realized f rom t he sale or disposit ion of t heir principal residence
by nat ural persons, t he proceeds of which is f ully ut ilized in acquiring or const ruct ing a new principal
residence wit hin eight een (18) calendar mont hs f rom t he dat e of sale or disposit ion, shall be exempt
f rom t he capit al gains t ax imposed under t his Subsect ion: Provided, T hat t he hist orical cost or
adjust ed basis of t he real propert y sold or disposed shall be carried over t o t he new principal
residence built or acquired: Provided, f urt her, T hat t he Commissioner shall have been duly not if ied by
t he t axpayer wit hin t hirt y (30) days f rom t he dat e of sale or disposit ion t hrough a prescribed ret urn of
his int ent ion t o avail of t he t ax exempt ion herein ment ioned: Provided, st ill f urt her, T hat t he said t ax
exempt ion can only be availed of once every t en (10) years: Provided, f inally, t hat if t here is no f ull
exempt ion can only be availed of once every t en (10) years: Provided, f inally, t hat if t here is no f ull
ut ilizat ion of t he proceeds of sale or disposit ion, t he port ion of t he gain presumed t o have been
realized f rom t he sale or disposit ion shall be subject t o capit al gains t ax. For t his purpose, t he gross
selling price or f air market value at t he t ime of sale, whichever is higher, shall be mult iplied by a
f ract ion which t he unut ilized amount bears t o t he gross selling price in order t o det ermine t he t axable
port ion and t he t ax prescribed under paragraph (1) of t his Subsect ion shall be imposed t hereon.
Section 25. Tax on Nonresident Alien Individual. (A) Nonresident Alien Engaged in t rade or Business Wit hin t he Philippines. (1) In General. A nonresident alien individual engaged in t rade or business in t he Philippines shall be
subject t o an income t ax in t he same manner as an individual cit izen and a resident alien individual, on
t axable income received f rom all sources wit hin t he Philippines. A nonresident alien individual who shall
come t o t he Philippines and st ay t herein f or an aggregat e period of more t han one hundred eight y
(180) days during any calendar year shall be deemed a nonresident alien doing business in t he
Philippines. Sect ion 22 (G) of t his Code not wit hst anding.
(2) Cash and/or Property Dividends from a Domestic Corporation or Joint Stock Company, or Insurance or
Mutual Fund Company or Regional Operating Headquarter or Multinational Company, or Share in the
Distributable Net Income of a Partnership (Except a General Professional Partnership), Joint Account, Joint
Venture Taxable as a Corporation or Association., Interests, Royalties, Prizes, and Other Winnings. Cash
and/or propert y dividends f rom a domest ic corporat ion, or f rom a joint st ock company, or f rom an
insurance or mut ual f und company or f rom a regional operat ing headquart er of mult inat ional
company, or t he share of a nonresident alien individual in t he dist ribut able net income af t er t ax of a
part nership (except a general prof essional part nership) of which he is a part ner, or t he share of a
nonresident alien individual in t he net income af t er t ax of an associat ion, a joint account , or a joint
vent ure t axable as a corporat ion of which he is a member or a co-vent urer; int erest s; royalt ies (in any
f orm); and prizes (except prizes amount ing t o T en t housand pesos (P10,000) or less which shall be
subject t o t ax under Subsect ion (B)(1) of Sect ion 24) and ot her winnings (except Philippine Charit y
Sweepst akes and Lot t o winnings); shall be subject t o an income t ax of t went y percent (20%) on t he
t ot al amount t hereof : Provided, however, t hat royalt ies on books as well as ot her lit erary works, and
royalt ies on musical composit ions shall be subject t o a f inal t ax of t en percent (10%) on t he t ot al
amount t hereof : Provided, f urt her, T hat cinemat ographic f ilms and similar works shall be subject t o
t he t ax provided under Sect ion 28 of t his Code: Provided, f urt hermore, T hat int erest income f rom
long-t erm deposit or invest ment in t he f orm of savings, common or individual t rust f unds, deposit
subst it ut es, invest ment management account s and ot her invest ment s evidenced by cert if icat es in
such f orm prescribed by t he Bangko Sent ral ng Pilipinas (BSP) shall be exempt f rom t he t ax imposed
under t his Subsect ion: Provided, f inally, t hat should t he holder of t he cert if icat e pre-t erminat e t he
deposit or invest ment bef ore t he f if t h (5t h) year, a f inal t ax shall be imposed on t he ent ire income
and shall be deduct ed and wit hheld by t he deposit ory bank f rom t he proceeds of t he long-t erm
deposit or invest ment cert if icat e based on t he remaining mat urit y t hereof :
Four (4) years t o less t han f ive (5) years
-
5%;
T hree (3) years t o less t han f our (4)

years -
12%; and
Less t han t hree (3) years -
20%.
(3) Capital Gains. Capit al gains realized f rom sale, bart er or exchange of shares of st ock in domest ic
corporat ions not t raded t hrough t he local st ock exchange, and real propert ies shall be subject t o t he
t ax prescribed under Subsect ions (C) and (D) of Sect ion 24.
(B) Nonresident Alien Individual Not Engaged in T rade or Business Wit hin t he Philippines. T here shall
be levied, collect ed and paid f or each t axable year upon t he ent ire income received f rom all sources
wit hin t he Philippines by every nonresident alien individual not engaged in t rade or business wit hin t he
Philippines as int erest , cash and/or propert y dividends, rent s, salaries, wages, premiums, annuit ies,
compensat ion, remunerat ion, emolument s, or ot her f ixed or det erminable annual or periodic or casual
gains, prof it s, and income, and capit al gains, a t ax equal t o t went y-f ive percent (25%) of such income.
Capit al gains realized by a nonresident alien individual not engaged in t rade or business in t he
Philippines f rom t he sale of shares of st ock in any domest ic corporat ion and real propert y shall be
subject t o t he income t ax prescribed under Subsect ions (C) and (D) of Sect ion 24.
(C) Alien Individual Employed by Regional or Area Headquart ers and Regional Operat ing Headquart ers
of Mult inat ional Companies. T here shall be levied, collect ed and paid f or each t axable year upon
t he gross income received by every alien individual employed by regional or area headquart ers and
regional operat ing headquart ers est ablished in t he Philippines by mult inat ional companies as salaries,
wages, annuit ies, compensat ion, remunerat ion and ot her emolument s, such as honoraria and
allowances, f rom such regional or area headquart ers and regional operat ing headquart ers, a t ax
equal t o f if t een percent (15%) of such gross income: Provided, however, T hat t he same t ax
t reat ment shall apply t o Filipinos employed and occupying t he same posit ion as t hose of aliens
employed by t hese mult inat ional companies. For purposes of t his Chapt er, t he t erm mult inat ional
company means a f oreign f irm or ent it y engaged in int ernat ional t rade wit h af f iliat es or subsidiaries
or branch of f ices in t he Asia-Pacif ic Region and ot her f oreign market s.
(D) Alien Individual Employed by Of f shore Banking Unit s. T here shall be levied, collect ed and paid f or
each t axable year upon t he gross income received by every alien individual employed by of f shore
banking unit s est ablished in t he Philippines as salaries, wages, annuit ies, compensat ion, remunerat ion
and ot her emolument s, such as honoraria and allowances, f rom such of f -shore banking unit s, a t ax
equal t o f if t een percent (15%) of such gross income: Provided, however, T hat t he same t ax
t reat ment shall apply t o Filipinos employed and occupying t he same posit ions as t hose of aliens
employed by t hese of f shore banking unit s.
(E) Alien Individual Employed by Pet roleum Service Cont ract or and Subcont ract or. An Alien individual
who is a permanent resident of a f oreign count ry but who is employed and assigned in t he Philippines
by a f oreign service cont ract or or by a f oreign service subcont ract or engaged in pet roleum
operat ions in t he Philippines shall be liable t o a t ax of f if t een percent (15%) of t he salaries, wages,
annuit ies, compensat ion, remunerat ion and ot her emolument s, such as honoraria and allowances,
received f rom such cont ract or or subcont ract or: Provided, however, T hat t he same t ax t reat ment
shall apply t o a Filipino employed and occupying t he same posit ion as an alien employed by
pet roleum service cont ract or and subcont ract or.
Any income earned f rom all ot her sources wit hin t he Philippines by t he alien employees ref erred t o
under Subsect ions (C), (D) and (E) hereof shall be subject t o t he pert inent income t ax, as t he case
may be, imposed under t his Code.
Section 26. Tax Liability of Members of General Professional Partnerships. A general prof essional
part nership as such shall not be subject t o t he income t ax imposed under t his Chapt er. Persons
engaging in business as part ners in a general prof essional part nership shall be liable f or income t ax
only in t heir separat e and individual capacit ies.1avvphil.et
For purposes of comput ing t he dist ribut ive share of t he part ners, t he net income of t he part nership
shall be comput ed in t he same manner as a corporat ion.
Each part ner shall report as gross income his dist ribut ive share, act ually or const ruct ively received, in
t he net income of t he part nership.
CHAPT ER IV T AX ON CORPORAT IONS
Section 27. Rates of Income tax on Domestic Corporations. (A) In General. Except as ot herwise provided in t his Code, an income t ax of t hirt y-f ive percent (35%)
is hereby imposed upon t he t axable income derived during each t axable year f rom all sources wit hin
and wit hout t he Philippines by every corporat ion, as def ined in Sect ion 22(B) of t his Code and t axable
under t his T it le as a corporat ion, organized in, or exist ing under t he laws of t he Philippines: Provided,
T hat ef f ect ive January 1, 1998, t he rat e of income t ax shall be t hirt y-f our percent (34%); ef f ect ive
January 1, 1999, t he rat e shall be t hirt y-t hree percent (33%); and ef f ect ive January 1, 2000 and
t hereaf t er, t he rat e shall be t hirt y-t wo percent (32%).
In t he case of corporat ions adopt ing t he f iscal-year account ing period, t he t axable income shall be
comput ed wit hout regard t o t he specif ic dat e when specif ic sales, purchases and ot her t ransact ions
occur. T heir income and expenses f or t he f iscal year shall be deemed t o have been earned and spent
equally f or each mont h of t he period.
T he reduced corporat e income t ax rat es shall be applied on t he amount comput ed by mult iplying t he
number of mont hs covered by t he new rat es wit hin t he f iscal year by t he t axable income of t he
corporat ion f or t he period, divided by t welve.
Provided, f urt her, T hat t he President , upon t he recommendat ion of t he Secret ary of Finance, may
ef f ect ive January 1, 2000, allow corporat ions t he opt ion t o be t axed at f if t een percent (15%) of gross
income as def ined herein, af t er t he f ollowing condit ions have been sat isf ied:
(1) A t ax ef f ort rat io of t went y percent (20%) of Gross Nat ional Product (GNP);
(2) A rat io of f ort y percent (40%) of income t ax collect ion t o t ot al t ax revenues;
(3) A VAT t ax ef f ort of f our percent (4%) of GNP; and
(4) A 0.9 percent (0.9%) rat io of t he Consolidat ed Public Sect or Financial Posit ion (CPSFP) t o GNP.
T he opt ion t o be t axed based on gross income shall be available only t o f irms whose rat io of cost of
sales t o gross sales or receipt s f rom all sources does not exceed f if t y-f ive percent (55%).
T he elect ion of t he gross income t ax opt ion by t he corporat ion shall be irrevocable f or t hree (3)
consecut ive t axable years during which t he corporat ion is qualif ied under t he scheme.
For purposes of t his Sect ion, t he t erm gross income derived f rom business shall be equivalent t o
gross sales less sales ret urns, discount s and allowances and cost of goods sold. Cost of goods sold
shall include all business expenses direct ly incurred t o produce t he merchandise t o bring t hem t o t heir
present locat ion and use.
For a t rading or merchandising concern, cost of goods sold shall include t he invoice cost of t he
goods sold, plus import dut ies, f reight in t ransport ing t he goods t o t he place where t he goods are
act ually sold, including insurance while t he goods are in t ransit .
For a manuf act uring concern, cost of goods manuf act ured and sold shall include all cost s of
product ion of f inished goods, such as raw mat erials used, direct labor and manuf act uring overhead,
f reight cost , insurance premiums and ot her cost s incurred t o bring t he raw mat erials t o t he f act ory or
warehouse.
In t he case of t axpayers engaged in t he sale of service, gross income means gross receipt s less
sales ret urns, allowances and discount s.
(B) Propriet ary Educat ional Inst it ut ions and Hospit als. Propriet ary educat ional inst it ut ions and
hospit als which are nonprof it shall pay a t ax of t en percent (10%) on t heir t axable income except
t hose covered by Subsect ion (D) hereof : Provided, t hat if t he gross income f rom unrelat ed t rade,
business or ot her act ivit y exceeds f if t y percent (50%) of t he t ot al gross income derived by such
educat ional inst it ut ions or hospit als f rom all sources, t he t ax prescribed in Subsect ion (A) hereof shall
be imposed on t he ent ire t axable income. For purposes of t his Subsect ion, t he t erm unrelat ed t rade,
business or ot her act ivit y means any t rade, business or ot her act ivit y, t he conduct of which is not
subst ant ially relat ed t o t he exercise or perf ormance by such educat ional inst it ut ion or hospit al of it s
primary purpose or f unct ion. A Propriet ary educat ional inst it ut ion is any privat e school maint ained
and administ ered by privat e individuals or groups wit h an issued permit t o operat e f rom t he
Depart ment of Educat ion, Cult ure and Sport s (DECS), or t he Commission on Higher Educat ion
(CHED), or t he T echnical Educat ion and Skills Development Aut horit y (T ESDA), as t he case may be, in
accordance wit h exist ing laws and regulat ions.
(C) Government -owned or Cont rolled-Corporat ions, Agencies or Inst rument alit ies. T he provisions of
exist ing special or general laws t o t he cont rary not wit hst anding, all corporat ions, agencies, or
inst rument alit ies owned or cont rolled by t he Government , except t he Government Service Insurance
Syst em (GSIS), t he Social Securit y Syst em (SSS), t he Philippine Healt h Insurance Corporat ion (PHIC),
t he Philippine Charit y Sweepst akes Of f ice (PCSO) and t he Philippine Amusement and Gaming
Corporat ion (PAGCOR), shall pay such rat e of t ax upon t heir t axable income as are imposed by t his
Sect ion upon corporat ions or associat ions engaged in s similar business, indust ry, or act ivit y.
(D) Rat es of T ax on Cert ain Passive Incomes. (1) Int erest f rom Deposit s and Yield or any ot her Monet ary Benef it f rom Deposit Subst it ut es and
f rom T rust Funds and Similar Arrangement s, and Royalt ies. A f inal t ax at t he rat e of t went y percent
(20%) is hereby imposed upon t he amount of int erest on currency bank deposit and yield or any ot her
monet ary benef it f rom deposit subst it ut es and f rom t rust f unds and similar arrangement s received
by domest ic corporat ions, and royalt ies, derived f rom sources wit hin t he Philippines: Provided,
however, T hat int erest income derived by a domest ic corporat ion f rom a deposit ory bank under t he
expanded f oreign currency deposit syst em shall be subject t o a f inal income t ax at t he rat e of seven
and one-half percent (7 1/2%) of such int erest income.
(2) Capit al Gains f rom t heSaleof Shares of St ock Not T raded in t he St ock Exchange. A f inal t ax at
t he rat es prescribed below shall be imposed on net capit al gains realized during t he t axable year
f rom t he sale, exchange or ot her disposit ion of shares of st ock in a domest ic corporat ion except
shares sold or disposed of t hrough t he st ock exchange:
Not over P100,000
5%
Amount in excess of
P100,000
10%
(3) T ax on Income Derived under t he Expanded Foreign Currency Deposit Syst em. Income derived
by a deposit ory bank under t he expanded f oreign currency deposit syst em f rom f oreign currency
t ransact ions wit h local commercial banks, including branches of f oreign banks t hat may be aut horized
by t he Bangko Sent ral ng Pilipinas (BSP) t o t ransact business wit h f oreign currency deposit ory
syst em unit s and ot her deposit ory banks under t he expanded f oreign currency deposit syst em,
including int erest income f rom f oreign currency loans grant ed by such deposit ory banks under said
expanded f oreign currency deposit syst em t o resident s, shall be subject t o a f inal income t ax at t he
rat e of t en percent (10%) of such income.
Any income of nonresident s, whet her individuals or corporat ions, f rom t ransact ions wit h deposit ory
banks under t he expanded syst em shall be exempt f rom income t ax.
(4) Int ercorporat e Dividends. Dividends received by a domest ic corporat ion f rom anot her domest ic
corporat ion shall not be subject t o t ax.
(5) Capit al Gains Realized f rom t heSale, Exchange or Disposit ion of Lands and/or Buildings. A f inal
t ax of six percent (6%) is hereby imposed on t he gain presumed t o have been realized on t he sale,
exchange or disposit ion of lands and/or buildings which are not act ually used in t he business of a
corporat ion and are t reat ed as capit al asset s, based on t he gross selling price of f air market value as
det ermined in accordance wit h Sect ion 6(E) of t his Code, whichever is higher, of such lands and/or
buildings.
(E) Minimum Corporat e Income T ax on Domest ic Corporat ions. (1) Imposit ion of T ax. A minimum corporat e income t ax of t wo percent (2%0 of t he gross income as
of t he end of t he t axable year, as def ined herein, is hereby imposed on a corporat ion t axable under
t his T it le, beginning on t he f ourt h t axable year immediat ely f ollowing t he year in which such
corporat ion commenced it s business operat ions, when t he minimum income t ax is great er t han t he
t ax comput ed under Subsect ion (A) of t his Sect ion f or t he t axable year.
(2) Carry Froward of Excess Minimum T ax. Any excess of t he minimum corporat e income t ax over
t he normal income t ax as comput ed under Subsect ion (A) of t his Sect ion shall be carried f orward and
credit ed against t he normal income t ax f or t he t hree (3) immediat ely succeeding t axable years.
(3) Relief f rom t he Minimum Corporat e Income T ax Under Cert ain Condit ions. T he Secret ary of
Finance is hereby aut horized t o suspend t he imposit ion of t he minimum corporat e income t ax on any
corporat ion which suf f ers losses on account of prolonged labor disput e, or because of f orce majeure,
or because of legit imat e business reverses.
T he Secret ary of Finance is hereby aut horized t o promulgat e, upon recommendat ion of t he
Commissioner, t he necessary rules and regulat ion t hat shall def ine t he t erms and condit ions under
which he may suspend t he imposit ion of t he minimum corporat e income t ax in a merit orious case.
(4) Gross Income Def ined. For purposes of applying t he minimum corporat e income t ax provided
under Subsect ion (E) hereof , t he t erm gross income shall mean gross sales less sales ret urns,
discount s and allowances and cost of goods sold. Cost of goods sold shall include all business
expenses direct ly incurred t o produce t he merchandise t o bring t hem t o t heir present locat ion and
use.
For a t rading or merchandising concern, cost of goods sold shall include t he invoice cost of t he
goods sold, plus import dut ies, f reight in t ransport ing t he goods t o t he place where t he goods are
act ually sold including insurance while t he goods are in t ransit .
For a manuf act uring concern, cost of goods manuf act ured and sold shall include all cost s of
product ion of f inished goods, such as raw mat erials used, direct labor and manuf act uring overhead,
f reight cost , insurance premiums and ot her cost s incurred t o bring t he raw mat erials t o t he f act ory or
warehouse.
In t he case of t axpayers engaged in t he sale of service, gross income means gross receipt s less
sales ret urns, allowances, discount s and cost of services. Cost of services shall mean all direct
cost s and expenses necessarily incurred t o provide t he services required by t he cust omers and
client s including (A) salaries and employee benef it s of personnel, consult ant s and specialist s direct ly
rendering t he service and (B) cost of f acilit ies direct ly ut ilized in providing t he service such as
depreciat ion or rent al of equipment used and cost of supplies: Provided, however, T hat in t he case of
banks, cost of services shall include int erest expense.
Section 28. Rates of Income Tax on Foreign Corporations. (A) T ax on Resident Foreign Corporat ions. (1) In General. Except as ot herwise provided in t his Code, a corporat ion organized, aut horized, or
exist ing under t he laws of any f oreign count ry, engaged in t rade or business wit hin t he Philippines,
shall be subject t o an income t ax equivalent t o t hirt y-f ive percent (35%) of t he t axable income
derived in t he preceding t axable year f rom all sources wit hin t he Philippines: provided, T hat ef f ect ive
January 1, 1998, t he rat e of income t ax shall be t hirt y-f our percent (34%); ef f ect ive January 1, 1999,
t he rat e shall be t hirt y-t hree percent (33%), and ef f ect ive January 1, 2000 and t hereaf t er, t he rat e
shall be t hirt y-t wo percent (32%).
In t he case of corporat ions adopt ing t he f iscal-year account ing period, t he t axable income shall be
comput ed wit hout regard t o t he specif ic dat e when sales, purchases and ot her t ransact ions occur.
T heir income and expenses f or t he f iscal year shall be deemed t o have been earned and spent
equally f or each mont h of t he period.
T he reduced corporat e income t ax rat es shall be applied on t he amount comput ed by mult iplying t he
number of mont hs covered by t he new rat es wit hin t he f iscal year by t he t axable income of t he
corporat ion f or t he period, divided by t welve.
Provided, however, T hat a resident f oreign corporat ion shall be grant ed t he opt ion t o be t axed at
f if t een percent (15%) on gross income under t he same condit ions, as provided in Sect ion 27 (A).
(2) Minimum Corporat e Income T ax on Resident Foreign Corporat ions. A minimum corporat e income
t ax of t wo percent (2%) of gross income, as prescribed under Sect ion 27 (E) of t his Code, shall be
imposed, under t he same condit ions, on a resident f oreign corporat ion t axable under paragraph (1) of
t his Subsect ion.
(3) Int ernat ional Carrier. An int ernat ional carrier doing business in t he Philippines shall pay a t ax of
t wo and one-half percent (2 1/2%) on it s Gross Philippine Billings as def ined hereunder:
(a) Int ernat ional Air Carrier. Gross Philippine Billings ref ers t o t he amount of gross revenue derived
f rom carriage of persons, excess baggage, cargo and mail originat ing f rom t he Philippines in a
cont inuous and unint errupt ed f light , irrespect ive of t he place of sale or issue and t he place of
payment of t he t icket or passage document : Provided, T hat t icket s revalidat ed, exchanged and/or
indorsed t o anot her int ernat ional airline f orm part of t he Gross Philippine Billings if t he passenger
boards a plane in a port or point in t he Philippines: Provided, f urt her, T hat f or a f light which originat es
f rom t he Philippines, but t ransshipment of passenger t akes place at any port out side t he Philippines
on anot her airline, only t he aliquot port ion of t he cost of t he t icket corresponding t o t he leg f lown
f rom t he Philippines t o t he point of t ransshipment shall f orm part of Gross Philippine Billings.
(b) Int ernat ional Shipping. Gross Philippine Billings means gross revenue whet her f or passenger,
cargo or mail originat ing f rom t he Philippines up t o f inal dest inat ion, regardless of t he place of sale or
payment s of t he passage or f reight document s.
(4) Of f shore Banking Unit s. T he provisions of any law t o t he cont rary not wit hst anding, income
derived by of f shore banking unit s aut horized by t he Bangko Sent ral ng Pilipinas (BSP) t o t ransact
business wit h of f shore banking unit s, including any int erest income derived f rom f oreign currency
loans grant ed t o resident s, shall be subject t o a f inal income t ax at t he rat e of t en percent (10%) of
such income.
Any income of nonresident s, whet her individuals or corporat ions, f rom t ransact ions wit h said of f shore
banking unit s shall be exempt f rom income t ax.
(5) T ax on Branch Prof it s Remit t ances. Any prof it remit t ed by a branch t o it s head of f ice shall be
subject t o a t ax of f if t een (15%) which shall be based on t he t ot al prof it s applied or earmarked f or
remit t ance wit hout any deduct ion f or t he t ax component t hereof (except t hose act ivit ies which are
regist ered wit h t he Philippine Economic Zone Aut horit y). T he t ax shall be collect ed and paid in t he
same manner as provided in Sect ions 57 and 58 of t his Code: provided, t hat int erest s, dividends,
rent s, royalt ies, including remunerat ion f or t echnical services, salaries, wages premiums, annuit ies,
emolument s or ot her f ixed or det erminable annual, periodic or casual gains, prof it s, income and
capit al gains received by a f oreign corporat ion during each t axable year f rom all sources wit hin t he
Philippines shall not be t reat ed as branch prof it s unless t he same are ef f ect ively connect ed wit h t he
conduct of it s t rade or business in t he Philippines.
(6) Regional or Area Headquart ers and Regional Operat ing Headquart ers of Mult inat ional Companies.
(a) Regional or area headquart ers as def ined in Sect ion 22(DD) shall not be subject t o income t ax.
(a) Regional or area headquart ers as def ined in Sect ion 22(DD) shall not be subject t o income t ax.
(b) Regional operat ing headquart ers as def ined in Sect ion 22(EE) shall pay a t ax of t en percent (10%)
of t heir t axable income.
(7) T ax on Cert ain Incomes Received by a Resident Foreign Corporat ion. (a) Int erest f rom Deposit s and Yield or any ot her Monet ary Benef it f rom Deposit Subst it ut es, T rust
Funds and Similar Arrangement s and Royalt ies. Int erest f rom any currency bank deposit and yield or
any ot her monet ary benef it f rom deposit subst it ut es and f rom t rust f unds and similar arrangement s
and royalt ies derived f rom sources wit hin t he Philippines shall be subject t o a f inal income t ax at t he
rat e of t went y percent (20%) of such int erest : Provided, however, T hat int erest income derived by a
resident f oreign corporat ion f rom a deposit ory bank under t he expanded f oreign currency deposit
syst em shall be subject t o a f inal income t ax at t he rat e of seven and one-half percent (7 1/2%) of
such int erest income.
(b) Income Derived under t he Expanded Foreign Currency Deposit Syst em. Income derived by a
deposit ory bank under t he expanded f oreign currency deposit syst em f rom f oreign currency
t ransact ions wit h local commercial banks including branches of f oreign banks t hat may be aut horized
by t he Bangko Sent ral ng Pilipinas (BSP) t o t ransact business wit h f oreign currency deposit syst em
unit s, including int erest income f rom f oreign currency loans grant ed by such deposit ory banks under
said expanded f oreign currency deposit syst em t o resident s, shall be subject t o a f inal income t ax at
t he rat e of t en percent (10%) of such income.
Any income of nonresident s, whet her individuals or corporat ions, f rom t ransact ions wit h deposit ory
banks under t he expanded syst em shall be exempt f rom income t ax.
(c) Capit al Gains f romSaleof Shares of St ock Not T raded in t he St ock Exchange. A f inal t ax at t he
rat es prescribed below is hereby imposed upon t he net capit al gains realized during t he t axable year
f rom t he sale, bart er, exchange or ot her disposit ion of shares of st ock in a domest ic corporat ion
except shares sold or disposed of t hrough t he st ock exchange:
Not over P100,000
5%

P100,000
10%
(d) Int ercorporat e Dividends. Dividends received by a resident f oreign corporat ion f rom a domest ic
corporat ion liable t o t ax under t his Code shall not be subject t o t ax under t his T it le.
(B) T ax on Nonresident Foreign Corporat ion. (1) In General. Except as ot herwise provided in t his Code, a f oreign corporat ion not engaged in t rade
or business in t he Philippines shall pay a t ax equal t o t hirt y-f ive percent (35%) of t he gross income
received during each t axable year f rom all sources wit hin t he Philippines, such as int erest s, dividends,
rent s, royalt ies, salaries, premiums (except reinsurance premiums), annuit ies, emolument s or ot her
f ixed or det erminable annual, periodic or casual gains, prof it s and income, and capit al gains, except
capit al gains subject t o t ax under subparagraphs (C) and (d): Provided, T hat ef f ect ive 1, 1998, t he
rat e of income t ax shall be t hirt y-f our percent (34%); ef f ect ive January 1, 1999, t he rat e shall be
t hirt y-t hree percent (33%); and, ef f ect ive January 1, 2000 and t hereaf t er, t he rat e shall be t hirt y-t wo
percent (32%).
(2) Nonresident Cinematographic Film Owner, Lessor or Distributor. A cinemat ographic f ilm owner,
lessor, or dist ribut or shall pay a t ax of t went y-f ive percent (25%) of it s gross income f rom all sources
wit hin t he Philippines.
(3) Nonresident Owner or Lessor of Vessels Chartered by Philippine Nationals. A nonresident owner or
lessor of vessels shall be subject t o a t ax of f our and one-half percent (4 1/2%) of gross rent als,
lease or chart er f ees f rom leases or chart ers t o Filipino cit izens or corporat ions, as approved by t he
Marit ime Indust ry Aut horit y.
(4) Nonresident Owner or Lessor of Aircraft, Machineries and Other Equipment. Rent als, chart ers and
ot her f ees derived by a nonresident lessor of aircraf t , machineries and ot her equipment shall be
subject t o a t ax of seven and one-half percent (7 1/2%) of gross rent als or f ees.
(5) Tax on Certain Incomes Received by a Nonresident Foreign Corporation. (a) Interest on Foreign Loans. A f inal wit hholding t ax at t he rat e of t went y percent (20%) is hereby
imposed on t he amount of int erest on f oreign loans cont ract ed on or af t er August 1, 1986;
(b) Intercorporate Dividends. A f inal wit hholding t ax at t he rat e of f if t een percent (15%) is hereby
imposed on t he amount of cash and/or propert y dividends received f rom a domest ic corporat ion,
which shall be collect ed and paid as provided in Sect ion 57 (A) of t his Code, subject t o t he condit ion
t hat t he count ry in which t he nonresident f oreign corporat ion is domiciled, shall allow a credit against
t he t ax due f rom t he nonresident f oreign corporat ion t axes deemed t o have been paid in t he
Philippines equivalent t o t went y percent (20%) f or 1997, ninet een percent (19%) f or 1998, eight een
percent (18%) f or 1999, and sevent een percent (17%) t hereaf t er, which represent s t he dif f erence
bet ween t he regular income t ax of t hirt y-f ive percent (35%) in 1997, t hirt y-f our percent (34%) in 1998,
and t hirt y-t hree percent (33%) in 1999, and t hirt y-t wo percent (32%) t hereaf t er on corporat ions and
t he f if t een percent (15%) t ax on dividends as provided in t his subparagraph;
(c) Capital Gains from Sale of Shares of Stock not Traded in the Stock Exchange. A f inal t ax at t he rat es
prescribed below is hereby imposed upon t he net capit al gains realized during t he t axable year f rom
t he sale, bart er, exchange or ot her disposit ion of shares of st ock in a domest ic corporat ion, except
shares sold, or disposed of t hrough t he st ock exchange:
Not over P100,000
5%

P100,000
10%
Section 29. Imposition of Improperly Accumulated Earnings Tax. (A) In General. In addit ion t o ot her t axes imposed by t his T it le, t here is hereby imposed f or each
t axable year on t he improperly accumulat ed t axable income of each corporat ion described in
Subsect ion B hereof , an improperly accumulat ed earnings t ax equal t o t en percent (10%) of t he
improperly accumulat ed t axable income.
(B) Tax on Corporations Subject to Improperly Accumulated Earnings Tax. (1) In General. T he improperly accumulat ed earnings t ax imposed in t he preceding Sect ion shall
apply t o every corporat ion f ormed or availed f or t he purpose of avoiding t he income t ax wit h respect
t o it s shareholders or t he shareholders of any ot her corporat ion, by permit t ing earnings and prof it s t o
accumulat e inst ead of being divided or dist ribut ed.
(2) Exceptions. T he improperly accumulat ed earnings t ax as provided f or under t his Sect ion shall not
apply t o:
(a) Publicly-held corporat ions;
(b) Banks and ot her nonbank f inancial int ermediaries; and
(c) Insurance companies.
(C) Evidence of Purpose to Avoid Income Tax. (1) Prima Facie Evidence. t he f act t hat any corporat ion is a mere holding company or invest ment
company shall be prima f acie evidence of a purpose t o avoid t he t ax upon it s shareholders or
members.
(2) Evidence Determinative of Purpose. T he f act t hat t he earnings or prof it s of a corporat ion are
permit t ed t o accumulat e beyond t he reasonable needs of t he business shall be det erminat ive of t he
purpose t o avoid t he t ax upon it s shareholders or members unless t he corporat ion, by t he clear
preponderance of evidence, shall prove t o t he cont rary.
(D) Improperly Accumulated Taxable Income. For purposes of t his Sect ion, t he t erm improperly
accumulat ed t axable income means t axable income adjust ed by:
(1) Income exempt f rom t ax;
(2) Income excluded f rom gross income;
(3) Income subject t o f inal t ax; and
(4) T he amount of net operat ing loss carry-over deduct ed;
And reduced by t he sum of :
(1) Dividends act ually or const ruct ively paid; and
(2) Income t ax paid f or t he t axable year.
Provided, however, T hat f or corporat ions using t he calendar year basis, t he accumulat ed earnings
under t ax shall not apply on improperly accumulat ed income as of December 31, 1997. In t he case of
corporat ions adopt ing t he f iscal year account ing period, t he improperly accumulat ed income not
subject t o t his t ax, shall be reckoned, as of t he end of t he mont h comprising t he t welve (12)-mont h
period of f iscal year 1997-1998.
(E) Reasonable Needs of t he Business. For purposes of t his Sect ion, t he t erm reasonable needs of
t he business includes t he reasonably ant icipat ed needs of t he business.
Section 30. Exemptions from Tax on Corporations. T he f ollowing organizat ions shall not be t axed
under t his T it le in respect t o income received by t hem as such:
(A) Labor, agricult ural or hort icult ural organizat ion not organized principally f or prof it ;
(B) Mut ual savings bank not having a capit al st ock represent ed by shares, and cooperat ive bank
wit hout capit al st ock organized and operat ed f or mut ual purposes and wit hout prof it ;
(C) A benef iciary societ y, order or associat ion, operat ing f ort he exclusive benef it of t he members
such as a f rat ernal organizat ion operat ing under t he lodge syst em, or mut ual aid associat ion or a
nonst ock corporat ion organized by employees providing f or t he payment of lif e, sickness, accident , or
ot her benef it s exclusively t o t he members of such societ y, order, or associat ion, or nonst ock
corporat ion or t heir dependent s;
(D) Cemet ery company owned and operat ed exclusively f or t he benef it of it s members;
(E) Nonst ock corporat ion or associat ion organized and operat ed exclusively f or religious, charit able,
scient if ic, at hlet ic, or cult ural purposes, or f or t he rehabilit at ion of vet erans, no part of it s net income
or asset shall belong t o or inures t o t he benef it of any member, organizer, of f icer or any specif ic
person;
(F) Business league chamber of commerce, or board of t rade, not organized f or prof it and no part of
t he net income of which inures t o t he benef it of any privat e st ock-holder, or individual;

(G) Civic league or organizat ion not organized f or prof it but operat ed exclusively f or t he promot ion of
social welf are;
(H) A nonst ock and nonprof it educat ional inst it ut ion;
(I) Government educat ional inst it ut ion;
(J) Farmers or ot her mut ual t yphoon or f ire insurance company, mut ual dit ch or irrigat ion company,
mut ual or cooperat ive t elephone company, or like organizat ion of a purely local charact er, t he income
of which consist s solely of assessment s, dues, and f ees collect ed f rom members f or t he sole
purpose of meet ing it s expenses; and
(K) Farmers, f ruit growers, or like associat ion organized and operat ed as a sales agent f or t he
purpose of market ing t he product s of it s members and t urning back t o t hem t he proceeds of sales,
less t he necessary selling expenses on t he basis of t he quant it y of produce f inished by t hem;
Not wit hst anding t he provisions in t he preceding paragraphs, t he income of what ever kind and
charact er of t he f oregoing organizat ions f rom any of t heir propert ies, real or personal, or f rom any of
t heir act ivit ies conduct ed f or prof it regardless of t he disposit ion made of such income, shall be
subject t o t ax imposed under t his Code.
CHAPT ER V COMPUT AT ION OF T AXABLE INCOME
Section 31. Taxable Income Defined. T he t erm t axable income means t he pert inent it ems of gross
income specif ied in t his Code, less t he deduct ions and/or personal and addit ional exempt ions, if any,
aut horized f or such t ypes of income by t his Code or ot her special laws.
CHAPT ER VI COMPUT AT ION OF GROSS INCOME
Section 32. Gross Income. (A) General Definition. Except when ot herwise provided in t his T it le, gross income means all income
derived f rom what ever source, including (but not limit ed t o) t he f ollowing it ems:
(1) Compensat ion f or services in what ever f orm paid, including, but not limit ed t o f ees, salaries,
wages, commissions, and similar it ems;
(2) Gross income derived f rom t he conduct of t rade or business or t he exercise of a prof ession;
(3) Gains derived f rom dealings in propert y;
(4) Int erest s;
(5) Rent s;
(6) Royalt ies;
(7) Dividends;
(8) Annuit ies;
(9) Prizes and winnings;
(10) Pensions; and
(11) Part ners dist ribut ive share f rom t he net income of t he general prof essional part nership.
(B) Exclusions from Gross Income. T he f ollowing it ems shall not be included in gross income and shall
be exempt f rom t axat ion under t his t it le:

(1) Lif e Insurance. T he proceeds of lif e insurance policies paid t o t he heirs or benef iciaries upon t he
deat h of t he insured, whet her in a single sum or ot herwise, but if such amount s are held by t he insurer
under an agreement t o pay int erest t hereon, t he int erest payment s shall be included in gross income.
(2) Amount Received by Insured as Ret urn of Premium. T he amount received by t he insured, as a
ret urn of premiums paid by him under lif e insurance, endowment , or annuit y cont ract s, eit her during
t he t erm or at t he mat urit y of t he t erm ment ioned in t he cont ract or upon surrender of t he cont ract .
(3) Gif t s, Bequest s, and Devises. _ T he value of propert y acquired by gif t , bequest , devise, or
descent : Provided, however, T hat income f rom such propert y, as well as gif t , bequest , devise or
descent of income f rom any propert y, in cases of t ransf ers of divided int erest , shall be included in
gross income.
(4) Compensat ion f or Injuries or Sickness. amount s received, t hrough Accident or Healt h Insurance
or under Workmens Compensat ion Act s, as compensat ion f or personal injuries or sickness, plus t he
amount s of any damages received, whet her by suit or agreement , on account of such injuries or
sickness.
(5) Income Exempt under T reat y. Income of any kind, t o t he ext ent required by any t reat y obligat ion
binding upon t he Government of t he Philippines.
(6) Ret irement Benef it s, Pensions, Grat uit ies, et c.(a) Ret irement benef it s received under Republic Act No. 7641 and t hose received by of f icials and
employees of privat e f irms, whet her individual or corporat e, in accordance wit h a reasonable privat e
benef it plan maint ained by t he employer: Provided, T hat t he ret iring of f icial or employee has been in
t he service of t he same employer f or at least t en (10) years and is not less t han f if t y (50) years of
age at t he t ime of his ret irement : Provided, f urt her, T hat t he benef it s grant ed under t his
subparagraph shall be availed of by an of f icial or employee only once. For purposes of t his
Subsect ion, t he t erm reasonable privat e benef it plan means a pension, grat uit y, st ock bonus or
prof it -sharing plan maint ained by an employer f or t he benef it of some or all of his of f icials or
employees, wherein cont ribut ions are made by such employer f or t he of f icials or employees, or bot h,
f or t he purpose of dist ribut ing t o such of f icials and employees t he earnings and principal of t he f und
t hus accumulat ed, and wherein it s is provided in said plan t hat at no t ime shall any part of t he corpus
or income of t he f und be used f or, or be divert ed t o, any purpose ot her t han f or t he exclusive benef it
of t he said of f icials and employees.
(b) Any amount received by an of f icial or employee or by his heirs f rom t he employer as a
consequence of separat ion of such of f icial or employee f rom t he service of t he employer because of
deat h sickness or ot her physical disabilit y or f or any cause beyond t he cont rol of t he said of f icial or
employee.
(c) T he provisions of any exist ing law t o t he cont rary not wit hst anding, social securit y benef it s,
ret irement grat uit ies, pensions and ot her similar benef it s received by resident or nonresident cit izens
of t he Philippines or aliens who come t o reside permanent ly in t he Philippines f rom f oreign
government agencies and ot her inst it ut ions, privat e or public.
(d) Payment s of benef it s due or t o become due t o any person residing in t he Philippines under t he
laws of t he Unit ed St at es administ ered by t he Unit ed St at es Vet erans Administ rat ion.
(e) Benef it s received f rom or enjoyed under t he Social Securit y Syst em in accordance wit h t he
provisions of Republic Act No. 8282.
(f ) Benef it s received f rom t he GSIS under Republic Act No. 8291, including ret irement grat uit y
received by government of f icials and employees.
(7) Miscellaneous It ems. (a) Income Derived by Foreign Government . Income derived f rom invest ment s in t he Philippines in
loans, st ocks, bonds or ot her domest ic securit ies, or f rom int erest on deposit s in banks in t he
Philippines by (i) f oreign government s, (ii) f inancing inst it ut ions owned, cont rolled, or enjoying
ref inancing f rom f oreign government s, and (iii) int ernat ional or regional f inancial inst it ut ions
est ablished by f oreign government s.
(b) Income Derived by t he Government or it s Polit ical Subdivisions. Income derived f rom any public
ut ilit y or f rom t he exercise of any essent ial government al f unct ion accruing t o t he Government of t he
Philippines or t o any polit ical subdivision t hereof .
(c) Prizes and Awards. Prizes and awards made primarily in recognit ion of religious, charit able,
scient if ic, educat ional, art ist ic, lit erary, or civic achievement but only if :
(i) T he recipient was select ed wit hout any act ion on his part t o ent er t he cont est or proceeding; and
(ii) T he recipient is not required t o render subst ant ial f ut ure services as a condit ion t o receiving t he
prize or award.
(d) Prizes and Awards in sport s Compet it ion. All prizes and awards grant ed t o at hlet es in local and
int ernat ional sport s compet it ions and t ournament s whet her held in t he Philippines or abroad and
sanct ioned by t heir nat ional sport s associat ions.
(e) 13t h Mont h Pay and Ot her Benef it s. Gross benef it s received by of f icials and employees of
public and privat e ent it ies: Provided, however, T hat t he t ot al exclusion under t his subparagraph shall
not exceed T hirt y t housand pesos (P30,000) which shall cover:
(i) Benef it s received by of f icials and employees of t he nat ional and local government pursuant t o
Republic Act No. 6686;
(ii) Benef it s received by employees pursuant t o President ial Decree No. 851, as amended by
Memorandum Order No. 28, dat ed August 13, 1986;
(iii) Benef it s received by of f icials and employees not covered by President ial decree No. 851, as
amended by Memorandum Order No. 28, dat ed August 13, 1986; and
(iv) Ot her benef it s such as product ivit y incent ives and Christ mas bonus: Provided, f urt her, T hat t he
ceiling of T hirt y t housand pesos (P30,000) may be increased t hrough rules and regulat ions issued by
t he Secret ary of Finance, upon recommendat ion of t he Commissioner, af t er considering among
ot hers, t he ef f ect on t he same of t he inf lat ion rat e at t he end of t he t axable year.
(f ) GSIS, SSS, Medicare and Ot her Cont ribut ions. GSIS, SSS, Medicare and Pag-ibig cont ribut ions,
and union dues of individuals.
(g) Gains f rom t heSaleof Bonds, Debent ures or ot her Cert if icat e of Indebt edness. Gains realized
f rom t he same or exchange or ret irement of bonds, debent ures or ot her cert if icat e of indebt edness
wit h a mat urit y of more t han f ive (5) years.
(h) Gains f rom Redempt ion of Shares in Mut ual Fund. Gains realized by t he invest or upon
redempt ion of shares of st ock in a mut ual f und company as def ined in Sect ion 22 (BB) of t his Code.
Section 33. Special Treatment of Fringe Benefit.(A) Imposition of Tax. A f inal t ax of t hirt y-f our percent (34%) ef f ect ive January 1, 1998; t hirt y-t hree
percent (33%) ef f ect ive January 1, 1999; and t hirt y-t wo percent (32%) ef f ect ive January 1, 2000 and
t hereaf t er, is hereby imposed on t he grossed-up monet ary value of f ringe benef it f urnished or
grant ed t o t he employee (except rank and f ile employees as def ined herein) by t he employer,
whet her an individual or a corporat ion (unless t he f ringe benef it is required by t he nat ure of , or
necessary t o t he t rade, business or prof ession of t he employer, or when t he f ringe benef it is f or t he

convenience or advant age of t he employer). T he t ax herein imposed is payable by t he employer
which t ax shall be paid in t he same manner as provided f or under Sect ion 57 (A) of t his Code. T he
grossed-up monet ary value of t he f ringe benef it shall be det ermined by dividing t he act ual monet ary
value of t he f ringe benef it by sixt y-six percent (66%) ef f ect ive January 1, 1998; sixt y-seven percent
(67%) ef f ect ive January 1, 1999; and sixt y-eight percent (68%) ef f ect ive January 1, 2000 and
t hereaf t er: Provided, however, T hat f ringe benef it f urnished t o employees and t axable under
Subsect ions (B), (C), (D) and (E) of Sect ion 25 shall be t axed at t he applicable rat es imposed t hereat :
Provided, f urt her, T hat t he grossed -Up value of t he f ringe benef it shall be det ermined by dividing t he
act ual monet ary value of t he f ringe benef it by t he dif f erence bet ween one hundred percent (100%)
and t he applicable rat es of income t ax under Subsect ions (B), (C), (D), and (E) of Sect ion 25.
(B) Fringe Benefit defined. For purposes of t his Sect ion, t he t erm f ringe benef it means any good,
service or ot her benef it f urnished or grant ed in cash or in kind by an employer t o an individual
employee (except rank and f ile employees as def ined herein) such as, but not limit ed t o, t he
f ollowing:
(1) Housing;
(2) Expense account ;
(3) Vehicle of any kind;
(4) Household personnel, such as maid, driver and ot hers;
(5) Int erest on loan at less t han market rat e t o t he ext ent of t he dif f erence bet ween t he market rat e
and act ual rat e grant ed;
(6) Membership f ees, dues and ot her expenses borne by t he employer f or t he employee in social and
at hlet ic clubs or ot her similar organizat ions;
(7) Expenses f or f oreign t ravel;
(8)Holidayand vacat ion expenses;
(9) Educat ional assist ance t o t he employee or his dependent s; and
(10) Lif e or healt h insurance and ot her non-lif e insurance premiums or similar amount s in excess of
what t he law allows.
(C) Fringe Benefits Not Taxable. T he f ollowing f ringe benef it s are not t axable under t his Sect ion:
(1) f ringe benef it s which are aut horized and exempt ed f rom t ax under special laws;
(2) Cont ribut ions of t he employer f or t he benef it of t he employee t o ret irement , insurance and
hospit alizat ion benef it plans;
(3) Benef it s given t o t he rank and f ile employees, whet her grant ed under a collect ive bargaining
agreement or not ; and
(4) De minimis benef it s as def ined in t he rules and regulat ions t o be promulgat ed by t he Secret ary of
Finance, upon recommendat ion of t he Commissioner.
T he Secret ary of Finance is hereby aut horized t o promulgat e, upon recommendat ion of t he
Commissioner, such rules and regulat ions as are necessary t o carry out ef f icient ly and f airly t he
provisions of t his Sect ion, t aking int o account t he peculiar nat ure and special need of t he t rade,
business or prof ession of t he employer.
CHAPT ER VII ALLOWABLE DEDUCT IONS
Section 34. Deductions from Gross Income. Except f or t axpayers earning compensat ion income
arising f rom personal services rendered under an employer-employee relat ionship where no
deduct ions shall be allowed under t his Sect ion ot her t han under subsect ion (M) hereof , in comput ing
t axable income subject t o income t ax under Sect ions 24 (A); 25 (A); 26; 27 (A), (B) and (C); and 28 (A)
(1), t here shall be allowed t he f ollowing deduct ions f rom gross income;
(A) Expenses. (1) Ordinary and Necessary T rade, Business or Prof essional Expenses.(a) In General. T here shall be allowed as deduct ion f rom gross income all t he ordinary and
necessary expenses paid or incurred during t he t axable year in carrying on or which are direct ly
at t ribut able t o, t he development , management , operat ion and/or conduct of t he t rade, business or
exercise of a prof ession, including:
(i) A reasonable allowance f or salaries, wages, and ot her f orms of compensat ion f or personal
services act ually rendered, including t he grossed-up monet ary value of f ringe benef it f urnished or
grant ed by t he employer t o t he employee: Provided, T hat t he f inal t ax imposed under Sect ion 33
hereof has been paid;
(ii) A reasonable allowance f or t ravel expenses, here and abroad, while away f rom home in t he pursuit
of t rade, business or prof ession;
(iii) A reasonable allowance f or rent als and/or ot her payment s which are required as a condit ion f or
t he cont inued use or possession, f or purposes of t he t rade, business or prof ession, of propert y t o
which t he t axpayer has not t aken or is not t aking t it le or in which he has no equit y ot her t han t hat of a
lessee, user or possessor;
(iv) A reasonable allowance f or ent ert ainment , amusement and recreat ion expenses during t he
t axable year, t hat are direct ly connect ed t o t he development , management and operat ion of t he
t rade, business or prof ession of t he t axpayer, or t hat are direct ly relat ed t o or in f urt herance of t he
conduct of his or it s t rade, business or exercise of a prof ession not t o exceed such ceilings as t he
Secret ary of Finance may, by rules and regulat ions prescribe, upon recommendat ion of t he
Commissioner, t aking int o account t he needs as well as t he special circumst ances, nat ure and
charact er of t he indust ry, t rade, business, or prof ession of t he t axpayer: Provided, T hat any expense
incurred f or ent ert ainment , amusement or recreat ion t hat is cont rary t o law, morals public policy or
public order shall in no case be allowed as a deduct ion.
(b) Subst ant iat ion Requirement s. No deduct ion f rom gross income shall be allowed under
Subsect ion (A) hereof unless t he t axpayer shall subst ant iat e wit h suf f icient evidence, such as of f icial
receipt s or ot her adequat e records: (i) t he amount of t he expense being deduct ed, and (ii) t he direct
connect ion or relat ion of t he expense being deduct ed t o t he development , management , operat ion
and/or conduct of t he t rade, business or prof ession of t he t axpayer.
(c) Bribes, Kickbacks and Ot her Similar Payment s. No deduct ion f rom gross income shall be allowed
under Subsect ion (A) hereof f or any payment made, direct ly or indirect ly, t o an of f icial or employee of
t he nat ional government , or t o an of f icial or employee of any local government unit , or t o an of f icial or
employee of a government -owned or -cont rolled corporat ion, or t o an of f icial or employee or
represent at ive of a f oreign government , or t o a privat e corporat ion, general prof essional part nership,
or a similar ent it y, if t he payment const it ut es a bribe or kickback.
(2) Expenses Allowable t o Privat e Educat ional Inst it ut ions. In addit ion t o t he expenses allowable as
deduct ions under t his Chapt er, a privat e educat ional inst it ut ion, ref erred t o under Sect ion 27 (B) of
t his Code, may at it s opt ion elect eit her: (a) t o deduct expendit ures ot herwise considered as capit al
out lays of depreciable asset s incurred during t he t axable year f or t he expansion of school f acilit ies or
(b) t o deduct allowance f or depreciat ion t hereof under Subsect ion (F) hereof .
(B) Interest.-
(1) In General. T he amount of int erest paid or incurred wit hin a t axable year on indebt edness in
connect ion wit h t he t axpayers prof ession, t rade or business shall be allowed as deduct ion f rom
gross income: Provided, however, T hat t he t axpayers ot herwise allowable deduct ion f or int erest
expense shall be reduced by an amount equal t o t he f ollowing percent ages of t he int erest income
subject ed t o f inal t ax:
Fort y-one percent (41%) beginning January 1, 1998;
T hirt y-nine percent (39%) beginning January 1, 1999; and
T hirt y-eight percent (38%) beginning January 1, 2000;
(2) Exceptions. No deduct ion shall be allowed in respect of int erest under t he succeeding
subparagraphs:
(a) If wit hin t he t axable year an individual t axpayer report ing income on t he cash basis incurs an
indebt edness on which an int erest is paid in advance t hrough discount or ot herwise: Provided, T hat
such int erest shall be allowed a a deduct ion in t he year t he indebt edness is paid: Provided, f urt her,
T hat if t he indebt edness is payable in periodic amort izat ions, t he amount of int erest which
corresponds t o t he amount of t he principal amort ized or paid during t he year shall be allowed as
deduct ion in such t axable year;
(b)If bot h t he t axpayer and t he person t o whom t he payment has been made or is t o be made are
persons specif ied under Sect ion 36 (B); or
(c)If t he indebt edness is incurred t o f inance pet roleum explorat ion.
(3) Opt ional T reat ment of Int erest Expense. At t he opt ion of t he t axpayer, int erest incurred t o
acquire propert y used in t rade business or exercise of a prof ession may be allowed as a deduct ion or
t reat ed as a capit al expendit ure.
(C) Taxes.(1) In General. T axes paid or incurred wit hin t he t axable year in connect ion wit h t he t axpayers
prof ession, t rade or business, shall be allowed as deduct ion, except
(a) T he income t ax provided f or under t his T it le;
(b) Income t axes imposed by aut horit y of any f oreign count ry; but t his deduct ion shall be allowed in
t he case of a t axpayer who does not signif y in his ret urn his desire t o have t o any ext ent t he benef it s
of paragraph (3) of t his subsect ion (relat ing t o credit s f or t axes of f oreign count ries);
(c) Est at e and donors t axes; and
(d) T axes assessed against local benef it s of a kind t ending t o increase t he value of t he propert y
assessed.
Provided, T hat t axes allowed under t his Subsect ion, when ref unded or credit ed, shall be included as
part of gross income in t he year of receipt t o t he ext ent of t he income t ax benef it of said deduct ion.
(2) Limitations on Deductions. In t he case of a nonresident alien individual engaged in t rade or
business in t he Philippines and a resident f oreign corporat ion, t he deduct ions f or t axes provided in
paragraph (1) of t his Subsect ion (C) shall be allowed only if and t o t he ext ent t hat t hey are connect ed
wit h income f rom sources wit hin t he Philippines.
(3) Credit Against Tax for Taxes of Foreign Countries. If t he t axpayer signif ies in his ret urn his desire t o
have t he benef it s of t his paragraph, t he t ax imposed by t his T it le shall be credit ed wit h:
(a) Cit izen and Domest ic Corporat ion. In t he case of a cit izen of t he Philippines and of a domest ic
corporat ion, t he amount of income t axes paid or incurred during t he t axable year t o any f oreign
count ry; and
(b) Part nerships and Est at es. In t he case of any such individual who is a member of a general
prof essional part nership or a benef iciary of an est at e or t rust , his proport ionat e share of such t axes
of t he general prof essional part nership or t he est at e or t rust paid or incurred during t he t axable year
t o a f oreign count ry, if his dist ribut ive share of t he income of such part nership or t rust is report ed f or
t axat ion under t his T it le.
An alien individual and a f oreign corporat ion shall not be allowed t he credit s against t he t ax f or t he
t axes of f oreign count ries allowed under t his paragraph.
(4) Limitations on Credit. T he amount of t he credit t aken under t his Sect ion shall be subject t o each
of t he f ollowing limit at ions:
(a) T he amount of t he credit in respect t o t he t ax paid or incurred t o any count ry shall not exceed t he
same proport ion of t he t ax against which such credit is t aken, which t he t axpayers t axable income
f rom sources wit hin such count ry under t his T it le bears t o his ent ire t axable income f or t he same
t axable year; and
(b) T he t ot al amount of t he credit shall not exceed t he same proport ion of t he t ax against which such
credit is t aken, which t he t axpayers t axable income f rom sources wit hout t he Philippines t axable
under t his T it le bears t o his ent ire t axable income f or t he same t axable year.
(5) Adjustments on Payment of Incurred Taxes. If accrued t axes when paid dif f er f rom t he amount s
claimed as credit s by t he t axpayer, or if any t ax paid is ref unded in whole or in part , t he t axpayer shall
not if y t he Commissioner; who shall redet ermine t he amount of t he t ax f or t he year or years af f ect ed,
and t he amount of t ax due upon such redet erminat ion, if any, shall be paid by t he t axpayer upon
not ice and demand by t he Commissioner, or t he amount of t ax overpaid, if any, shall be credit ed or
ref unded t o t he t axpayer. In t he case of such a t ax incurred but not paid, t he Commissioner as a
condit ion precedent t o t he allowance of t his credit may require t he t axpayer t o give a bond wit h
suret ies sat isf act ory t o and t o be approved by t he Commissioner in such sum as he may require,
condit ioned upon t he payment by t he t axpayer of any amount of t ax f ound due upon any such
redet erminat ion. T he bond herein prescribed shall cont ain such f urt her condit ions as t he
Commissioner may require.
(6) Year in Which Credit Taken. T he credit s provided f or in Subsect ion (C)(3) of t his Sect ion may, at
t he opt ion of t he t axpayer and irrespect ive of t he met hod of account ing employed in keeping his
books, be t aken in t he year which t he t axes of t he f oreign count ry were incurred, subject , however, t o
t he condit ions prescribed in Subsect ion (C)(5) of t his Sect ion. If t he t axpayer elect s t o t ake such
credit s in t he year in which t he t axes of t he f oreign count ry accrued, t he credit s f or all subsequent
years shall be t aken upon t he same basis and no port ion of any such t axes shall be allowed as a
deduct ion in t he same or any succeeding year.
(7) Proof of Credits. T he credit s provided in Subsect ion (C)(3) hereof shall be allowed only if t he
t axpayer est ablishes t o t he sat isf act ion of t he Commissioner t he f ollowing:
(a) T he t ot al amount of income derived f rom sources wit hout t he Philippines;
(b) T he amount of income derived f rom each count ry, t he t ax paid or incurred t o which is claimed as a
credit under said paragraph, such amount t o be det ermined under rules and regulat ions prescribed by
t he Secret ary of Finance; and
(c) All ot her inf ormat ion necessary f or t he verif icat ion and comput at ion of such credit s.
(D) Losses. -
(1) In General. Losses act ually sust ained during t he t axable year and not compensat ed f or by
insurance or ot her f orms of indemnit y shall be allowed as deduct ions:
(a) If incurred in t rade, prof ession or business;
(b) Of propert y connect ed wit h t he t rade, business or prof ession, if t he loss arises f rom f ires, st orms,
shipwreck, or ot her casualt ies, or f rom robbery, t hef t or embezzlement .
T he Secret ary of Finance, upon recommendat ion of t he Commissioner, is hereby aut horized t o
promulgat e rules and regulat ions prescribing, among ot her t hings, t he t ime and manner by which t he
t axpayer shall submit a declarat ion of loss sust ained f rom casualt y or f rom robbery, t hef t or
embezzlement during t he t axable year: Provided, however, T hat t he t ime limit t o be so prescribed in
t he rules and regulat ions shall not be less t han t hirt y (30) days nor more t han ninet y (90) days f rom
t he dat e of discovery of t he casualt y or robbery, t hef t or embezzlement giving rise t o t he loss.
(c) No loss shall be allowed as a deduct ion under t his Subsect ion if at t he t ime of t he f iling of t he
ret urn, such loss has been claimed as a deduct ion f or est at e t ax purposes in t he est at e t ax ret urn.
(2) Proof of Loss. In t he case of a nonresident alien individual or f oreign corporat ion, t he losses
deduct ible shall be t hose act ually sust ained during t he year incurred in business, t rade or exercise of
a prof ession conduct ed wit hin t he Philippines, when such losses are not compensat ed f or by
insurance or ot her f orms of indemnit y. T he secret ary of Finance, upon recommendat ion of t he
Commissioner, is hereby aut horized t o promulgat e rules and regulat ions prescribing, among ot her
t hings, t he t ime and manner by which t he t axpayer shall submit a declarat ion of loss sust ained f rom
casualt y or f rom robbery, t hef t or embezzlement during t he t axable year: Provided, T hat t he t ime t o
be so prescribed in t he rules and regulat ions shall not be less t han t hirt y (30) days nor more t han
ninet y (90) days f rom t he dat e of discovery of t he casualt y or robbery, t hef t or embezzlement giving
rise t o t he loss; and
(3) Net Operating Loss Carry-Over. T he net operat ing loss of t he business or ent erprise f or any
t axable year immediat ely preceding t he current t axable year, which had not been previously of f set as
deduct ion f rom gross income shall be carried over as a deduct ion f rom gross income f or t he next
t hree (3) consecut ive t axable years immediat ely f ollowing t he year of such loss: Provided, however,
T hat any net loss incurred in a t axable year during which t he t axpayer was exempt f rom income t ax
shall not be allowed as a deduct ion under t his Subsect ion: Provided, f urt her, T hat a net operat ing loss
carry-over shall be allowed only if t here has been no subst ant ial change in t he ownership of t he
business or ent erprise in t hat (i) Not less t han sevent y-f ive percent (75%) in nominal value of out st anding issued shares., if t he
business is in t he name of a corporat ion, is held by or on behalf of t he same persons; or
(ii) Not less t han sevent y-f ive percent (75%) of t he paid up capit al of t he corporat ion, if t he business
is in t he name of a corporat ion, is held by or on behalf of t he same persons.
For purposes of t his subsect ion, t he t erm not operat ing loss shall mean t he excess of allowable
deduct ion over gross income of t he business in a t axable year.
Provided, T hat f or mines ot her t han oil and gas wells, a net operat ing loss wit hout t he benef it of
incent ives provided f or under Execut ive Order No. 226, as amended, ot herwise known as t he Omnibus
Invest ment s Code of 1987, incurred in any of t he f irst t en (10) years of operat ion may be carried over
as a deduct ion f rom t axable income f or t he next f ive (5) years immediat ely f ollowing t he year of such
loss. T he ent ire amount of t he loss shall be carried over t o t he f irst of t he f ive (5) t axable years
f ollowing t he loss, and any port ion of such loss which exceeds, t he t axable income of such f irst year
shall be deduct ed in like manner f orm t he t axable income of t he next remaining f our (4) years.
(4) Capital Losses. (a) Limitation. Loss f rom sales or Exchanges of capit al asset s shall be allowed only t o t he ext ent
provided in Sect ion 39.

(b) Securities Becoming worthless. If securit ies as def ined in Sect ion 22 (T ) become wort hless during
t he t axable year and are capit al asset s, t he loss result ing t heref rom shall, f or purposes of t his T it le,
be considered as a loss f rom t he sale or exchange, on t he last day of such t axable year, of capit al
asset s.
(5) Losses From Wash Sales of St ock or Securit ies. Losses f rom wash sales of st ock or securit ies
as provided in Sect ion 38.
(6) Wagering Losses. Losses f rom wagering t ransact ions shall b allowed only t o t he ext ent of t he
gains f rom such t ransact ions.
(7) Abandonment Losses. (a) In t he event a cont ract area where pet roleum operat ions are undert aken is part ially or wholly
abandoned, all accumulat ed explorat ion and development expendit ures pert aining t heret o shall be
allowed as a deduct ion: Provided, T hat accumulat ed expendit ures incurred in t hat area prior t o
January 1, 1979 shall be allowed as a deduct ion only f rom any income derived f rom t he same cont ract
area. In all cases, not ices of abandonment shall be f iled wit h t he Commissioner.
(b) In case a producing well is subsequent ly abandoned, t he unamort ized cost s t hereof , as well as t he
undepreciat ed cost s of equipment direct ly used t herein, shall be allowed as a deduct ion in t he year
such well, equipment or f acilit y is abandoned by t he cont ract or: Provided, T hat if such abandoned
well is reent ered and product ion is resumed, or if such equipment or f acilit y is rest ored int o service,
t he said cost s shall be included as part of gross income in t he year of resumpt ion or rest orat ion and
shall be amort ized or depreciat ed, as t he case may be.
(E) Bad Debts. (1) In General. Debt s due t o t he t axpayer act ually ascert ained t o be wort hless and charged of f
wit hin t he t axable year except t hose not connect ed wit h prof ession, t rade or business and t hose
sust ained in a t ransact ion ent ered int o bet ween part ies ment ioned under Sect ion 36 (B) of t his Code:
Provided, T hat recovery of bad debt s previously allowed as deduct ion in t he preceding years shall be
included as part of t he gross income in t he year of recovery t o t he ext ent of t he income t ax benef it
of said deduct ion.
(2) Securit ies Becoming Wort hless. If securit ies, as def ined in Sect ion 22 (T ), are ascert ained t o be
wort hless and charged of f wit hin t he t axable year and are capit al asset s, t he loss result ing t heref rom
shall, in t he case of a t axpayer ot her t han a bank or t rust company incorporat ed under t he laws of t he
Philippines a subst ant ial part of whose business is t he receipt of deposit s, f or t he purpose of t his
T it le, be considered as a loss f rom t he sale or exchange, on t he last day of such t axable year, of
capit al asset s.
(F) Depreciation. (1) General Rule. T here shall be allowed as a depreciat ion deduct ion a reasonable allowance f or t he
exhaust ion, wear and t ear (including reasonable allowance f or obsolescence) of propert y used in t he
t rade or business. In t he case of propert y held by one person f or lif e wit h remainder t o anot her
person, t he deduct ion shall be comput ed as if t he lif e t enant were t he absolut e owner of t he propert y
and shall be allowed t o t he lif e t enant . In t he case of propert y held in t rust , t he allowable deduct ion
shall be apport ioned bet ween t he income benef iciaries and t he t rust ees in accordance wit h t he
pert inent provisions of t he inst rument creat ing t he t rust , or in t he absence of such provisions, on t he
basis of t he t rust income allowable t o each.
(2) Use of Cert ain Met hods and Rat es. T he t erm reasonable allowance as used in t he preceding
paragraph shall include, but not limit ed t o, an allowance comput ed in accordance wit h rules and
regulat ions prescribed by t he Secret ary of Finance, upon recommendat ion of t he Commissioner,
under any of t he f ollowing met hods:

(a) T he st raight -line met hod;
(b) Declining-balance met hod, using a rat e not exceeding t wice t he rat e which would have been used
had t he annual allowance been comput ed under t he met hod described in Subsect ion (F) (1);
(c) T he sum-of -t he-years-digit met hod; and
(d) any ot her met hod which may be prescribed by t he Secret ary of Finance upon recommendat ion of
t he Commissioner.
(3) Agreement as t o Usef ul Lif e on Which Depreciat ion Rat e is Based. Where under rules and
regulat ions prescribed by t he Secret ary of Finance upon recommendat ion of t he Commissioner, t he
t axpayer and t he Commissioner have ent ered int o an agreement in writ ing specif ically dealing wit h
t he usef ul lif e and rat e of depreciat ion of any propert y, t he rat e so agreed upon shall be binding on
bot h t he t axpayer and t he nat ional Government in t he absence of f act s and circumst ances not t aken
int o considerat ion during t he adopt ion of such agreement . T he responsibilit y of est ablishing t he
exist ence of such f act s and circumst ances shall rest wit h t he part y init iat ing t he modif icat ion. Any
change in t he agreed rat e and usef ul lif e of t he depreciable propert y as specif ied in t he agreement
shall not be ef f ect ive f or t axable years prior t o t he t axable year in which not ice in writ ing by cert if ied
mail or regist ered mail is served by t he part y init iat ing such change t o t he ot her part y t o t he
agreement :
Provided, however, t hat where t he t axpayer has adopt ed such usef ul lif e and depreciat ion rat e f or
any depreciable and claimed t he depreciat ion expenses as deduct ion f rom his gross income, wit hout
any writ t en object ion on t he part of t he Commissioner or his duly aut horized represent at ives, t he
af oresaid usef ul lif e and depreciat ion rat e so adopt ed by t he t axpayer f or t he af oresaid depreciable
asset shall be considered binding f or purposes of t his Subsect ion.
(4) Depreciat ion of Propert ies Used in Pet roleum Operat ions. An allowance f or depreciat ion in
respect of all propert ies direct ly relat ed t o product ion of pet roleum init ially placed in service in a
t axable year shall be allowed under t he st raight -line or declining-balance met hod of depreciat ion at
t he opt ion of t he service cont ract or.
However, if t he service cont ract or init ially elect s t he declining-balance met hod, it may at any
subsequent dat e, shif t t o t he st raight -line met hod.
T he usef ul lif e of propert ies used in or relat ed t o product ion of pet roleum shall be t en (10) years of
such short er lif e as may be permit t ed by t he Commissioner.
Propert ies not used direct ly in t he product ion of pet roleum shall be depreciat ed under t he st raight line met hod on t he basis of an est imat ed usef ul lif e of f ive (5) years.
(5) Depreciat ion of Propert ies Used in Mining Operat ions. an allowance f or depreciat ion in respect
of all propert ies used in mining operat ions ot her t han pet roleum operat ions, shall be comput ed as
f ollows:
(a) At t he normal rat e of depreciat ion if t he expect ed lif e is t en (10) years or less; or
(b) Depreciat ed over any number of years bet ween f ive (5) years and t he expect ed lif e if t he lat t er is
more t han t en (10) years, and t he depreciat ion t hereon allowed as deduct ion f rom t axable income:
Provided, T hat t he cont ract or not if ies t he Commissioner at t he beginning of t he depreciat ion period
which depreciat ion rat e allowed by t his Sect ion will be used.
(6) Depreciat ion Deduct ible by Nonresident Aliens Engaged in T rade or Business or Resident Foreign
Corporat ions. In t he case of a nonresident alien individual engaged in t rade or business or resident
f oreign corporat ion, a reasonable allowance f or t he det eriorat ion of Propert y arising out of it s use or
employment or it s non-use in t he business t rade or prof ession shall be permit t ed only when such
propert y is locat ed in t he Philippines.
(G) Depletion of Oil and Gas Wells and Mines. (1) In General. In t he case of oil and gas wells or mines, a reasonable allowance f or deplet ion or
amort izat ion comput ed in accordance wit h t he cost -deplet ion met hod shall be grant ed under rules
and regulat ions t o be prescribed by t he Secret ary of f inance, upon recommendat ion of t he
Commissioner. Provided, T hat when t he allowance f or deplet ion shall equal t he capit al invest ed no
f urt her allowance shall be grant ed: Provided, f urt her, T hat af t er product ion in commercial quant it ies
has commenced, cert ain int angible explorat ion and development drilling cost s: (a) shall be deduct ible
in t he year incurred if such expendit ures are incurred f or non-producing wells and/or mines, or (b) shall
be deduct ible in f ull in t he year paid or incurred or at t he elect ion of t he t axpayer, may be capit alized
and amort ized if such expendit ures incurred are f or producing wells and/or mines in t he same cont ract
area.
Int angible cost s in pet roleum operat ions ref ers t o any cost incurred in pet roleum operat ions which in
it self has no salvage value and which is incident al t o and necessary f or t he drilling of wells and
preparat ion of wells f or t he product ion of pet roleum: Provided, T hat said cost s shall not pert ain t o
t he acquisit ion or improvement of propert y of a charact er subject t o t he allowance f or depreciat ion
except t hat t he allowances f or depreciat ion on such propert y shall be deduct ible under t his
Subsect ion.
Any int angible explorat ion, drilling and development expenses allowed as a deduct ion in comput ing
t axable income during t he year shall not be t aken int o considerat ion in comput ing t he adjust ed cost
basis f or t he purpose of comput ing allowable cost deplet ion.
(2) Elect ion t o Deduct Explorat ion and Development Expendit ures. In comput ing t axable income
f rom mining operat ions, t he t axpayer may at his opt ion, deduct explorat ion and development
expendit ures accumulat ed as cost or adjust ed basis f or cost deplet ion as of dat e of prospect ing, as
well as explorat ion and development expendit ures paid or incurred during t he t axable year: Provided,
T hat t he amount deduct ible f or explorat ion and development expendit ures shall not exceed t went yf ive percent (25%) of t he net income f rom mining operat ions comput ed wit hout t he benef it of any t ax
incent ives under exist ing laws. T he act ual explorat ion and development expendit ures minus t went yf ive percent (25%) of t he net income f rom mining shall be carried f orward t o t he succeeding years
unt il f ully deduct ed.
T he elect ion by t he t axpayer t o deduct t he explorat ion and development expendit ures is irrevocable
and shall be binding in succeeding t axable years.
Net income f rom mining operat ions, as used in t his Subsect ion, shall mean gross income f rom
operat ions less allowable deduct ions which are necessary or relat ed t o mining operat ions. Allowable
deduct ions shall include mining, milling and market ing expenses, and depreciat ion of propert ies
direct ly used in t he mining operat ions. T his paragraph shall not apply t o expendit ures f or t he
acquisit ion or improvement of propert y of a charact er which is subject t o t he allowance f or
depreciat ion.
In no case shall t his paragraph apply wit h respect t o amount s paid or incurred f or t he explorat ion and
development of oil and gas.
T he t erm explorat ion expendit ures means expendit ures paid or incurred f or t he purpose of
ascert aining t he exist ence, locat ion, ext ent or qualit y of any deposit of ore or ot her mineral, and paid
or incurred bef ore t he beginning of t he development st age of t he mine or deposit .
T he t erm development expendit ures means expendit ures paid or incurred during t he development
st age of t he mine or ot her nat ural deposit s. T he development st age of a mine or ot her nat ural
deposit shall begin at t he t ime when deposit s of ore or ot her minerals are shown t o exist in suf f icient
commercial quant it y and qualit y and shall end upon commencement of act ual commercial ext ract ion.
(3) Deplet ion of Oil and Gas Wells and Mines Deduct ible by a Nonresident Alien individual or Foreign
Corporat ion. In t he case of a nonresident alien individual engaged in t rade or business in t he
Philippines or a resident f oreign corporat ion, allowance f or deplet ion of oil and gas wells or mines
under paragraph (1) of t his Subsect ion shall be aut horized only in respect t o oil and gas wells or mines
locat ed wit hin t he Philippines.
(H) Charitable and Other Contributions. (1) In General. Cont ribut ions or gif t s act ually paid or made wit hin t he t axable year t o, or f or t he use
of t he Government of t he Philippines or any of it s agencies or any polit ical subdivision t hereof
exclusively f or public purposes, or t o accredit ed domest ic corporat ion or associat ions organized and
operat ed exclusively f or religious, charit able, scient if ic, yout h and sport s development , cult ural or
educat ional purposes or f or t he rehabilit at ion of vet erans, or t o social welf are inst it ut ions, or t o nongovernment organizat ions, in accordance wit h rules and regulat ions promulgat ed by t he Secret ary of
f inance, upon recommendat ion of t he Commissioner, no part of t he net income of which inures t o t he
benef it of any privat e st ockholder or individual in an amount not in excess of t en percent (10%) in t he
case of an individual, and f ive percent (5%) in t he case of a corporat ion, of t he t axpayers t axable
income derived f rom t rade, business or prof ession as comput ed wit hout t he benef it of t his and t he
f ollowing subparagraphs.
(2) Contributions Deductible in Full. Not wit hst anding t he provisions of t he preceding subparagraph,
donat ions t o t he f ollowing inst it ut ions or ent it ies shall be deduct ible in f ull;
(a) Donat ions t o t he Government . Donat ions t o t he Government of t he Philippines or t o any of it s
agencies or polit ical subdivisions, including f ully-owned government corporat ions, exclusively t o
f inance, t o provide f or, or t o be used in undert aking priorit y act ivit ies in educat ion, healt h, yout h and
sport s development , human set t lement s, science and cult ure, and in economic development
according t o a Nat ional Priorit y Plan det ermined by t he Nat ional Economic and Development Aut horit y
(NEDA), In consult at ion wit h appropriat e government agencies, including it s regional development
councils and privat e philant rophic persons and inst it ut ions: Provided, T hat any donat ion which is made
t o t he Government or t o any of it s agencies or polit ical subdivisions not in accordance wit h t he said
annual priorit y plan shall be subject t o t he limit at ions prescribed in paragraph (1) of t his Subsect ion;
(b) Donat ions t o Cert ain Foreign Inst it ut ions or Int ernat ional Organizat ions. donat ions t o f oreign
inst it ut ions or int ernat ional organizat ions which are f ully deduct ible in pursuance of or in compliance
wit h agreement s, t reat ies, or commit ment s ent ered int o by t he Government of t he Philippines and
t he f oreign inst it ut ions or int ernat ional organizat ions or in pursuance of special laws;
(c) Donat ions t o Accredit ed Nongovernment Organizat ions. t he t erm nongovernment organizat ion
means a non prof it domest ic corporat ion:
(1) Organized and operat ed exclusively f or scient if ic, research, educat ional, charact er-building and
yout h and sport s development , healt h, social welf are, cult ural or charit able purposes, or a
combinat ion t hereof , no part of t he net income of which inures t o t he benef it of any privat e individual;
(2) Which, not lat er t han t he 15t h day of t he t hird mont h af t er t he close of t he accredit ed
nongovernment organizat ions t axable year in which cont ribut ions are received, makes ut ilizat ion
direct ly f or t he act ive conduct of t he act ivit ies const it ut ing t he purpose or f unct ion f or which it is
organized and operat ed, unless an ext ended period is grant ed by t he Secret ary of Finance in
accordance wit h t he rules and regulat ions t o be promulgat ed, upon recommendat ion of t he
Commissioner;
(3) T he level of administ rat ive expense of which shall, on an annual basis, conf orm wit h t he rules and
regulat ions t o be prescribed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner, but in no case t o exceed t hirt y percent (30%) of t he t ot al expenses; and
(4) T he asset s of which, in t he even of dissolut ion, would be dist ribut ed t o anot her nonprof it domest ic
corporat ion organized f or similar purpose or purposes, or t o t he st at e f or public purpose, or would be

dist ribut ed by a court t o anot her organizat ion t o be used in such manner as in t he judgment of said
court shall best accomplish t he general purpose f or which t he dissolved organizat ion was organized.
Subject t o such t erms and condit ions as may be prescribed by t he Secret ary of Finance, t he t erm
ut ilizat ion means:
(i) Any amount in cash or in kind (including administ rat ive expenses) paid or ut ilized t o accomplish one
or more purposes f or which t he accredit ed nongovernment organizat ion was creat ed or organized.
(ii) Any amount paid t o acquire an asset used (or held f or use) direct ly in carrying out one or more
purposes f or which t he accredit ed nongovernment organizat ion was creat ed or organized.
An amount set aside f or a specif ic project which comes wit hin one or more purposes of t he
accredit ed nongovernment organizat ion may be t reat ed as a ut ilizat ion, but only if at t he t ime such
amount is set aside, t he accredit ed nongovernment organizat ion has est ablished t o t he sat isf act ion
of t he Commissioner t hat t he amount will be paid f or t he specif ic project wit hin a period t o be
prescribed in rules and regulat ions t o be promulgat ed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner, but not t o exceed f ive (5) years, and t he project is one which
can be bet t er accomplished by set t ing aside such amount t han by immediat e payment of f unds.
(3) Valuation. T he amount of any charit able cont ribut ion of propert y ot her t han money shall be
based on t he acquisit ion cost of said propert y.
(4) Proof of Deductions. Cont ribut ions or gif t s shall be allowable as deduct ions only if verif ied under
t he rules and regulat ions prescribed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner.
(I) Research and Development.(1) In General. a t axpayer may t reat research or development expendit ures which are paid or
incurred by him during t he t axable year in connect ion wit h his t rade, business or prof ession as ordinary
and necessary expenses which are not chargeable t o capit al account . T he expendit ures so t reat ed
shall be allowed as deduct ion during t he t axable year when paid or incurred.
(2) Amortization of Certain Research and Development Expenditures. At t he elect ion of t he t axpayer
and in accordance wit h t he rules and regulat ions t o be prescribed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner, t he f ollowing research and development expendit ures may be
t reat ed as def erred expenses:
(a) Paid or incurred by t he t axpayer in connect ion wit h his t rade, business or prof ession;
(b) Not t reat ed as expenses under paragraph 91) hereof ; and
(c) Chargeable t o capit al account but not chargeable t o propert y of a charact er which is subject t o
depreciat ion or deplet ion.
In comput ing t axable income, such def erred expenses shall be allowed as deduct ion rat ably
dist ribut ed over a period of not less t han sixt y (60) mont hs as may be elect ed by t he t axpayer
(beginning wit h t he mont h in which t he t axpayer f irst realizes benef it s f rom such expendit ures).
T he elect ion provided by paragraph (2) hereof may be made f or any t axable year beginning af t er t he
ef f ect ivit y of t his Code, but only if made not lat er t han t he t ime prescribed by law f or f iling t he ret urn
f or such t axable year. T he met hod so elect ed, and t he period select ed by t he t axpayer, shall be
adhered t o in comput ing t axable income f or t he t axable year f or which t he elect ion is made and f or all
subsequent t axable years unless wit h t he approval of t he Commissioner, a change t o a dif f erent
met hod is aut horized wit h respect t o a part or all of such expendit ures. T he elect ion shall not apply t o
any expendit ure paid or incurred during any t axable year f or which t he t axpayer makes t he elect ion.
(3) Limitations on deduction. T his Subsect ion shall not apply t o:

(a) Any expendit ure f or t he acquisit ion or improvement of land, or f or t he improvement of propert y t o
be used in connect ion wit h research and development of a charact er which is subject t o depreciat ion
and deplet ion; and
(b) Any expendit ure paid or incurred f or t he purpose of ascert aining t he exist ence, locat ion, ext ent , or
qualit y of any deposit of ore or ot her mineral, including oil or gas.
(J) Pension Trusts. An employer est ablishing or maint aining a pension t rust t o provide f or t he
payment of reasonable pensions t o his employees shall be allowed as a deduct ion (in addit ion t o t he
cont ribut ions t o such t rust during t he t axable year t o cover t he pension liabilit y accruing during t he
year, allowed as a deduct ion under Subsect ion (A) (1) of t his Sect ion ) a reasonable amount
t ransf erred or paid int o such t rust during t he t axable year in excess of such cont ribut ions, but only if
such amount (1)has not t heret of ore been allowed as a deduct ion, and (2) is apport ioned in equal
part s over a period of t en (10) consecut ive years beginning wit h t he year in which t he t ransf er or
payment is made.
(K) Additional Requirements for Deductibility of Certain Payments. Any amount paid or payable which is
ot herwise deduct ible f rom, or t aken int o account in comput ing gross income or f or which depreciat ion
or amort izat ion may be allowed under t his Sect ion, shall be allowed as a deduct ion only if it is shown
t hat t he t ax required t o be deduct ed and wit hheld t heref rom has been paid t o t he Bureau of Int ernal
Revenue in accordance wit h t his Sect ion 58 and 81 of t his Code.
(L) Optional Standard Deduction. In lieu of t he deduct ions allowed under t he preceding Subsect ions,
an individual subject t o t ax under Sect ion 24, ot her t han a nonresident alien, may elect a st andard
deduct ion in an amount not exceeding t en percent (10%) of his gross income. Unless t he t axpayer
signif ies in his ret urn his int ent ion t o elect t he opt ional st andard deduct ion, he shall be considered as
having availed himself of t he deduct ions allowed in t he preceding Subsect ions. Such elect ion when
made in t he ret urn shall be irrevocable f or t he t axable year f or which t he ret urn is made: Provided,
T hat an individual who is ent it led t o and claimed f or t he opt ional st andard deduct ion shall not be
required t o submit wit h his t ax ret urn such f inancial st at ement s ot herwise required under t his Code:
Provided, f urt her, T hat except when t he Commissioner ot herwise permit s, t he said individual shall
keep such records pert aining t o his gross income during t he t axable year, as may be required by t he
rules and regulat ions promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner.
(M) Premium Payments on Health and/or Hospitalization Insurance of an Individual Taxpayer. t he amount
of premiums not t o exceed T wo t housand f our hundred pesos (P2,400) per f amily or T wo hundred
pesos (P200) a mont h paid during t he t axable year f or healt h and/or hospit alizat ion insurance t aken
by t he t axpayer f or himself , including his f amily, shall be allowed as a deduct ion f rom his gross
income: Provided, T hat said f amily has a gross income of not more t han T wo hundred f if t y t housand
pesos (P250,000) f or t he t axable year: Provided, f inally, T hat in t he case of married t axpayers, only
t he spouse claiming t he addit ional exempt ion f or dependent s shall be ent it led t o t his deduct ion.
Not wit hst anding t he provision of t he preceding Subsect ions, T he Secret ary of Finance, upon
recommendat ion of t he Commissioner, af t er a public hearing shall have been held f or t his purpose,
may prescribe by rules and regulat ions, limit at ions or ceilings f or any of t he it emized deduct ions under
Subsect ions (A) t o (J) of t his Sect ion: Provided, T hat f or purposes of det ermining such ceilings or
limit at ions, t he Secret ary of Finance shall consider t he f ollowing f act ors: (1) adequacy of t he
prescribed limit s on t he act ual expendit ure requirement s of each part icular indust ry; and (2)ef f ect s of
inf lat ion on expendit ure levels: Provided, f urt her, T hat no ceilings shall f urt her be imposed on it ems of
expense already subject t o ceilings under present law.
Section 35. Allowance of Personal Exemption for Individual Taxpayer. (A) In General. For purposes of det ermining t he t ax provided in Sect ion 24 (A) of t his T it le, t here
shall be allowed a basic personal exempt ion as f ollows:
shall be allowed a basic personal exempt ion as f ollows:

For single individual or married
individual judicially decreed as
legally separat ed wit h no
qualif ied dependent s
P20,000
For Head of Family
P25,000
For each married individual
P32,000
In t he case of married individuals where only one of t he spouses is deriving gross income, only such
spouse shall be allowed t he personal exempt ion.
For purposes of t his paragraph, t he t erm head of f amily means an unmarried or legally separat ed
man or woman wit h one or bot h parent s, or wit h one or more brot hers or sist ers, or wit h one or more
legit imat e, recognized nat ural or legally adopt ed children living wit h and dependent upon him f or t heir
chief support , where such brot hers or sist ers or children are not more t han t went y-one (21) years of
age, unmarried and not gainf ully employed or where such children, brot hers or sist ers, regardless of
age are incapable of self -support because of ment al or physical def ect .
(B) Addit ional Exempt ion f or Dependent s. T here shall be allowed an addit ional exempt ion of Eight
t housand pesos (P8,000) f or each dependent not exceeding f our (4).
T he addit ional exempt ion f or dependent shall be claimed by only one of t he spouses in t he case of
married individuals.
In t he case of legally separat ed spouses, addit ional exempt ions may be claimed only by t he spouse
who has cust ody of t he child or children: Provided, T hat t he t ot al amount of addit ional exempt ions
t hat may be claimed by bot h shall not exceed t he maximum addit ional exempt ions herein allowed.
For purposes of t his Subsect ion, a dependent means a legit imat e, illegit imat e or legally adopt ed
child chief ly dependent upon and living wit h t he t axpayer if such dependent is not more t han t went yone (21) years of age, unmarried and not gainf ully employed or if such dependent , regardless of age,
is incapable of self -support because of ment al or physical def ect .
(C) Change of St at us. If t he t axpayer marries or should have addit ional dependent (s) as def ined
above during t he t axable year, t he t axpayer may claim t he corresponding addit ional exempt ion, as
t he case may be, in f ull f or such year.
If t he t axpayer dies during t he t axable year, his est at e may st ill claim t he personal and addit ional
exempt ions f or himself and his dependent (s) as if he died at t he close of such year.
If t he spouse or any of t he dependent s dies or if any of such dependent s marries, becomes t went yone (21) years old or becomes gainf ully employed during t he t axable year, t he t axpayer may st ill
claim t he same exempt ions as if t he spouse or any of t he dependent s died, or as if such dependent s
married, became t went y-one (21) years old or became gainf ully employed at t he close of such year.
(D) Personal Exempt ion Allowable t o Nonresident Alien Individual. A nonresident alien individual
engaged in t rade, business or in t he exercise of a prof ession in t he Philippines shall be ent it led t o a
personal exempt ion in t he amount equal t o t he exempt ions allowed in t he income t ax law in t he
count ry of which he is a subject or cit izen, t o cit izens of t he Philippines not residing in such count ry,
not t o exceed t he amount f ixed in t his Sect ion as exempt ion f or cit izens or resident of t he Philippines:
Provided, T hat said nonresident alien should f ile a t rue and accurat e ret urn of t he t ot al income
received by him f rom all sources in t he Philippines, as required by t his T it le.
Section 36. Items not Deductible.-
(A) General Rule. In comput ing net income, no deduct ion shall in any case be allowed in respect t o (1) Personal, living or f amily expenses;
(2) Any amount paid out f or new buildings or f or permanent improvement s, or bet t erment s made t o
increase t he value of any propert y or est at e;
T his Subsect ion shall not apply t o int angible drilling and development cost s incurred in pet roleum
operat ions which are deduct ible under Subsect ion (G) (1) of Sect ion 34 of t his Code.
(3) Any amount expended in rest oring propert y or in making good t he exhaust ion t hereof f or which an
allowance is or has been made; or
(4) Premiums paid on any lif e insurance policy covering t he lif e of any of f icer or employee, or of any
person f inancially int erest ed in any t rade or business carried on by t he t axpayer, individual or
corporat e, when t he t axpayer is direct ly or indirect ly a benef iciary under such policy.
(B) Losses from Sales or Exchanges of Property. In comput ing net income, no deduct ions shall in any
case be allowed in respect of losses f rom sales or exchanges of propert y direct ly or indirect ly (1) Bet ween members of a f amily. For purposes of t his paragraph, t he f amily of an individual shall
include only his brot hers and sist ers (whet her by t he whole or half -blood), spouse, ancest ors, and
lineal descendant s; or
(2) Except in t he case of dist ribut ions in liquidat ion, bet ween an individual and corporat ion more t han
f if t y percent (50%) in value of t he out st anding st ock of which is owned, direct ly or indirect ly, by or f or
such individual; or
(3) Except in t he case of dist ribut ions in liquidat ion, bet ween t wo corporat ions more t han f if t y percent
(50%) in value of t he out st anding st ock of which is owned, direct ly or indirect ly, by or f or t he same
individual if eit her one of such corporat ions, wit h respect t o t he t axable year of t he corporat ion
preceding t he dat e of t he sale of exchange was under t he law applicable t o such t axable year, a
personal holding company or a f oreign personal holding company;
(4) Bet ween t he grant or and a f iduciary of any t rust ; or
(5) Bet ween t he f iduciary of and t he f iduciary of a t rust and t he f iduciary of anot her t rust if t he same
person is a grant or wit h respect t o each t rust ; or
(6) Bet ween a f iduciary of a t rust and benef iciary of such t rust .
Section 37. Special Provisions Regarding Income and Deductions of Insurance Companies, Whether
Domestic or Foreign. (A) Special Deduction Allowed to Insurance Companies. In t he case of insurance companies, whet her
domest ic or f oreign doing business in t he Philippines, t he net addit ions, if any, required by law t o be
made wit hin t he year t o reserve f unds and t he sums ot her t han dividends paid wit hin t he year on
policy and annuit y cont ract s may be deduct ed f rom t heir gross income: Provided, however, T hat t he
released reserve be t reat ed as income f or t he year of release.
(B) Mutual Insurance Companies. In t he case of mut ual f ire and mut ual employers liabilit y and mut ual
workmens compensat ion and mut ual casualt y insurance companies requiring t heir members t o make
premium deposit s t o provide f or losses and expenses, said companies shall not ret urn as income any
port ion of t he premium deposit s ret urned t o t heir policyholders, but shall ret urn as t axable income all
income received by t hem f rom all ot her sources plus such port ion of t he premium deposit s as are
ret ained by t he companies f or purposes ot her t han t he payment of losses and expenses and
reinsurance reserves.
(C) Mutual Marine Insurance Companies. Mut ual marine insurance companies shall include in t heir
ret urn of gross income, gross premiums collect ed and received by t hem less amount s paid t o
policyholders on account of premiums previously paid by t hem and int erest paid upon t hose amount s
bet ween t he ascert ainment and payment t hereof .
(D) Assessment Insurance Companies. Assessment insurance companies, whet her domest ic or
f oreign, may deduct f rom t heir gross income t he act ual deposit of sums wit h t he of f icers of t he
Government of t he Philippines pursuant t o law, as addit ions t o guarant ee or reserve f unds.
Section 38. Losses from Wash Sales of Stock or Securities. (A) In t he case of any loss claimed t o have been sust ained f rom any sale or ot her disposit ion of
shares of st ock or securit ies where it appears t hat wit hin a period beginning t hirt y (30) days bef ore
t he dat e of such sale or disposit ion and ending t hirt y (30) days af t er such dat e, t he t axpayer has
acquired (by purchase or by exchange upon which t he ent ire amount of gain or loss was recognized
by law), or has ent ered int o a cont act or opt ion so t o acquire, subst ant ially ident ical st ock or
securit ies, t hen no deduct ion f or t he loss shall be allowed under Sect ion 34 unless t he claim is made
by a dealer in st ock or securit ies and wit h respect t o a t ransact ion made in t he ordinary course of t he
business of such dealer.
(B) If t he amount of st ock or securit ies acquired (or covered by t he cont ract or opt ion t o acquire) is
less t han t he amount of st ock or securit ies sold or ot herwise disposed of , t hen t he part icular shares
of st ock or securit ies, t he loss f orm t he sale or ot her disposit ion of which is not deduct ible, shall be
det ermined under rules and regulat ions prescribed by t he Secret ary of Finance, upon
(C) If t he amount of st ock or securit ies acquired (or covered by t he cont ract or opt ion t o acquire
which) result ed in t he non-deduct ibilit y of t he loss, shall be det ermined under rules and regulat ions
prescribed by t he Secret ary of Finance, upon recommendat ion of t he Commissioner.
Section 39. Capital Gains and Losses. (A) Definitions. As used in t his T it le (1) Capital Assets. t he t erm capit al asset s means propert y held by t he t axpayer (whet her or not
connect ed wit h his t rade or business), but does not include st ock in t rade of t he t axpayer or ot her
propert y of a kind which would properly be included in t he invent ory of t he t axpayer if on hand at t he
close of t he t axable year, or propert y held by t he t axpayer primarily f or sale t o cust omers in t he
ordinary course of his t rade or business, or propert y used in t he t rade or business, of a charact er
which is subject t o t he allowance f or depreciat ion provided in Subsect ion (F) of Sect ion 34; or real
propert y used in t rade or business of t he t axpayer.
(2) Net Capital Gain. T he t erm net capit al gain means t he excess of t he gains f rom sales or
exchanges of capit al asset s over t he losses f rom such sales or exchanges.
(3) Net Capital Loss. T he t erm net capit al loss means t he excess of t he losses f rom sales or
exchanges of capit al asset s over t he gains f rom such sales or exchanges.
(B) Percentage Taken into Account. In t he case of a t axpayer, ot her t han a corporat ion, only t he
f ollowing percent ages of t he gain or loss recognized upon t he sale or exchange of a capit al asset
shall be t aken int o account in comput ing net capit al gain, net capit al loss, and net income:
(1)One hundred percent (100%) if t he capit al asset has been held f or not more t han t welve (12)
mont hs; and
(2)Fif t y percent (50%) if t he capit al asset has been held f or more t han t welve (12) mont hs;
(C) Limitation on Capital Losses. Losses f rom sales or exchanges of capit al asset s shall be allowed
only t o t he ext ent of t he gains f rom such sales or exchanges. If a bank or t rust company incorporat ed
under t he laws of t he Philippines, a subst ant ial part of whose business is t he receipt of deposit s, sells
any bond, debent ure, not e, or cert if icat e or ot her evidence of indebt edness issued by any
corporat ion (including one issued by a government or polit ical subdivision t hereof ), wit h int erest
coupons or in regist ered f orm, any loss result ing f rom such sale shall not be subject t o t he f oregoing
limit at ion and shall not be included in det ermining t he applicabilit y of such limit at ion t o ot her losses.
(D) Net Capital Loss Carry-over. If any t axpayer, ot her t han a corporat ion, sust ains in any t axable
year a net capit al loss, such loss (in an amount not in excess of t he net income f or such year) shall be
t reat ed in t he succeeding t axable year as a loss f rom t he sale or exchange of a capit al asset held f or
not more t han t welve (12) mont hs.
(E) Retirement of Bonds, Etc. For purposes of t his T it le, amount s received by t he holder upon t he
ret irement of bonds, debent ures, not es or cert if icat es or ot her evidences of indebt edness issued by
any corporat ion (including t hose issued by a government or polit ical subdivision t hereof ) wit h int erest
coupons or in regist ered f orm, shall be considered as amount s received in exchange t heref or.
(F) Gains or losses from Short Sales, Etc. For purposes of t his T it le (1) Gains or losses f rom short sales of propert y shall be considered as gains or losses f rom sales or
exchanges of capit al asset s; and
(2) Gains or losses at t ribut able t o t he f ailure t o exercise privileges or opt ions t o buy or sell propert y
shall be considered as capit al gains or losses.
Section 40. Determination of Amount and Recognition of Gain or Loss. (A) Computation of Gain or Loss. T he gain f rom t he sale or ot her disposit ion of propert y shall be t he
excess of t he amount realized t heref rom over t he basis or adjust ed basis f or det ermining gain, and
t he loss shall be t he excess of t he basis or adjust ed basis f or det ermining loss over t he amount
realized. T he amount realized f rom t he sale or ot her disposit ion of propert y shall be t he sum of
money received plus t he f air market value of t he propert y (ot her t han money) received;
(B) Basis for Determining Gain or Loss from Sale or Disposition of Property. T he basis of propert y shall
be (1) T he cost t hereof in t he case of propert y acquired on or af t er March 1, 1913, if such propert y was
acquired by purchase; or
(2) T he f air market price or value as of t he dat e of acquisit ion, if t he same was acquired by
inherit ance; or
(3) If t he propert y was acquired by gif t , t he basis shall be t he same as if it would be in t he hands of
t he donor or t he last preceding owner by whom it was not acquired by gif t , except t hat if such basis is
great er t han t he f air market value of t he propert y at t he t ime of t he gif t t hen, f or t he purpose of
det ermining loss, t he basis shall be such f air market value; or
(4) If t he propert y was acquired f or less t han an adequat e considerat ion in money or moneys wort h,
t he basis of such propert y is t he amount paid by t he t ransf eree f or t he propert y; or
(5) T he basis as def ined in paragraph (C)(5) of t his Sect ion, if t he propert y was acquired in a
t ransact ion where gain or loss is not recognized under paragraph (C)(2) of t his Sect ion.
(C) Exchange of Property. (1) General Rule. Except as herein provided, upon t he sale or exchange or propert y, t he ent ire
amount of t he gain or loss, as t he case may be, shall be recognized.
(2) Exception. No gain or loss shall be recognized if in pursuance of a plan of merger or consolidat ion
(a) A corporat ion, which is a part y t o a merger or consolidat ion, exchanges propert y solely f or st ock in
a corporat ion, which is a part y t o t he merger or consolidat ion; or
(b) A shareholder exchanges st ock in a corporat ion, which is a part y t o t he merger or consolidat ion,
solely f or t he st ock of anot her corporat ion also a part y t o t he merger or consolidat ion; or
(c) A securit y holder of a corporat ion, which is a part y t o t he merger or consolidat ion, exchanges his
securit ies in such corporat ion, solely f or st ock or securit ies in such corporat ion, a part y t o t he merger
or consolidat ion.
No gain or loss shall also be recognized if propert y is t ransf erred t o a corporat ion by a person in
exchange f or st ock or unit of part icipat ion in such a corporat ion of which as a result of such exchange
said person, alone or t oget her wit h ot hers, not exceeding f our (4) persons, gains cont rol of said
corporat ion: Provided, T hat st ocks issued f or services shall not be considered as issued in ret urn f or
propert y.
(3) Exchange Not Solely in Kind. (a) If , in connect ion wit h an exchange described in t he above except ions, an individual, a shareholder,
a securit y holder or a corporat ion receives not only st ock or securit ies permit t ed t o be received
wit hout t he recognit ion of gain or loss, but also money and/or propert y, t he gain, if any, but not t he
loss, shall be recognized but in an amount not in excess of t he sum of t he money and f air market
value of such ot her propert y received: Provided, T hat as t o t he shareholder, if t he money and/or
ot her propert y received has t he ef f ect of a dist ribut ion of a t axable dividend, t here shall be t axed as
dividend t o t he shareholder an amount of t he gain recognized not in excess of his proport ionat e
share of t he undist ribut ed earnings and prof it s of t he corporat ion; t he remainder, if any, of t he gain
recognized shall be t reat ed as a capit al gain.
(b) If , in connect ion wit h t he exchange described in t he above except ions, t he t ransf eror corporat ion
receives not only st ock permit t ed t o be received wit hout t he recognit ion of gain or loss but also
money and/or ot her propert y, t hen (i) if t he corporat ion receiving such money and/or ot her propert y
dist ribut es it in pursuance of t he plan of merger or consolidat ion, no gain t o t he corporat ion shall be
recognized f rom t he exchange, but (ii) if t he corporat ion receiving such ot her propert y and/or money
does not dist ribut e it in pursuance of t he plan of merger or consolidat ion, t he gain, if any, but not t he
loss t o t he corporat ion shall be recognized but in an amount not in excess of t he sum of such money
and t he f air market value of such ot her propert y so received, which is not dist ribut ed.
(4) Assumption of Liability. (a) If t he t axpayer, in connect ion wit h t he exchanges described in t he f oregoing except ions, receives
st ock or securit ies which would be permit t ed t o be received wit hout t he recognit ion of t he gain if it
were t he sole considerat ion, and as part of t he considerat ion, anot her part y t o t he exchange
assumes a liabilit y of t he t axpayer, or acquires f rom t he t axpayer propert y, subject t o a liabilit y, t hen
such assumpt ion or acquisit ion shall not be t reat ed as money and/or ot her propert y, and shall not
prevent t he exchange f rom being wit hin t he except ions.
(b) If t he amount of t he liabilit ies assumed plus t he amount of t he liabilit ies t o which t he propert y is
subject exceed t he t ot al of t he adjust ed basis of t he propert y t ransf erred pursuant t o such
exchange, t hen such excess shall be considered as a gain f rom t he sale or exchange of a capit al
asset or of propert y which is not a capit al asset , as t he case may be.1avvphil.et
(5) Basis (a) T he basis of t he st ock or securit ies received by t he t ransf eror upon t he exchange specif ied in t he
above except ion shall be t he same as t he basis of t he propert y, st ock or securit ies exchanged,
decreased by (1) t he money received, and (2) t he f air market value of t he ot her propert y received,
and increased by (a) t he amount t reat ed as dividend of t he shareholder and (b) t he amount of any
gain t hat was recognized on t he exchange: Provided, T hat t he propert y received as boot shall have
as basis it s f air market value: Provided, f urt her, T hat if as part of t he considerat ion t o t he t ransf eror,
t he t ransf eree of propert y assumes a liabilit y of t he t ransf eror or acquires f orm t he lat t er propert y
subject t o a liabilit y, such assumpt ion or acquisit ion (in t he amount of t he liabilit y) shall, f or purposes
of t his paragraph, be t reat ed as money received by t he t ransf eror on t he exchange: Provided, f inally,
T hat if t he t ransf eror receives several kinds of st ock or securit ies, t he Commissioner is hereby
aut horized t o allocat e t he basis among t he several classes of st ocks or securit ies.
(b) T he basis of t he propert y t ransf erred in t he hands of t he t ransf eree shall be t he same as it would
be in t he hands of t he t ransf eror increased by t he amount of t he gain recognized t o t he t ransf eror on
t he t ransf er.
(6) Definitions. (a) T he t erm securit ies means bonds and debent ures but not not es of what ever class or durat ion.
(b) T he t erm merger or consolidat ion, when used in t his Sect ion, shall be underst ood t o mean: (i) t he
ordinary merger or consolidat ion, or (ii) t he acquisit ion by one corporat ion of all or subst ant ially all t he
propert ies of anot her corporat ion solely f or st ock: Provided, T hat f or a t ransact ion t o be regarded as
a merger or consolidat ion wit hin t he purview of t his Sect ion, it must be undert aken f or a bona f ide
business purpose and not solely f or t he purpose of escaping t he burden of t axat ion: Provided,
f urt her, T hat in det ermining whet her a bona f ide business purpose exist s, each and every st ep of t he
t ransact ion shall be considered and t he whole t ransact ion or series of t ransact ion shall be t reat ed as
a single unit : Provided, f inally, T hat in det ermining whet her t he propert y t ransf erred const it ut es a
subst ant ial port ion of t he propert y of t he t ransf eror, t he t erm propert y shall be t aken t o include t he
cash asset s of t he t ransf eror.
(c) T he3t erm cont rol, when used in t his Sect ion, shall mean ownership of st ocks in a corporat ion
possessing at least f if t y-one percent (51%) of t he t ot al vot ing power of all classes of st ocks ent it led
t o vot e.
(d) T he Secret ary of Finance, upon recommendat ion of t he Commissioner, is hereby aut horized t o
issue rules and regulat ions f or t he purpose subst ant ially all and f or t he proper implement at ion of t his
Sect ion.
Section 41. Inventories. whenever in t he judgment of t he Commissioner, t he use of invent ories is
necessary in order t o det ermine clearly t he income of any t axpayer, invent ories shall be t aken by
such t axpayer upon such basis as t he Secret ary of Finance, upon recommendat ion of t he
Commissioner, may, by rules and regulat ions, prescribe as conf orming as nearly as may be t o t he
best account ing pract ice in t he t rade or business and as most clearly ref lect ing t he income.
If a t axpayer, af t er having complied wit h t he t erms and a condit ions prescribed by t he Commissioner,
uses a part icular met hod of valuing it s invent ory f or any t axable year, t hen such met hod shall be used
in all subsequent t axable years unless:
(i) wit h t he approval of t he Commissioner, a change t o a dif f erent met hod is aut horized; or
(ii) t he Commissioner f inds t hat t he nat ure o t he st ock on hand (e.g., it s scarcit y, liquidit y,
market abilit y and price movement s) is such t hat invent ory gains should be considered realized f or t ax
purposes and, t heref ore, it is necessary t o modif y t he valuat ion met hod f or purposes of ascert aining
t he income, prof it s, or loss in a move realist ic manner: Provided, however, T hat t he Commissioner
shall not exercise his aut horit y t o require a change in invent ory met hod more of t en t han once every
t hree (3 years: Provided, f urt her, T hat any change in an invent ory valuat ion met hod must be subject
t o approval by t he Secret ary of Finance.
Section 42. Income from Sources Within the Philippines.-
(A) Gross Income From Sources Within the Philippines. T he f ollowing it ems of gross income shall be
t reat ed as gross income f rom sources wit hin t he Philippines:
(1) Interests. Int erest s derived f rom sources wit hin t he Philippines, and int erest s on bonds, not es or
ot her int erest -bearing obligat ion of resident s, corporat e or ot herwise;
(2) Dividends. T he amount received as dividends:
(a) f rom a domest ic corporat ion; and
(b) f rom a f oreign corporat ion, unless less t han f if t y percent (50%) of t he gross income of such
f oreign corporat ion f or t he t hree-year period ending wit h t he close of it s t axable year preceding t he
declarat ion of such dividends or f or such part of such period as t he corporat ion has been in
exist ence) was derived f rom sources wit hin t he Philippines as det ermined under t he provisions of t his
Sect ion; but only in an amount which bears t he same rat ion t o such dividends as t he gross income of
t he corporat ion f or such period derived f rom sources wit hin t he Philippines bears t o it s gross income
f rom all sources.
(3) Services. Compensat ion f or labor or personal services perf ormed in t he Philippines;
(4) Rentals and royalties. Rent als and royalt ies f rom propert y locat ed in t he Philippines or f rom any
int erest in such propert y, including rent als or royalt ies f or (a) T he use of or t he right or privilege t o use in t he Philippines any copyright , pat ent , design or model,
plan, secret f ormula or process, goodwill, t rademark, t rade brand or ot her like propert y or right ;
(b) T he use of , or t he right t o use in t he Philippines any indust rial, commercial or scient if ic equipment ;
(c) T he supply of scient if ic, t echnical, indust rial or commercial knowledge or inf ormat ion;
(d) T he supply of any assist ance t hat is ancillary and subsidiary t o, and is f urnished as a means of
enabling t he applicat ion or enjoyment of , any such propert y or right as is ment ioned in paragraph (a),
any such equipment as is ment ioned in paragraph (b) or any such knowledge or inf ormat ion as is
ment ioned in paragraph (c);1avvphil.et
(e) T he supply of services by a nonresident person or his employee in connect ion wit h t he use of
propert y or right s belonging t o, or t he inst allat ion or operat ion of any brand, machinery or ot her
apparat us purchased f rom such nonresident person;
(f ) T echnical advice, assist ance or services rendered in connect ion wit h t echnical management or
administ rat ion of any scient if ic, indust rial or commercial undert aking, vent ure, project or scheme; and
(g) T he use of or t he right t o use:
(i) Mot ion pict ure f ilms;
(ii) Films or video t apes f or use in connect ion wit h t elevision; and
(iii) T apes f or use in connect ion wit h radio broadcast ing.
(5) Sale of Real Property. gains, prof it s and income f rom t he sale of real propert y locat ed in t he
Philippines; and
(6) Sale of Personal Property. gains; prof it s and income f rom t he sale of personal propert y, as
det ermined in Subsect ion (E) of t his Sect ion.
(B) Taxable Income From Sources Within the Philippines. (1) General Rule. From t he it ems of gross income specif ied in Subsect ion (A) of t his Sect ion, t here
shall be deduct ed t he expenses, losses and ot her deduct ions properly allocat ed t heret o and a
rat able part of expenses, int erest s, losses and ot her deduct ions ef f ect ively connect ed wit h t he
business or t rade conduct ed exclusively wit hin t he Philippines which cannot def init ely be allocat ed t o
some it ems or class of gross income: Provided, T hat such it ems of deduct ions shall be allowed only if
f ully subst ant iat ed by all t he inf ormat ion necessary f or it s calculat ion. T he remainder, if any, shall be
t reat ed in f ull as t axable income f rom sources wit hin t he Philippines.
(2) Exception. No deduct ions f or int erest paid or incurred abroad shall be allowed f rom t he it em of
gross income specif ied in subsect ion (A) unless indebt edness was act ually incurred t o provide f unds
f or use in connect ion wit h t he conduct or operat ion of t rade or business in t he Philippines.
(C) Gross Income From Sources Without the Philippines. T he f ollowing it ems of gross income shall be
t reat ed as income f rom sources wit hout t he Philippines:
(1) Int erest s ot her t han t hose derived f rom sources wit hin t he Philippines as provided in paragraph (1)
of Subsect ion (A) of t his Sect ion;
(2) Dividends ot her t han t hose derived f rom sources wit hin t he Philippines as provided in paragraph
(2) of Subsect ion (A) of t his Sect ion;
(3) Compensat ion f or labor or personal services perf ormed wit hout t he Philippines;
(4) Rent als or royalt ies f rom propert y locat ed wit hout t he Philippines or f rom any int erest in such
propert y including rent als or royalt ies f or t he use of or f or t he privilege of using wit hout t he
Philippines, pat ent s, copyright s, secret processes and f ormulas, goodwill, t rademarks, t rade brands,
f ranchises and ot her like propert ies; and
(5) Gains, prof it s and income f rom t he sale of real propert y locat ed wit hout t he Philippines.
(D) Taxable Income From Sources Without the Philippines. From t he it ems of gross income specif ied in
Subsect ion (C) of t his Sect ion t here shall be deduct ed t he expenses, losses, and ot her deduct ions
properly apport ioned or allocat ed t heret o and a rat able part of any expense, loss or ot her deduct ion
which cannot def init ely be allocat ed t o some it ems or classes of gross income. T he remainder, if any,
shall be t reat ed in f ull as t axable income f rom sources wit hout t he Philippines.
(E) Income From Sources Partly Within and Partly Without the Philippines.- It ems of gross income,
expenses, losses and deduct ions, ot her t han t hose specif ied in Subsect ions (A) and (C) of t his
Sect ion, shall be allocat ed or apport ioned t o sources wit hin or wit hout t he Philippines, under t he rules
and regulat ions prescribed by t he Secret ary of Finance, upon recommendat ion of t he Commissioner.
Where it ems of gross income are separat ely allocat ed t o sources wit hin t he Philippines, t here shall be
deduct ed (f or t he purpose of comput ing t he t axable income t heref rom) t he expenses, losses and
ot her deduct ions properly apport ioned or allocat ed t heret o and a rat able part of ot her expenses,
losses or ot her deduct ions which cannot def init ely be allocat ed t o some it ems or classes of gross
income. T he remainder, if any, shall be included in f ull as t axable income f rom sources wit hin t he
Philippines. In t he case of gross income derived f rom sources part ly wit hin and part ly wit hout t he
Philippines, t he t axable income may f irst be comput ed by deduct ing t he expenses, losses or ot her
deduct ions apport ioned or allocat ed t heret o and a rat able part of any expense, loss or ot her
deduct ion which cannot def init ely be allocat ed t o some it ems or classes of gross income; and t he
port ion of such t axable income at t ribut able t o sources wit hin t he Philippines may be det ermined by
processes or f ormulas of general apport ionment prescribed by t he Secret ary of Finance. Gains,
prof it s and income f rom t he sale of personal propert y produced (in whole or in part ) by t he t axpayer
wit hin and sold wit hout t he Philippines, or produced (in whole or in part ) by t he t axpayer wit hout and
sold wit hin t he Philippines, shall be t reat ed as derived part ly f rom sources wit hin and part ly f rom
sources wit hout t he Philippines.
Gains, prof it s and income derived f rom t he purchase of personal propert y wit hin and it s sale wit hout
t he Philippines, or f rom t he purchase of personal propert y wit hout and it s sale wit hin t he Philippines
shall be t reat ed as derived ent irely f orm sources wit hin t he count ry in which sold: Provided, however,
T hat gain f rom t he sale of shares of st ock in a domest ic corporat ion shall be t reat ed as derived
ent irely f orm sources wit hin t he Philippines regardless of where t he said shares are sold. T he t ransf er
by a nonresident alien or a f oreign corporat ion t o anyone of any share of st ock issued by a domest ic
corporat ion shall not be ef f ect ed or made in it s book unless: (1) t he t ransf eror has f iled wit h t he
Commissioner a bond condit ioned upon t he f ut ure payment by him of any income t ax t hat may be
due on t he gains derived f rom such t ransf er, or (2) t he Commissioner has cert if ied t hat t he t axes, if
any, imposed in t his T it le and due on t he gain realized f rom such sale or t ransf er have been paid. It
shall be t he dut y of t he t ransf eror and t he corporat ion t he shares of which are sold or t ransf erred, t o
advise t he t ransf eree of t his requirement .
(F) Definitions. As used in t his Sect ion t he words sale or sold include exchange or exchanged;
and t he word produced includes creat ed, f abricat ed, manuf act ured, ext ract ed, processed,
cured or aged.
CHAPT ER VIII ACCOUNT ING PERIODS AND MET HODS OF ACCOUNT ING
Section 43. General Rule. T he t axable income shall be comput ed upon t he basis of t he t axpayers
annual account ing period (f iscal year or calendar year, as t he case may be) in accordance wit h t he
met hod of account ing regularly employed in keeping t he books of such t axpayer, but if no such
met hod of account ing has been so employed, or if t he met hod employed does not clearly ref lect t he
income, t he comput at ion shall be made in accordance wit h such met hod as in t he opinion of t he
Commissioner clearly ref lect s t he income. If t he t axpayers annual account ing period is ot her t han a
f iscal year, as def ined in Sect ion 22(Q), or if t he t axpayer has no annual account ing period, or does
not keep books, or if t he t axpayer is an individual, t he t axable income shall be comput ed on t he basis
of t he calendar year.
Section 44. Period in which Items of Gross Income Included. T he amount of all it ems of gross income
shall be included in t he gross income f or t he t axable year in which received by t he t axpayer, unless,
under met hods of account ing permit t ed under Sect ion 43, any such amount s are t o be properly
account ed f or as of a dif f erent period. In t he case of t he deat h of a t axpayer, t here shall be included
in comput ing t axable income f or t he t axable period in which f alls t he dat e of his deat h, amount s
accrued up t o t he dat e of his deat h if not ot herwise properly includible in respect of such period or a
prior period.
Section 45. Period for which Deductions and Credits Taken. T he deduct ions provided f or in t his T it le
shall be t aken f or t he t axable year in which paid or accrued or paid or incurred, dependent upon t he
met hod of account ing t he basis of which t he net income is comput ed, unless in order t o clearly ref lect
t he income, t he deduct ions should be t aken as of a dif f erent period. In t he case of t he deat h of a
t axpayer, t here shall be allowed as deduct ions f or t he t axable period in which f alls t he dat e of his
deat h, amount s accrued up t o t he dat e of his deat h if not ot herwise properly allowable in respect of
such period or a prior period.
Section 46. Change of Accounting Period. If a t axpayer, ot her t han an individual, changes his
account ing period f rom f iscal year t o calendar year, f rom calendar year t o f iscal year, or f rom one
f iscal year t o anot her, t he net income shall, wit h t he approval of t he Commissioner, be comput ed on
t he basis of such new account ing period, subject t o t he provisions of Sect ion 47.
Section 47. Final or Adjustment Returns for a Period of Less than Twelve (12) Months.
(A) Returns for Short Period Resulting from Change of Accounting Period. If a t axpayer, ot her t han an
individual, wit h t he approval of t he Commissioner, changes t he basis of comput ing net income f rom
f iscal year t o calendar year, a separat e f inal or adjust ment ret urn shall be made f or t he period
bet ween t he close of t he last f iscal year f or which ret urn was made and t he f ollowing December 31. If
t he change is f rom calendar year t o f iscal year, a separat e f inal or adjust ment ret urn shall be made
f or t he period bet ween t he close of t he last calendar year f or which ret urn was made and t he dat e
designat ed as t he close of t he f iscal year. If t he change is f rom one f iscal year t o anot her f iscal year,
a separat e f inal or adjust ment ret urn shall be made f or t he period bet ween t he close of t he f ormer
f iscal year and t he dat e designat ed as t he close of t he new f iscal year.

(B) Income Computed on Basis of Short Period. Where a separat e f inal or adjust ment ret urn is made
under Subsect ion (A) on account of a change in t he account ing period, and in all ot her cases where a
separat e f inal or adjust ment ret urn is required or permit t ed by rules and regulat ions prescribed by t he
Secret ary of Finance, upon recommendat ion of t he Commissioner, t o be made f or a f ract ional part of
a year, t hen t he income shall be comput ed on t he basis of t he period f or which separat e f inal or
adjust ment ret urn is made.
Section 48. Accounting for Long-term Contracts. Income f rom long-t erm cont ract s shall be report ed
f or t ax purposes in t he manner as provided in t his Sect ion. As used herein, t he t erm long-t erm
cont ract s means building, inst allat ion or const ruct ion cont ract s covering a period in excess of one (1)
year. Persons whose gross income is derived in whole or in part f rom such cont ract s shall report such
income upon t he basis of percent age of complet ion. T he ret urn should be accompanied by a ret urn
cert if icat e of archit ect s or engineers showing t he percent age of complet ion during t he t axable year
of t he ent ire work perf ormed under cont ract . T here should be deduct ed f rom such gross income all
expendit ures made during t he t axable year on account of t he cont ract , account being t aken of t he
mat erial and supplies on hand at t he beginning and end of t he t axable period f or use in connect ion
wit h t he work under t he cont ract but not yet so applied. If upon complet ion of a cont ract , it is f ound
t hat t he t axable net income arising t hereunder has not been clearly ref lect ed f or any year or years,
t he Commissioner may permit or require an amended ret urn.
Section 49. Installment Basis. (A) Sales of Dealers in Personal Property. Under rules and regulat ions prescribed by t he Secret ary of
Finance, upon recommendat ion of t he Commissioner, a person who regularly sells or ot herwise
disposes of personal propert y on t he inst allment plan may ret urn as income t heref rom in any t axable
year t hat proport ion of t he inst allment payment s act ually received in t hat year, which t he gross prof it
realized or t o be realized when payment is complet ed, bears t o t he t ot al cont ract price.
(B) Sales of Realty and Casual Sales of Personality. In t he case (1) of a casual sale or ot her casual
disposit ion of personal propert y (ot her t han propert y of a kind which would properly be included in t he
invent ory of t he t axpayer if on hand at t he close of t he t axable year), f or a price exceeding One
t housand pesos (P1,000), or (2) of a sale or ot her disposit ion of real propert y, if in eit her case t he
init ial payment s do not exceed t went y-f ive percent (25%) of t he selling price, t he income may, under
t he rules and regulat ions prescribed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner, be ret urned on t he basis and in t he manner above prescribed in t his Sect ion. As used
in t his Sect ion, t he t erm init ial payment s means t he payment s received in cash or propert y ot her
t han evidences of indebt edness of t he purchaser during t he t axable period in which t he sale or ot her
disposit ion is made.
(C) Sales of Real Property Considered as Capital Asset by Individuals. An individual who sells or
disposes of real propert y, considered as capit al asset , and is ot herwise qualif ied t o report t he gain
t heref rom under Subsect ion (B) may pay t he capit al gains t ax in inst allment s under rules and
regulat ions t o be promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner.
(D) Change from Accrual to Installment Basis. If a t axpayer ent it led t o t he benef it s of Subsect ion (A)
elect s f or any t axable year t o report his t axable income on t he inst allment basis, t hen in comput ing
his income f or t he year of change or any subsequent year, amount s act ually received during any such
year on account of sales or ot her disposit ions of propert y made in any prior year shall not be
excluded.
Section 50. Allocation of Income and Deductions. In t he case of t wo or more organizat ions, t rades or
businesses (whet her or not incorporat ed and whet her or not organized in t he Philippines) owned or
cont rolled direct ly or indirect ly by t he same int erest s, t he Commissioner is aut horized t o dist ribut e,
apport ion or allocat e gross income or deduct ions bet ween or among such organizat ion, t rade or
business, if he det ermined t hat such dist ribut ion, apport ionment or allocat ion is necessary in order t o
prevent evasion of t axes or clearly t o ref lect t he income of any such organizat ion, t rade or business.
CHAPT ER IX RET URNS AND PAYMENT OF T AX
Section 51. Individual Return. (A) Requirements. (1) Except as provided in paragraph (2) of t his Subsect ion, t he f ollowing individuals are required t o f ile
an income t ax ret urn:
(a) Every Filipino cit izen residing in t he Philippines;
(b) Every Filipino cit izen residing out side t he Philippines, on his income f rom sources wit hin t he
Philippines;
(c) Every alien residing in t he Philippines, on income derived f rom sources wit hin t he Philippines; and
(d) Every nonresident alien engaged in t rade or business or in t he exercise of prof ession in t he
Philippines.
(2) T he f ollowing individuals shall not be required t o f ile an income t ax ret urn;
(a) An individual whose gross income does not exceed his t ot al personal and addit ional exempt ions
f or dependent s under Sect ion 35: Provided, T hat a cit izen of t he Philippines and any alien individual
engaged in business or pract ice of prof ession wit hin t he Philippine shall f ile an income t ax ret urn,
regardless of t he amount of gross income;
(b) An individual wit h respect t o pure compensat ion income, as def ined in Sect ion 32 (A)(1), derived
f rom sources wit hin t he Philippines, t he income t ax on which has been correct ly wit hheld under t he
provisions of Sect ion 79 of t his Code: Provided, T hat an individual deriving compensat ion concurrent ly
f rom t wo or more employers at any t ime during t he t axable year shall f ile an income t ax ret urn:
Provided, f urt her, T hat an individual whose compensat ion income derived f rom sources wit hin t he
Philippines exceeds Sixt y t housand pesos (P60,000) shall also f ile an income t ax ret urn;
(c) An individual whose sole income has been subject ed t o f inal wit hholding t ax pursuant t o Sect ion
57(A) of t his Code; and
(d) An individual who is exempt f rom income t ax pursuant t o t he provisions of t his Code and ot her
laws, general or special.
(3) T he f orgoing not wit hst anding, any individual not required t o f ile an income t ax ret urn may
nevert heless be required t o f ile an inf ormat ion ret urn pursuant t o rules and regulat ions prescribed by
t he Secret ary of Finance, upon recommendat ion of t he Commissioner.
(4) T he income t ax ret urn shall be f iled in duplicat e by t he f ollowing persons:
(a) A resident cit izen on his income f rom all sources;
(b) A nonresident cit izen on his income derived f rom sources wit hin t he Philippines;
(c) A resident alien on his income derived f rom sources wit hin t he Philippines; and
(d) A nonresident alien engaged in t rade or business in t he Philippines- on his income derived f rom
sources wit hin t he Philippines.
(B) Where to File. Except in cases where t he Commissioner ot herwise permit s, t he ret urn shall be
f iled wit h an aut horized agent bank, Revenue Dist rict Of f icer, Collect ion Agent or duly aut horized
T reasurer of t he cit y or municipalit y in which such person has his legal residence or principal place of
business in t he Philippines, or if t here be no legal residence or place of business in t he Philippines, wit h
t he Of f ice of t he Commissioner.
(C) When to File. (1) T he ret urn of any individual specif ied above shall be f iled on or bef ore t he f if t eent h (15t h) day of
April of each year covering income f or t he preceding t axable year.
(2) Individuals subject t o t ax on capit al gains;
(a) From t he sale or exchange of shares of st ock not t raded t hru a local st ock exchange as
prescribed under Sect ion 24(c) shall f ile a ret urn wit hin t hirt y (30) days af t er each t ransact ion and a
f inal consolidat ed ret urn on or bef ore April 15 of each year covering all st ock t ransact ions of t he
preceding t axable year; and
(b) From t he sale or disposit ion of real propert y under Sect ion 24(D) shall f ile a ret urn wit hin t hirt y (30)
days f ollowing each sale or ot her disposit ion.
(D) Husband and Wife. Married individuals, whet her cit izens, resident or nonresident aliens, who do
not derive income purely f rom compensat ion, shall f ile a ret urn f or t he t axable year t o include t he
income of bot h spouses, but where it is impract icable f or t he spouses t o f ile one ret urn, each spouse
may f ile a separat e ret urn of income but t he ret urns so f iled shall be consolidat ed by t he Bureau f or
purposes of verif icat ion f or t he t axable year.
(E) Return of Parent to Include Income of Children. T he income of unmarried minors derived f rom
properly received f rom a living parent shall be included in t he ret urn of t he parent , except (1) when t he
donors t ax has been paid on such propert y, or (2) when t he t ransf er of such propert y is exempt f rom
donors t ax.
(F) Persons Under Disability. If t he t axpayer is unable t o make his own ret urn, t he ret urn may be
made by his duly aut horized agent or represent at ive or by t he guardian or ot her person charged wit h
t he care of his person or propert y, t he principal and his represent at ive or guardian assuming t he
responsibilit y of making t he ret urn and incurring penalt ies provided f or erroneous, f alse or f raudulent
ret urns.
(G) Signature Presumed Correct. T he f act t hat an individuals name is signed t o a f iled ret urn shall be
prima f acie evidence f or all purposes t hat t he ret urn was act ually signed by him.
Section 52. Corporation Returns. (A) Requirements. Every corporat ion subject t o t he t ax herein imposed, except f oreign corporat ions
not engaged in t rade or business in t he Philippines, shall render, in duplicat e, a t rue and accurat e
quart erly income t ax ret urn and f inal or adjust ment ret urn in accordance wit h t he provisions of
Chapt er XII of t his T it le. T he ret urn shall be f iled by t he president , vice-president or ot her principal
of f icer, and shall be sworn t o by such of f icer and by t he t reasurer or assist ant t reasurer.
(B) Taxable Year of Corporation. A corporat ion may employ eit her calendar year or f iscal year as a
basis f or f iling it s annual income t ax ret urn: Provided, T hat t he corporat ion shall not change t he
account ing period employed wit hout prior approval f rom t he Commissioner in accordance wit h t he
provisions of Sect ion 47 of t his Code.
(C) Return of Corporation Contemplating Dissolution or Reorganization. Every corporat ion shall, wit hin
t hirt y (30) days af t er t he adopt ion by t he corporat ion of a resolut ion or plan f or it s dissolut ion, or f or
t he liquidat ion of t he whole or any part of it s capit al st ock, including a corporat ion which has been
not if ied of possible involunt ary dissolut ion by t he Securit ies and Exchange Commission, or f or it s
reorganizat ion, render a correct ret urn t o t he Commissioner, verif ied under oat h, set t ing f ort h t he
t erms of such resolut ion or plan and such ot her inf ormat ion as t he Secret ary of Finance, upon
recommendat ion of t he commissioner, shall, by rules and regulat ions, prescribe.

T he dissolving or reorganizing corporat ion shall, prior t o t he issuance by t he Securit ies and Exchange
Commission of t he Cert if icat e of Dissolut ion or Reorganizat ion, as may be def ined by rules and
regulat ions prescribed by t he Secret ary of Finance, upon recommendat ion of t he Commissioner,
secure a cert if icat e of t ax clearance f rom t he Bureau of Int ernal Revenue which cert if icat e shall be
submit t ed t o t he Securit ies and Exchange Commission.
(D) Return on Capital Gains Realized from Sale of Shares of Stock not Traded in the Local Stock Exchange.
Every corporat ion deriving capit al gains f rom t he sale or exchange of shares of st ock not t raded
t hru a local st ock exchange as prescribed under Sect ions 24 (c), 25 (A)(3), 27 (E)(2), 28(A)(8)(c) and 28
(B)(5)(c), shall f ile a ret urn wit hin t hirt y (30) days af t er each t ransact ions and a f inal consolidat ed
ret urn of all t ransact ions during t he t axable year on or bef ore t he f if t eent h (15t h) day of t he f ourt h
(4t h) mont h f ollowing t he close of t he t axable year.
Section 53. Extension of Time to File Returns. T he Commissioner may, in merit orious cases, grant a
reasonable ext ension of t ime f or f iling ret urns of income (or f inal and adjust ment ret urns in case of
corporat ions), subject t o t he provisions of Sect ion 56 of t his Code.
Section 54. Returns of Receivers, Trustees in Bankruptcy or Assignees. In cases wherein receivers,
t rust ees in bankrupt cy or assignees are operat ing t he propert y or business of a corporat ion, subject
t o t he t ax imposed by t his T it le, such receivers, t rust ees or assignees shall make ret urns of net
income as and f or such corporat ion, in t he same manner and f orm as such organizat ion is
hereinbef ore required t o make ret urns, and any t ax due on t he income as ret urned by receivers,
t rust ees or assignees shall be assessed and collect ed in t he same manner as if assessed direct ly
against t he organizat ions of whose businesses or propert ies t hey have cust ody or cont rol.
Section 55. Returns of General Professional Partnerships. Every general prof essional part nership shall
f ile, in duplicat e, a ret urn of it s income, except income exempt under Sect ion 32 (B) of t his T it le,
set t ing f ort h t he it ems of gross income and of deduct ions allowed by t his T it le, and t he names,
T axpayer Ident if icat ion Numbers (T IN), addresses and shares of each of t he part ners.
Section 56. Payment and Assessment of Income Tax for Individuals and Corporation. (A) Payment of T ax. (1) In General. T he t ot al amount of t ax imposed by t his T it le shall be paid by t he person subject
t heret o at t he t ime t he ret urn is f iled. In t he case of t ramp vessels, t he shipping agent s and/or t he
husbanding agent s, and in t heir absence, t he capt ains t hereof are required t o f ile t he ret urn herein
provided and pay t he t ax due t hereon bef ore t heir depart ure. Upon f ailure of t he said agent s or
capt ains t o f ile t he ret urn and pay t he t ax, t he Bureau of Cust oms is hereby aut horized t o hold t he
vessel and prevent it s depart ure unt il proof of payment of t he t ax is present ed or a suf f icient bond is
f iled t o answer f or t he t ax due.
(2) Installment of Payment. When t he t ax due is in excess of T wo t housand pesos (P2,000), t he
t axpayer ot her t han a corporat ion may elect t o pay t he t ax in t wo (2) equal inst allment s in which
case, t he f irst inst allment shall be paid at t he t ime t he ret urn is f iled and t he second inst allment , on or
bef ore July 15 f ollowing t he close of t he calendar year. If any inst allment is not paid on or bef ore t he
dat e f ixed f or it s payment , t he whole amount of t he t ax unpaid becomes due and payable, t oget her
wit h t he delinquency penalt ies.
(3) Payment of Capital Gains Tax. T he t ot al amount of t ax imposed and prescribed under Sect ion 24
(c), 24(D), 27(E)(2), 28(A)(8)(c) and 28(B)(5)(c) shall be paid on t he dat e t he ret urn prescribed t heref or
is f iled by t he person liable t heret o: Provided, T hat if t he seller submit s proof of his int ent ion t o avail
himself of t he benef it of exempt ion of capit al gains under exist ing special laws, no such payment s
shall be required : Provided, f urt her, T hat in case of f ailure t o qualif y f or exempt ion under such special
laws and implement ing rules and regulat ions, t he t ax due on t he gains realized f rom t he original
t ransact ion shall immediat ely become due and payable, subject t o t he penalt ies prescribed under
applicable provisions of t his Code: Provided, f inally, T hat if t he seller, having paid t he t ax, submit s
such proof of int ent wit hin six (6) mont hs f rom t he regist rat ion of t he document t ransf erring t he real
propert y, he shall be ent it led t o a ref und of such t ax upon verif icat ion of his compliance wit h t he
requirement s f or such exempt ion.
In case t he t axpayer elect s and is qualif ied t o report t he gain by inst allment s under Sect ion 49 of t his
Code, t he t ax due f rom each inst allment payment shall be paid wit hin (30) days f rom t he receipt of
such payment s.
No regist rat ion of any document t ransf erring real propert y shall be ef f ect ed by t he Regist er of Deeds
unless t he Commissioner or his duly aut horized represent at ive has cert if ied t hat such t ransf er has
been report ed, and t he t ax herein imposed, if any, has been paid.
(B) Assessment and Payment of Def iciency T ax. Af t er t he ret urn is f iled, t he Commissioner shall
examine it and assess t he correct amount of t he t ax. T he t ax or def iciency income t ax so discovered
shall be paid upon not ice and demand f rom t he Commissioner.
As used in t his Chapt er, in respect of a t ax imposed by t his T it le, t he t erm def iciency means:
(1) T he amount by which t he t ax imposed by t his T it le exceeds t he amount shown as t he t ax by t he
t axpayer upon his ret urn; but t he amount so shown on t he ret urn shall be increased by t he amount s
previously assessed (or collect ed wit hout assessment ) as a def iciency, and decreased by t he
amount previously abat ed, credit ed, ret urned or ot herwise repaid in respect of such t ax; or
(2) If no amount is shown as t he t ax by t he t axpayer upon t his ret urn, or if no ret urn is made by t he
t axpayer, t hen t he amount by which t he t ax exceeds t he amount s previously assessed (or collect ed
wit hout assessment ) as a def iciency; but such amount s previously assessed or collect ed wit hout
assessment shall f irst be decreased by t he amount s previously abat ed, credit ed ret urned or
ot herwise repaid in respect of such t ax.
Section 57. Withholding of Tax at Source. (A) Withholding of Final Tax on Certain Incomes. Subject t o rules and regulat ions t he Secret ary of
Finance may promulgat e, upon t he recommendat ion of t he Commissioner, requiring t he f iling of
income t ax ret urn by cert ain income payees, t he t ax imposed or prescribed by Sect ions 24(B)(1),
24(B)(2), 24(C), 24(D)(1); 25(A)(2), 25(A)(3), 25(B), 25(C), 25(D), 25(E), 27(D)(!), 27(D)(2), 27(D)(3),
27(D)(5), 28 (A)(4), 28(A)(5), 28(A)(7)(a), 28(A)(7)(b), 28(A)(7)(c), 28(B)(1), 28(B)(2), 28(B)(3), 28(B)(4),
28(B)(5)(a), 28(B)(5)(b), 28(B)(5)(c); 33; and 282 of t his Code on specif ied it ems of income shall be
wit hheld by payor-corporat ion and/or person and paid in t he same manner and subject t o t he same
condit ions as provided in Sect ion 58 of t his Code.
(B) Withholding of Creditable Tax at Source. T he Secret ary of Finance may, upon t he recommendat ion
of t he Commissioner, require t he wit hholding of a t ax on t he it ems of income payable t o nat ural or
juridical persons, residing in t he Philippines, by payor-corporat ion/persons as provided f or by law, at
t he rat e of not less t han one percent (1%) but not more t han t hirt y-t wo percent (32%) t hereof , which
shall be credit ed against t he income t ax liabilit y of t he t axpayer f or t he t axable year.
(C) Tax-free Covenant Bonds. In any case where bonds, mort gages, deeds of t rust or ot her similar
obligat ions of domest ic or resident f oreign corporat ions, cont ain a cont ract or provisions by which t he
obligor agrees t o pay any port ion of t he t ax imposed in t his T it le upon t he obligee or t o reimburse t he
obligee f or any port ion of t he t ax or t o pay t he int erest wit hout deduct ion f or any t ax which t he
obligor may be required or permit t ed t o pay t hereon or t o ret ain t heref rom under any law of t he
Philippines, or any st at e or count ry, t he obligor shall deduct bonds, mort gages, deeds of t rust or
ot her obligat ions, whet her t he int erest or ot her payment s are payable annually or at short er or longer
periods, and whet her t he bonds, securit ies or obligat ions had been or will be issued or market ed, and
t he int erest or ot her payment t hereon paid, wit hin or wit hout t he Philippines, if t he int erest or ot her
payment is payable t o a nonresident alien or t o a cit izen or resident of t he Philippines.
Section 58. Returns and Payment of Taxes Withheld at Source. (A) Quarterly Returns and Payments of Taxes Withheld. T axes deduct ed and wit hheld under Sect ion
57 by wit hholding agent s shall be covered by a ret urn and paid t o, except in cases where t he
Commissioner ot herwise permit s, an aut horized T reasurer of t he cit y or municipalit y where t he
wit hholding agent has his legal residence or principal place of business, or where t he wit hholding
agent is a corporat ion, where t he principal of f ice is locat ed.
T he t axes deduct ed and wit hheld by t he wit hholding agent shall be held as a special f und in t rust f or
t he government unt il paid t o t he collect ing of f icers.
T he ret urn f or f inal wit hholding t ax shall be f iled and t he payment made wit hin t went y-f ive (25) days
f rom t he close of each calendar quart er, while t he ret urn f or credit able wit hholding t axes shall be f iled
and t he payment made not lat er t han t he last day of t he mont h f ollowing t he close of t he quart er
during which wit hholding was made: Provided, T hat t he Commissioner, wit h t he approval of t he
Secret ary of Finance, may require t hese wit hholding agent s t o pay or deposit t he t axes deduct ed or
wit hheld at more f requent int ervals when necessary t o prot ect t he int erest of t he government .
(B) Statement of Income Payments Made and Taxes Withheld. Every wit hholding agent required t o
deduct and wit hhold t axes under Sect ion 57 shall f urnish each recipient , in respect t o his or it s
receipt s during t he calendar quart er or year, a writ t en st at ement showing t he income or ot her
payment s made by t he wit hholding agent during such quart er or year, and t he amount of t he t ax
deduct ed and wit hheld t heref rom, simult aneously upon payment at t he request of t he payee, but not
lat e t han t he t went iet h (20t h) day f ollowing t he close of t he quart er in t he case of corporat e payee,
or not lat er t han March 1 of t he f ollowing year in t he case of individual payee f or credit able
wit hholding t axes. For f inal wit hholding t axes, t he st at ement should be given t o t he payee on or
bef ore January 31 of t he succeeding year.
(C) Annual Information Return. Every wit hholding agent required t o deduct and wit hhold t axes under
Sect ion 57 shall submit t o t he Commissioner an annual inf ormat ion ret urn cont aining t he list of payees
and income payment s, amount of t axes wit hheld f rom each payee and such ot her pert inent
inf ormat ion as may be required by t he Commissioner. In t he case of f inal wit hholding t axes, t he ret urn
shall be f iled on or bef ore January 31 of t he succeeding year, and f or credit able wit hholding t axes,
not lat er t han March 1 of t he year f ollowing t he year f or which t he annual report is being submit t ed.
T his ret urn, if made and f iled in accordance wit h t he rules and regulat ions approved by t he Secret ary
of Finance, upon recommendat ion of t he Commissioner, shall be suf f icient compliance wit h t he
requirement s of Sect ion 68 of t his T it le in respect t o t he income payment s.
T he Commissioner may, by rules and regulat ions, grant t o any wit hholding agent a reasonable
ext ension of t ime t o f urnish and submit t he ret urn required in t his Subsect ion.
(D) Income of Recipient. Income upon which any credit able t ax is required t o be wit hheld at source
under Sect ion 57 shall be included in t he ret urn of it s recipient but t he excess of t he amount of t ax so
wit hheld over t he t ax due on his ret urn shall be ref unded t o him subject t o t he provisions of Sect ion
204; if t he income t ax collect ed at source is less t han t he t ax due on his ret urn, t he dif f erence shall be
paid in accordance wit h t he provisions of Sect ion 56.
All t axes wit hheld pursuant t o t he provisions of t his Code and it s implement ing rules and regulat ions
are hereby considered t rust f unds and shall be maint ained in a separat e account and not commingled
wit h any ot her f unds of t he wit hholding agent .
(E) Registration with Register of Deeds. No regist rat ion of any document t ransf erring real propert y
shall be ef f ect ed by t he Regist er of Deeds unless t he Commissioner or his duly aut horized
represent at ive has cert if ied t hat such t ransf er has been report ed, and t he capit al gains or credit able
wit hholding t ax, if any, has been paid: Provided, however, T hat t he inf ormat ion as may be required by
rules and regulat ions t o be prescribed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner, shall be annot at ed by t he Regist er of Deeds in t he T ransf er Cert if icat e of T it le or
Condominium Cert if icat e of T it le: Provided, f urt her, T hat in cases of t ransf er of propert y t o a
Condominium Cert if icat e of T it le: Provided, f urt her, T hat in cases of t ransf er of propert y t o a
corporat ion, pursuant t o a merger, consolidat ion or reorganizat ion, and where t he law allows def erred
recognit ion of income in accordance wit h Sect ion 40, t he inf ormat ion as may be required by rules and
Commissioner, shall be annot at ed by t he Regist er of Deeds at t he back of t he T ransf er Cert if icat e
of T it le or Condominium Cert if icat e of T it le of t he real propert y involved: Provided, f inally, T hat any
violat ion of t his provision by t he Regist er of Deeds shall be subject t o t he penalt ies imposed under
Sect ion 269 of t his Code.
Section 59. Tax on Profits Collectible from Owner or Other Persons. T he t ax imposed under t his T it le
upon gains, prof it s, and income not f alling under t he f oregoing and not ret urned and paid by virt ue of
t he f oregoing or as ot herwise provided by law shall be assessed by personal ret urn under rules and
Commissioner. T he int ent and purpose of t he T it le is t hat all gains, prof it s and income of a t axable
class, as def ined in t his T it le, shall be charged and assessed wit h t he corresponding t ax prescribed
by t his T it le, and said t ax shall be paid by t he owners of such gains, prof it s and income, or t he proper
person having t he receipt , cust ody, cont rol or disposal of t he same. For purposes of t his T it le,
ownership of such gains, prof it s and income or liabilit y t o pay t he t ax shall be det ermined as of t he
year f or which a ret urn is required t o be rendered.
CHAPT ER X EST AT ES AND T RUST S
Section 60. Imposition of Tax. (A) Application of Tax. T he t ax imposed by t his T it le upon individuals shall apply t o t he income of
est at es or of any kind of propert y held in t rust , including:
(1) Income accumulat ed in t rust f or t he benef it of unborn or unascert ained person or persons wit h
cont ingent int erest s, and income accumulat ed or held f or f ut ure dist ribut ion under t he t erms of t he
will or t rust ;
(2) Income which is t o be dist ribut ed current ly by t he f iduciary t o t he benef iciaries, and income
collect ed by a guardian of an inf ant which is t o be held or dist ribut ed as t he court may direct ;
(3) Income received by est at es of deceased persons during t he period of administ rat ion or
set t lement of t he est at e; and
(4) Income which, in t he discret ion of t he f iduciary, may be eit her dist ribut ed t o t he benef iciaries or
accumulat ed.
(B) Exception. T he t ax imposed by t his T it le shall not apply t o employees t rust which f orms part of
a pension, st ock bonus or prof it -sharing plan of an employer f or t he benef it of some or all of his
employees (1) if cont ribut ions are made t o t he t rust by such employer, or employees, or bot h f or t he
purpose of dist ribut ing t o such employees t he earnings and principal of t he f und accumulat ed by t he
t rust in accordance wit h such plan, and (2) if under t he t rust inst rument it is impossible, at any t ime
prior t o t he sat isf act ion of all liabilit ies wit h respect t o employees under t he t rust , f or any part of t he
corpus or income t o be (wit hin t he t axable year or t hereaf t er) used f or, or divert ed t o, purposes ot her
t han f or t he exclusive benef it of his employees: Provided, T hat any amount act ually dist ribut ed t o
any employee or dist ribut ee shall be t axable t o him in t he year in which so dist ribut ed t o t he ext ent
t hat it exceeds t he amount cont ribut ed by such employee or dist ribut ee.
(C) Computation and Payment. (1) In General. T he t ax shall be comput ed upon t he t axable income of t he est at e or t rust and shall
be paid by t he f iduciary, except as provided in Sect ion 63 (relat ing t o revocable t rust s) and Sect ion
64 (relat ing t o income f or t he benef it of t he grant or).
(2) Consolidation of Income of Two or More Trusts. Where, in t he case of t wo or more t rust s, t he
creat or of t he t rust in each inst ance is t he same person, and t he benef iciary in each inst ance is t he
same, t he t axable income of all t he t rust s shall be consolidat ed and t he t ax provided in t his Sect ion
comput ed on such consolidat ed income, and such proport ion of said t ax shall be assessed and
collect ed f rom each t rust ee which t he t axable income of t he t rust administ ered by him bears t o t he
consolidat ed income of t he several t rust s.
Section 61. Taxable Income. T he t axable income of t he est at e or t rust shall be comput ed in t he
same manner and on t he same basis as in t he case of an individual, except t hat :
(A) T here shall be allowed as a deduct ion in comput ing t he t axable income of t he est at e or t rust t he
amount of t he income of t he est at e or t rust f or t he t axable year which is t o be dist ribut ed current ly
by t he f iduciary t o t he benef iciaries, and t he amount of t he income collect ed by a guardian of an
inf ant which is t o be held or dist ribut ed as t he court may direct , but t he amount so allowed as a
deduct ion shall be included in comput ing t he t axable income of t he benef iciaries, whet her dist ribut ed
t o t hem or not . Any amount allowed as a deduct ion under t his Subsect ion shall not be allowed as a
deduct ion under Subsect ion (B) of t his Sect ion in t he same or any succeeding t axable year.
(B) In t he case of income received by est at es of deceased persons during t he period of
administ rat ion or set t lement of t he est at e, and in t he case of income which, in t he discret ion of t he
f iduciary, may be eit her dist ribut ed t o t he benef iciary or accumulat ed, t here shall be allowed as an
addit ional deduct ion in comput ing t he t axable income of t he est at e or t rust t he amount of t he income
of t he est at e or t rust f or it s t axable year, which is properly paid or credit ed during such year t o any
legat ee, heir or benef iciary but t he amount so allowed as a deduct ion shall be included in comput ing
t he t axable income of t he legat ee, heir or benef iciary.
(C) In t he case of a t rust administ ered in a f oreign count ry, t he deduct ions ment ioned in Subsect ions
(A) and (B) of t his Sect ion shall not be allowed: Provided, T hat t he amount of any income included in
t he ret urn of said t rust shall not be included in comput ing t he income of t he benef iciaries.
Section 62. Exemption Allowed to Estates and Trusts. For t he purpose of t he t ax provided f or in t his
T it le, t here shall be allowed an exempt ion of T went y t housand pesos (P20,000) f rom t he income of
t he est at e or t rust .
Section 63. Revocable trusts. Where at any t ime t he power t o revest in t he grant or t it le t o any part
of t he corpus of t he t rust is vest ed (1) in t he grant or eit her alone or in conjunct ion wit h any person not
having a subst ant ial adverse int erest in t he disposit ion of such part of t he corpus or t he income
t heref rom, or (2) in any person not having a subst ant ial adverse int erest in t he disposit ion of such
part of t he corpus or t he income t heref rom, t he income of such part of t he t rust shall be included in
comput ing t he t axable income of t he grant or.
Section 64. Income for Benefit of Grantor.(A) Where any part of t he income of a t rust (1) is, or in t he discret ion of t he grant or or of any person
not having a subst ant ial adverse int erest in t he disposit ion of such part of t he income may be held or
accumulat ed f or f ut ure dist ribut ion t o t he grant or, or (2) may, or in t he discret ion of t he grant or or of
any person not having a subst ant ial adverse int erest in t he disposit ion of such part of t he income, be
dist ribut ed t o t he grant or, or (3) is, or in t he discret ion of t he grant or or of any person not having a
subst ant ial adverse int erest in t he disposit ion of such part of t he income may be applied t o t he
payment of premiums upon policies of insurance on t he lif e of t he grant or, such part of t he income of
t he t rust shall be included in comput ing t he t axable income of t he grant or.
(B) As used in t his Sect ion, t he t erm in t he discret ion of t he grant or means in t he discret ion of t he
grant or, eit her alone or in conjunct ion wit h any person not having a subst ant ial adverse int erest in t he
disposit ion of t he part of t he income in quest ion.
Section 65. Fiduciary Returns. Guardians, t rust ees, execut ors, administ rat ors, receivers,
conservat ors and all persons or corporat ions, act ing in any f iduciary capacit y, shall render, in
duplicat e, a ret urn of t he income of t he person, t rust or est at e f or whom or which t hey act , and be
subject t o all t he provisions of t his T it le, which apply t o individuals in case such person, est at e or t rust
has a gross income of T went y t housand pesos (P20,000) or over during t he t axable year. Such
f iduciary or person f iling t he ret urn f or him or it , shall t ake oat h t hat he has suf f icient knowledge of t he
af f airs of such person, t rust or est at e t o enable him t o make such ret urn and t hat t he same is, t o t he
best of his knowledge and belief , t rue and correct , and be subject t o all t he provisions of t his T it le
which apply t o individuals: Provided, T hat a ret urn made by or f or one or t wo or more joint f iduciaries
f iled in t he province where such f iduciaries reside; under such rules and regulat ions as t he Secret ary
of Finance, upon recommendat ion of t he Commissioner, shall prescribe, shall be a suf f icient
compliance wit h t he requirement s of t his Sect ion.
Section 66. Fiduciaries Indemnified Against Claims for Taxes Paid. T rust ees, execut ors,
administ rat ors and ot her f iduciaries are indemnif ied against t he claims or demands of every
benef iciary f or all payment s of t axes which t hey shall be required t o make under t he provisions of t his
T it le, and t hey shall have credit f or t he amount of such payment s against t he benef iciary or principal
in any account ing which t hey make as such t rust ees or ot her f iduciaries.
CHAPT ER XI OT HER INCOME T AX REQUIREMENT S
Section 67. Collection of Foreign Payments. All persons, corporat ions, duly regist ered general copart nerships (companias colect ivas) undert aking f or prof it or ot herwise t he collect ion of f oreign
payment s of int erest s or dividends by means of coupons, checks or bills of exchange shall obt ain a
license f rom t he Commissioner, and shall be subject t o such rules and regulat ions enabling t he
government t o obt ain t he inf ormat ion required under t his T it le, as t he Secret ary of Finance, upon
recommendat ion of t he Commissioner, shall prescribe.
Section 68. Information at Source as to Income Payments. all persons, corporat ions or duly regist ered
co- part nerships (companias colect ivas), in what ever capacit y act ing, including lessees or mort gagors
of real or personal propert y, t rust ees, act ing in any t rust capacit y, execut ors, administ rat ors,
receivers, conservat ors and employees making payment t o anot her person, corporat ion or duly
regist ered general co-part nership (compania colect iva), of int erest s, rent s, salaries, wages,
premiums, annuit ies, compensat ions, remunerat ions, emolument s or ot her f ixed or det erminable
gains, prof it s and income, ot her t han payment described in Sect ion 69, in any t axable year, or in t he
case of such payment s made by t he Government of t he Philippines, t he of f icers or employees of t he
Government having inf ormat ion as t o such payment s and required t o make ret urns in regard t heret o,
are aut horized and required t o render a t rue and accurat e ret urn t o t he Commissioner, under such
rules and regulat ions, and in such f orm and manner as may be prescribed by t he Secret ary of
Finance, upon recommendat ion of t he Commissioner, set t ing f ort h t he amount of such gains, prof it s
and income and t he name and address of t he recipient of such payment s: Provided, T hat such
ret urns shall be required, in t he case of payment s of int erest upon bonds and mort gages or deeds of
t rust or ot her similar obligat ions of corporat ions, and in t he case of collect ions of it ems, not payable
in t he Philippines, of int erest upon t he bonds of f oreign count ries and int erest f rom t he bonds and
dividends f rom t he st ock of f oreign corporat ions by persons, corporat ions or duly regist ered general
co-part nerships (companias colect ivas), undert aking as a mat t er of business or f or prof it or
ot herwise t he collect ion of f oreign payment s of such int erest s or dividends by means of coupons or
bills of exchange.
Section 69. Return of Information of Brokers. Every person, corporat ion or duly regist ered general copart nership (compania colect iva), doing business as a broker in any exchange or board or ot her similar
place of business, shall, when required by t he Commissioner, render a correct ret urn duly verif ied
under oat h under such rules and regulat ions as t he Secret ary of Finance, upon recommendat ion of
t he Commissioner, may prescribe, showing t he names of cust omers f or whom such person,
corporat ion or duly regist ered general co-part nership (compania colect iva) has t ransact ed any
business, wit h such det ails as t o t he prof it s, losses or ot her inf ormat ion which t he Commissioner, may
require as t o each of such cust omers as will enable t he Commissioner t o det ermine whet her all
income t ax due on prof it s or gains of such cust omers has been paid.
Section 70. Returns of Foreign Corporations. -
(A) Requirements. Under rules and regulat ions prescribed by t he Secret ary of f inance, upon t he
recommendat ion of t he Commissioner, any at t orney, account ant , f iduciary, bank, t rust company,
f inancial inst it ut ion or ot her person, who aids, assist s, counsels or advises in, o wit h respect t o; t he
f ormat ion, organizat ion or reorganizat ion of any f oreign corporat ion, shall, wit hin t hirt y (30) days
t hereaf t er, f ile wit h t he Commissioner a ret urn.
(B) Form and Contents of Return. Such ret urn shall be in such f orm and shall set f ort h; under oat h, in
respect of each such corporat ion, t o t he f ull ext ent of t he inf ormat ion wit hin t he possession or
knowledge or under t he cont rol of t he person required t o f ile t he ret urn, such inf ormat ion as t he
Secret ary of Finance, upon recommendat ion of t he Commissioner, shall prescribe by rules and
regulat ions as necessary f or carrying out t he provisions of t his T it le. Not hing in t his Sect ion shall be
const rued t o require t he divulging of privileged communicat ions bet ween at t orney and client .
Section 71. Disposition of Income Tax Returns, Publication of Lists of Taxpayers and Filers. Af t er t he
assessment shall have been made, as provided in t his T it le, t he ret urns, t oget her wit h any
correct ions t hereof which may have been made by t he Commissioner, shall be f iled in t he Of f ice of
t he Commissioner and shall const it ut e public records and be open t o inspect ion as such upon t he
order of t he President of t he Philippines, under rules and regulat ions t o be prescribed by t he
Secret ary of Finance, upon recommendat ion of t he Commissioner.
T he Commissioner may, in each year, cause t o be prepared and published in any newspaper t he list s
cont aining t he names and addresses of persons who have f iled income t ax ret urns.
Section 72. Suit to Recover Tax Based on False or Fraudulent Returns. When an assessment is made
in case of any list , st at ement or ret urn, which in t he opinion of t he Commissioner was f alse or
f raudulent or cont ained any underst at ement or undervaluat ion, no t ax collect ed under such
assessment shall be recovered by any suit , unless it is proved t hat t he said list , st at ement or ret urn
was not f alse nor f raudulent and did not cont ain any underst at ement or undervaluat ion; but t his
provision shall not apply t o st at ement s or ret urns made or t o be made in good f ait h regarding annual
depreciat ion of oil or gas wells and mines.
Section 73. Distribution of dividends or Assets by Corporations. (A) Definition of Dividends. T he t erm dividends when used in t his T it le means any dist ribut ion made
by a corporat ion t o it s shareholders out of it s earnings or prof it s and payable t o it s shareholders,
whet her in money or in ot her propert y.
Where a corporat ion dist ribut es all of it s asset s in complet e liquidat ion or dissolut ion, t he gain
realized or loss sust ained by t he st ockholder, whet her individual or corporat e, is a t axable income or a
deduct ible loss, as t he case may be.
(B) Stock Dividend. A st ock dividend represent ing t he t ransf er of surplus t o capit al account shall not
be subject t o t ax. However, if a corporat ion cancels or redeems st ock issued as a dividend at such
t ime and in such manner as t o make t he dist ribut ion and cancellat ion or redempt ion, in whole or in
part , essent ially equivalent t o t he dist ribut ion of a t axable dividend, t he amount so dist ribut ed in
redempt ion or cancellat ion of t he st ock shall be considered as t axable income t o t he ext ent t hat it
represent s a dist ribut ion of earnings or prof it s.
(C) Dividends Distributed are Deemed Made from Most Recently Accumulated Profits. Any dist ribut ion
made t o t he shareholders or members of a corporat ion shall be deemed t o have been made f orm t he
most recent ly accumulat ed prof it s or surplus, and shall const it ut e a part of t he annual income of t he
dist ribut ee f or t he year in which received.
(D) Net Income of a Partnership Deemed Constructively Received by Partners. T he t axable income
declared by a part nership f or a t axable year which is subject t o t ax under Sect ion 27 (A) of t his Code,
af t er deduct ing t he corporat e income t ax imposed t herein, shall be deemed t o have been act ually or
const ruct ively received by t he part ners in t he same t axable year and shall be t axed t o t hem in t heir
individual capacit y, whet her act ually dist ribut ed or not .
CHAPT ER XII QUART ERLY CORPORAT E INCOME T AX ANNUAL DECLARAT ION AND
QUART ERLY PAYMENT S OF INCOME T AXES
Section 74. Declaration of Income Tax for Individuals. (A) In General. Except as ot herwise provided in t his Sect ion, every individual subject t o income t ax
under Sect ions 24 and 25(A) of t his T it le, who is receiving self -employment income, whet her it
const it ut es t he sole source of his income or in combinat ion wit h salaries, wages and ot her f ixed or
det erminable income, shall make and f ile a declarat ion of his est imat ed income f or t he current
t axable year on or bef ore April 15 of t he same t axable year. In general, self -employment income
consist s of t he earnings derived by t he individual f rom t he pract ice of prof ession or conduct of t rade
or business carried on by him as a sole propriet or or by a part nership of which he is a member.
Nonresident Filipino cit izens, wit h respect t o income f rom wit hout t he Philippines, and nonresident
aliens not engaged in t rade or business in t he Philippines, are not required t o render a declarat ion of
est imat ed income t ax. T he declarat ion shall cont ain such pert inent inf ormat ion as t he Secret ary of
Finance, upon recommendat ion of t he Commissioner, may, by rules and regulat ions prescribe. An
individual may make amendment s of a declarat ion f iled during t he t axable year under t he rules and
regulat ions prescribed by t he Secret ary of Finance, upon recommendat ion of t he Commissioner.
(B) Return and Payment of Estimated Income Tax by Individuals. T he amount of est imat ed income as
def ined in Subsect ion (C) wit h respect t o which a declarat ion is required under Subsect ion (A) shall be
paid in f our (4) inst allment s. T he f irst inst allment shall be paid at t he t ime of t he declarat ion and t he
second and t hird shall be paid on August 15 and November 15 of t he current year, respect ively. T he
f ourt h inst allment shall be paid on or bef ore April 15 of t he f ollowing calendar year when t he f inal
adjust ed income t ax ret urn is due t o be f iled.
(C) Definition of Estimated Tax. In t he case of an individual, t he t erm est imat ed t ax means t he
amount which t he individual declared as income t ax in his f inal adjust ed and annual income t ax ret urn
f or t he preceding t axable year minus t he sum of t he credit s allowed under t his T it le against t he said
t ax. If , during t he current t axable year, t he t axpayer reasonable expect s t o pay a bigger income t ax,
he shall f ile an amended declarat ion during any int erval of inst allment payment dat es.
Section 75. Declaration of Quarterly Corporate Income Tax. Every corporat ion shall f ile in duplicat e a
quart erly summary declarat ion of it s gross income and deduct ions on a cumulat ive basis f or t he
preceding quart er or quart ers upon which t he income t ax, as provided in T it le II of t his Code, shall be
levied, collect ed and paid. T he t ax so comput ed shall be decreased by t he amount of t ax previously
paid or assessed during t he preceding quart ers and shall be paid not lat er t han sixt y (60) days f rom
t he close of each of t he f irst t hree (3) quart ers of t he t axable year, whet her calendar or f iscal year.
Section 76. Final Adjustment Return. Every corporat ion liable t o t ax under Sect ion 27 shall f ile a f inal
adjust ment ret urn covering t he t ot al t axable income f or t he preceding calendar or f iscal year. If t he
sum of t he quart erly t ax payment s made during t he said t axable year is not equal t o t he t ot al t ax
due on t he ent ire t axable income of t hat year, t he corporat ion shall eit her:
(A)Pay t he balance of t ax st ill due; or
(B)Carry-over t he excess credit ; or
(C)Be credit ed or ref unded wit h t he excess amount paid, as t he case may be.
In case t he corporat ion is ent it led t o a t ax credit or ref und of t he excess est imat ed quart erly income
t axes paid, t he excess amount shown on it s f inal adjust ment ret urn may be carried over and credit ed
against t he est imat ed quart erly income t ax liabilit ies f or t he t axable quart ers of t he succeeding
t axable years. Once t he opt ion t o carry-over and apply t he excess quart erly income t ax against
income t ax due f or t he t axable quart ers of t he succeeding t axable years has been made, such opt ion
shall be considered irrevocable f or t hat t axable period and no applicat ion f or cash ref und or issuance
of a t ax credit cert if icat e shall be allowed t heref or.
Section 77. Place and Time of Filing and Payment of Quarterly Corporate Income Tax. (A) Place of Filing. -Except as t he Commissioner ot her wise permit s, t he quart erly income t ax
declarat ion required in Sect ion 75 and t he f inal adjust ment ret urn required I Sect ion 76 shall be f iled
wit h t he aut horized agent banks or Revenue Dist rict Of f icer or Collect ion Agent or duly aut horized
T reasurer of t he cit y or municipalit y having jurisdict ion over t he locat ion of t he principal of f ice of t he
corporat ion f iling t he ret urn or place where it s main books of account s and ot her dat a f rom which t he
ret urn is prepared are kept .
(B) Time of Filing the Income Tax Return. T he corporat e quart erly declarat ion shall be f iled wit hin sixt y
(60) days f ollowing t he close of each of t he f irst t hree (3) quart ers of t he t axable year. T he f inal
adjust ment ret urn shall be f iled on or bef ore t he f if t eent h (15t h) day of April, or on or bef ore t he
f if t eent h (15t h) day of t he f ourt h (4t h) mont h f ollowing t he close of t he f iscal year, as t he case may
be.
(C) Time of Payment of the Income Tax. T he income t ax due on t he corporat e quart erly ret urns and
t he f inal adjust ment income t ax ret urns comput ed in accordance wit h Sect ions 75 and 76 shall be paid
at t he t ime t he declarat ion or ret urn is f iled in a manner prescribed by t he Commissioner.
CHAPT ER XIII WIT HHOLDING ON WAGES
Section 78. Definitions. As used in t his Chapt er:
(A) Wages. T he t erm wages means all remunerat ion (ot her t han f ees paid t o a public of f icial) f or
services perf ormed by an employee f or his employer, including t he cash value of all remunerat ion paid
in any medium ot her t han cash, except t hat such t erm shall not include remunerat ion paid:
(1) For agricult ural labor paid ent irely in product s of t he f arm where t he labor is perf ormed, or
(2) For domest ic service in a privat e home, or
(3) For casual labor not in t he course of t he employers t rade or business, or
(4) For services by a cit izen or resident of t he Philippines f or a f oreign government or an int ernat ional
organizat ion.
If t he remunerat ion paid by an employer t o an employee f or services perf ormed during one-half (1/2)
or more of any payroll period of not more t han t hirt y-one (31) consecut ive days const it ut es wages, all
t he remunerat ion paid by such employer t o such employee f or such period shall be deemed t o be
wages; but if t he remunerat ion paid by an employer t o an employee f or services perf ormed during
more t han one -half (1/2) of any such payroll period does not const it ut e wages, t hen none of t he
remunerat ion paid by such employer t o such employee f or such period shall be deemed t o be wages.
(B) Payroll Period. T he t erm payroll period means a period f or which payment of wages is ordinarily
made t o t he employee by his employer, and t he t erm miscellaneous payroll period means a payroll
period ot her t han, a daily, weekly, biweekly, semi-mont hly, mont hly, quart erly, semi-annual, or annual
period.
(C) Employee. T he t erm employee ref ers t o any individual who is t he recipient of wages and
includes an of f icer, employee or elect ed of f icial of t he Government of t he Philippines or any polit ical
subdivision, agency or inst rument alit y t hereof . T he t erm employee also includes an of f icer of a
corporat ion.
(D) Employer. T he t erm employer means t he person f or whom an individual perf orms or perf ormed
any service, of what ever nat ure, as t he employee of such person, except t hat :
(1) If t he person f or whom t he individual perf orms or perf ormed any service does not have cont rol of
t he payment of t he wages f or such services, t he t erm employer (except f or t he purpose of
Subsect ion(A) means t he person having cont rol of t he payment of such wages; and
(2) In t he case of a person paying wages on behalf of a nonresident alien individual, f oreign
part nership or f oreign corporat ion not engaged in t rade or business wit hin t he Philippines, t he t erm
employer (except f or t he purpose of Subsect ion(A) means such person.
Section 79. Income Tax Collected at Source.(A) Requirement of Withholding. Every employer making payment of wages shall deduct and wit hhold
upon such wages a t ax det ermined in accordance wit h t he rules and regulat ions t o be prescribed by
t he Secret ary of Finance, upon recommendat ion of t he Commissioner: Provided, however, T hat no
wit hholding of a t ax shall be required where t he t ot al compensat ion income of an individual does not
exceed t he st at ut ory minimum wage, or f ive t housand pesos (P5,000.00) per mont h, whichever is
higher.
(B) Tax Paid by Recipient. If t he employer, in violat ion of t he provisions of t his Chapt er, f ails t o
deduct and wit hhold t he t ax as required under t his Chapt er, and t hereaf t er t he t ax against which such
t ax may be credit ed is paid, t he t ax so required t o be deduct ed and wit hheld shall not be collect ed
f rom t he employer; but t his Subsect ion shall in no case relieve t he employer f rom liabilit y f or any
penalt y or addit ion t o t he t ax ot herwise applicable in respect of such f ailure t o deduct and wit hhold.
(C) Refunds or Credits. (1) Employer. When t here has been an overpayment of t ax under t his Sect ion, ref und or credit shall
be made t o t he employer only t o t he ext ent t hat t he amount of such overpayment was not deduct ed
and wit hheld hereunder by t he employer.
(2) Employees. -T he amount deduct ed and wit hheld under t his Chapt er during any calendar year shall
be allowed as a credit t o t he recipient of such income against t he t ax imposed under Sect ion 24(A) of
t his T it le. Ref unds and credit s in cases of excessive wit hholding shall be grant ed under rules and
regulat ions promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he Commissioner.
Any excess of t he t axes wit hheld over t he t ax due f rom t he t axpayer shall be ret urned or credit ed
wit hin t hree (3) mont hs f rom t he f if t eent h (15t h) day of April. Ref unds or credit s made af t er such t ime
shall earn int erest at t he rat e of six percent (6%) per annum, st art ing af t er t he lapse of t he t hreemont h period t o t he dat e t he ref und of credit is made.
Ref unds shall be made upon warrant s drawn by t he Commissioner or by his duly aut horized
represent at ive wit hout t he necessit y of count er-signat ure by t he Chairman, Commission on Audit or
t he lat t ers duly aut horized represent at ive as an except ion t o t he requirement prescribed by Sect ion
49, Chapt er 8, Subt it le B, T it le 1 of Book V of Execut ive Order No. 292, ot herwise known as t he
Administ rat ive Code of 1987.
(D) Personal Exemptions. (1) In General. Unless ot herwise provided by t his Chapt er, t he personal and addit ional exempt ions
applicable under t his Chapt er shall be det ermined in accordance wit h t he main provisions of t his T it le.
(2) Exemption Certificate. (a) When to File. On or bef ore t he dat e of commencement of employment wit h an employer, t he
employee shall f urnish t he employer wit h a signed wit hholding exempt ion cert if icat e relat ing t o t he
personal and addit ional exempt ions t o which he is ent it led.
(b) Change of Status. In case of change of st at us of an employee as a result of which he would be
ent it led t o a lesser or great er amount of exempt ion, t he employee shall, wit hin t en (10) days f rom
such change, f ile wit h t he employer a new wit hholding exempt ion cert if icat e ref lect ing t he change.
(c) Use of Certificates. T he cert if icat es f iled hereunder shall be used by t he employer in t he
det erminat ion of t he amount of t axes t o be wit hheld.

(d) Failure to Furnish Certificate. Where an employee, in violat ion of t his Chapt er, eit her f ails or
ref uses t o f ile a wit hholding exempt ion cert if icat e, t he employer shall wit hhold t he t axes prescribed
under t he schedule f or zero exempt ion of t he wit hholding t ax t able det ermined pursuant t o
Subsect ion (A) hereof .
(E) Withholding on Basis of Average Wages. T he Commissioner may, under rules and regulat ions
promulgat ed by t he Secret ary of Finance, aut horize employers t o:
(1) est imat e t he wages which will be paid t o an employee in any quart er of t he calendar year;
(2) det ermine t he amount t o be deduct ed and wit hheld upon each payment of wages t o such
employee during such quart er as if t he appropriat e average of t he wages so est imat ed const it ut ed
t he act ual wages paid; and
(3) deduct and wit hhold upon any payment of wages t o such employee during ;such quart er such
amount as may be required t o be deduct ed and wit hheld during such quart er wit hout regard t o t his
Subsect ion.
(F) Husband and Wife. When a husband and wif e each are recipient s of wages, whet her f rom t he
same or f rom dif f erent employers, t axes t o be wit hheld shall be det ermined on t he f ollowing bases:
(1) T he husband shall be deemed t he head of t he f amily and proper claimant of t he addit ional
exempt ion in respect t o any dependent children, unless he explicit ly waives his right in f avor of his
wif e in t he wit hholding exempt ion cert if icat e.
(2) T axes shall be wit hheld f rom t he wages of t he wif e in accordance wit h t he schedule f or zero
exempt ion of t he wit hholding t ax t able prescribed in Subsect ion (D)(2)(d) hereof .
(G) Nonresident Aliens. Wages paid t o nonresident alien individuals engaged in t rade or business in
t he Philippines shall be subject t o t he provisions of t his Chapt er.
(H) Year-end Adjustment. On or bef ore t he end of t he calendar year but prior t o t he payment of t he
compensat ion f or t he last payroll period, t he employer shall det ermine t he t ax due f rom each
employee on t axable compensat ion income f or t he ent ire t axable year in accordance wit h Sect ion
24(A). T he dif f erence bet ween t he t ax due f rom t he employee f or t he ent ire year and t he sum of
t axes wit hheld f rom January t o November shall eit her be wit hheld f rom his salary in December of t he
current calendar year or ref unded t o t he employee not lat er t han January 25 of t he succeeding year.
Section 80. Liability for Tax. (A) Employer. T he employer shall be liable f or t he wit hholding and remit t ance of t he correct amount
of t ax required t o be deduct ed and wit hheld under t his Chapt er. If t he employer f ails t o wit hhold and
remit t he correct amount of t ax as required t o be wit hheld under t he provision of t his Chapt er, such
t ax shall be collect ed f rom t he employer t oget her wit h t he penalt ies or addit ions t o t he t ax ot herwise
applicable in respect t o such f ailure t o wit hhold and remit .
(B) Employee. Where an employee f ails or ref uses t o f ile t he wit hholding exempt ion cert if icat e or
willf ully supplies f alse or inaccurat e inf ormat ion t hereunder, t he t ax ot herwise required t o be wit hheld
by t he employer shall be collect ed f rom him including penalt ies or addit ions t o t he t ax f rom t he due
dat e of remit t ance unt il t he dat e of payment . On t he ot her hand, excess t axes wit hheld made by t he
employer due t o:
(1) f ailure or ref usal t o f ile t he wit hholding exempt ion cert if icat e; or
(2) f alse and inaccurat e inf ormat ion shall not be ref unded t o t he employee but shall be f orf eit ed in
f avor of t he Government .
Section 81. Filing of Return and Payment of Taxes Withheld. Except as t he Commissioner ot herwise
permit s, t axes deduct ed and wit hheld by t he employer on wages of employees shall be covered by a
ret urn and paid t o an aut horized agent bank; Collect ion Agent , or t he duly aut horized T reasurer of t he
cit y or municipalit y where t he employer has his legal residence or principal place of business, or in
case t he employer is a corporat ion, where t he principal of f ice is locat ed.
T he ret urn shall be f iled and t he payment made wit hin t went y-f ive (25) days f rom t he close of each
calendar quart er: Provided, however, T hat t he Commissioner may, wit h t he approval of t he Secret ary
of Finance, require t he employers t o pay or deposit t he t axes deduct ed and wit hheld at more
f requent int ervals, in cases where such requirement is deemed necessary t o prot ect t he int erest of
t he Government .
T he t axes deduct ed and wit hheld by employers shall be held in a special f und in t rust f or t he
Government unt il t he same are paid t o t he said collect ing of f icers.
Section 82. Return and Payment in Case of Government Employees. If t he employer is t he
Government of t he Philippines or any polit ical subdivision, agency or inst rument alit y t hereof , t he
ret urn of t he amount deduct ed and wit hheld upon any wage shall be made by t he of f icer or employee
having cont rol of t he payment of such wage, or by any of f icer or employee duly designat ed f or t he
purpose.
Section 83. Statements and Returns. (A) Requirements. Every employer required t o deduct and wit hhold a t ax shall f urnish t o each such
employee in respect of his employment during t he calendar year, on or bef ore January t hirt y-f irst
(31st ) of t he succeeding year, or if his employment is t erminat ed bef ore t he close of such calendar
year, on t he same day of which t he last payment of wages is made, a writ t en st at ement conf irming
t he wages paid by t he employer t o such employee during t he calendar year, and t he amount of t ax
deduct ed and wit hheld under t his Chapt er in respect of such wages. T he st at ement required t o be
f urnished by t his Sect ion in respect of any wage shall cont ain such ot her inf ormat ion, and shall be
f urnished at such ot her t ime and in such f orm as t he Secret ary of Finance, upon t he recommendat ion
of t he Commissioner, may, by rules and regulat ion, prescribe.
(B) Annual Information Returns. Every employer required t o deduct and wit hhold t he t axes in respect
of t he wages of his employees shall, on or bef ore January t hirt y-f irst (31st ) of t he succeeding year,
submit t o t he Commissioner an annual inf ormat ion ret urn cont aining a list of employees, t he t ot al
amount of compensat ion income of each employee, t he t ot al amount of t axes wit hheld t heref rom
during t he year, accompanied by copies of t he st at ement ref erred t o in t he preceding paragraph, and
such ot her inf ormat ion as may be deemed necessary. T his ret urn, if made and f iled in accordance
wit h rules and regulat ions promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner, shall be suf f icient compliance wit h t he requirement s of Sect ion 68 of t his T it le in
respect of such wages.
(C) Extension of time. T he Commissioner, under such rules and regulat ions as may be promulgat ed
by t he Secret ary of Finance, may grant t o any employer a reasonable ext ension of t ime t o f urnish
and submit t he st at ement s and ret urns required under t his Sect ion.
T IT LE III
EST AT E AND DONORS T AXES
CHAPT ER I EST AT E T AX
Section 84. Rates of Estate Tax. T here shall be levied, assessed, collect ed and paid upon t he t ransf er
of t he net est at e as det ermined in accordance wit h Sect ions 85 and 86 of every decedent , whet her
resident or nonresident of t he Philippines, a t ax based on t he value of such net est at e, as comput ed
in accordance wit h t he f ollowing schedule:
If t he net est at e is:

Over
But Not
Over
The Tax
shall be
Plus
Of the Excess
Over
P 200,000
Exempt
P 200,000
550,000
5%
P 200,000
500,000
2,000,000
P 15,000
8%
500,000
2,000,000
5,000,000
135,000
11%
2,000,000
5,000,000
10,000,000
465,000
15%
5,000,000
10,000,000
And Over
1,215,000
20%
10,000,000
Section 85. Gross Estate. t he value of t he gross est at e of t he decedent shall be det ermined by
including t he value at t he t ime of his deat h of all propert y, real or personal, t angible or int angible,
wherever sit uat ed: Provided, however, t hat in t he case of a nonresident decedent who at t he t ime of
his deat h was not a cit izen of t he Philippines, only t hat part of t he ent ire gross est at e which is
sit uat ed in t he Philippines shall be included in his t axable est at e.
(A) Decedents Interest. T o t he ext ent of t he int erest t herein of t he decedent at t he t ime of his
deat h;
(B) Transfer in Contemplation of Death. T o t he ext ent of any int erest t herein of which t he decedent
has at any t ime made a t ransf er, by t rust or ot herwise, in cont emplat ion of or int ended t o t ake ef f ect
in possession or enjoyment at or af t er deat h, or of which he has at any t ime made a t ransf er, by t rust
or ot herwise, under which he has ret ained f or his lif e or f or any period which does not in f act end
bef ore his deat h (1) t he possession or enjoyment of , or t he right t o t he income f rom t he propert y, or
(2) t he right , eit her alone or in conjunct ion wit h any person, t o designat e t he person who shall possess
or enjoy t he propert y or t he income t heref rom; except in case of a bonaf ide sale f or an adequat e and
f ull considerat ion in money or moneys wort h.
(C) Revocable Transfer. (1) T o t he ext ent of any int erest t herein, of which t he decedent has at any t ime made a t ransf er
(except in case of a bona f ide sale f or an adequat e and f ull considerat ion in money or moneys wort h)
by t rust or ot herwise, where t he enjoyment t hereof was subject at t he dat e of his deat h t o any
change t hrough t he exercise of a power (in what ever capacit y exerciseable) by t he decedent alone or
by t he decedent in conjunct ion wit h any ot her person (wit hout regard t o when or f rom what source t he
decedent acquired such power), t o alt er, amend, revoke, or t erminat e, or where any such power is
relinquished in cont emplat ion of t he decedent s deat h.
(2) For t he purpose of t his Subsect ion, t he power t o alt er, amend or revoke shall be considered t o
exist on t he dat e of t he decedent s deat h even t hough t he exercise of t he power is subject t o a
precedent giving of not ice or even t hough t he alt erat ion, amendment or revocat ion t akes ef f ect only
on t he expirat ion of a st at ed period af t er t he exercise of t he power, whet her or not on or bef ore t he
dat e of t he decedent s deat h not ice has been given or t he power has been exercised. In such cases,
proper adjust ment shall be made represent ing t he int erest s which would have been excluded f rom
t he power if t he decedent had lived, and f or such purpose if t he not ice has not been given or t he
power has not been exercised on or bef ore t he dat e of his
deat h, such not ice shall be considered t o have been given, or t he power exercised, on t he dat e of his
deat h.
(D) Property Passing Under General Power of Appointment. T o t he ext ent of any propert y passing
under a general power of appoint ment exercised by t he decedent : (1) by will, or (2) by deed execut ed
in cont emplat ion of , or int ended t o t ake ef f ect in possession or enjoyment at , or af t er his deat h, or
(3) by deed under which he has ret ained f or his lif e or any period not ascert ainable wit hout ref erence
t o his deat h or f or any period which does not in f act end bef ore his deat h (a) t he possession or
enjoyment of , or t he right t o t he income f rom, t he propert y, or (b) t he right , eit her alone or in
conjunct ion wit h any person, t o designat e t he persons who shall possess or enjoy t he propert y or t he
income t heref rom; except in case of a bona f ide sale f or an adequat e and f ull considerat ion in money
or moneys wort h.
(E) Proceeds of Life Insurance. T o t he ext ent of t he amount receivable by t he est at e of t he
deceased, his execut or, or administ rat or, as insurance under policies t aken out by t he decedent upon
his own lif e, irrespect ive of whet her or not t he insured ret ained t he power of revocat ion, or t o t he
ext ent of t he amount receivable by any benef iciary designat ed in t he policy of insurance, except
when it is expressly st ipulat ed t hat t he designat ion of t he benef iciary is irrevocable.
(F) Prior Interests. Except as ot herwise specif ically provided t herein, Subsect ions (B), (C) and (E) of
t his Sect ion shall apply t o t he t ransf ers, t rust s, est at es, int erest s, right s, powers and relinquishment
of powers, as severally enumerat ed and described t herein, whet her made, creat ed, arising, exist ing,
exercised or relinquished bef ore or af t er t he ef f ect ivit y of t his Code.
(G) Transfers of Insufficient Consideration. If any one of t he t ransf ers, t rust s, int erest s, right s or
powers enumerat ed and described in Subsect ions (B), (C) and (D) of t his Sect ion is made, creat ed,
exercised or relinquished f or a considerat ion in money or moneys wort h, but is not a bona f ide sale
f or an adequat e and f ull considerat ion in money or moneys wort h, t here shall be included in t he gross
est at e only t he excess of t he f air market value, at t he t ime of deat h, of t he propert y ot herwise t o be
included on account of such t ransact ion, over t he value of t he considerat ion received t heref or by t he
decedent .
(H) Capital of the Surviving Spouse. T he capit al of t he surviving spouse of a decedent shall not , f or
t he purpose of t his Chapt er, be deemed a part of his or her gross est at e.
Section 86. Computation of Net Estate. For t he purpose of t he t ax imposed in t his Chapt er, t he value
of t he net est at e shall be det ermined:
(A) Deductions Allowed to the Estate of Citizen or a Resident. In t he case of a cit izen or resident of t he
Philippines, by deduct ing f rom t he value of t he gross est at e (1) Expenses, Losses, Indebt edness, and t axes. Such amount s (a) For act ual f uneral expenses or in an amount equal t o f ive percent (5%) of t he gross est at e,
whichever is lower, but in no case t o exceed T wo hundred t housand pesos (P200,000);
(b) For judicial expenses of t he t est ament ary or int est at e proceedings;
(c) For claims against t he est at e: Provided, T hat at t he t ime t he indebt edness was incurred t he debt
inst rument was duly not arized and, if t he loan was cont ract ed wit hin t hree (3) years bef ore t he deat h
of t he decedent , t he administ rat or or execut or shall submit a st at ement showing t he disposit ion of
t he proceeds of t he loan;
(d) For claims of t he deceased against insolvent persons where t he value of decedent s int erest
t herein is included in t he value of t he gross est at e; and
(e) For unpaid mort gages upon, or any indebt edness in respect t o, propert y where t he value of
decedent s int erest t herein, undiminished by such mort gage or indebt edness, is included in t he value
of t he gross est at e, but not including any income t ax upon income received af t er t he deat h of t he
decedent , or propert y t axes not accrued bef ore his deat h, or any est at e t ax. T he deduct ion herein
allowed in t he case of claims against t he est at e, unpaid mort gages or any indebt edness shall, when
f ounded upon a promise or agreement , be limit ed t o t he ext ent t hat t hey were cont ract ed bona f ide
and f or an adequat e and f ull considerat ion in money or moneys wort h. T here shall also be deduct ed
losses incurred during t he set t lement of t he est at e arising f rom f ires, st orms, shipwreck, or ot her
casualt ies, or f rom robbery, t hef t or embezzlement , when such losses are not compensat ed f or by
insurance or ot herwise, and if at t he t ime of t he f iling of t he ret urn such losses have not been claimed
as a deduct ion f or t he income t ax purposes in an income t ax ret urn, and provided t hat such losses
were incurred not lat er t han t he last day f or t he payment of t he est at e t ax as prescribed in
Subsect ion (A) of Sect ion 91.
(2) Propert y Previously T axed. An amount equal t o t he value specif ied below of any propert y
f orming a part of t he gross est at e sit uat ed in t he Philippines of any person who died wit hin f ive (5)
years prior t o t he deat h of t he decedent , or t ransf erred t o t he decedent by gif t wit hin f ive (5) years
prior t o his deat h, where such propert y can be ident if ied as having been received by t he decedent
f rom t he donor by gif t , or f rom such prior decedent by gif t , bequest , devise or inherit ance, or which
can be ident if ied as having been acquired in exchange f or propert y so received:
One hundred percent (100%) of t he value, if t he prior decedent died wit hin one (1) year prior t o t he
deat h of t he decedent , or if t he propert y was t ransf erred t o him by gif t wit hin t he same period prior
t o his deat h;
Eight y percent (80%) of t he value, if t he prior decedent died more t han one (1) year but not more t han
t wo (2) years prior t o t he deat h of t he decedent , or if t he propert y was t ransf erred t o him by gif t
wit hin t he same period prior t o his deat h;
Sixt y percent (60%) of t he value, if t he prior decedent died more t han t wo (2) years but not more t han
t hree (3) years prior t o t he deat h of t he decedent , or if t he propert y was t ransf erred t o him by gif t
Fort y percent (40%) of t he value, if t he prior decedent died more t han t hree (3) years but not more
t han f our (4) years prior t o t he deat h of t he decedent , or if t he propert y was t ransf erred t o him by
gif t wit hin t he same period prior t o his deat h;
T went y percent (20%) of t he value, if t he prior decedent died more t han f our (4) years but not more
t han f ive (5) years prior t o t he deat h of t he decedent , or if t he propert y was t ransf erred t o him by gif t
T hese deduct ions shall be allowed only where a donors t ax or est at e t ax imposed under t his T it le
was f inally det ermined and paid by or on behalf of such donor, or t he est at e of such prior decedent ,
as t he case may be, and only in t he amount f inally det ermined as t he value of such propert y in
det ermining t he value of t he gif t , or t he gross est at e of such prior decedent , and only t o t he ext ent
t hat t he value of such propert y is included in t he decedent s gross est at e, and only if in det ermining
t he value of t he est at e of t he prior decedent , no deduct ion was allowable under paragraph (2) in
respect of t he propert y or propert ies given in exchange t heref or. Where a deduct ion was allowed of
any mort gage or ot her lien in det ermining t he donors t ax, or t he est at e t ax of t he prior decedent ,
which was paid in whole or in part prior t o t he decedent s deat h, t hen t he deduct ion allowable under
said Subsect ion shall be reduced by t he amount so paid. Such deduct ion allowable shall be reduced
by an amount which bears t he same rat io t o t he amount s allowed as deduct ions under paragraphs (1)
and (3) of t his Subsect ion as t he amount ot herwise deduct ible under said paragraph (2) bears t o t he
value of t he decedent s est at e. Where t he propert y ref erred t o consist s of t wo or more it ems, t he
aggregat e value of such it ems shall be used f or t he purpose of comput ing t he deduct ion.
(3) T ransf ers f or Public Use. T he amount of all t he bequest s, legacies, devises or t ransf ers t o or f or
t he use of t he Government of t he Republic of t he Philippines, or any polit ical subdivision t hereof , f or
exclusively public purposes.
(4) T he Family Home. An amount equivalent t o t he current f air market value of t he decedent s
f amily home: Provided, however, T hat if t he said current f air market value exceeds One million pesos
f amily home: Provided, however, T hat if t he said current f air market value exceeds One million pesos
(P1,000,000), t he excess shall be subject t o est at e t ax. As a sine qua non condit ion f or t he exempt ion
or deduct ion, said f amily home must have been t he decedent s f amily home as cert if ied by t he
barangay capt ain of t he localit y.
(5) St andard Deduct ion. An amount equivalent t o One million pesos (P1,000,000).
(6) Medical Expenses. Medical Expenses incurred by t he decedent wit hin one (1) year prior t o his
deat h which shall be duly subst ant iat ed wit h receipt s: Provided, T hat in no case shall t he deduct ible
medical expenses exceed Five Hundred T housand Pesos (P500,000).
(7) Amount Received by Heirs Under Republic Act No. 4917. Any amount received by t he heirs f rom
t he decedent employee as a consequence of t he deat h of t he decedent -employee in accordance
wit h Republic Act No. 4917: Provided, T hat such amount is included in t he gross est at e of t he
decedent .
(B) Deduct ions Allowed t o Nonresident Est at es. In t he case of a nonresident not a cit izen of t he
Philippines, by deduct ing f rom t he value of t hat part of his gross est at e which at t he t ime of his deat h
is sit uat ed in t he Philippines:
(1) Expenses, Losses, Indebt edness and T axes. T hat proport ion of t he deduct ions specif ied in
paragraph (1) of Subsect ion (A) of t his Sect ion which t he value of such part bears t o t he value of his
ent ire gross est at e wherever sit uat ed;
(2) Propert y Previously T axed. An amount equal t o t he value specif ied below of any propert y
f orming part of t he gross est at e sit uat ed in t he Philippines of any person who died wit hin f ive (5)
years prior t o t he deat h of t he decedent , or t ransf erred t o t he decedent by gif t wit hin f ive (5) years
prior t o his deat h, where such propert y can be ident if ied as having been received by t he decedent
f rom t he donor by gif t , or f rom such prior decedent by gif t , bequest , devise or inherit ance, or which
can be ident if ied as having been acquired in exchange f or propert y so received:
One hundred percent (100%) of t he value if t he prior decedent died wit hin one (1) year prior t o t he
deat h of t he decedent , or if t he propert y was t ransf erred t o him by gif t , wit hin t he same period prior
t o his deat h;
Eight y percent (80%) of t he value, if t he prior decedent died more t han one (1) year but not more t han
t wo (2) years prior t o t he deat h of t he decedent , or if t he propert y was t ransf erred t o him by gif t
Sixt y percent (60%) of t he value, if t he prior decedent died more t han t wo (2) years but not more t han
t hree (3) years prior t o t he deat h of t he decedent , or if t he propert y was t ransf erred t o him by gif t
Fort y percent (40%) of t he value, if t he prior decedent died more t han t hree (3) years but not more
t han f our (4) years prior t o t he deat h of t he decedent , or if t he propert y was t ransf erred t o him by
gif t wit hin t he same period prior t o his deat h; and
T went y percent (20%) of t he value, if t he prior decedent died more t han f our (4) years but not more
t han f ive (5) years prior t o t he deat h of t he decedent , or if t he propert y was t ransf erred t o him by gif t
wit hin t he same period prior t o his deat h.
T hese deduct ions shall be allowed only where a donors t ax, or est at e t ax imposed under t his T it le is
f inally det ermined and paid by or on behalf of such donor, or t he est at e of such prior decedent , as
t he case may be, and only in t he amount f inally det ermined as t he value of such propert y in
det ermining t he value of t he gif t , or t he gross est at e of such prior decedent , and only t o t he ext ent
t hat t he value of such propert y is included in t hat part of t he decedent s gross est at e which at t he
t ime of his deat h is sit uat ed in t he Philippines; and only if , in det ermining t he value of t he net est at e
of t he prior decedent , no deduct ion is allowable under paragraph (2) of Subsect ion (B) of t his Sect ion,
in respect of t he propert y or propert ies given in exchange t heref ore. Where a deduct ion was allowed
of any mort gage or ot her lien in det ermining t he donors t ax, or t he est at e t ax of t he prior decedent ,
which was paid in whole or in part prior t o t he decedent s deat h, t hen t he deduct ion allowable under
said paragraph shall be reduced by t he amount so paid. Such deduct ion allowable shall be reduced by
an amount which bears t he same rat io t o t he amount s allowed as deduct ions under paragraphs (1)
and (3) of t his Subsect ion as t he amount ot herwise deduct ible under paragraph (2) bears t o t he value
of t hat part of t he decedent s gross est at e which at t he t ime of his deat h is sit uat ed in t he
Philippines. Where t he propert y ref erred t o consist s of t wo (2) or more it ems, t he aggregat e value of
such it ems shall be used f or t he purpose of comput ing t he deduct ion.
(3) T ransf ers f or Public Use. T he amount of all bequest s, legacies, devises or t ransf ers t o or f or t he
use of t he Government of t he Republic of t he Philippines or any polit ical subdivision t hereof , f or
exclusively public purposes.
(C) Share in the Conjugal Property. t he net share of t he surviving spouse in t he conjugal part nership
propert y as diminished by t he obligat ions properly chargeable t o such propert y shall, f or t he purpose
of t his Sect ion, be deduct ed f rom t he net est at e of t he decedent .
(D) Miscellaneous Provisions. No deduct ion shall be allowed in t he case of a nonresident not a cit izen
of t he Philippines, unless t he execut or, administ rat or, or anyone of t he heirs, as t he case may be,
includes in t he ret urn required t o be f iled under Sect ion 90 t he value at t he t ime of his deat h of t hat
part of t he gross est at e of t he nonresident not sit uat ed in t he Philippines.
(E) Tax Credit for Estate Taxes paid to a Foreign Country. (1) In General. T he t ax imposed by t his T it le shall be credit ed wit h t he amount s of any est at e t ax
imposed by t he aut horit y of a f oreign count ry.
(a) T he amount of t he credit in respect t o t he t ax paid t o any count ry shall not exceed t he same
proport ion of t he t ax against which such credit is t aken, which t he decedent s net est at e sit uat ed
wit hin such count ry t axable under t his T it le bears t o his ent ir net est at e; and
credit is t aken, which t he decedent s net est at e sit uat ed out side t he Philippines t axable under t his
T it le bears t o his ent ire net est at e.
Section 87. Exemption of Certain Acquisitions and Transmissions. T he f ollowing shall not be t axed:
(A) T he merger of usuf ruct in t he owner of t he naked t it le;
(B) T he t ransmission or delivery of t he inherit ance or legacy by t he f iduciary heir or legat ee t o t he
f ideicommissary;
(C) T he t ransmission f rom t he f irst heir, legat ee or donee in f avor of anot her benef iciary, in
accordance wit h t he desire of t he predecessor; and
(D) All bequest s, devises, legacies or t ransf ers t o social welf are, cult ural and charit able inst it ut ions,
no part of t he net income of which insures t o t he benef it of any individual: Provided, however, T hat
not more t han t hirt y percent (30%) of t he said bequest s, devises, legacies or t ransf ers shall be used
by such inst it ut ions f or administ rat ion purposes.
Section 88. Determination of the Value of the Estate. (A) Usufruct. T o det ermine t he value of t he right of usuf ruct , use or habit at ion, as well as t hat of
annuit y, t here shall be t aken int o account t he probable lif e of t he benef iciary in accordance wit h t he
lat est Basic St andard Mort alit y T able, t o be approved by t he Secret ary of Finance, upon
recommendat ion of t he Insurance Commissioner.
(B) Properties. T he est at e shall be appraised at it s f air market value as of t he t ime of deat h.
However, t he appraised value of real propert y as of t he t ime of deat h shall be, whichever is higher of
(1) T he f air market value as det ermined by t he Commissioner, or
(2) T he f air market value as shown in t he schedule of values f ixed by t he Provincial and Cit y
Assessors.
Section 89. Notice of Death to be Filed. In all cases of t ransf ers subject t o t ax, or where, t hough
exempt f rom t ax, t he gross value of t he est at e exceeds T went y t housand pesos (P20,000), t he
execut or, administ rat or or any of t he legal heirs, as t he case may be, wit hin t wo (2) mont hs af t er t he
decedent s deat h, or wit hin a like period af t er qualif ying as such execut or or administ rat or, shall give
a writ t en not ice t hereof t o t he Commissioner.
Section 90. Estate Tax Returns. (A) Requirements. In all cases of t ransf ers subject t o t he t ax imposed herein, or where, t hough
exempt f rom t ax, t he gross value of t he est at e exceeds T wo hundred t housand pesos (P200,000), or
regardless of t he gross value of t he est at e, where t he said est at e consist s of regist ered or
regist rable propert y such as real propert y, mot or vehicle, shares of st ock or ot her similar propert y f or
which a clearance f rom t he Bureau of Int ernal Revenue is required as a condit ion precedent f or t he
t ransf er of ownership t hereof in t he name of t he t ransf eree, t he execut or, or t he administ rat or, or
any of t he legal heirs, as t he case may be, shall f ile a ret urn under oat h in duplicat e, set t ing f ort h:
(1) T he value of t he gross est at e of t he decedent at t he t ime of his deat h, or in case of a
nonresident , not a cit izen of t he Philippines, of t hat part of his gross est at e sit uat ed in t he
Philippines;
(2) T he deduct ions allowed f rom gross est at e in det ermining t he est at e as def ined in Sect ion 86; and
(3) Such part of such inf ormat ion as may at t he t ime be ascert ainable and such supplement al dat a as
may be necessary t o est ablish t he correct t axes.
Provided, however, T hat est at e t ax ret urns showing a gross value exceeding T wo million pesos
(P2,000,000) shall be support ed wit h a st at ement duly cert if ied t o by a Cert if ied Public Account ant
cont aining t he f ollowing:
(a) It emized asset s of t he decedent wit h t heir corresponding gross value at t he t ime of his deat h, or
in t he case of a nonresident , not a cit izen of t he Philippines, of t hat part of his gross est at e sit uat ed
in t he Philippines;
(b) It emized deduct ions f rom gross est at e allowed in Sect ion 86; and
(c) T he amount of t ax due whet her paid or st ill due and out st anding.
(B) Time for filing. For t he purpose of det ermining t he est at e t ax provided f or in Sect ion 84 of t his
Code, t he est at e t ax ret urn required under t he preceding Subsect ion (A) shall be f iled wit hin six (6)
mont hs f rom t he decedent s deat h.
A cert if ied copy of t he schedule of part it ion and t he order of t he court approving t he same shall be
f urnished t he Commissioner wit hin t hirt y (30) af t er t he promulgat ion of such order.
(C) Extension of Time. T he Commissioner shall have aut horit y t o grant , in merit orious cases, a
reasonable ext ension not exceeding t hirt y (30) days f or f iling t he ret urn.
(D) Place of Filing. Except in cases where t he Commissioner ot herwise permit s, t he ret urn required
under Subsect ion (A) shall be f iled wit h an aut horized agent bank, or Revenue Dist rict Of f icer,
Collect ion Of f icer, or duly aut horized T reasurer of t he cit y or municipalit y in which t he decedent was
domiciled at t he t ime of his deat h or if t here be no legal residence in t he Philippines, wit h t he Of f ice of
t he Commissioner.
Section 91. Payment of Tax. (A) Time of Payment. T he est at e t ax imposed by Sect ion 84 shall be paid at t he t ime t he ret urn is
f iled by t he execut or, administ rat or or t he heirs.
(B) Extension of Time. When t he Commissioner f inds t hat t he payment on t he due dat e of t he est at e
t ax or of any part t hereof would impose undue hardship upon t he est at e or any of t he heirs, he may
ext end t he t ime f or payment of such t ax or any part t hereof not t o exceed f ive (5) years, in case t he
est at e is set t led t hrough t he court s, or t wo (2) years in case t he est at e is set t led ext rajudicially. In
such case, t he amount in respect of which t he ext ension is grant ed shall be paid on or bef ore t he
dat e of t he expirat ion of t he period of t he ext ension, and t he running of t he St at ut e of Limit at ions f or
assessment as provided in Sect ion 203 of t his Code shall be suspended f or t he period of any such
ext ension.
Where t he t axes are assessed by reason of negligence, int ent ional disregard of rules and regulat ions,
or f raud on t he part of t he t axpayer, no ext ension will be grant ed by t he Commissioner.
If an ext ension is grant ed, t he Commissioner may require t he execut or, or administ rat or, or
benef iciary, as t he case may be, t o f urnish a bond in such amount , not exceeding double t he amount
of t he t ax and wit h such suret ies as t he Commissioner deems necessary, condit ioned upon t he
payment of t he said t ax in accordance wit h t he t erms of t he ext ension.
(C) Liability for Payment T he est at e t ax imposed by Sect ion 84 shall be paid by t he execut or or
administ rat or bef ore delivery t o any benef iciary of his dist ribut ive share of t he est at e. Such
benef iciary shall t o t he ext ent of his dist ribut ive share of t he est at e, be subsidiarily liable f or t he
payment of such port ion of t he est at e t ax as his dist ribut ive share bears t o t he value of t he t ot al net
est at e.
For t he purpose of t his Chapt er, t he t erm execut or or administ rat or means t he execut or or
administ rat or of t he decedent , or if t here is no execut or or administ rat or appoint ed, qualif ied, and
act ing wit hin t he Philippines, t hen any person in act ual or const ruct ive possession of any propert y of
t he decedent .
Section 92. Discharge of Executor or Administrator from Personal Liability. If t he execut or or
administ rat or makes a writ t en applicat ion t o t he Commissioner f or det erminat ion of t he amount of
t he est at e t ax and discharge f rom personal liabilit y t heref ore, t he Commissioner (as soon as
possible, and in any event wit hin one (1) year af t er t he making of such applicat ion, or if t he applicat ion
is made bef ore t he ret urn is f iled, t hen wit hin one (1) year af t er t he ret urn is f iled, but not af t er t he
expirat ion of t he period prescribed f or t he assessment of t he t ax in Sect ion 203 shall not not if y t he
execut or or administ rat or of t he amount of t he t ax. T he execut or or administ rat or, upon payment of
t he amount of which he is not if ied, shall be discharged f rom personal liabilit y f or any def iciency in t he
t ax t hereaf t er f ound t o be due and shall be ent it led t o a receipt or writ ing showing such discharge.
Section 93. Definition of Deficiency. As used in t his Chapt er, t he t erm def iciency means:
(a) T he amount by which t he t ax imposed by t his Chapt er exceeds t he amount shown as t he t ax by
t he execut or, administ rat or or any of t he heirs upon his ret urn; but t he amount s so shown on t he
ret urn shall f irst be increased by t he amount s previously assessed (or collect ed wit hout assessment )
as a def iciency and decreased by t he amount previously abat ed, ref unded or ot herwise repaid in
respect of such t ax; or
(b) If no amount is shown as t he t ax by t he execut or, administ rat or or any of t he heirs upon his ret urn,
or if no ret urn is made by t he execut or, administ rat or, or any heir, t hen t he amount by which t he t ax
exceeds t he amount s previously assessed (or collect ed wit hout assessment ) as a def iciency; but
such amount s previously assessed or collect ed wit hout assessment shall f irst be decreased by t he
amount s previously abat ed, ref unded or ot herwise repaid in respect of such t ax.
Section 94. Payment before Delivery by Executor or Administrator. No judge shall aut horize t he
execut or or judicial administ rat or t o deliver a dist ribut ive share t o any part y int erest ed in t he est at e
unless a cert if icat ion f rom t he Commissioner t hat t he est at e t ax has been paid is shown.
Section 95. Duties of Certain Officers and Debtors. Regist ers of Deeds shall not regist er in t he
Regist ry of Propert y any document t ransf erring real propert y or real right s t herein or any chat t el
mort gage, by way of gif t s int er vivos or mort is causa, legacy or inherit ance, unless a cert if icat ion
f rom t he Commissioner t hat t he t ax f ixed in t his T it le and act ually due t hereon had been paid is show,
and t hey shall immediat ely not if y t he Commissioner, Regional Direct or, Revenue Dist rict Of f icer, or
Revenue Collect ion Of f icer or T reasurer of t he cit y or municipalit y where t heir of f ices are locat ed, of
t he non payment of t he t ax discovered by t hem. Any lawyer, not ary public, or any government of f icer
who, by reason of his of f icial dut ies, int ervenes in t he preparat ion or acknowledgment of document s
regarding part it ion or disposal of donat ion int ervivos or mort is causa, legacy or inherit ance, shall have
t he dut y of f urnishing t he Commissioner, Regional Direct or, Revenue Dist rict Of f icer or Revenue
Collect ion Of f icer of t he place where he may have his principal of f ice, wit h copies of such document s
and any inf ormat ion what soever which may f acilit at e t he collect ion of t he af orement ioned t ax.
Neit her shall a debt or of t he deceased pay his debt s t o t he heirs, legat ee, execut or or administ rat or
of his credit or, unless t he cert if icat ion of t he Commissioner t hat t he t ax f ixed in t his Chapt er had
been paid is shown; but he may pay t he execut or or judicial administ rat or wit hout said cert if icat ion if
t he credit is included in t he invent ory of t he est at e of t he deceased.
Section 96. Restitution of Tax Upon Satisfaction of Outstanding Obligations. If af t er t he payment of t he
est at e t ax, new obligat ions of t he decedent shall appear, and t he persons int erest ed shall have
sat isf ied t hem by order of t he court , t hey shall have a right t o t he rest it ut ion of t he proport ional part
of t he t ax paid.
Section 97. Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights. T here shall not be
t ransf erred t o any new owner in t he books of any corporat ion, sociedad anonima, part nership,
business, or indust ry organized or est ablished in t he Philippines any share, obligat ion, bond or right by
way of gif t int er vivos or mort is causa, legacy or inherit ance, unless a cert if icat ion f rom t he
Commissioner t hat t he t axes f ixed in t his T it le and due t hereon have been paid is shown.
If a bank has knowledge of t he deat h of a person, who maint ained a bank deposit account alone, or
joint ly wit h anot her, it shall not allow any wit hdrawal f rom t he said deposit account , unless t he
Commissioner has cert if ied t hat t he t axes imposed t hereon by t his T it le have been paid: Provided,
however, T hat t he administ rat or of t he est at e or any one (1) of t he heirs of t he decedent may, upon
aut horizat ion by t he Commissioner, wit hdraw an amount not exceeding T went y t housand pesos
(P20,000) wit hout t he said cert if icat ion. For t his purpose, all wit hdrawal slips shall cont ain a st at ement
t o t he ef f ect t hat all of t he joint deposit ors are st ill living at t he t ime of wit hdrawal by any one of t he
joint deposit ors and such st at ement shall be under oat h by t he said deposit ors.
CHAPT ER II DONORS T AX
Section 98. Imposition of Tax. (A) T here shall be levied, assessed, collect ed and paid upon t he t ransf er by any person, resident or
nonresident , of t he propert y by gif t , a t ax, comput ed as provided in Sect ion 99.
(B) T he t ax shall apply whet her t he t ransf er is in t rust or ot herwise, whet her t he gif t is direct or
indirect , and whet her t he propert y is real or personal, t angible or int angible.
Section 99. Rates of Tax Payable by Donor. (A) In General. T he t ax f or each calendar year shall be comput ed on t he basis of t he t ot al net gif t s
made during t he calendar year in accordance wit h t he f ollowing schedule:
If t he net gif t is:

Over
But Not
Over
The Tax
shall be
Plus
Of the Excess
Over
P 100,000
Exempt
P 100,000
200,000
2%
P100,000
200,000
500,000
2,000
4%
200,000
500,000
1,000,000
14,000
6%
500,000
1,000,000
3,000,000
44,000
8%
1,000,000
3,000,000
5,000,000
204,000
10%
3,000,000
5,000,000
10,000,000
404,000
12%
5,000,000
1,004,000
15%
10,000,000
10,000,000
(B) Tax Payable by Donor if Donee is a Stranger. When t he donee or benef iciary is st ranger, t he t ax
payable by t he donor shall be t hirt y percent (30%) of t he net gif t s. For t he purpose of t his t ax, a
st ranger, is a person who is not a:
(1) Brot her, sist er (whet her by whole or half -blood), spouse, ancest or and lineal descendant ; or
(2) Relat ive by consanguinit y in t he collat eral line wit hin t he f ourt h degree of relat ionship.
(C) Any cont ribut ion in cash or in kind t o any candidat e, polit ical part y or coalit ion of part ies f or
campaign purposes shall be governed by t he Elect ion Code, as amended.
Section 100. Transfer for Less Than Adequate and full Consideration. Where propert y, ot her t han real
propert y ref erred t o in Sect ion 24(D), is t ransf erred f or less t han an adequat e and f ull considerat ion in
money or moneys wort h, t hen t he amount by which t he f air market value of t he propert y exceeded
t he value of t he considerat ion shall, f or t he purpose of t he t ax imposed by t his Chapt er, be deemed
a gif t , and shall be included in comput ing t he amount of gif t s made during t he calendar year.
Section 101. Exemption of Certain Gifts. T he f ollowing gif t s or donat ions shall be exempt f rom t he
t ax provided f or in t his Chapt er:
(A) In t he Case of Gif t s Made by a Resident . (1) Dowries or gif t s made on account of marriage and bef ore it s celebrat ion or wit hin one year
t hereaf t er by parent s t o each of t heir legit imat e, recognized nat ural, or adopt ed children t o t he
ext ent of t he f irst T en t housand pesos (P10,000):
(2) Gif t s made t o or f or t he use of t he Nat ional Government or any ent it y creat ed by any of it s
agencies which is not conduct ed f or prof it , or t o any polit ical subdivision of t he said Government ; and
(3) Gif t s in f avor of an educat ional and/or charit able, religious, cult ural or social welf are corporat ion,
inst it ut ion, accredit ed nongovernment organizat ion, t rust or philant hrophic organizat ion or research
inst it ut ion or organizat ion: Provided, however, T hat not more t han t hirt y percent (30%) of said gif t s
shall be used by such donee f or administ rat ion purposes. For t he purpose of t he exempt ion, a nonprof it educat ional and/or charit able corporat ion, inst it ut ion, accredit ed nongovernment organizat ion,
t rust or philant hrophic organizat ion and/or research inst it ut ion or organizat ion is a school, college or
universit y and/or charit able corporat ion, accredit ed nongovernment organizat ion, t rust or
philant hrophic organizat ion and/or research inst it ut ion or organizat ion, incorporat ed as a nonst ock
ent it y, paying no dividends, governed by t rust ees who receive no compensat ion, and devot ing all it s
income, whet her st udent s f ees or gif t s, donat ion, subsidies or ot her f orms of philant hrophy, t o t he
accomplishment and promot ion of t he purposes enumerat ed in it s Art icles of Incorporat ion.
(B) In t he Case of Gif t s Made by a Nonresident not a Cit izen of t he Philippines. (1) Gif t s made t o or f or t he use of t he Nat ional Government or any ent it y creat ed by any of it s
agencies which is not conduct ed f or prof it , or t o any polit ical subdivision of t he said Government .
(2) Gif t s in f avor of an educat ional and/or charit able, religious, cult ural or social welf are corporat ion,
inst it ut ion, f oundat ion, t rust or philant hrophic organizat ion or research inst it ut ion or organizat ion:
Provided, however, T hat not more t han t hirt y percent (30% of said gif t s shall be used by such donee
f or administ rat ion purposes.
(C) T ax Credit f or Donors T axes Paid t o a Foreign Count ry. (1) In General. T he t ax imposed by t his T it le upon a donor who was a cit izen or a resident at t he
t ime of donat ion shall be credit ed wit h t he amount of any donors t ax of any charact er and
descript ion imposed by t he aut horit y of a f oreign count ry.
(a) T he amount of t he credit in respect t o t he t ax paid t o any count ry shall not exceed t he same
proport ion of t he t ax against which such credit is t aken, which t he net gif t s sit uat ed wit hin such
count ry t axable under t his T it le bears t o his ent ire net gif t s; and
credit is t aken, which t he donors net gif t s sit uat ed out side t he Philippines t axable under t his t it le
bears t o his ent ire net gif t s.
Section 102. Valuation of Gifts Made in Property. If t he gif t is made in propert y, t he f air market value
t hereof at t he t ime of t he gif t shall be considered t he amount of t he gif t . In case of real propert y, t he
provisions of Sect ion 88(B) shall apply t o t he valuat ion t hereof .
Section 103. Filing of Return and Payment of Tax. (A) Requirements. any individual who makes any t ransf er by gif t (except t hose which, under Sect ion
101, are exempt f rom t he t ax provided f or in t his Chapt er) shall, f or t he purpose of t he said t ax, make
a ret urn under oat h in duplicat e. T he ret urn shall se f ort h:
(1) Each gif t made during t he calendar year which is t o be included in comput ing net gif t s;
(2) T he deduct ions claimed and allowable;
(3) Any previous net gif t s made during t he same calendar year;
(4) T he name of t he donee; and
(5) Such f urt her inf ormat ion as may be required by rules and regulat ions made pursuant t o law.
(B) T ime and Place of Filing and Payment . T he ret urn of t he donor required in t his Sect ion shall be
f iled wit hin t hirt y (30) days af t er t he dat e t he gif t is made and t he t ax due t hereon shall be paid at t he
t ime of f iling. Except in cases where t he Commissioner ot herwise permit s, t he ret urn shall be f iled and
t he t ax paid t o an aut horized agent bank, t he Revenue Dist rict Of f icer, Revenue Collect ion Of f icer or
duly aut horized T reasurer of t he cit y or municipalit y where t he donor was domiciled at t he t ime of t he
t ransf er, or if t here be no legal residence in t he Philippines, wit h t he Of f ice of t he Commissioner. In
t he case of gif t s made by a nonresident , t he ret urn may be f iled wit h t he Philippine Embassy or
Consulat e in t he count ry where he is domiciled at t he t ime of t he t ransf er, or direct ly wit h t he Of f ice
of t he Commissioner.
Section 104. Definitions. For purposes of t his T it le, t he t erms gross est at e and gif t s include real
and personal propert y, whet her t angible or int angible, or mixed, wherever sit uat ed: Provided,
however, T hat where t he decedent or donor was a nonresident alien at t he t ime of his deat h or
donat ion, as t he case may be, his real and personal propert y so t ransf erred but which are sit uat ed
out side t he Philippines shall not be included as part of his gross est at e or gross gif t : Provided,
f urt her, T hat f ranchise which must be exercised in t he Philippines; shares, obligat ions or bonds issued
by any corporat ion or sociedad anonima organized or const it ut ed in t he Philippines in accordance wit h
it s laws; shares, obligat ions or bonds by any f oreign corporat ion eight y-f ive percent (85%) of t he
business of which is locat ed in t he Philippines; shares, obligat ions or bonds issued by any f oreign
corporat ion if such shares, obligat ions or bonds have acquired a business sit us in t he Philippines;
shares or right s in any part nership, business or indust ry est ablished in t he Philippines, shall be
considered as sit uat ed in t he Philippines: Provided, st ill f urt her, t hat no t ax shall be collect ed under
t his T it le in respect of int angible personal propert y: (a) if t he decedent at t he t ime of his deat h or t he
donor at t he t ime of t he donat ion was a cit izen and resident of a f oreign count ry which at t he t ime of
his deat h or donat ion did not impose a t ransf er t ax of any charact er, in respect of int angible personal
propert y of cit izens of t he Philippines not residing in t hat f oreign count ry, or (b) if t he laws of t he
f oreign count ry of which t he decedent or donor was a cit izen and resident at t he t ime of his deat h or
donat ion allows a similar exempt ion f rom t ransf er or deat h t axes of every charact er or descript ion in
respect of int angible personal propert y owned by cit izens of t he Philippines not residing in t hat
f oreign count ry.
T he t erm def iciency means: (a) t he amount by which t ax imposed by t his Chapt er exceeds t he
amount shown as t he t ax by t he donor upon his ret urn; but t he amount so shown on t he ret urn shall
f irst be increased by t he amount previously assessed (or Collect ed wit hout assessment ) as a
def iciency, and decreased by t he amount s previously abat ed, ref unded or ot herwise repaid in
respect of such t ax, or (b) if no amount is shown as t he t ax by t he donor, t hen t he amount by which
t he t ax exceeds t he amount s previously assessed, (or collect ed wit hout assessment ) as a
def iciency, but such amount s previously assessed, or collect ed wit hout assessment , shall f irst be
decreased by t he amount previously abat ed, ref unded or ot herwise repaid in respect of such t ax.
T IT LE IV
VALUE- ADDED T AX
CHAPT ER I IMPOSIT ION OF T AX
Section 105. Persons Liable. Any person who, in t he course of t rade or business, sells bart ers,
exchanges, leases goods or propert ies, renders services, and any person who import s goods shall be
subject t o t he value-added t ax (VAT ) imposed in Sect ions 106 t o 108 of t his Code.
T he value-added t ax is an indirect t ax and t he amount of t ax may be shif t ed or passed on t o t he
buyer, t ransf eree or lessee of t he goods, propert ies or services. T his rule shall likewise apply t o
exist ing cont ract s of sale or lease of goods, propert ies or services at t he t ime of t he ef f ect ivit y of
Republic Act No. 7716.
T he phrase in t he course of t rade or business means t he regular conduct or pursuit of a commercial
or an economic act ivit y, including t ransact ions incident al t heret o, by any person regardless of
whet her or not t he person engaged t herein is a nonst ock, nonprof it privat e organizat ion (irrespect ive
of t he disposit ion of it s net income and whet her or not it sells exclusively t o members or t heir guest s),
or government ent it y.
T he rule of regularit y, t o t he cont rary not wit hst anding, services as def ined in t his Code rendered in
t he Philippines by nonresident f oreign persons shall be considered as being course of t rade or
business.
business.
Section 106. Value-Added Tax on Sale of Goods or Properties. (A) Rat e and Base of T ax. T here shall be levied, assessed and collect ed on every sale, bart er or
exchange of goods or propert ies, value-added t ax equivalent t o t en percent (10%) of t he gross
selling price or gross value in money of t he goods or propert ies sold, bart ered or exchanged, such t ax
t o be paid by t he seller or t ransf eror.
(1) T he t erm goods or propert ies shall mean all t angible and int angible object s which are capable of
pecuniary est imat ion and shall include:
(a) Real propert ies held primarily f or sale t o cust omers or held f or lease in t he ordinary course of
t rade or business;
(b) T he right or t he privilege t o use pat ent , copyright , design or model, plan, secret f ormula or
process, goodwill, t rademark, t rade brand or ot her like propert y or right ;
(c) T he right or t he privilege t o use in t he Philippines of any indust rial, commercial or scient if ic
equipment ;
(d) T he right or t he privilege t o use mot ion pict ure f ilms, t apes and discs; and
(e) Radio, t elevision, sat ellit e t ransmission and cable t elevision t ime.
T he t erm gross selling price means t he t ot al amount of money or it s equivalent which t he purchaser
pays or is obligat ed t o pay t o t he seller in considerat ion of t he sale, bart er or exchange of t he goods
or propert ies, excluding t he value-added t ax. T he excise t ax, if any, on such goods or propert ies shall
f orm part of t he gross selling price.
(2) T he f ollowing sales by VAT -regist ered persons shall be subject t o zero percent (0%) rat e:
(a) Export Sales. T he t erm export sales means:
(1) T he sale and act ual shipment of goods f rom t he Philippines t o a f oreign count ry, irrespect ive of
any shipping arrangement t hat may be agreed upon which may inf luence or det ermine t he t ransf er of
ownership of t he goods so export ed and paid f or in accept able f oreign currency or it s equivalent in
goods or services, and account ed f or in accordance wit h t he rules and regulat ions of t he Bangko
Sent ral ng Pilipinas (BSP);
(2) Sale of raw mat erials or packaging mat erials t o a nonresident buyer f or delivery t o a resident local
export -orient ed ent erprise t o be used in manuf act uring, processing, packing or repacking in t he
Philippines of t he said buyers goods and paid f or in accept able f oreign currency and account ed f or in
accordance wit h t he rules and regulat ions of t he Bangko Sent ral ng Pilipinas (BSP);
(3)Saleof raw mat erials or packaging mat erials t o export -orient ed ent erprise whose export sales
exceed sevent y percent (70%) of t ot al annual product ion;
(4)Saleof gold t o t he Bangko Sent ral ng Pilipinas (BSP); and
(5) T hose considered export sales under Execut ive Order NO. 226, ot herwise known as t he Omnibus
Invest ment Code of 1987, and ot her special laws.
(b) Foreign Currency Denominat edSale. T he phrase f oreign currency denominat ed sale means sale
t o a nonresident of goods, except t hose ment ioned in Sect ions 149 and 150, assembled or
manuf act ured in t he Philippines f or delivery t o a resident in t he Philippines, paid f or in accept able
f oreign currency and account ed f or in accordance wit h t he rules and regulat ions of t he Bangko
Sent ral ng Pilipinas (BSP).
(c) Sales t o persons or ent it ies whose exempt ion under special laws or int ernat ional agreement s t o
which t he Philippines is a signat ory ef f ect ively subject s such sales t o zero rat e.
(B) T ransact ions DeemedSale. T he f ollowing t ransact ions shall be deemed sale:
(1) T ransf er, use or consumpt ion not in t he course of business of goods or propert ies originally
int ended f or sale or f or use in t he course of business;
(2) Dist ribut ion or t ransf er t o:
(a) Shareholders or invest ors as share in t he prof it s of t he VAT -regist ered persons; or
(b) Credit ors in payment of debt ;
(3) Consignment of goods if act ual sale is not made wit hin sixt y (60) days f ollowing t he dat e such
goods were consigned; and
(4) Ret irement f rom or cessat ion of business, wit h respect t o invent ories of t axable goods exist ing as
of such ret irement or cessat ion.
(C) Changes in or Cessat ion of St at us of a VAT -regist ered Person. T he t ax imposed in Subsect ion
(A) of t his Sect ion shall also apply t o goods disposed of or exist ing as of a cert ain dat e if under
circumst ances t o be prescribed in rules and regulat ions t o be promulgat ed by t he Secret ary of
Finance, upon recommendat ion of t he Commissioner, t he st at us of a person as a VAT -regist ered
person changes or is t erminat ed.
(D) Det erminat ion of t he T ax. (1) T he t ax shall be comput ed by mult iplying t he t ot al amount indicat ed in t he invoice by one-elevent h
(1/11).
(2) Sales Ret urns, Allowances and Sales Discount s. T he value of goods or propert ies sold and
subsequent ly ret urned or f or which allowances were grant ed by a VAT -regist ered person may be
deduct ed f rom t he gross sales or receipt s f or t he quart er in which a ref und is made or a credit
memorandum or ref und is issued. Sales discount grant ed and indicat ed in t he invoice at t he t ime of
sale and t he grant of which does not depend upon t he happening of a f ut ure event may be excluded
f rom t he gross sales wit hin t he same quart er it was given.
(3) Aut horit y of t he Commissioner t o Det ermine t he Appropriat e T ax Base. T he Commissioner shall,
by rules and regulat ions prescribed by t he Secret ary of Finance, det ermine t he appropriat e t ax base
in cases where a t ransact ion is deemed a sale, bart er or exchange of goods or propert ies under
Subsect ion (B) hereof , or where t he gross selling price is unreasonably lower t han t he act ual market
value.
Section 107. Value-Added Tax on Importation of Goods. (A) In General. T here shall be levied, assessed and collect ed on every import at ion of goods a valueadded t ax equivalent t o t en percent (10%) based on t he t ot al value used by t he Bureau of Cust oms
in det ermining t arif f and cust oms dut ies plus cust oms dut ies, excise t axes, if any, and ot her charges,
such t ax t o be paid by t he import er prior t o t he release of such goods f rom cust oms cust ody:
Provided, T hat where t he cust oms dut ies are det ermined on t he basis of t he quant it y or volume of
t he goods, t he value-added t ax shall be based on t he landed cost plus excise t axes, If any.
(B) Transfer of Goods by Tax-exempt Persons. In t he case of t ax-f ree import at ion of goods int o t he
Philippines by persons, ent it ies or agencies exempt f rom t ax where such goods are subsequent ly
sold, t ransf erred or exchanged in t he Philippines t o non-exempt persons or ent it ies, t he purchasers,
t ransf erees or recipient s shall be considered t he import ers t hereof , who shall be liable f or any int ernal
revenue t ax on such import at ion. T he t ax due on such import at ion shall const it ut e a lien on t he goods
superior t o all charges or liens on t he goods, irrespect ive of t he possessor t hereof .
Section 108. Value-added Tax on Sale of Services and Use or Lease of Properties. (A) Rate and Base of Tax. T here shall be levied, assessed and collect ed, a value-added t ax
equivalent t o t en percent (10%) of gross receipt s derived f rom t he sale or exchange of services,
including t he use or lease of propert ies.
T he phrase sale or exchange of services means t he perf ormance of all kinds or services in t he
Philippines f or ot hers f or a f ee, remunerat ion or considerat ion, including t hose perf ormed or rendered
by const ruct ion and service cont ract ors; st ock, real est at e, commercial, cust oms and immigrat ion
brokers; lessors of propert y, whet her personal or real; warehousing services; lessors or dist ribut ors of
cinemat ographic f ilms; persons engaged in milling processing, manuf act uring or repacking goods f or
ot hers; propriet ors, operat ors or keepers of hot els, mot els, rest houses, pension houses, inns, resort s;
propriet ors or operat ors of rest aurant s, ref reshment parlors, caf es and ot her eat ing places, including
clubs and cat erers; dealers in securit ies; lending invest ors; t ransport at ion cont ract ors on t heir
t ransport of goods or cargoes, including persons who t ransport goods or cargoes f or hire anot her
domest ic common carriers by land, air and wat er relat ive t o t heir t ransport of goods or cargoes;
services of f ranchise grant ees of t elephone and t elegraph, radio and t elevision broadcast ing and all
ot her f ranchise grant ees except t hose under Sect ion 119 of t his Code; services of banks, non-bank
f inancial int ermediaries and f inance companies; and non-lif e insurance companies (except t heir crop
insurances), including suret y, f idelit y, indemnit y and bonding companies; and similar services
regardless of whet her or not t he perf ormance t hereof calls f or t he exercise or use of t he physical or
ment al f acult ies. T he phrase sale or exchange of services shall likewise include:
(1) T he lease or t he use of or t he right or privilege t o use any copyright , pat ent , design or model, plan
secret f ormula or process, goodwill, t rademark, t rade brand or ot her like propert y or right ;
(2) T he lease of t he use of , or t he right t o use of any indust rial, commercial or scient if ic equipment ;
(3) T he supply of scient if ic, t echnical, indust rial or commercial knowledge or inf ormat ion;
(4) T he supply of any assist ance t hat is ancillary and subsidiary t o and is f urnished as a means of
enabling t he applicat ion or enjoyment of any such propert y, or right as is ment ioned in subparagraph
(2) or any such knowledge or inf ormat ion as is ment ioned in subparagraph (3);
(5) T he supply of services by a nonresident person or his employee in connect ion wit h t he use of
propert y or right s belonging t o, or t he inst allat ion or operat ion of any brand, machinery or ot her
apparat us purchased f rom such nonresident person.
(6) T he supply of t echnical advice, assist ance or services rendered in connect ion wit h t echnical
management or administ rat ion of any scient if ic, indust rial or commercial undert aking, vent ure, project
or scheme;
(7) T he lease of mot ion pict ure f ilms, f ilms, t apes and discs; and
(8) T he lease or t he use of or t he right t o use radio, t elevision, sat ellit e t ransmission and cable
t elevision t ime.
Lease of propert ies shall be subject t o t he t ax herein imposed irrespect ive of t he place where t he
cont ract of lease or licensing agreement was execut ed if t he propert y is leased or used in t he
Philippines.
T he t erm gross receipt s means t he t ot al amount of money or it s equivalent represent ing t he
cont ract price, compensat ion, service f ee, rent al or royalt y, including t he amount charged f or
mat erials supplied wit h t he services and deposit s and advanced payment s act ually or const ruct ively
received during t he t axable quart er f or t he services perf ormed or t o be perf ormed f or anot her
person, excluding value-added t ax.
(B) Transactions Subject to Zero Percent (0%) Rate T he f ollowing services perf ormed in t he Philippines
by VAT - regist ered persons shall be subject t o zero percent (0%) rat e.
(1) Processing, manuf act uring or repacking goods f or ot her persons doing business out side t he
Philippines which goods are subsequent ly export ed, where t he services are paid f or in accept able
f oreign currency and account ed f or in accordance wit h t he rules and regulat ions of t he Bangko
Sent ral ng Pilipinas (BSP);
(2) Services ot her t han t hose ment ioned in t he preceding paragraph, t he considerat ion f or which is
paid f or in accept able f oreign currency and account ed f or in accordance wit h t he rules and
regulat ions of t he Bangko Sent ral ng Pilipinas (BSP);
(3) Services rendered t o persons or ent it ies whose exempt ion under special laws or int ernat ional
agreement s t o which t he Philippines is a signat ory ef f ect ively subject s t he supply of such services t o
zero percent (0%) rat e;
(4) Services rendered t o vessels engaged exclusively in int ernat ional shipping; and
(5) Services perf ormed by subcont ract ors and/or cont ract ors in processing, convert ing, of
manuf act uring goods f or an ent erprise whose export sales exceed sevent y percent (70%) of t ot al
annual product ion.
(C) Determination of the Tax. T he t ax shall be comput ed by mult iplying t he t ot al amount indicat ed in
t he of f icial receipt by one-elevent h (1/11).
Section 109. Exempt Transactions. T he f ollowing shall be exempt f rom t he value-added t ax:
(a)Saleof nonf ood agricult ural product s; marine and f orest product s in t heir original st at e by t he
primary producer or t he owner of t he land where t he same are produced;
(b)Saleof cot t on seeds in t heir original st at e; and copra;
(c) Sale or import at ion of agricult ural and marine f ood product s in t heir original st at e, livest ock and
poult ry of or king generally used as, or yielding or producing f oods f or human consumpt ion; and
breeding st ock and genet ic mat erials t heref or.
Product s classif ied under t his paragraph and paragraph (a) shall be considered in t heir original st at e
even if t hey have undergone t he simple processes of preparat ion or preservat ion f or t he market ,
such as f reezing, drying, salt ing, broiling, roast ing, smoking or st ripping.
Polished and/or husked rice, corn grit s, raw cane sugar and molasses, and ordinary salt shall be
considered in t heir original st at e;
(d) Sale or import at ion of f ert ilizers; seeds, seedlings and f ingerlings; f ish, prawn, livest ock and
poult ry f eeds, including ingredient s, whet her locally produced or import ed, used in t he manuf act ure of
f inished f eeds (except specialt y f eeds f or race horses, f ight ing cocks, aquarium f ish, zoo animals and
ot her animals generally considered as pet s);
(e)Saleor import at ion of coal and nat ural gas, in what ever f orm or st at e, and pet roleum product s
(except lubricat ing oil, processed gas, grease, wax and pet rolat um) subject t o excise t ax imposed
under T it le VI;
(f ) Sale or import at ion of raw mat erials t o be used by t he buyer or import er himself in t he
manuf act ure of pet roleum product s subject t o excise t ax, except lubricat ing oil, processed gas,
grease, wax and pet rolat um;
(g) Import at ion of passenger and/or cargo vessels of more t han f ive t housand t ons (5,000) whet her
coast wise or ocean-going, including engine and spare part s of said vessel t o be used by t he import er
himself as operat or t hereof ;
(h) Import at ion of personal and household ef f ect s belonging t o t he resident s of t he Philippines
ret urning f rom abroad and nonresident cit izens coming t o reset t le in t he Philippines: Provided, T hat
such goods are exempt f rom cust oms dut ies under t he T arif f and Cust oms Code of t he Philippines;
(i) Import at ion of prof essional inst rument s and implement s, wearing apparel, domest ic animals, and
personal household ef f ect s (except any vehicle, vessel, aircraf t , machinery ot her goods f or use in t he
manuf act ure and merchandise of any kind in commercial quant it y) belonging t o persons coming t o
set t le in t he Philippines, f or t heir own use and not f or sale, bart er or exchange, accompanying such
persons, or arriving wit hin ninet y (90) days bef ore or af t er t heir arrival, upon t he product ion of
evidence sat isf act ory t o t he Commissioner, t hat such persons are act ually coming t o set t le in t he
Philippines and t hat t he change of residence is bona f ide;
(j) Services subject t o percent age t ax under T it le V;
(k) Services by agricult ural cont ract growers and milling f or ot hers of palay int o rice, corn int o grit s and
sugar cane int o raw sugar;
(l) Medical, dent al, hospit al and vet erinary services subject t o t he provisions of Sect ion 17 of Republic
Act No. 7716, as amended:
(m) Educat ional services rendered by privat e educat ional inst it ut ions, duly accredit ed by t he
Depart ment of Educat ion, Cult ure and Sport s (DECS) and t he Commission on Higher Educat ion
(CHED), and t hose rendered by government educat ional inst it ut ions;
(n)Saleby t he art ist himself of his works of art , lit erary works, musical composit ions and similar
creat ions, or his services perf ormed f or t he product ion of such works;
(o) Services rendered by individuals pursuant t o an employer-employee relat ionship;
(p) Services rendered by regional or area headquart ers est ablished in t he Philippines by mult inat ional
corporat ions which act as supervisory, communicat ions and coordinat ing cent ers f or t heir af f iliat es,
subsidiaries or branches in t he Asia-Pacif ic Region and do not earn or derive income f rom t he
Philippines;
(q) T ransact ions which are exempt under int ernat ional agreement s t o which t he Philippines is a
signat ory or under special laws, except t hose under President ial Decree Nos. 66, 529 and 1590;
(r) Sales by agricult ural cooperat ives duly regist ered wit h t he Cooperat ive Development Aut horit y t o
t heir members as well as sale of t heir produce, whet her in it s original st at e or processed f orm, t o nonmembers; t heir import at ion of direct f arm input s, machineries and equipment , including spare part s
t hereof , t o be used direct ly and exclusively in t he product ion and/or processing of t heir produce;
(s) Sales by elect ric cooperat ives duly regist ered wit h t he Cooperat ive Development aut horit y or
Nat ional Elect rif icat ion Administ rat ion, relat ive t o t he generat ion and dist ribut ion of elect ricit y as well
as t heir import at ion of machineries and equipment , including spare part s, which shall be direct ly used
in t he generat ion and dist ribut ion of elect ricit y;
(t ) Gross receipt s f rom lending act ivit ies by credit or mult i-purpose cooperat ives duly regist ered wit h
t he Cooperat ive Development Aut horit y whose lending operat ion is limit ed t o t heir members;
(u) Sales by non-agricult ural, non- elect ric and non-credit cooperat ives duly regist ered wit h t he
Cooperat ive Development Aut horit y: Provided, T hat t he share capit al cont ribut ion of each member
does not exceed Fif t een t housand pesos (P15,000) and regardless of t he aggregat e capit al and net
surplus rat ably dist ribut ed among t he members;
(v) Export sales by persons who are not VAT -regist ered;
(w) Sale of real propert ies not primarily held f or sale t o cust omers or held f or lease in t he ordinary
course of t rade or business or real propert y ut ilized f or low-cost and socialized housing as def ined by
Republic Act No. 7279, ot herwise known as t he Urban Development and Housing Act of 1992, and
ot her relat ed laws, house and lot and ot her resident ial dwellings valued at One million pesos
(P1,000,000) and below: Provided, T hat not lat er t han January 31st of t he calendar year subsequent
t o t he ef f ect ivit y of t his Act and each calendar year t hereaf t er, t he amount of One million pesos
(P1,000,000) shall be adjust ed t o it s present value using t he Consumer Price Index, as published by
t he nat ional St at ist ics Of f ice (NSO);
(x) Lease of a resident ial unit wit h a mont hly rent al not exceeding Eight t housand pesos(P8,000);
Provided, T hat not lat er t han January 31st of t he calendar year subsequent t o t he ef f ect ivit y of
Republic Act No. 8241 and each calendar year t hereaf t er, t he amount of Eight t housand pesos
(P8,000) shall be adjust ed t o it s present value using t he Consumer Price Index as published by t he
Nat ional St at ist ics Of f ice (NS0);
(y) Sale, import at ion, print ing or publicat ion of books and any newspaper, magazine review or bullet in
which appears at regular int ervals wit h f ixed prices f or subscript ion and sale and which is not devot ed
principally t o t he publicat ion of paid advert isement s; and
(z) Sale or lease of goods or propert ies or t he perf ormance of services ot her t han t he t ransact ions
ment ioned in t he preceding paragraphs, t he gross annual sales and/or receipt s do not exceed t he
amount of Five hundred f if t y t housand pesos (P550,000): Provided, T hat not lat er t han January 31st
of t he calendar year subsequent t o t he ef f ect ivit y of Republic Act No. 8241 and each calendar year
t hereaf t er, t he amount of Five hundred f if t y t housand pesos (550,000) shall be adjust ed t o it s present
value using t he Consumer Price Index, as published by t he Nat ional St at ist ics Of f ice (NSO).
T he f oregoing exempt ions t o t he cont rary not wit hst anding, any person whose sale of goods or
propert ies or services which are ot herwise not subject t o VAT , but who issues a VAT invoice or
receipt t heref or shall, in addit ion t o his liabilit y t o ot her applicable percent age t ax, if any, be liable t o
t he t ax imposed in Sect ion 106 or 108 wit hout t he benef it of input t ax credit , and such t ax shall also
be recognized as input t ax credit t o t he purchaser under Sect ion 110, all of t his Code.
Section 110. Tax Credits. A. Creditable Input Tax. (1) Any input t ax evidenced by a VAT invoice or of f icial receipt issued in accordance wit h Sect ion 113
hereof on t he f ollowing t ransact ions shall be credit able against t he out put t ax:
(a) Purchase or import at ion of goods:
(i) For sale; or
(ii) For conversion int o or int ended t o f orm part of a f inished product f or sale including packaging
mat erials; or
(iii) For use as supplies in t he course of business; or
(iv) For use as mat erials supplied in t he sale of service; or
(v) For use in t rade or business f or which deduct ion f or depreciat ion or amort izat ion is allowed under
t his Code, except aut omobiles, aircraf t and yacht s.
(b) Purchase of services on which a value-added t ax has been act ually paid.
(2) T he input t ax on domest ic purchase of goods or propert ies shall be credit able:
(a) T o t he purchaser upon consummat ion of sale and on import at ion of goods or propert ies; and
(b) T o t he import er upon payment of t he value-added t ax prior t o t he release of t he goods f rom t he
cust ody of t he Bureau of Cust oms.
However, in t he case of purchase of services, lease or use of propert ies, t he input t ax shall be
credit able t o t he purchaser, lessee or licensee upon payment of t he compensat ion, rent al, royalt y or
f ee.
(3) A VAT -regist ered person who is also engaged in t ransact ions not subject t o t he value-added t ax
shall be allowed t ax credit as f ollows:
(a) T ot al input t ax which can be direct ly at t ribut ed t o t ransact ions subject t o value-added t ax; and
(b) A rat able port ion of any input t ax which cannot be direct ly at t ribut ed t o eit her act ivit y.
T he t erm input t ax means t he value-added t ax due f rom or paid by a VAT -regist ered person in t he
course of his t rade or business on import at ion of goods or local purchase of goods or services,
including lease or use of propert y, f rom a VAT -regist ered person. It shall also include t he t ransit ional
input t ax det ermined in accordance wit h Sect ion 111 of t his Code.
T he t erm out put t ax means t he value-added t ax due on t he sale or lease of t axable goods or
propert ies or services by any person regist ered or required t o regist er under Sect ion 236 of t his Code.
(B) Excess Output or Input Tax. If at t he end of any t axable quart er t he out put t ax exceeds t he input
t ax, t he excess shall be paid by t he Vat -regist ered person. If t he input t ax exceeds t he out put t ax,
t he excess shall be carried over t o t he succeeding quart er or quart ers. any input t ax at t ribut able t o
t he purchase of capit al goods or t o zero-rat ed sales by a VAT -regist ered person may at his opt ion
be ref unded or credit ed against ot her int ernal revenue t axes, subject t o t he provisions of Sect ion 112.
(C) Determination of Creditable Input Tax. T he sum of t he excess input t ax carried over f rom t he
preceding mont h or quart er and t he input t ax credit able t o a VAT -regist ered person during t he
t axable mont h or quart er shall be reduced by t he amount of claim f or ref und or t ax credit f or valueadded t ax and ot her adjust ment s, such as purchase ret urns or allowances and input t ax at t ribut able
t o exempt sale.
T he claim f or t ax credit ref erred t o in t he f oregoing paragraph shall include not only t hose f iled wit h
t he Bureau of Int ernal Revenue but also t hose f iled wit h ot her government agencies, such as t he
Board of Invest ment s t he Bureau of Cust oms.
Section 111. Transitional/Presumptive Input Tax Credits. (A) Transitional Input Tax Credits. A person who becomes liable t o value-added t ax or any person who
elect s t o be a VAT -regist ered person shall, subject t o t he f iling of an invent ory according t o rules and
regulat ions prescribed by t he Secret ary of f inance, upon recommendat ion of t he Commissioner, be
allowed input t ax on his beginning invent ory of goods, mat erials and supplies equivalent f or eight
percent (8%) of t he value of such invent ory or t he act ual value-added t ax paid on such goods,
mat erials and supplies, whichever is higher, which shall be credit able against t he out put t ax.
(B) Presumptive Input Tax Credits. (1) Persons or f irms engaged in t he processing of sardines, mackerel and milk, and in manuf act uring
ref ined sugar and cooking oil, shall be allowed a presumpt ive input t ax, credit able against t he out put
t ax, equivalent t o one and one-half percent (1 1/2%) of t he gross value in money of t heir purchases of
primary agricult ural product s which are used as input s t o t heir product ion.
As used in t his Subsect ion, t he t erm processing shall mean past eurizat ion, canning and act ivit ies
which t hrough physical or chemical process alt er t he ext erior t ext ure or f orm or inner subst ance of a
product in such manner as t o prepare it f or special use t o which it could not have been put in it s
original f orm or condit ion.
(2) Public works cont ract ors shall be allowed a presumpt ive input t ax equivalent t o one and one-half
percent (1 1/2%) of t he cont ract price wit h respect t o government cont ract s only in lieu of act ual input
t axes t heref rom.

Section 112. Refunds or Tax Credits of Input Tax. (A) Zero-rated or Effectively Zero-rated Sales. any VAT -regist ered person, whose sales are zero-rat ed
or ef f ect ively zero-rat ed may, wit hin t wo (2) years af t er t he close of t he t axable quart er when t he
sales were made, apply f or t he issuance of a t ax credit cert if icat e or ref und of credit able input t ax
due or paid at t ribut able t o such sales, except t ransit ional input t ax, t o t he ext ent t hat such input t ax
has not been applied against out put t ax: Provided, however, T hat in t he case of zero-rat ed sales
under Sect ion 106(A)(2)(a)(1), (2) and (B) and Sect ion 108 (B)(1) and (2), t he accept able f oreign
currency exchange proceeds t hereof had been duly account ed f or in accordance wit h t he rules and
regulat ions of t he Bangko Sent ral ng Pilipinas (BSP): Provided, f urt her, T hat where t he t axpayer is
engaged in zero-rat ed or ef f ect ively zero-rat ed sale and also in t axable or exempt sale of goods of
propert ies or services, and t he amount of credit able input t ax due or paid cannot be direct ly and
ent irely at t ribut ed t o any one of t he t ransact ions, it shall be allocat ed proport ionat ely on t he basis of
t he volume of sales.
(B) Capital Goods. A VAT -regist ered person may apply f or t he issuance of a t ax credit cert if icat e or
ref und of input t axes paid on capit al goods import ed or locally purchased, t o t he ext ent t hat such
input t axes have not been applied against out put t axes. T he applicat ion may be made only wit hin t wo
(2) years af t er t he close of t he t axable quart er when t he import at ion or purchase was made.
(C) Cancellation of VAT Registration. A person whose regist rat ion has been cancelled due t o
ret irement f rom or cessat ion of business, or due t o changes in or cessat ion of st at us under Sect ion
106(C) of t his Code may, wit hin t wo (2) years f rom t he dat e of cancellat ion, apply f or t he issuance of
a t ax credit cert if icat e f or any unused input t ax which may be used in payment of his ot her int ernal
revenue t axes.
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. In proper cases, t he
Commissioner shall grant a ref und or issue t he t ax credit cert if icat e f or credit able input t axes wit hin
one hundred t went y (120) days f rom t he dat e of submission of compet e document s in support of t he
applicat ion f iled in accordance wit h Subsect ions (A) and (B) hereof .
In case of f ull or part ial denial of t he claim f or t ax ref und or t ax credit , or t he f ailure on t he part of t he
Commissioner t o act on t he applicat ion wit hin t he period prescribed above, t he t axpayer af f ect ed
may, wit hin t hirt y (30) days f rom t he receipt of t he decision denying t he claim or af t er t he expirat ion
of t he one hundred t went y day-period, appeal t he decision or t he unact ed claim wit h t he Court of T ax
Appeals.(E) Manner of Giving Refund. Ref unds shall be made upon warrant s drawn by t he Commissioner or by
his duly aut horized represent at ive wit hout t he necessit y of being count ersigned by t he Chairman,
Commission on audit , t he provisions of t he Administ rat ive Code of 1987 t o t he cont rary
not wit hst anding: Provided, T hat ref unds under t his paragraph shall be subject t o post audit by t he
Commission on Audit .
CHAPT ER II COMPLIANCE REQUIREMENT S
Section 113. Invoicing and Accounting Requirements for VAT-Registered Persons. (A) Invoicing Requirements. A VAT -regist ered person shall, f or every sale, issue an invoice or receipt .
In addit ion t o t he inf ormat ion required under Sect ion 237, t he f ollowing inf ormat ion shall be indicat ed
in t he invoice or receipt :
(1) A st at ement t hat t he seller is a VAT -regist ered person, f ollowed by his t axpayers ident if icat ion
number (T IN); and
(2) T he t ot al amount which t he purchaser pays or is obligat ed t o pay t o t he seller wit h t he indicat ion
t hat such amount includes t he value-added t ax.
(B) Accounting Requirements. Not wit hst anding t he provisions of Sect ion 233, all persons subject t o
t he value-added t ax under Sect ions 106 and 108 shall, in addit ion t o t he regular account ing records
required, maint ain a subsidiary sales journal and subsidiary purchase journal on which t he daily sales
and purchases are recorded. T he subsidiary journals shall cont ain such inf ormat ion as may be
required by t he Secret ary of Finance.
Section 114. Return and Payment of Value-Added Tax. (A) In General. Every person liable t o pay t he value-added t ax imposed under t his T it le shall f ile a
quart erly ret urn of t he amount of his gross sales or receipt s wit hin t went y-f ive (25) days f ollowing t he
close of each t axable quart er prescribed f or each t axpayer: Provided, however, T hat VAT -regist ered
persons shall pay t he value-added t ax on a mont hly basis.
Any person, whose regist rat ion has been cancelled in accordance wit h Sect ion 236, shall f ile a ret urn
and pay t he t ax due t hereon wit hin t went y-f ive (25) days f rom t he dat e of cancellat ion of regist rat ion:
Provided, T hat only one consolidat ed ret urn shall be f iled by t he t axpayer f or his principal place of
business or head of f ice and all branches.
(B) Where to File the Return and Pay the Tax. Except as t he Commissioner ot herwise permit s, t he
ret urn shall be f iled wit h and t he t ax paid t o an aut horized agent bank, Revenue Collect ion Of f icer or
duly aut horized cit y or municipal T reasurer in t he Philippines locat ed wit hin t he revenue dist rict where
t he t axpayer is regist ered or required t o regist er.
(C) Withholding of Creditable Value-added Tax. T he Government or any of it s polit ical subdivisions,
inst rument alit ies or agencies, including government -owned or -cont rolled corporat ions (GOCCs) shall,
bef ore making payment on account of each purchase of goods f rom sellers and services rendered by
cont ract ors which are subject t o t he value-added t ax imposed in Sect ions 106 and 108 of t his Code,
deduct and wit hhold t he value-added t ax due at t he rat e of t hree percent (3%) of t he gross payment
f or t he purchase of goods and six percent (6%) on gross receipt s f or services rendered by
cont ract ors on every sale or inst allment payment which shall be credit able against t he value-added
t ax liabilit y of t he seller or cont ract or: Provided, however, T hat in t he case of government public
works cont ract ors, t he wit hholding rat e shall be eight and one-half percent (8.5%): Provided, f urt her,
T hat t he payment f or lease or use of propert ies or propert y right s t o nonresident owners shall be
subject t o t en percent (10%) wit hholding t ax at t he t ime of payment . For t his purpose, t he payor or
person in cont rol of t he payment shall be considered as t he wit hholding agent .
T he value-added t ax wit hheld under t his Sect ion shall be remit t ed wit hin t en (10) days f ollowing t he
end of t he mont h t he wit hholding was made.
Section 115. Power of the Commissioner to Suspend the Business Operations of a Taxpayer. T he
Commissioner or his aut horized represent at ive is hereby empowered t o suspend t he business
operat ions and t emporarily close t he business est ablishment of any person f or any of t he f ollowing
violat ions:
(a) In t he case of a VAT -regist ered Person. (1) Failure t o issue receipt s or invoices;
(2) Failure t o f ile a value-added t ax ret urn as required under Sect ion 114; or
(3) Underst at ement of t axable sales or receipt s by t hirt y percent (30%) or more of his correct t axable
sales or receipt s f or t he t axable quart er.
(b) Failure of any Person t o Regist er as Required under Sect ion 236. T he t emporary closure of t he est ablishment shall be f or t he durat ion of not less t han f ive (5) days
and shall be lif t ed only upon compliance wit h what ever requirement s prescribed by t he Commissioner
in t he closure order.
T IT LE V
OT HER PERCENT AGE T AXES
Section 116. Tax on Persons Exempt from Value-Added Tax (VAT). Any person whose sales or
receipt s are exempt under Sect ion 109(z) of t his Code f rom t he payment of value-added t ax and
who is not a VAT -regist ered person shall pay a t ax equivalent t o t hree percent (3%) of his gross
quart erly sales or receipt s: Provided, T hat cooperat ives shall be exempt f rom t he t hree percent
(3%)gross receipt s t ax herein imposed.
Section 117. Percentage Tax on Domestic Carriers and Keepers of Garages. Cars f or rent or hire driven
by t he lessee, t ransport at ion cont ract ors, including persons who t ransport passengers f or hire, and
ot her domest ic carriers by land, air or wat er, f or t he t ransport of passengers, except owners of
bancas and owner of animal-drawn t wo wheeled vehicle, and keepers of garages shall pay a t ax
equivalent t o t hree percent (3%) of t heir quart erly gross receipt s.
T he gross receipt s of common carriers derived f rom t heir incoming and out going f reight shall not be
subject ed t o t he local t axes imposed under Republic Act No. 7160, ot herwise known as t he Local
Government Code of 1991.
In comput ing t he percent age t ax provided in t his Sect ion, t he f ollowing shall be considered t he
minimum quart erly gross receipt s in each part icular case:
Jeepney f or hire 1.Manilaand ot her cit ies
P
2,400
2. Provincial
1,200
Public ut ilit y bus Not exceeding 30 passengers
3,600
Exceeding 30 but not exceeding 50 passengers
6,000
Exceeding 50 passengers
7,200
T axis 1.Manilaand ot her cit ies
P
3,600
2. Provincial
2,400
Car f or hire (wit h chauf f er)
3,000
Car f or hire (wit hout chauf f er)
1,800
Section 118. Percentage Tax on International Carriers. (A) Int ernat ional air carriers doing business in t he Philippines shall pay a t ax of t hree percent (3%) of
t heir quart erly gross receipt s.
(B) Int ernat ional shipping carriers doing business in t he Philippines shall pay a t ax equivalent t o t hree
percent (3%) of t heir quart erly gross receipt s.
Section 119. Tax on Franchises. Any provision of general or special law t o t he cont rary
not wit hst anding, t here shall be levied, assessed and collect ed in respect t o all f ranchises on radio
and/or t elevision broadcast ing companies whose annual gross receipt s of t he preceding year does
not exceed T en million pesos (P10,000.00), subject t o Sect ion 236 of t his Code, a t ax of t hree percent
(3%) and on elect ric, gas and wat er ut ilit ies, a t ax of t wo percent (2%) on t he gross receipt s derived
f rom t he business covered by t he law grant ing t he f ranchise: Provided, however, T hat radio and
t elevision broadcast ing companies ref erred t o in t his Sect ion shall have an opt ion t o be regist ered as
a value-added t axpayer and pay t he t ax due t hereon: Provided, f urt her, T hat once t he opt ion is
exercised, it shall not be revoked.
T he grant ee shall f ile t he ret urn wit h, and pay t he t ax due t hereon t o t he Commissioner or his duly
aut horized represent at ive, in accordance wit h t he provisions of Sect ion 128 of t his Code, and t he
ret urn shall be subject t o audit by t he Bureau of Int ernal Revenue, any provision of any exist ing law t o
t he cont rary not wit hst anding.
Section 120. Tax on Overseas Dispatch, Message or Conversation Originating from the Philippines. (A) Persons Liable. T here shall be collect ed upon every overseas dispat ch, message or conversat ion
t ransmit t ed f rom t he Philippines by t elephone, t elegraph, t elewrit er exchange, wireless and ot her
communicat ion equipment service, a t ax of t en percent (10%) on t he amount paid f or such services.
T he t ax imposed in t his Sect ion shall be payable by t he person paying f or t he services rendered and
shall be paid t o t he person rendering t he services who is required t o collect and pay t he t ax wit hin
t went y (20) days af t er t he end of each quart er.
(B) Exemptions. T he t ax imposed by t his Sect ion shall not apply t o:
(1) Government. Amount s paid f or messages t ransmit t ed by t he Government of t he Republic of t he
Philippines or any of it s polit ical subdivisions or inst rument alit ies;
(2) Diplomatic Services. Amount s paid f or messages t ransmit t ed by any embassy and consular
of f ices of a f oreign government ;
(3) International Organizations. Amount s paid f or messages t ransmit t ed by a public int ernat ional
organizat ion or any of it s agencies based in t he Philippines enjoying privileges, exempt ions and
immunit ies which t he Government of t he Philippines is commit t ed t o recognize pursuant t o an
int ernat ional agreement ; and
(4) News Services. Amount s paid f or messages f rom any newspaper, press associat ion, radio or
t elevision newspaper, broadcast ing agency, or newst ickers services, t o any ot her newspaper, press
associat ion, radio or t elevision newspaper broadcast ing agency, or newst icker service or t o a bona
f ide correspondent , which messages deal exclusively wit h t he collect ion of news it ems f or, or t he
disseminat ion of news it em t hrough, public press, radio or t elevision broadcast ing or a newst icker
service f urnishing a general news service similar t o t hat of t he public press.
Section 121. Tax on Banks and Non-bank Financial Intermediaries. T here shall be a collect ed t ax on
gross receipt s derived f rom sources wit hin t he Philippines by all banks and non-bank f inancial
int ermediaries in accordance wit h t he f ollowing schedule:
(a) On int erest , commissions and discount s f rom lending act ivit ies as well as income f rom f inancial
leasing, on t he basis of remaining mat urit ies of inst rument s f rom which such receipt s are derived:
Short -t erm mat urit y (non in excess of t wo (2) years).. 5%
Medium-t erm mat urit y (over t wo (2) years but not exceeding f our (4) years) 3%
Long-t erm mat urit y (1) Over f our (4) years but not exceeding seven (7) years. 1%
(2) Over seven (7) years 0%

(b) On
dividends.
0%
(c) On royalt ies, rent als of propert y, real or personal, prof it s, f rom exchange and all ot her it ems
t reat ed as gross income under Sect ion 32 of t his Code 5%
Provided, however, T hat in case t he mat urit y period ref erred t o in paragraph (a) is short ened t hru
pret erminat ion, t hen t he mat urit y period shall be reckoned t o end as of t he dat e of pret erminat ion f or
purposes of classif ying t he t ransact ion as short , medium or long-t erm and t he correct rat e of t ax
shall be applied accordingly.
Not hing in t his Code shall preclude t he Commissioner f rom imposing t he same t ax herein provided on
persons perf orming similar banking act ivit ies.
Section 122. Tax on Finance Companies. T here shall be collect ed a t ax of f ive percent (5%) on t he
gross receipt s derived by all f inance companies, as well as by ot her f inancial int ermediaries not
perf orming quasi-banking f unct ions dong business in t he Philippines, f rom int erest , discount s and all
ot her it ems t reat ed as gross income under t his Code: Provided, T hat int erest s, commissions and
discount s f rom lending act ivit ies, as well as income f rom f inancial leasing, shall be t axed on t he basis
of t he remaining mat urit ies of t he inst rument s f rom which such receipt s are derived, in accordance
wit h t he f ollowing schedule:
Short -t erm mat urit y (non in excess of t wo (2) years). 5%
Medium-t erm mat urit y (over t wo (2) years
but not exceeding f our (4) years).. 3%
Long-t erm mat urit y (1) Over f our (4) years but not exceeding seven (7) years.. 1%
(2) Over seven (7) years 0%
Provided, however, T hat in case t he mat urit y period is short ened t hru pret erminat ion, t hen t he
mat urit y period shall be reckoned t o end as of t he dat e of pret erminat ion f or purposes of classif ying
t he t ransact ion as short , medium or long-t erm and t he correct rat e of t ax shall be applied
accordingly.
Not hing in t his Code shall preclude t he Commissioner f rom imposing t he same t ax herein provided on
persons perf orming similar f inancing act ivit ies.
Section 123. Tax on Life Insurance Premiums. T here shall be collect ed f rom every person, company
or corporat ion (except purely cooperat ive companies or associat ions) doing lif e insurance business of
any sort in t he Philippines a t ax of f ive percent (5%) of t he t ot al premium collect ed, whet her such
premiums are paid in money, not es, credit s or any subst it ut e f or money; but premiums ref unded
wit hin six (6) mont hs af t er payment on account of reject ion of risk or ret urned f or ot her reason t o a
person insured shall not be included in t he t axable receipt s; nor shall any t ax be paid upon reinsurance
by a company t hat has already paid t he t ax; nor upon doing business out side t he Philippines on
account of any lif e insurance of t he insured who is a nonresident , if any t ax on such premium is
imposed by t he f oreign count ry where t he branch is est ablished nor upon premiums collect ed or
received on account of any reinsurance, if t he insured, in case of personal insurance, resides out side
t he Philippines, if any t ax on such premiums is imposed by t he f oreign count ry where t he original
insurance has been issued or perf ect ed; nor upon t hat port ion of t he premiums collect ed or received
by t he insurance companies on variable cont ract s (as def ined in sect ion 232(2) of President ial Decree
by t he insurance companies on variable cont ract s (as def ined in sect ion 232(2) of President ial Decree
No. 612), in excess of t he amount s necessary t o insure t he lives of t he variable cont ract workers.
Cooperat ive companies or associat ions are such as are conduct ed by t he members t hereof wit h t he
money collect ed f rom among t hemselves and solely f or t heir own prot ect ion and not f or prof it .
Section 124. Tax on Agents of Foreign Insurance Companies. Every f ire, marine or miscellaneous
insurance agent aut horized under t he Insurance Code t o procure policies of insurance as he may have
previously been legally aut horized t o t ransact on risks locat ed in t he Philippines f or companies not
aut horized t o t ransact business in t he Philippines shall pay a t ax equal t o t wice t he t ax imposed in
Sect ion 123: Provided, T hat t he provision of t his Sect ion shall not apply t o reinsurance: Provided,
however, T hat t he provisions of t his Sect ion shall not af f ect t he right of an owner of propert y t o
apply f or and obt ain f or himself policies in f oreign companies in cases where said owner does not
make use of t he services of any agent , company or corporat ion residing or doing business in t he
Philippines. In all cases where owners of propert y obt ain insurance direct ly wit h f oreign companies, it
shall be t he dut y of said owners t o report t o t he Insurance Commissioner and t o t he Commissioner
each case where insurance has been so ef f ect ed, and shall pay t he t ax of f ive percent (5%) on
premiums paid, in t he manner required by Sect ion 123.
Section 125. Amusement Taxes. T here shall be collect ed f rom t he propriet or, lessee or operat or of
cockpit s, cabaret s, night or day clubs, boxing exhibit ions, prof essional basket ball games, Jai-Alai and
racet racks, a t ax equivalent t o:
(a) Eight een percent (18%) in t he case of cockpit s;
(b) Eight een percent (18%) in t he case of cabaret s, night or day clubs;
(c) T en percent (10%) in t he case of boxing exhibit ions: Provided, however, T hat boxing exhibit ions
wherein World or Orient al Championships in any division is at st ake shall be exempt f rom amusement
t ax: Provided, f urt her, T hat at least one of t he cont enders f or World or Orient al Championship is a
cit izen of t he Philippines and said exhibit ions are promot ed by a cit izen/s of t he Philippines or by a
corporat ion or associat ion at least sixt y percent (60%) of t he capit al of which is owned by such
cit izens;
(d) Fif t een percent (15%) in t he case of prof essional basket ball games as envisioned in President ial
Decree No. 871: Provided, however, T hat t he t ax herein shall be in lieu of all ot her percent age t axes
of what ever nat ure and descript ion; and
(e) T hirt y percent (30%) in t he case of Jai-Alai and racet racks of t heir gross receipt s, irrespect ive, of
whet her or not any amount is charged f or admission.
For t he purpose of t he amusement t ax, t he t erm gross receipt s embraces all t he receipt s of t he
propriet or, lessee or operat or of t he amusement place. Said gross receipt s also include income f rom
t elevision, radio and mot ion pict ure right s, if any. A person or ent it y or associat ion conduct ing any
act ivit y subject t o t he t ax herein imposed shall be similarly liable f or said t ax wit h respect t o such
port ion of t he receipt s derived by him or it .
T he t axes imposed herein shall be payable at t he end of each quart er and it shall be t he dut y of t he
propriet or, lessee or operat or concerned, as well as any part y liable, wit hin t went y (20) days af t er t he
end of each quart er, t o make a t rue and complet e ret urn of t he amount of t he gross receipt s derived
during t he preceding quart er and pay t he t ax due t hereon.
Section 126. Tax on Winnings. Every person who wins in horse races shall pay a t ax equivalent t o t en
percent (10%) of his winnings or dividends, t he t ax t o be based on t he act ual amount paid t o him f or
every winning t icket af t er deduct ing t he cost of t he t icket : Provided, T hat in t he case of winnings
f rom double, f orecast /quinella and t rif ect a bet s, t he t ax shall be f our percent (4%). In t he case of
owners of winning race horses, t he t ax shall be t en percent (10%) of t he prizes.
T he t ax herein prescribed shall be deduct ed f rom t he dividends corresponding t o each winning t icket
or t he prize of each winning race horse owner and wit hheld by t he operat or, manager or person in
charge of t he horse races bef ore paying t he dividends or prizes t o t he persons ent it led t heret o.
T he operat or, manager or person in charge of horse races shall, wit hin t went y (20) days f rom t he
dat e t he t ax was deduct ed and wit hheld in accordance wit h t he second paragraph hereof , f ile a t rue
and correct ret urn wit h t he Commissioner in t he manner or f orm t o be prescribed by t he Secret ary of
Finance, and pay wit hin t he same period t he t ot al amount of t ax so deduct ed and wit hheld.
Section 127. Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded through the Local
Stock Exchange or through Initial Public Offering. (A) T ax onSale, Bart er or Exchange of Shares of St ock List ed and T raded t hrough t he Local St ock
Exchange. T here shall be levied, assessed and collect ed on every sale, bart er, exchange, or ot her
disposit ion of shares of st ock list ed and t raded t hrough t he local st ock exchange ot her t han t he sale
by a dealer in securit ies, a t ax at t he rat e of one-half of one percent (1/2 of 1%) of t he gross selling
price or gross value in money of t he shares of st ock sold, bart ered, exchanged or ot herwise disposed
which shall be paid by t he seller or t ransf eror.
(B) T ax on Shares of St ock Sold or Exchanged T hrough Init ial Public Of f ering. T here shall be levied,
assessed and collect ed on every sale, bart er, exchange or ot her disposit ion t hrough init ial public
of f ering of shares of st ock in closely held corporat ions, as def ined herein, a t ax at t he rat es provided
hereunder based on t he gross selling price or gross value in money of t he shares of st ock sold,
bart ered, exchanged or ot herwise disposed in accordance wit h t he proport ion of shares of st ock
sold, bart ered, exchanged or ot herwise disposed t o t he t ot al out st anding shares of st ock af t er t he
list ing in t he local st ock exchange:
Up t o t went y-f ive percent (25%) 4%
Over t went y-f ive percent (25%) but not over t hirt y-t hree
and one t hird percent (33 1/3%).. 2%
Over t hirt y-t hree and one t hird percent (33 1/3%). 1%
T he t ax herein imposed shall be paid by t he issuing corporat ion in primary of f ering or by t he seller in
secondary of f ering.
For purposes of t his Sect ion, t he t erm closely held corporat ion means any corporat ion at least f if t y
percent (50%) in value of out st anding capit al st ock or at least f if t y percent (505) of t he t ot al
combined vot ing power of all classes of st ock ent it led t o vot e is owned direct ly or indirect ly by or f or
not more t han t went y (20) individuals.
For purposes of det ermining whet her t he corporat ion is a closely held corporat ion, insof ar as such
det erminat ion is based on st ock ownership, t he f ollowing rules shall be applied:
(1) Stock Not Owned by Individuals. St ock owned direct ly or indirect ly by or f or a corporat ion,
part nership, est at e or t rust shall be considered as being owned proport ionat ely by it s shareholders,
part ners or benef iciaries.
(2) Family and Partnership Ownerships. An individual shall be considered as owning t he st ock owned,
direct ly or indirect ly, by or f or his f amily, or by or f or his part ner. For purposes of t he paragraph, t he
f amily of an individual includes only his brot hers and sist ers (whet her by whole or half -blood), spouse,
ancest ors and lineal descendant s.
(3) Option. If any person has an opt ion acquire st ock, such st ock shall be considered as owned by
such person. For purposes of t his paragraph, an opt ion t o acquire such an opt ion and each one of a
series of opt ions shall be considered as an opt ion t o acquire such st ock.
(4) Constructive Ownership as Actual Ownership. St ock const ruct ively owned by reason of t he
applicat ion of paragraph (1) or (3) hereof shall, f or purposes of applying paragraph (1) or (2), be
t reat ed as act ually owned by such person; but st ock const ruct ively owned by t he individual by reason
of t he applicat ion of paragraph (2) hereof shall not be t reat ed as owned by him f or purposes of again
applying such paragraph in order t o make anot her t he const ruct ive owner of such st ock.
(C) Ret urn on Capit al Gains Realized f romSaleof Shares of St ocks. (1) Ret urn on Capit al Gains Realized f romSaleof Shares of St ock List ed and T raded in t he Local
St ock Exchange. It shall be t he dut y of every st ock broker who ef f ect ed t he sale subject t o t he t ax
imposed herein t o collect t he t ax and remit t he same t o t he Bureau of Int ernal Revenue wit hin f ive (5)
banking days f rom t he dat e of collect ion t hereof and t o submit on Mondays of each week t o t he
secret ary of t he st ock exchange, of which he is a member, a t rue and complet e ret urn which shall
cont ain a declarat ion of all t he t ransact ions ef f ect ed t hrough him during t he preceding week and of
t axes collect ed by him and t urned over t o t he Bureau Of Int ernal Revenue.
(2) Ret urn on Public Of f erings of Share St ock. In case of primary of f ering, t he corporat e issuer shall
f ile t he ret urn and pay t he corresponding t ax wit hin t hirt y (30) days f rom t he dat e of list ing of t he
shares of st ock in t he local st ock exchange. In t he case of secondary of f ering, t he provision of
Subsect ion (C)(1) of t his Sect ion shall apply as t o t he t ime and manner of t he payment of t he t ax.
(D) Common Provisions. any gain derived f rom t he sale, bart er, exchange or ot her disposit ion of
shares of st ock under t his Sect ion shall be exempt f rom t he t ax imposed in Sect ions 24(C), 27(D)(2),
28(A)(8)(c), and 28(B)(5)(c) of t his Code and f rom t he regular individual or corporat e income t ax. T ax
paid under t his Sect ion shall not be deduct ible f or income t ax purposes.
Section 128. Returns and Payment of Percentage Taxes. (A) Ret urns of Gross Sales, Receipt s or Earnings and Payment of T ax. (1) Persons Liable t o Pay Percent age T axes. Every person subject t o t he percent age t axes
imposed under t his T it le shall f ile a quart erly ret urn of t he amount of his gross sales, receipt s or
earnings and pay t he t ax due t hereon wit hin t went y-f ive (25) days af t er t he end of each t axable
quart er: Provided, T hat in t he case of a person whose VAT regist rat ion is cancelled and who
becomes liable t o t he t ax imposed in Sect ion 116 of t his Code, t he t ax shall accrue f rom t he dat e of
cancellat ion and shall be paid in accordance wit h t he provisions of t his Sect ion.
(2) Person Ret iring f rom Business. Any person ret iring f rom a business subject t o percent age t ax
shall not if y t he nearest int ernal revenue of f icer, f ile his ret urn and pay t he t ax due t hereon wit hin
t went y (20) days af t er closing his business.
(3) Except ions. T he Commissioner may, by rules and regulat ions, prescribe:
(a) T he t ime f or f iling t he ret urn at int ervals ot her t han t he t ime prescribed in t he preceding
paragraphs f or a part icular class or classes of t axpayers af t er considering such f act ors as volume of
sales, f inancial condit ion, adequat e measures of securit y, and such ot her relevant inf ormat ion
required t o be submit t ed under t he pert inent provisions of t his Code; and
(b) T he manner and t ime of payment of percent age t axes ot her t han as hereinabove prescribed,
including a scheme of t ax prepayment .
(4) Det erminat ion of Correct Sales or Receipt s. When it is f ound t hat a person has f ailed t o issue
receipt s or invoices, or when no ret urn is f iled, or when t here is reason t o believe t hat t he books of
account s or ot her records do not correct ly ref lect t he declarat ions made or t o be made in a ret urn
required t o be f iled under t he provisions of t his Code, t he Commissioner, af t er t aking int o account t he
sales, receipt s or ot her t axable base of ot her persons engaged in similar businesses under similar
sit uat ions or circumst ances, or af t er considering ot her relevant inf ormat ion may prescribe a minimum
amount of such gross receipt s, sales and t axable base and such amount so prescribed shall be prima
f acie correct f or purposes of det ermining t he int ernal revenue t ax liabilit ies of such person.
(B) Where t o File. Except as t he Commissioner ot herwise permit s, every person liable t o t he
percent age t ax under t his T it le may, at his opt ion, f ile a separat e ret urn f or each branch or place of
business, or a consolidat ed ret urn f or all branches or places of business wit h t he aut horized agent
bank, Revenue Dist rict Of f icer, Collect ion Agent or duly aut horized T reasurer of t he cit y or
municipalit y where said business or principal place of business is locat ed, as t he case may be.
T IT LE VI
EXCISE T AX ON CERT AIN GOODS
CHAPT ER I GENERAL PROVISIONS
Section 129. Goods subject to Excise Taxes. Excise t axes apply t o goods manuf act ured or produced
in t he Philippines f or domest ic sales or consumpt ion or f or any ot her disposit ion and t o t hings
import ed. T he excise t ax imposed herein shall be in addit ion t o t he value-added t ax imposed under
T it le IV.
For purposes of t his T it le, excise t axes herein imposed and based on weight or volume capacit y or
any ot her physical unit of measurement shall be ref erred t o as specif ic t ax and an excise t ax herein
imposed and based on selling price or ot her specif ied value of t he good shall be ref erred t o as ad
valorem t ax.
Section 130. Filing of Return and Payment of Excise Tax on Domestic Products. (A) Persons Liable t o File a Ret urn, Filing of Ret urn on Removal and Payment of T ax. (1) Persons Liable t o File a Ret urn. Every person liable t o pay excise t ax imposed under t his T it le
shall f ile a separat e ret urn f or each place of product ion set t ing f ort h, among ot hers t he descript ion
and quant it y or volume of product s t o be removed, t he applicable t ax base and t he amount of t ax
due t hereon: Provided, however, T hat in t he case of indigenous pet roleum, nat ural gas or liquef ied
nat ural gas, t he excise t ax shall be paid by t he f irst buyer, purchaser or t ransf eree f or local sale,
bart er or t ransf er, while t he excise t ax on export ed product s shall be paid by t he owner, lessee,
concessionaire or operat or of t he mining claim.
Should domest ic product s be removed f rom t he place of product ion wit hout t he payment of t he t ax,
t he owner or person having possession t hereof shall be liable f or t he t ax due t hereon.
(2) T ime f or Filing of Ret urn and Payment of t he T ax. Unless ot herwise specif ically allowed, t he
ret urn shall be f iled and t he excise t ax paid by t he manuf act urer or producer bef ore removal of
domest ic product s f orm place of product ion: Provided, T hat t he t ax excise on locally manuf act ured
pet roleum product s and indigenous pet roleum/levied under Sect ions 148 and 151(A)(4), respect ively,
of t his T it le shall be paid wit hin t en (10) days f rom t he dat e of removal of such product s f or t he
period f rom January 1, 1998 t o June 30, 1998; wit hin f ive (5) days f rom t he dat e of removal of such
product s f or t he period f rom July 1, 1998 t o December 31, 1998; and, bef ore removal f rom t he place
of product ion of such product s f rom January 1, 1999 and t hereaf t er: Provided, f urt her, T hat t he
excise t ax on nonmet allic mineral or mineral product s, or quarry resources shall be due and payable
upon removal of such product s f rom t he localit y where mined or ext ract ed, but wit h respect t o t he
excise t ax on locally produced or ext ract ed met allic mineral or mineral product s, t he person liable
shall f ile a ret urn and pay t he t ax wit hin f if t een (15) days af t er t he end of t he calendar quart er when
such product s were removed subject t o such condit ions as may be prescribed by rules and
regulat ions t o be promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner. For t his purpose, t he t axpayer shall f ile a bond in an amount which approximat es t he
amount of excise t ax due on t he removals f or t he said quart er. T he f oregoing rules not wit hst anding,
f or import ed mineral or mineral product s, whet her met allic or nonmet allic, t he excise t ax due t hereon
shall be paid bef ore t heir removal f rom cust oms cust ody.
(3) Place of Filing of Ret urn and Payment of t he T ax. Except as t he Commissioner ot herwise
permit s, t he ret urn shall be f iled wit h and t he t ax paid t o any aut horized agent bank or Revenue
permit s, t he ret urn shall be f iled wit h and t he t ax paid t o any aut horized agent bank or Revenue
Collect ion Of f icer, or duly aut horized Cit y or Municipal T reasurer in t he Philippines.
(4) Except ions. T he Secret ary of Finance, upon recommendat ion of t he Commissioner may, by rules
and regulat ions, prescribe:
(a) T he t ime f or f iling t he ret urn at int ervals ot her t han t he t ime prescribed in t he preceding
paragraphs f or a part icular class or classes of t axpayers af t er considering f act ors such as volume of
removals, adequat e measures of securit y and such ot her relevant inf ormat ion required t o be
submit t ed under t he pert inent provisions of t his Code; and
(b) T he manner and t ime of payment of excise t axes ot her t han as herein prescribed, under a t ax
prepayment , advance deposit or similar schemes. In t he case of locally produced of ext ract ed
minerals and mineral product s or quarry resources where t he mine sit e or place of ext ract ion is not
t he same as t he place of processing or product ion, t he ret urn shall be f iled wit h and t he t ax paid t o
t he Revenue Dist rict Of f ice having jurisdict ion over t he localit y where t he same are mined, ext ract ed
or quarried: Provided, however, T hat f or met allic minerals processed abroad, t he ret urn shall be f iled
and t he t ax due t hereon paid t o t he Revenue Dist rict Of f ice having jurisdict ion over t he localit y where
t he same are mined, ext ract ed or quarried.
(B) Det erminat ion of Gross Selling Price of Goods Subject t o Ad Valorem T ax. Unless ot herwise
provided, t he price, excluding t he value-added t ax, at which t he goods are sold at wholesale in t he
place of product ion or t hrough t heir sales agent s t o t he public shall const it ut e t he gross selling price.
If t he manuf act urer also sells or allows such goods t o be sold at wholesale in anot her est ablishment
of which he is t he owner or in t he prof it s of which he has an int erest , t he wholesale price in such
est ablishment shall const it ut e t he gross selling price. Should such price be less t han t he cost of
manuf act ure plus expenses incurred unt il t he goods are f inally sold, t hen a proport ionat e margin of
prof it , not less t han t en percent (10%) of such manuf act uring cost and expenses, shall be added t o
const it ut e t he gross selling price.
(C) Manuf act urers or Producers Sworn St at ement . Every manuf act urer or producer of goods or
product s subject t o excise t axes shall f ile wit h t he Commissioner on t he dat e or dat es designat ed by
t he lat t er, and as of t en as may be required, a sworn st at ement showing, among ot her inf ormat ion,
t he dif f erent goods or product s manuf act ured or produced and t heir corresponding gross selling price
or market value, t oget her wit h t he cost of manuf act ure or product ion plus expenses incurred or t o be
incurred unt il t he goods or product s are f inally sold.
(D) Credit f or Excise t ax on Goods Act ually Export ed. When goods locally produced or
manuf act ured are removed and act ually export ed wit hout ret urning t o t he Philippines, whet her so
export ed in t heir original st at e or as ingredient s or part s of any manuf act ured goods or product s, any
excise t ax paid t hereon shall be credit ed or ref unded upon submission of t he proof of act ual
export at ion and upon receipt of t he corresponding f oreign exchange payment : Provided, T hat t he
excise t ax on mineral product s, except coal and coke, imposed under Sect ion 151 shall not be
credit able or ref undable even if t he mineral product s are act ually export ed.
Section 131. Payment of Excise Taxes on Importer Articles. (A) Persons Liable. Excise t axes on import ed art icles shall be paid by t he owner or import er t o t he
Cust oms Of f icers, conf ormably wit h t he regulat ions of t he Depart ment of Finance and bef ore t he
release of such art icles f rom t he cust omshouse, or by t he person who is f ound in possession of
art icles which are exempt f rom excise t axes ot her t han t hose legally ent it led t o exempt ion.
In t he case of t ax-f ree art icles brought or import ed int o t he Philippines by persons, ent it les, or
agencies exempt f rom t ax which are subsequent ly sold, t ransf erred or exchanged in t he Philippines
t o non-exempt persons or ent it les, t he purchasers or recipient s shall be considered t he import ers
t hereof , and shall be liable f or t he dut y and int ernal revenue t ax due on such import at ion.
T he provision of any special or general law t o t he cont rary not wit hst anding, t he import at ion of cigars
and cigaret t es, dist illed spirit s and wines int o t he Philippines, even if dest ined f or t ax and dut y f ree
shops, shall be subject t o all applicable t axes, dut ies, charges, including excise t axes due t hereon:
Provided, however, T hat t his shall not apply t o cigars and cigaret t es, dist illed spirit s and wines
brought direct ly int o t he duly chart ered or legislat ed f reeport s of t he Subic Special Economic and
Freeport Zone, crat ed under Republic Act No. 7227; t he Cagayan Special Economic Zone and
Freeport , creat ed under Republic Act No. 7922; and t he Zamboanga Cit y Special Economic Zone,
creat ed under Republic Act No. 7903, and are not t ransshipped t o any ot her port in t he Philippines:
Provided, f urt her, T hat import at ions of cigars and cigaret t es, dist illed spirit s and wines by a
government -owned and operat ed dut y-f ree shop, like t he Dut y-Free Philippines (DFP), shall be
exempt ed f rom all applicable t axes, dut ies, charges, including excise t ax due t hereon: Provided, st ill
f urt her, T hat if such art icles direct ly import ed by a government -owned and operat ed dut y-f ree shop
like t he Dut y-Free Philippines, shall be labelled t ax and dut y-f ree and not f or resale: Provided, st ill
f urt her, T hat is such art icles brought int o t he duly chart ered or legislat ed f reeport s under Republic
Act s No. 7227, 7922 and 7903 are subsequent ly int roduced int o t he Philippine cust oms t errit ory, t hen
such art icles shall, upon such int roduct ion, be deemed import ed int o t he Philippines and shall be
subject t o all impost s and excise t axes provided herein and ot her st at ut es: Provided, f inally, T hat t he
removal and t ransf er of t ax and dut y-f ree goods, product s, machinery, equipment and ot her similar
art icles, f rom one f reeport t o anot her f reeport , shall not be deemed an int roduct ion int o t he Philippine
cust oms t errit ory.
Art icles consf iscat ed shall be disposed of in accordance wit h t he rules and regulat ions t o be
promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he Commissioner of Cust oms
and Int ernal Revenue, upon consult at ion wit h t he Secret ary of T ourism and t he General manager of
t he Philippine T ourism Aut horit y.
T he t ax due on any such goods, product s, machinery, equipment or ot her similar art icles shall
const it ut e a lien on t he art icle it self , and such lien shall be superior t o all ot her charges or liens,
irrespect ive of t he possessor t hereof .
(B) Rat e and Basis of t he Excise T ax on Import ed Art icles. Unless ot herwise specif ied import ed
art icles shall be subject t o t he same rat es and basis of excise t axes applicable t o locally
manuf act ured art icles.
Section 132. Mode of Comput ing Cont ent s of Cask or Package. Every f ract ional part of a proof lit er
equal t o or great er t han a half lit er in a cask or package cont aining more t han one lit er shall be t axed
as a lit er, and any smaller f ract ional part shall be exempt ; but any package of spirit s, t he t ot al
cont ent of which are less t han a proof lit er, shall be t axed as one lit er.
CHAPT ER II EXEMPT ION OR CONDIT IONAL T AX-FREE REMOVAL OF CERT AIN ART ICLES
Section 133. Removal of Wines and distilled Spirits for Treatment of Tobacco Leaf. Upon issuance of a
permit f rom t he Commissioner and subject t o t he rules and regulat ions prescribed by t he Secret ary
of Finance, manuf act urers of cigars and cigaret t es may wit hdraw f rom bond, f ree of excise local and
import ed wines and dist illed spirit s in specif ic quant it ies and grades f or use in t he t reat ment of
t obacco leaf t o b used in t he manuf act ure of cigars and cigaret t es; but such wines and dist illed
spirit s must f irst be suit ably denat ured.
Section 134. Domestic Denatured Alcohol. Domest ic alcohol of not less t han one hundred eight y
degrees (180O) proof (ninet y percent (90%) absolut e alcohol) shall, when suit ably denat ured and
rendered unf it f or oral int ake, be exempt f rom t he excise t ax prescribed in Sect ion 141: Provided,
however, T hat such denat ured alcohol shall be subject t o t ax under Sect ion 106(A) of t his Code:
Provided, f urt her, T hat if such alcohol is t o be used f or mot ive power, it shall be t axed under Sect ion
148(d) of t his Code: Provided, f inally, T hat any alcohol, previously rendered unf it f or oral int ake af t er
denat uring but subsequent ly rendered f it or oral int ake af t er undergoing f erment at ion, dilut ion,
purif icat ion, mixt ure or any ot her similar process shall be t axed under Sect ion 141 of t his Code and
such t ax shall be paid by t he person in possession of such reprocessed spirit s.
Section 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies.
Pet roleum product s sold t o t he f ollowing are exempt f rom excise t ax:
(a) Int ernat ional carriers of Philippine or f oreign regist ry on t heir use or consumpt ion out side t he
Philippines: Provided, T hat t he pet roleum product s sold t o t hese int ernat ional carriers shall be st ored
in a bonded st orage t ank and may be disposed of only in accordance wit h t he rules and regulat ions t o
be prescribed by t he Secret ary of Finance, upon recommendat ion of t he Commissioner;
(b) Exempt ent it ies or agencies covered by t ax t reat ies, convent ions and ot her int ernat ional
agreement s f or t heir use of consumpt ion: Provided, however, T hat t he count ry of said f oreign
int ernat ional carrier or exempt ent it ies or agencies exempt s f rom similar t axes pet roleum product s
sold t o Philippine carriers, ent it ies or agencies; and
(c) Ent it ies which are by law exempt f rom direct and indirect t axes.
Section 136. Denaturation, Withdrawal and Use of Denatured Alcohol. Any person who produces,
wit hdraws, sells, t ransport s or knowingly uses, or is in possession of denat ured alcohol, or art icles
cont aining denat ured alcohol in violat ion of laws or regulat ions now or hereaf t er in f orce pert aining
t heret o shall be required t o pay t he corresponding t ax, in addit ion t o t he penalt ies provided f or under
T it le X of t his Code.
Section 137. Removal of Spirits Under Bond for Rectification. Spirit s requiring rect if icat ion may be
removed f rom t he place of product ion t o anot her est ablishment f or t he purpose of rect if icat ion
wit hout prepayment of t he excise t ax: Provided, T hat t he dist iller removing such spirit s and t he
rect if ier receiving t hem shall f ile wit h t he Commissioner t heir joint bond condit ioned upon t he payment
by t he rect if ier of t he excise t ax due on t he rect if ied alcohol: Provided, f urt her, T hat in cases where
alcohol has already been rect if ied eit her by original and cont inuous dist illat ion or by redist illat ion, no
loss f or rect if icat ion and handling shall be allowed and t he rect if ier t hereof shall pay t he excise t ax
due on such losses: Provided, f inally, T hat where a rect if ier makes use of spirit s upon which t he
excise t ax has not been paid, he shall be liable f or t he payment of t he t ax ot herwise due t hereon.
Section 138. Removal of Fermented Liquors to Bonded Warehouse. Any brewer may remove or
t ransport f rom his brewery or ot her place of manuf act ure t o a bonded warehouse used by him
exclusively f or t he st orage or sale in bulk of f erment ed liquors of his own manuf act ure, any quant it y
of such f erment ed liquors, not less t han one t housand (1,000) lit ers at one removal, wit hout
prepayment of t he t ax t hereon under a permit which shall be grant ed by t he Commissioner. Such
permit shall be af f ixed t o every package so removed and shall be cancelled or dest royed in such
manner as t he Commissioner may prescribe. T hereaf t er, t he manuf act urer of such f erment ed liquors
shall pay t he t ax in t he same manner and under t he same penalt y and liabilit y as when paid at t he
brewery.
Section 139. Removal of Damaged Liquors Free of Tax. When any f erment ed liquor has become sour
or ot herwise damaged so as t o be unf it f or use as such, brewers may sell and af t er securing a special
permit f rom t he Commissioner, under such condit ions as may be prescribed in t he rules and
regulat ions prescribed by t he Secret ary of Finance, remove t he same wit hout t he payment of t ax
t hereon in cask or ot her packages, dist inct f rom t hose ordinarily used f or f erment ed liquors, each
cont aining not less t han one hundred sevent y-f ive (175) lit ers wit h a not e of t heir cont ent s
permanent ly af f ixed t hereon.
Section 140. Removal of Tobacco Products without Prepayment of Tax. Product s of t obacco ent irely
unf it f or chewing or smoking may be removed f ree of t ax f or agricult ural or indust rial use, under such
condit ions as may be prescribed in t he rules and regulat ions prescribed by t he Secret ary of Finance.
St emmed leaf t obacco, f ine-cut short s, t he ref use of f ine-cut chewing t obacco, scraps, cut t ings,
clippings, st ems, or midribs, and sweepings of t obacco may be sold in bulk as raw mat erial by one
manuf act urer direct ly t o anot her wit hout payment of t he t ax, under such condit ions as may be
prescribed in t he rules and regulat ions prescribed by t he Secret ary of Finance.
St emmed leaf t obacco, as herein used, means leaf t obacco which has had t he st em or midrib
removed. T he t erm does not include broken leaf t obacco.
removed. T he t erm does not include broken leaf t obacco.

CHAPT ER III- EXCISE T AX ON ALCOHOL PRODUCT S
Section 141. Distilled Spirits. On dist illed spirit s, t here shall be collect ed, subject t o t he provisions of
Sect ion 133 of t his Code, excise t axes as f ollows:
(a) If produced f rom t he sap of nipa, coconut , cassava, camot e, or buri palm or f rom t he juice, syrup
or sugar of t he cane, provided such mat erials are produced commercially in t he count ry where t hey
are processed int o dist illed spirit s, per proof lit er, Eight pesos (P8.00): Provided, T hat if produced in a
pot st ill or ot her similar primary dist illing apparat us by a dist iller producing not more t han one hundred
(100) lit ers a day, cont aining not more t han f if t y percent (50%) of alcohol by volume, per proof lit er,
Four pesos (P4.00);
(b) If produced f rom raw mat erials ot her t han t hose enumerat ed in t he preceding paragraph, t he t ax
shall be in accordance wit h t he net ret ail price per bot t le of seven hundred f if t y millilit er (750 ml.)
volume capacit y (excluding t he excise t ax and t he value-added t ax)as f ollows:
(1) Less t han T wo hundred and f if t y pesos (P250) Sevent y-f ive pesos (P75), per proof lit er;
(2) T wo hundred and f if t y pesos (P250) up t o Six hundred and Sevent y-Five pesos (P675) One
hundred and f if t y pesos (P150), per proof lit er; and
(3) More t han Six hundred and sevent y-f ive pesos (P675) T hree hundred pesos (P300), per proof
lit er.
(c) Medicinal preparat ions, f lavoring ext ract s, and all ot her preparat ions, except t oilet preparat ions,
of which, excluding wat er, dist illed spirit s f or t he chief ingredient , shall be subject t o t he same t ax as
such chief ingredient .
T his t ax shall be proport ionally increased f or any st rengt h of t he spirit s t axed over proof spirit s, and
t he t ax shall at t ach t o t his subst ance as soon as it is in exist ence as such, whet her it be
subsequent ly separat ed as pure or impure spirit s, or t ransf ormed int o any ot her subst ance eit her in
t he process of original product ion or by any subsequent process.
Spirit s or dist illed spirit s is t he subst ance known as et hyl alcohol, et hanol or spirit s of wine, including
all dilut ions, purif icat ions and mixt ures t hereof , f rom what ever source, by what ever process
produced, and shall include whisky, brandy, rum, gin and vodka, and ot her similar product s or mixt ures.
Proof spirit s is liquor cont aining one-half (1/2) of it s volume of alcohol of a specif ic gravit y of seven
t housand nine hundred and t hirt y-nine t housandt hs (0.7939) at f if t een degrees cent igrade (15O C). A
proof lit er means a lit er of proof spirit s.
T he rat es of t ax imposed under t his Sect ion shall be increased by t welve percent (12%) on January 1,
2000.
New brands shall be classif ied according t o t heir current net ret ail price.
For t he above purpose, net ret ail price shall mean t he price at which t he dist illed spirit is sold on
ret ail in t en (10) major supermarket s in Met ro Manila, excluding t he amount int ended t o cover t he
applicable excise t ax and t he value-added t ax as of Oct ober 1, 1996.
T he classif icat ion of each brand of dist illed spirit s based on t he average net ret ail price as of
Oct ober 1, 1996, as set f ort h in Annex A, shall remain in f orce unt il revised by Congress.
Section 142. Wines, On wines, t here shall be collect ed per lit er of volume capacit y, t he f ollowing
t axes:
(a) Sparkling wines/champagnes regardless of proof , if t he net ret ail price per bot t le (excluding t he
excise t ax and value-added t ax) is:
(1) Five hundred pesos (P500) or less One hundred pesos (P100); and
(2) More t han Five hundred pesos (P500) T hree hundred pesos (P300).
(b) St ill wines cont aining f ourt een percent (14%) of alcohol by volume or less, T welve pesos (P12.00);
and
(c) St ill wines cont aining more t han f ourt een percent (14%) but not more t han t went y-f ive percent
(25%) of alcohol by volume, T went y-f our pesos (P24.00).
Fort if ied wines cont aining more t han t went y-f ive percent of alcohol by volume shall be t axed as
dist illed spirit s. Fort if ied wines shall mean nat ural wines t o which dist illed spirit s are added t o
increase t heir alcoholic st rengt h.
T he rat es of t ax imposed under t his Sect ion shall be increased by t welve percent (12%) on January 1,
2000.
For t he above purpose, net ret ail price shall mean t he price at which wine is sold on ret ail in t en (10)
major supermarket s in Met ro Manila, excluding t he amount int ended t o cover t he applicable excise
t ax and t he value- added t ax as of Oct ober 1, 1996.
T he classif icat ion of each brand of wines based on it s average net ret ail price as of Oct ober 1, 1996,
as set f ort h in Annex B, shall remain in f orce unt il revised by Congress.
Section 143. Fermented Liquor. T here shall be levied, assessed and collect ed an excise t ax on beer,
lager beer, ale, port er and ot her f erment ed liquors except t uba, basi, t apuy and similar domest ic
f erment ed liquors in accordance wit h t he f ollowing schedule:
(a) If t he net ret ail price (excluding t he excise t ax and value-added t ax) per lit er of volume capacit y is
less t han Fourt een pesos and f if t y cent avos (P14.50), t he t ax shall be Six pesos and f if t een cent avos
(P6.15) per lit er;
(b) If t he net ret ail price (excluding t he excise t ax and t he value-added t ax) t he per lit er of volume
capacit y is Fourt een pesos and f if t y cent avos (P14.50) up t o T went y-t wo pesos (P22.00), t he t ax
shall be Nine pesos and f if t een cent avos (P9.15) per lit er;
(c) If t he net ret ail price (excluding t he excise t ax and t he value-added t ax) per lit er of volume
capacit y is more t han T went y-t wo pesos (P22.00), t he t ax shall be T welve pesos and f if t een
cent avos (P12.15) per lit er.
Variant s of exist ing brands which are int roduced in t he domest ic market af t er t he ef f ect ivit y of
Republic Act No. 8240 shall be t axed under t he highest classif icat ion of any variant of t hat brand.
Ferment ed liquor which are brewed and sold at micro-breweries or small est ablishment s such as pubs
and rest aurant s shall be subject t o t he rat e in paragraph (c) hereof .
T he excise t ax f rom any brand of f erment ed liquor wit hin t he next t hree (3) years f rom t he ef f ect ivit y
of Republic Act No. 8240 shall not be lower t han t he t ax which was due f rom each brand on Oct ober 1,
1996.
T he rat es of excise t ax on f erment ed liquor under paragraphs (a), (b) and (c) hereof shall be
increased by t welve percent (12%) on January 1, 2000.
For t he above purpose, net ret ail price shall mean t he price at which t he f erment ed liquor is sold on
ret ail in t went y (20) major supermarket s in Met ro Manila (f or brands of f erment ed liquor market ed
nat ionally) excluding t he amount int ended t o cover t he applicable excise t ax and t he value-added
t ax. For brands which are market ed only out side t he Met ro Manila, t he net ret ail price shall mean t he
price at t he which t he f erment ed liquor is sold in f ive (5) major supermarket s in t he region excluding
t he amount int ended t o cover t he applicable excise t ax and t he value-added t ax.
T he classif icat ion of each brand of f erment ed liquor based on it s average net ret ail price as of
Oct ober 1, 1996, as set f ort h in Annex C, shall remain in f orce unt il revised by Congress.
A variant of brand shall ref er t o a brand on which a modif ier is pref ixed and/or suf f ixed t o t he root
name of t he brand and/or a dif f erent brand which carries t he same logo or design of t he exist ing
brand.
Every brewer or import er of f erment ed liquor shall, wit hin t hirt y (30) days f rom t he ef f ect ivit y of R.A.
No. 8240, and wit hin t he f irst f ive (5) days of every mont h t hereaf t er, submit t o t he Commissioner a
sworn st at ement of t he volume of sales f or each part icular brand of f erment ed liquor sold at his
est ablishment f or t he t hree-mont h period immediat ely preceding.
Any brewer or import er who, in violat ion of t his Sect ion, knowingly misdeclares or misrepresent s in his
or it s sworn st at ement herein required any pert inent dat a or inf ormat ion shall be penalized by a
summary cancellat ion or wit hdrawal of his or it s permit t o engage in business as brewer of import er of
f erment ed liquor.
Any corporat ion, associat ion of part nership liable f or any of t he act s or omissions in violat ion of t his
Sect ion shall be f ined t reble t he amount of def iciency t axes, surcharge, and int erest which may be
assessed pursuant t o t his Sect ion.
Any person liable f or any of t he act s or omissions prohibit ed under t his Sect ion shall be criminally
liable and penalized under Sect ion 254 of t his Code. Any person who willf ully aids or abet s in t he
commission of any such act or omission shall be criminally liable in t he same manner as t he principal.
If t he of f ender is not a cit izen of t he Philippines, he shall be deport ed immediat ely af t er serving t he
sent ence, wit hout f urt her proceedings f or deport at ion.
CHAPT ER IV EXCISE T AX ON T OBACCO PRODUCT S
Section 144. Tobacco Products. T here shall be collect ed a t ax of sevent y-f ive cent avos (P0.75) on
each kilogram of t he f ollowing product s of t obacco:
(a) T obacco t wist ed by hand or reduced int o a condit ion t o be consumed in any manner ot her t han
t he ordinary mode of drying and curing;
(b) T obacco prepared or part ially prepared wit h or wit hout t he use of nay machine or inst rument s or
wit hout being pressed or sweet ened; and
(c) Fine-cut short s and ref use, scraps, clippings, cut t ings, st ems and sweepings of t obacco.
Fine-cut short s and ref use, scraps, clippings, cut t ings, st ems and sweepings of t obacco result ing
f rom t he handling or st ripping of whole leaf t obacco may be t ransf erred, disposed of , or ot herwise
sold, wit hout prepayment of t he excise t ax herein provided f or under such condit ions as may be
prescribed in t he rules and regulat ions promulgat ed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner, if t he same are t o be export ed or t o be used in t he
manuf act ure of ot her t obacco product s on which t he excise t ax will event ually be paid on t he f inished
product .
On t obacco specially prepared f or chewing so as t o be unsuit able f or use in any ot her manner, on
each kilogram, Sixt y cent avos (P0.60).
Section 145. Cigars and Cigarettes. -
(A) Cigars. T here shall be levied, assessed and collect ed on cigars a t ax of One peso (P1.00) per
cigar.
(B) Cigaret t es Packed by Hand. T here shall be levied, assessed and collect ed on cigaret t es packed
by hand a t ax of Fort y cent avos (P0.40) per pack.
(C) Cigaret t es Packed by Machine.- T here shall be levied, assessed and collect ed on cigaret t es
packed by machine a t ax at t he rat es prescribed below:
(1) If t he net ret ail price (excluding t he excise t ax and t he value-added t ax) is above T en pesos
(P10.00) per pack, t he t ax shall be T welve pesos (P12.00) per pack;
(2) If t he net ret ail price (excluding t he excise t ax and t he value-added t ax) exceeds Six pesos and
f if t y cent avos (P6.50) but does not exceed T en pesos (P10.00) per pack, t he t ax shall be Eight pesos
(8.00) per pack;
(3) If t he net ret ail price (excluding t he excise t ax and t he value-added t ax) is Five pesos (P5.00) but
does not exceed Six pesos and f if t y cent avos (P6.50) per pack, t he t ax shall be Five pesos (P5.00)
per pack;
(4) If t he net ret ail price (excluding t he excise t ax and t he value-added t ax is below Five pesos (P5.00)
per pack, t he t ax shall be One peso (P1.00) per pack;
Variant s of exist ing brands of cigaret t es which are int roduced in t he domest ic market af t er t he
ef f ect ivit y of R.A. No. 8240 shall be t axed under t he highest classif icat ion of any variant of t hat brand.
T he excise t ax f rom any brand of cigaret t es wit hin t he next t hree (3) years f rom t he ef f ect ivit y of
R.A. No. 8240 shall not be lower t han t he t ax, which is due f rom each brand on Oct ober 1, 1996:
Provided, however, T hat in cases where t he excise t ax rat es imposed in paragraphs (1), (2), (3) and
(4) hereinabove will result in an increase in excise t ax of more t han sevent y percent (70%); f or a brand
of cigaret t e, t he increase shall t ake ef f ect in t wo t ranches: f if t y percent (50%) of t he increase shall
be ef f ect ive in 1997 and one hundred percent (100%) of t he increase shall be ef f ect ive in 1998.
Duly regist ered or exist ing brands of cigaret t es or new brands t hereof packed by machine shall only
be packed in t went ies.
T he rat es of excise t ax on cigars and cigaret t es under paragraphs (1), (2), (3) and (4) hereof , shall be
increased by t welve percent (12%) on January 1, 2000.
For t he above purpose, net ret ail price shall mean t he price at which t he cigaret t e is sold on ret ail in
t went y (20) major supermarket s in Met ro Manila (f or brands of cigaret t es market ed nat ionally),
excluding t he amount int ended t o cover t he applicable excise t ax and t he value-added t ax. For
brands which are market ed only out side Met ro Manila, t he net ret ail price shall mean t he price at
which t he cigaret t e is sold in f ive (5) major supermarket s in t he region excluding t he amount int ended
t o cover t he applicable excise t ax and t he value-added t ax.
T he classif icat ion of each brand of cigaret t es based on it s average net ret ail price as of Oct ober 1,
1996, as set f ort h in Annex D, shall remain in f orce unt il revised by Congress.
Variant of a brand shall ref er t o a brand on which a modif ier is pref ixed and/or suf f ixed t o t he root
name of t he brand and/or a dif f erent brand which carries t he same logo or design of t he exist ing
brand.
Manuf act ures and import ers of cigars and cigaret t es shall, wit hin t hirt y (30) days f rom t he ef f ect ivit y
of R. A. No. 8240 and wit hin t he f irst f ive (5) days of every mont h t hereaf t er submit t o t he
Commissioner a sworn st at ement of t he volume of sales f or each part icular brand of cigars and/or
cigaret t es sold at his est ablishment f or t he t hree-mont h period immediat ely preceding.
Any manuf act urer or import er who, in violat ion of t his Sect ion, knowingly misdeclares or misrepresent s
in his or it s sworn st at ement herein required any pert inent dat a or inf ormat ion shall, upon discovery,
be penalized by a summary cancellat ion or wit hdrawal of his or it s permit t o engage in business as
manuf act urer or import er of cigars or cigaret t es.
Any corporat ion, associat ion or part nership liable f or any of t he act s or omissions in violat ion of t his
Sect ion shall be f ined t reble t he amount of def iciency t axes, surcharges and int erest which may be
assessed pursuant t o t his Sect ion.
Any person liable f or any of t he act s or omissions prohibit ed under t his Sect ion shall be criminally
liable and penalized under Sect ion 254 of t his Code. Any person who willf ully aids or abet s in t he
commission of any such act or omission shall be criminally liable in t he same manner as t he principal.
If t he of f ender is not a cit izen of t he Philippines, he shall be deport ed immediat ely af t er serving t he
sent ence wit hout f urt her proceedings f or deport at ion.
Section 146. Inspection Fee. For inspect ion made in accordance wit h t his Chapt er, t here shall be
collect ed a f ee of Fif t y cent avos (P0.50) f or each t housand cigars or f ract ion t hereof ; T en cent avos
(P0.10) f or each t housand cigaret t es of f ract ion t hereof ; T wo cent avos (P0.02) f or each kilogram of
leaf t obacco or f ract ion t hereof ; and T hree cent avos (P0.03) f or each kilogram or f ract ion t hereof , of
scrap and ot her manuf act ured t obacco.
T he inspect ion f ee on leaf t obacco, scrap, cigars, cigaret t es and ot her t obacco product s as def ined
in Sect ion 147 of t his Code shall be paid by t he wholesaler, manuf act urer, producer, owner or
operat or of redrying plant , as t he case may be, immediat ely bef ore removal t here of f rom t he
est ablishment of t he wholesaler, manuf act urer, owner or operat or of t he redrying plant . In case of
import ed leaf t obacco and product s t hereof , t he inspect ion f ee shall be paid by t he import er bef ore
removal f rom cust oms cust ody.
Fif t y percent (50%) of t he t obacco inspect ion f ee shall accrue t o t he T obacco Inspect ion Fund
creat ed by Sect ion 12 of Act No. 2613, as amended by Act No. 3179, and f if t y percent (50%) shall
accrue t o t heCult uralCent erof t he Philippines.
Section 147. Definition of Terms. When used herein and in st at ement s or of f icial f orms prescribed
hereunder, t he f ollowing t erms shall have t he meaning indicat ed:
(a) Cigars mean all rolls of t obacco or any subst it ut e t hereof , wrapped in leaf t obacco.
(b) Cigaret t es mean all rolls of f inely-cut leaf t obacco, or any subst it ut e t heref or, wrapped in paper
or in any ot her mat erial.
(c) Wholesale price shall mean t he amount of money or price paid f or cigars or cigaret t es purchased
f or t he purpose of resale, regardless of quant it y.
(d) Ret ail price shall mean t he amount of money or price which an ult imat e consumer or end-user
pays f or cigars or cigaret t es purchased.
CHAPT ER V EXCISE T AX ON PET ROLEUM PRODUCT S
Section 148. Manufactured Oils and Other Fuels. T here shall be collect ed on ref ined and
manuf act ured mineral oils and mot or f uels, t he f ollowing excise t axes which shall at t ach t o t he goods
hereunder enumerat ed as soon as t hey are in exist ence as such:
(a) Lubricat ing oils and greases, including but not limit ed t o, basest ock f or lube oils and greases, high
vacuum dist illat es, aromat ic ext ract s, and ot her similar preparat ions, and addit ives f or lubricat ing oils
and greases, whet her such addit ives are pet roleum based or not , per lit er and kilogram respect ively,
of volume capacit y or weight , Four pesos and f if t y cent avos (P4.50): Provided, however, T hat t he
excise t axes paid on t he purchased f eedst ock (bunker) used in t he manuf act ure of excisable art icles
and f orming part t hereof shall be credit ed against t he excise t ax due t heref rom: Provided, f urt her,
T hat lubricat ing oils and greases produced f rom basest ocks and addit ives on which t he excise t ax
has already been paid shall no longer be subject t o excise t ax: Provided, f inally, T hat locally produced
or import ed oils previously t axed as such but are subsequent ly reprocessed, reref ined or recycled
shall likewise be subject t o t he t ax imposed under t his Sect ion.
(b) Processed gas, per lit er of volume capacit y, Five cent avos (P0.05);
(c) Waxes and pet rolat um, per kilogram, T hree pesos and f if t y cent avos (P3.50);
(d) On denat ured alcohol t o be used f or mot ive power, per lit er of volume capacit y, Five cent avos
(P0.05): Provided, T hat unless ot herwise provided by special laws, if t he denat ured alcohol is mixed
wit h gasoline, t he excise t ax on which has already been paid, only t he alcohol cont ent shall be subject
t o t he t ax herein prescribed. For purposes of t his Subsect ion, t he removal of denat ured alcohol of not
less t han one hundred eight y degrees (180o ) proof (ninet y percent (90%) absolut e alcohol) shall be
deemed t o have been removed f or mot ive power, unless shown ot herwise;
(e) Napht ha, regular gasoline and ot her similar product s of dist illat ion, per lit er of volume capacit y,
Four pesos and eight y cent avos (P4.80): Provided, however, T hat napht ha, when used as a raw
mat erial in t he product ion of pet rochemical product s or as replacement f uel f or nat ural-gas-f iredcombined cycle power plant , in lieu of locally-ext ract ed nat ural gas during t he non-availabilit y t hereof ,
subject t o t he rules and regulat ions t o be promulgat ed by t he Secret ary of Energy, in consult at ion
wit h t he Secret ary of Finance, per lit er of volume capacit y, Zero (P0.00): Provided, f urt her, T hat t he
by-product including f uel oil, diesel f uel, kerosene, pyrolysis gasoline, liquef ied pet roleum gases and
similar oils having more or less t he same generat ing power, which are produced in t he processing of
napht ha int o pet rochemical product s shall be subject t o t he applicable excise t ax specif ied in t his
Sect ion, except when such by-product s are t ransf erred t o any of t he local oil ref ineries t hrough sale,
bart er or exchange, f or t he purpose of f urt her processing or blending int o f inished product s which are
subject t o excise t ax under t his Sect ion;
(f ) Leaded premium gasoline, per lit er of volume capacit y, Five pesos and t hirt y-f ive cent avos (P5.35);
unleaded premium gasoline, per lit er of volume capacit y, Four pesos and t hirt y-f ive cent avos (P4.35);
(g) Aviat ion t urbo jet f uel, per lit er of volume capacit y, T hree pesos and sixt y-seven cent avos (P3.67);
(h) Kerosene, per lit er of volume capacit y, Sixt y cent avos (0.60): Provided, T hat kerosene, when used
as aviat ion f uel, shall be subject t o t he same t ax on aviat ion t urbo jet f uel under t he preceding
paragraph (g), such t ax t o be assessed on t he user t hereof ;
(i) Diesel f uel oil, an on similar f uel oils having more or less t he same generat ing power, per lit er of
volume capacit y, One peso and sixt y-t hree cent avos (P1.63);
(j) Liquef ied pet roleum gas, per lit er, Zero (P0.00): Provided, T hat liquef ied pet roleum gas used f or
mot ive power shall be t axed at t he equivalent rat e as t he excise t ax on diesel f uel oil;
(k) Asphalt s, per kilogram, Fif t y-six cent avos (P0.56); and
(l) Bunker f uel oil, and on similar f uel oils having more or less t he same generat ing power, per lit er of
volume capacit y, T hirt y cent avos (P0.30).
CHAPT ER VI EXCISE T AX ON MISCELLANEOUS ART ICLES
Section 149. Automobiles. T here shall be levied, assessed and collect ed an ad valorem t ax on
aut omobiles based on t he manuf act urers or import ers selling price, net of excise and value-added
t ax, in accordance wit h t he f ollowing schedule:
Engine Displacement (in cc.)
Gasoline
Diesel
Tax Rate
Up t o 1600
Up t o 1800
15%
1601 t o 2000
1801 t o 2300
35%
2001 t o 2700
2301 t o 3000
50%
2701 or over
3001 t o over
100%
Provided, T hat in t he case of import ed aut omobiles not f or sale, t he t ax imposed herein shall be
based on t he t ot al value used by t he Bureau of Cust oms in det ermining t arif f and cust oms dut ies,
including cust oms dut y and all ot her charges, plus t en percent (10%) of t he t ot al t hereof .
Aut omobiles acquired f or use by persons or ent it ies operat ing wit hin t he f reeport zone shall be
exempt f rom excise t ax: provided, T hat ut ilit y vehicles of regist ered zone ent erprises, which are
indispensable in t he conduct and operat ions of t heir business, such as delivery t rucks and cargo vans
wit h gross vehicle weight above t hree (3) met ric t ons may be allowed unrest rict ed use out side t he
f reeport zone: Provided, f urt her, T hat vehicles owned by t ourist -orient ed ent erprises, such as t ourist
buses and cars wit h yellow plat es, color-coded, and ut ilized exclusively f or t he purpose of
t ransport ing t ourist s in t ourism-relat ed act ivit ies, and service vehicles of f reeport regist ered
ent erprises and execut ives, such as company service cars and expat riat es and invest ors
aut omobiles brought in t he name of such ent erprises, may be used out side t he f reeport zone f or
such periods as may be prescribed by t he Depart ment s of Finance, and T rade and Indust ry, t he
Bureau of Cust oms and t he Freeport aut horit ies concerned, which in no case shall exceed f ourt een
(14) days per mont h.
In case such t ourist buses and cars, service vehicles of regist eredf reeport ent erprises and company
service cars are used f or more t han an aggregat e period of f ourt een (14) days per mont h out side of
t hef reeport zone, t he owner or import er shall pay t he corresponding cust oms dut ies, t axes and
charges.
In t he case of personally-owned vehicles of resident s, including leaseholders of residences inside t he
f reeport zone, t he use of such vehicles out side of t he f reeport zone shall be deemed an int roduct ion
int o t he Philippine cust oms t errit ory, and such int roduct ion shall be deemed an import at ion int o t he
Philippines and shall subject such vehicles t o Cust oms dut ies t axes and charges, including excise t ax
due on such vehicle.
T he Secret aries of Finance, and T rade and Indust ry, t oget her wit h t he Commissioner of Cust oms and
t he administ rat ors of t he f reeport s concerned, shall promulgat e rules and regulat ions f or t he proper
ident if icat ion and cont rol of said aut omobiles.
Section 150. Non-essential Goods. T here shall be levied, assessed and collect ed a t ax equivalent t o
t went y-percent (20%) based on t he wholesale price or t he value of import at ion used by t he Bureau of
Cust oms in det ermining t arif f and cust oms dut ies, net of excise t ax and value-added t ax, of t he
f ollowing goods:
(a) All goods commonly or commercially known as jewelry, whet her real or imit at ion, pearls, precious
and semi-precious st ones and imit at ions t hereof ; goods made of , or ornament ed, mount ed or f it t ed
wit h, precious met als or imit at ions t hereof or ivory (not including surgical and dent al inst rument s,
silver-plat ed wares, f rames or mount ings f or spect acles or eyeglasses, and dent al gold or gold alloys
and ot her precious met als used in f illing, mount ing or f it t ing t he t eet h); opera glasses and lorgnet t es.
T he t erm precious met als shall include plat inum, gold, silver and ot her met als of similar or great er
value. T he t erm imit at ions t hereof shall include plat ings and alloys of such met als;
(b) Perf umes and t oilet wat ers;
(c) Yacht s and ot her vessels int ended f or pleasure or sport s.

CHAPT ER VII EXCISE T AX ON MINERAL PRODUCT S
Section 151. Mineral Products. (A) Rates of Tax. T here shall be levied, assessed and collect ed on minerals, mineral product s and
quarry resources, excise t ax as f ollows:
(1) On coal and coke, a t ax of T en pesos (P10.00) per met ric t on;
(2) On all nonmet allic minerals and quarry resources, a t ax of t wo percent (2%) based on t he act ual
market value of t he gross out put t hereof at t he t ime of removal, in t he case of t hose locally
ext ract ed or produced; or t he value used by t he Bureau of Cust oms in det ermining t arif f and cust oms
dut ies, net of excise t ax and value-added t ax, in t he case of import at ion.
Not wit hst anding t he provision of paragraph (4) of Subsect ion (A) of Sect ion 151, locally ext ract ed
nat ural gas and liquef ied nat ural gas shall be t axed at t he rat e of t wo percent (2%);
(3) On all met allic minerals, a t ax based on t he act ual market value of t he gross out put t hereof at t he
t ime of removal, in t he case of t hose locally ext ract ed or produced; or t he value used by t he Bureau
of Cust oms in det ermining t arif f and cust oms dut ies, net of excise t ax and value-added t ax, in t he
case of import at ion, in accordance wit h t he f ollowing schedule;
(a) Copper and ot her met allic minerals;
(i) On t he f irst t hree (3) years upon t he ef f ect ivit y of Republic Act No. 7729, one percent (1%);
(ii) On t he f ourt h and t he f if t h years, one and a half percent (1 %); and
(iii) On t he sixt h year and t hereaf t er, t wo percent (2%);
(b) Gold and chromit e, t wo percent (2%).
(4) On indigenous pet roleum, a t ax of t hree percent (3%) of t he f air int ernat ional market price t hereof ,
on t he f irst t axable sale, bart er, exchange or such similar t ransact ion, such t ax t o be paid by t he
buyer or purchaser bef ore removal f rom t he place of product ion. T he phrase f irst t axable sale,
bart er, exchange or similar t ransact ion means t he t ransf er of indigenous pet roleum in it s original
st at e t o a f irst t axable t ransf eree. T he f air int ernat ional market price shall be det ermined in
consult at ion wit h an appropriat e government agency.
For t he purpose of t his Subsect ion, indigenous pet roleum shall include locally-ext ract ed mineral oil,
hydrocarbon gas, bit umen, crude asphalt , mineral gas and all ot her similar or nat urally associat ed
subst ances wit h t he except ion of coal, peat , bit uminous shale and/or st rat if ied mineral deposit s.
(B) For purposes of t his Sect ion, t he t erm (1) Gross out put shall be int erpret ed as t he act ual market value of minerals or mineral product s or of
bullion f rom each mine or mineral land operat ed as a separat e ent it y, wit hout any deduct ion f rom
mining, milling, ref ining (including all expenses incurred t o prepare t he said minerals or mineral
product s in a market able st at e), as well as t ransport ing, handling, market ing or any ot her expenses:
Provided, T hat if t he minerals or mineral product s are sold or consigned abroad by t he lessee or
owner of t he mine under C.I.F. t erms, t he act ual cost of ocean f reight and insurance shall be
deduct ed: provided, however, T hat in t he case of mineral concent rat e, not t raded in commodit y
exchanges in t he Philippines or abroad, such as copper concent rat e, t he act ual market value shall be
t he world price quot at ions of t he ref ined mineral product s cont ent t hereof prevailing in t he said
commodit y exchanges, af t er deduct ing t he smelt ing, ref ining and ot her charges incurred in t he
process of convert ing t he mineral concent rat es int o ref ined met al t raded in t hose commodit y
exchanges.
(2) Minerals shall mean all nat urally occurring inorganic subst ances (f ound in nat ure) whet her in solid,
liquid, gaseous or any int ermediat e st at e.
(3) Mineral product s shall mean t hings produced and prepared in a market able st at e by simple
t reat ment processes such as washing or drying, but wit hout undergoing any chemical change or
process or manuf act uring by t he lessee, concessionaire or owner of mineral lands.
(4) Quarry resources shall mean any common st one or ot her common mineral subst ances as t he
Direct or of t he Bureau of Mines and Geo-Sciences may declare t o be quarry resources such as, but
not rest rict ed t o, marl, marble, granit e, volcanic cinders, basalt , t uf f and rock phosphat e: Provided,
T hat t hey cont ain no met al or ot her valuable minerals in economically workable quant it ies.
CHAPT ER VIII ADMINIST RAT IVE PROVISIONS REGULAT ING BUSINESS OF PERSONS DEALING
IN ART ICLES SUBJECT T O EXCISE T AX
Section 152. Extent of Supervision Over Establishments Producing Taxable Output. T he Bureau of
Int ernal Revenue has aut horit y t o supervise est ablishment s where art icles subject t o excise t ax are
made or kept . T he Secret ary of Finance shall prescribe rules and regulat ions as t o t he mode in which
t he process of product ion shall be conduct ed insof ar as may be necessary t o secure a sanit ary
out put and t o saf eguard t he revenue.
Section 153. Records to be Kept by Manufacturers; Assessment Based Thereon. Manuf act urers of
art icles subject t o excise t ax shall keep such records as required by rules and regulat ions
recommended by t he Commissioner and approved by t he Secret ary of Finance, and such records,
whet her of raw mat erials received int o t he f act ory or of art icles produced t herein, shall be deemed
public and of f icial document s f or all purposes.
T he records of raw mat erials kept by such manuf act urers may be used as evidence by which t o
det ermine t he amount of excise t axes due f rom t hem, and whenever t he amount s of raw mat erial
received int o any f act ory exceeds t he amount of manuf act ured or part ially manuf act ured product s
on hand and lawf ully removed f rom t he f act ory, plus wast e removed or dest royed, and a reasonable
allowance f or unavoidable loss in manuf act ure, t he Commissioner may assess and collect t he t ax due
on t he product s which should have been produced f rom t he excess.
T he excise t ax due on t he product s as det ermined and assessed in accordance wit h t his Sect ion
shall be payable upon demand or wit hin t he period specif ied t herein.
Section 154. Premises Subject to Approval by Commissioner. No person shall engage in business as a
manuf act urer of or dealer in art icles subject t o excise t ax unless t he premises upon which t he
business is t o conduct ed shall have been approved by t he Commissioner.
Section 155. Manufacturers to Provide Themselves with Counting or Metering Devices to Determine
Production. Manuf act urers of cigaret t es, alcoholic product s, oil product s and ot her art icles subject
t o excise t ax t hat can be similarly measured shall provide t hemselves wit h such necessary number of
suit able count ing or met ering devices t o det ermine as accurat ely as possible t he volume, quant it y or
number of t he art icles produced by t hem under rules and regulat ions promulgat ed by t he Secret ary
of Finance, upon recommendat ion of t he Commissioner.
T his requirement shall be complied wit h bef ore commencement of operat ions.
Section 156. Labels and Form of Packages. All art icles of domest ic manuf act ure subject t o excise
t ax and all leaf t obacco shall be put up and prepared by t he manuf act urer or producer, when
removed f or sale or consumpt ion, in such packages only and bearing such marks or brand as shall be
prescribed in t he rules and regulat ions promulgat ed by t he Secret ary of Finance; and goods of similar
charact er import ed int o t he 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 t he t ax has been paid on art icles or
product s subject t o excise t ax, t he same shall not t hereaf t er be st ored or permit t ed t o remain in t he
dist illery, dist illery warehouse, bonded warehouse, or ot her f act ory or place where produced.
However, upon prior permit f rom t he Commissioner, oil ref ineries and/or companies may st ore or
deposit t ax-paid pet roleum product s and commingle t he same wit h it s own manuf act ured product s
not yet subject ed t o excise t ax. Import ed pet roleum product s may be allowed t o be wit hdrawn f rom
cust oms cust ody wit hout t he prepayment of excise t ax, which product s may be commingled wit h t he
t ax-paid or bonded product s of t he import er himself af t er securing a prior permit f rom t he
Commissioner: Provided, T hat wit hdrawals shall be t axed and account ed f or on a f irst -in, f irst -out
basis.
Section 158. Storage of Goods in Internal-revenue Bonded Warehouses. An int ernal-revenue bonded
warehouse may be maint ained in any port of ent ry f or t he st oring of import ed or manuf act ured goods
which are subject t o excise t ax. T he t axes on such goods shall be payable only upon removal f rom
such warehouse and a reasonable charge shall be made f or t heir st orage t herein. T he Commissioner,
may, in his discret ion, exact a bond t o secure t he payment of t he t ax on any goods so st ored.
Section 159. Proof of Exportation; Exporters Bond. Export ers of goods t hat would be subject t o
excise t ax, if sold or removed f or consumpt ion in t he Philippines, shall submit proof of export at ion
sat isf act ory t o t he Commissioner, and, when t he same is deemed necessary, shall be required t o
give a bond prior t o t he removal of t he goods f or shipment , condit ioned upon t he export at ion of t he
same in good f ait h.
Section 160. Manufacturers and Importers Bond. Manuf act urers and import ers of art icles subject t o
excise t ax shall post a bond subject t o t he f ollowing condit ions:
(A) Initial Bond. In case of init ial bond, t he amount shall be equal t o One Hundred t housand pesos
(P100,000): Provided, T hat if af t er six (6) mont hs of operat ion, t he amount of init ial bond is less t han
t he amount of t he t ot al excise t ax paid during t he period, t he amount of t he bond shall be adjust ed
t o t wice t he t ax act ually paid f or t he period.
(B) Bond for the Succeeding Years of Operation. T he bonds f or t he succeeding years of operat ion
shall be based on t he act ual t ot al excise t ax paid during t he period t he year immediat ely preceding
t he year of operat ion.
Such bond shall be condit ioned upon f ait hf ul compliance, during t he t ime such business is f ollowed,
wit h laws and rules and regulat ions relat ing t o such business and f or t he sat isf act ion of all f ines and
penalt ies imposed by t his Code.
Section 161. Records to be Kept by Wholesale Dealers. Wholesale dealers shall keep records of t heir
purchases and sales or deliveries of art icles subject t o excise t ax, in such f orm as shall be prescribed
in t he rules and regulat ions by t he Secret ary of Finance. T hese records and t he ent ire st ock of goods
subject t o t ax shall be subject at all t imes t o inspect ion of int ernal revenue of f icers.
Section 162. Records to be Kept by Dealers in Leaf Tobacco. Dealers in leaf t obacco shall keep
records of t he product s sold or delivered by t hem t o ot her persons in such manner as may be
prescribed in t he rules and regulat ions by t he Secret ary of Finance, such records t o be at all t imes
subject t o inspect ion of int ernal revenue of f icers.
Section 163. Preservation of Invoices and Stamps. All dealers whosoever shall preserve, f or t he
period prescribed in Sect ion 235, all of f icial invoices received by t hem f rom ot her dealers or f rom
manuf act urers, t oget her wit h t he f ract ional part s of st amps af f ixed t heret o, if any, and upon
demand, shall deliver or t ransmit t he same t o any int erval revenue of f icer.
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. Manuf act urers, indent ors, wholesalers and import ers of any apparat us or
mechanical cont rivance specially f or t he manuf act ure of art icles subject t o t ax shall, bef ore any such
apparat us or mechanical cont rivance is removed f rom t he place of manuf act ure or f rom t he cust oms
house, give writ t en inf ormat ion t o t he Commissioner as t o t he nat ure and capacit y of t he same, t he
t ime when it is t o be removed, and t he place f or which it is dest ined, as well as t he name of t he
person by whom it is t o be used; and such apparat us or mechanical cont rivance shall not be set up
nor dismant led or t ransf erred wit hout a permit in writ ing f rom t he Commissioner.
A writ t en permit f rom t he Commissioner f or import ing, manuf act uring or selling of cigaret t e paper in
bobbins or rolls, cigaret t e t ipping paper or cigaret t e f ilt er t ips is required bef ore any person shall
engage in t he import at ion, manuf act ure or sale of t he said art icles. No permit t o sell said art icles shall
be grant ed unless t he name and address of t he prospect ive buyer is f irst submit t ed t o t he
Commissioner and approved by him. Records, showing t he st ock of t he said art icles and t he disposal
t hereof by sale of persons wit h t heir respect ive addresses as approved by t he Commissioner, shall
be kept by t he seller, and records, showing st ock of said art icles and consumpt ion t hereof , shall be
kept by t he buyer, subject t o inspect ion by int ernal revenue of f icers.
Section 165. Establishment of Distillery Warehouse. Every dist iller, when so required by t he
Commissioner, shall provide at his own expense a warehouse, and shall be sit uat ed in and const it ut e
a part of his dist illery premises and t o be used only f or t he st orage of dist illed spirit s of his own
manuf act ure unt il t he t ax t hereon shall have been paid; but no dwelling house shall be used f or such
purpose. Such warehouse, when approved by t he Commissioner, is declared t o be a bonded
warehouse, and shall be known as a dist illery warehouse.
Section 166. Custody of Distillery or Distillery Warehouse. Every dist illery or dist illery warehouse shall
be in t he joint cust ody of t he revenue inspect or, if one is assigned t heret o, and of t he propriet or
t hereof . It shall be kept securely locked, and shall at no t ime be unlocked or opened or remain
unlocked or opened unless in t he presence of such revenue inspect or or ot her person who may be
designat ed t o act f or him as provided by law.
Section 167. Limitation on Quantity of Spirits Removed from Warehouse. No dist illed spirit s shall be
removed f rom any dist illery, dist illery warehouse, or bonded warehouse in quant it ies of less t han
f if t een (15) gauge lit ers at any one t ime, except bot t led goods, which may be removed by t he case
of not less t han t welve (12) bot t les.
Section 168. Denaturing Within Premises. For purposes of t his T it le, t he process of denat uring
alcohol shall be ef f ect ed only wit hin t he dist illery premises where t he alcohol t o be denat ured is
produced in accordance wit h f ormulas duly approved by t he Bureau of Int ernal Revenue and only in
t he presence of duly designat ed represent at ives of said Bureau.
Section 169. Recovery of Alcohol for Use in Arts and Industries. Manuf act urers employing processes in
which denat ured alcohol used in art s and indust ries is expressed or evaporat ed f rom t he art icles
manuf act ured may, under rules and regulat ions t o be prescribed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner, be permit t ed t o recover t he alcohol so used and rest ore it
again t o a condit ion suit able solely f or use in manuf act uring processes.
Section 170. Requirements Governing Rectification and Compounding of Liquors. Persons engaged in
t he rect if icat ion or compounding of liquors shall, as t o t he mode of conduct ing t heir business and
supervision over t he same, be subject t o all t he requirement s of law applicable t o dist illeries:
Provided, T hat where a rect if ier makes use of spirit s upon which t he excise t ax has been paid, no
f urt her t ax shall be collect ed on any rect if ied spirit s produced exclusively t heref rom: Provided,
f urt her, T hat compounders in t he manuf act ure of any int oxicat ing beverage what ever, shall not be
allowed t o make use of spirit s upon which t he excise t ax has not been previously paid.
Section 171. Authority of Internal Revenue Officer in Searching for Taxable Articles. Any int ernal revenue
of f icer may, in t he discharge of his of f icial dut ies, ent er any house, building or place where art icles
subject t o t ax under t his T it le are produced or kept , or are believed by him upon reasonable grounds
t o be produced or kept , so f ar as may be necessary t o examine, discover or seize t he same.
He may also st op and search any vehicle or ot her means of t ransport at ion when upon reasonable
grounds he believes t hat t he same carries any art icle on which t he excise t ax has not been paid.
Section 172. Detention of Package Containing Taxable Articles. Any revenue of f icer may det ain any
package cont aining or supposed t o cont ain art icles subject t o excise t ax when he has good reason t o
believe t hat t he lawf ul t ax has not been paid or t hat t he package has been or is being removed in
violat ion of law, and every such package shall be held by such of f icer in a saf e place unt il it shall be
det ermined whet her t he propert y so det ained is liable by law t o be proceeded against f or f orf eit ure;
but such summary det ent ion shall not cont inue in any case longer t han seven (7) days wit hout due
process of law or int ervent ion of t he of f icer t o whom such det ent ion is t o be report ed.
T IT LE VII
DOCUMENT ARY ST AMP T AX
Section 173. Stamp Taxes Upon Documents, Loan Agreements, Instruments and Papers. Upon
document s, inst rument s, loan agreement s and papers, and upon accept ances, assignment s, sales
and t ransf ers of t he obligat ion, right or propert y incident t heret o, t here shall be levied, collect ed and
paid f or, and in respect of t he t ransact ion so had or accomplished, t he corresponding document ary
st amp t axes prescribed in t he f ollowing Sect ions of t his T it le, by t he person making, signing, issuing,
accept ing, or t ransf erring t he same wherever t he document is made, signed, issued, accept ed or
t ransf erred when t he obligat ion or right arises f rom Philippine sources or t he propert y is sit uat ed in
t he Philippines, and t he same t ime such act is done or t ransact ion had: Provided, T hat whenever one
part y t o t he t axable document enjoys exempt ion f rom t he t ax herein imposed, t he ot her part y who is
not exempt shall be t he one direct ly liable f or t he t ax.
Section 174. Stamp Tax on Debentures and Certificates of Indebtedness. On all debent ures and
cert if icat es of indebt edness issued by any associat ion, company or corporat ion, t here shall be
collect ed a document ary st amp t ax of One peso and f if t y cent avos (P1.50) on each T wo hundred
pesos (P200), or f ract ional part t hereof , of t he f ace value of such document s.
Section 175. Stamp Tax on Original Issue of Shares of Stock. On every original issue, whet her on
organizat ion, reorganizat ion or f or any lawf ul purpose, of shares of st ock by any associat ion,
company or corporat ion, t here shall be collect ed a document ary st amp t ax of T wo pesos (P2.00) on
each T wo hundred pesos (P200), or f ract ional part t hereof , of t he par value, of such shares of st ock:
Provided, T hat in t he case of t he original issue of shares of st ock wit hout par value t he amount of t he
document ary st amp t ax herein prescribed shall be based upon t he act ual considerat ion f or t he
issuance of such shares of st ock: provided, f urt her, T hat in t he case of st ock dividends, on t he act ual
value represent ed by each share.
Section 176. Stamp Tax on Sales, Agreements to Sell, Memoranda of Sales, Deliveries or Transfer of Duebills, Certificates of Obligation, or Shares of Certificates of Stock. On all sales, or agreement s t o sell, or
memoranda of sale, or deliveries, or t ransf er of due-bills, cert if icat es of obligat ion, or shares of
cert if icat es of st ock in any associat ion, company, or corporat ion, or t ransf er of such securit ies by
assignment in blank, or by delivery, or by any paper or agreement , or memorandum or ot her
evidences of t ransf er or sale whet her ent it ling t he holder in any manner t o t he benef it of such duebills, cert if icat es of obligat ion or st ock, or t o secure t he f ut ure payment of money, or f or t he f ut ure
t ransf er of any due-bill, cert if icat e of obligat ion or st ock, t here shall be collect ed a document ary
st amp t ax of One peso and f if t y cent avos (P1.50) on each T wo hundred pesos (P200) or f ract ional
part t hereof , of t he par value of such due-bill, cert if icat e of obligat ion or st ock; Provided, T hat only
one t ax shall be collect ed on each sale or t ransf er of st ock or securit ies f rom one person t o anot her,
regardless of whet her or not a cert if icat e of st ock or obligat ion is issued, indorsed, or delivered in
pursuance of such sale or t ransf er: and Provided, f urt her, T hat in t he case of st ock wit hout par value
t he amount of document ary st amp t ax herein prescribed shall be equivalent t o t went y-f ive percent
(25%) of t he document ary st amp t ax paid upon t he original issue of said st ock.
Section 177. Stamp Tax on Bonds, Debentures, Certificate of Stock or Indebtedness Issued in Foreign
Countries. On all bonds, debent ures, cert if icat es of st ock, or cert if icat es of indebt edness issued in
any f oreign count ry, t here shall be collect ed f rom t he person selling or t ransf erring t he same in t he
Philippines, such as t ax as is required by law on similar inst rument s when issued, sold or t ransf erred in
t he Philippines.
Section 178. Stamp Tax on Certificates of Profits or Interest in Property or Accumulations. On all
cert if icat es of prof it s, or any cert if icat e or memorandum showing int erest in t he propert y or
accumulat ions of any associat ion, company or corporat ion, and on all t ransf ers of such cert if icat es or
memoranda, t here shall be collect ed a document ary st amp t ax of Fif t y cent avos (P0.50) on each
T wo hundred pesos (P200), or f ract ional part t hereof , of t he f ace value of such cert if icat e or
memorandum.
Section 179. Stamp Tax on Bank Checks, Drafts, Certificates of Deposit not Bearing Interest, and Other
Instruments. On each bank check, draf t , or cert if icat e of deposit not drawing int erest , or order f or
t he payment of any sum of money drawn upon or issued by any bank, t rust company, or any person
or persons, companies or corporat ions, at sight or on demand, t here shall be collect ed a
document ary st amp t ax of One peso and f if t y cent avos (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 agreement s, including t hose signed abroad, wherein t he object of t he cont ract is
locat ed or used in t he Philippines, bills of exchange (bet ween point s wit hin t he Philippines), draf t s,
inst rument s and securit ies issued by t he Government or any of it s inst rument alit ies, deposit
subst it ut e debt inst rument s, cert if icat es of deposit s drawing int erest , orders f or t he payment of any
sum of money ot herwise t han at sight or on demand, on all promissory not es, whet her negot iable or
non-negot iable, except bank not es issued f or circulat ion, and on each renewal of any such not e, t here
shall be collect ed a document ary st amp t ax of T hirt y cent avos (P0.30) on each T wo hundred pesos
(P200), or f ract ional part t hereof , of t he f ace value of any such agreement , bill of exchange, draf t ,
cert if icat e of deposit , or not e: Provided, T hat only one document ary st amp t ax shall be imposed on
eit her loan agreement , or promissory not es issued t o secure such loan, whichever will yield a higher
t ax: Provided, however, T hat loan agreement s or promissory not es t he aggregat e of which does not
exceed T wo hundred f if t y t housand pesos (P250,000) execut ed by an individual f or his purchase on
inst allment f or his personal use or t hat of his f amily and not f or business, resale, bart er or hire of a
house, lot , mot or vehicle, appliance or f urnit ure shall be exempt f rom t he payment of t he
document ary st amp t ax provided under t his Sect ion.
Section 181. Stamp Tax Upon Acceptance of Bills of Exchange and Others. Upon any accept ance or
payment of any bill of exchange or order f or t he payment of money purport ing t o be drawn in a
f oreign count ry but payable in t he Philippines, t here shall be collect ed a document ary st amp t ax of
T hirt y cent avos (P0.30) on each T wo hundred pesos (P200), or f ract ional part t hereof , of t he f ace
value of any such bill of exchange, or order, or t he Philippine equivalent t o such value, if expressed in
f oreign currency.
Section 182. Stamp Tax on Foreign Bills of Exchange and Letters of Credit. On all f oreign bills of
exchange and let t ers of credit (including orders, by t elegraph or ot herwise, f or t he payment of money
issued by express or st eamship companies or by any person or persons) drawn in but payable out of
t he Philippines in a set of t hree (3) or more according t o t he cust om of merchant s and bankers, t here
shall be collect ed a document ary st amp t ax of T hirt y cent avos (P0.30) on each T wo hundred pesos
(P200), or f ract ional part t hereof , of t he f ace value of any such bill of exchange or let t er of credit , or
t he Philippine equivalent of such f ace value, if expressed in f oreign currency.
Section 183. Stamp Tax on Life Insurance Policies. On all policies of insurance or ot her inst rument s by
what ever name t he same may be called, whereby any insurance shall be made or renewed upon any
lif e or lives, t here shall be collect ed a document ary st amp t ax of Fif t y cent avos (P0.50) on each T wo
hundred pesos (P200), or f ract ional part t hereof , of t he amount insured by any such policy.
Section 184. Stamp Tax on Policies of Insurance Upon Property. On all policies of insurance or ot her
inst rument s by what ever name t he same may be called, by which insurance shall be made or renewed
upon propert y of any descript ion, including rent s or prof it s, against peril by sea or on inland wat ers, or
by f ire or light ning, t here shall be collect ed a document ary st amp t ax of Fif t y cent avos (P0.50) on
each Four pesos (P4.00), or f ract ional part t hereof , of t he amount of premium charged: Provided,
however, T hat no document ary st amp t ax shall be collect ed on reinsurance cont ract s or on any
inst rument by which cession or accept ance of insurance risks under any reinsurance agreement is
ef f ect ed or recorded.
Section 185. Stamp Tax on Fidelity Bonds and Other Insurance Policies. On all policies of insurance or
bonds or obligat ions of t he nat ure of indemnit y f or loss, damage or liabilit y made or renewed by any
person, associat ion, company or corporat ion t ransact ing t he business of accident , f idelit y,
employers liabilit y, plat e, glass, st eam, boiler, burglar, elevat or, aut omat ic sprinkler, or ot her branch
of insurance (except lif e, marine, inland, and f ire insurance), and all bonds, undert akings, or
recognizances, condit ioned f or t he perf ormance of t he dut ies of any of f ice or posit ion, f or t he doing
or not doing of anyt hing t herein specif ied, and on all obligat ions guarant eeing t he validit y or legalit y of
any bond or ot her obligat ions issued by any province, cit y, municipalit y, or ot her public body or
organizat ion, and on all obligat ions guarant eeing t he t it le t o any real est at e, or guarant eeing any
mercant ile credit s, which may be made or renewed by any such person, company or corporat ion,
t here shall be collect ed a document ary st amp t ax of Fif t y cent avos (P0.50) on each Four pesos
(P4.00), or f ract ional part t hereof , of t he premium charged.
Section 186. Stamp Tax on Policies of Annuities and Pre-Need Plans. On all policies of annuit ies, or
ot her inst rument s by what ever name t he same may be called, whereby an annuit y may be made,
t ransf erred or redeemed, t here shall be collect ed a document ary st amp t ax of One peso and f if t y
cent avos (P1.50) on each T wo hundred pesos (P200) or f ract ional part t hereof , of t he capit al of t he
annuit y, or should t his be unknown, t hen on each T wo hundred (P200) pesos, or f ract ional part
t hereof , of t hirt y-t hree and one-t hird (33 1/3) t imes t he annual income. On pre-need plans, t he
document ary st amp t ax shall be Fif t y cent avos (P0.50) on each Five hundred pesos (P500), or
f ract ional part t hereof , of t he value or amount of t he plan.
Section 187. Stamp Tax on Indemnity Bonds. On all bonds f or indemnif ying any person, f irm or
corporat ion who shall become bound or engaged as suret y f or t he payment of any sum of money or
f or t he due execut ion or perf ormance of t he dut ies of any of f ice or posit ion or t o account f or money
received by virt ue t hereof , and on all ot her bonds of any descript ion, except such as may be required
in legal proceedings, or are ot herwise provided f or herein, t here shall be collect ed a document ary
st amp t ax of T hirt y cent avos (P0.30) on each Four pesos (P4.00), or f ract ional part t hereof , of t he
premium charged.
Section 188. Stamp Tax on Certificates. On each cert if icat e of damages or ot herwise, and on every
cert if icat e or document issued by any cust oms of f icer, marine surveyor, or ot her person act ing as
such, and on each cert if icat e issued by a not ary public, and on each cert if icat e of any descript ion
required by law or by rules or regulat ions of a public of f ice, or which is issued f or t he purpose of giving
inf ormat ion, or est ablishing proof of a f act , and not ot herwise specif ied herein, t here shall be
collect ed a document ary st amp t ax of Fif t een pesos (P15.00).
Section 189. Stamp Tax on Warehouse Receipts. On each warehouse receipt f or propert y held in
st orage in a public or privat e warehouse or yard f or any person ot her t han t he propriet or of such
warehouse or yard, t here shall be collect ed a document ary st amp t ax of Fif t een pesos (P15.00):
Provided, T hat no t ax shall be collect ed on each warehouse receipt issued t o any one person in any
one calendar mont h covering propert y t he value of which does not exceed T wo 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 t icket , lot t o, or ot her aut horized number games, t here shall be collect ed a
document ary st amp t ax of T en cent avos (P0.10): Provided, T hat if t he cost of t he t icket exceeds
One peso (P1.00), an addit ional t ax of T en cent avos (P0.10) on every One peso (P1.00, or f ract ional
part t hereof , shall be collect ed.

Section 191. Stamp Tax on Bills of Lading or Receipts. On each set of bills of lading or receipt s
(except chart er part y) f or any goods, merchandise or ef f ect s shipped f rom one port or place in t he
Philippines t o anot her port or place in t he Philippines (except on f erries across rivers), or t o any
f oreign port , t here shall be collect ed document ary st amp t ax of One peso (P1.00), if t he value of such
goods exceeds One hundred pesos (P100) and does not exceed One T housand pesos (P1,000); T en
pesos (P10), if t he value exceeds One t housand pesos (P1,000): Provided, however, T hat f reight
t icket s covering goods, merchandise or ef f ect s carried as accompanied baggage of passengers on
land and wat er carriers primarily engaged in t he t ransport at ion of passengers are hereby exempt .
Section 192. Stamp Tax on Proxies. On each proxy f or vot ing at any elect ion f or of f icers of any
company or associat ion, or f or any ot her purpose, except proxies issued af f ect ing t he af f airs of
associat ions or corporat ions organized f or religious, charit able or lit erary purposes, t here shall be
collect ed a document ary st amp t ax of Fif t een pesos (P15.00).
Section 193. Stamp Tax on Powers of Attorney. On each power of at t orney t o perf orm any act
what soever, except act s connect ed wit h t he collect ion of claims due f rom or accruing t o t he
Government of t he Republic of t he Philippines, or t he government of any province, cit y or municipalit y,
t here shall be collect ed a document ary st amp t ax of Five pesos (P5.00).
Section 194. Stamp tax on Leases and Other Hiring Agreements. On each lease, agreement ,
memorandum, or cont ract f or hire, use or rent of any lands or t enement s, or port ions t hereof , t here
shall be collect ed a document ary st amp t ax of T hree pesos (P3.00) f or t he f irst T wo t housand pesos
(P2,000), or f ract ional part t hereof , and an addit ional One peso (P1.00) f or every One T housand
pesos (P1,000) or f ract ional part t hereof , in excess of t he f irst T wo t housand pesos (P2,000) f or each
year of t he t erm of said cont ract or agreement .
Section 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust. On every mort gage or pledge of
lands, est at e, or propert y, real or personal, herit able or movable, what soever, where t he same shall
be made as a securit y f or t he payment of any def init e and cert ain sum of money lent at t he t ime or
previously due and owing of f orborne t o be paid, being payable and on any conveyance of land,
est at e, or propert y what soever, in t rust or t o be sold, or ot herwise convert ed int o money which shall
be and int ended only as securit y, eit her by express st ipulat ion or ot herwise, t here shall be collect ed a
document ary st amp t ax at t he f ollowing rat es:
(a) When t he amount secured does not exceed Five t housand pesos (P5,000), T went y pesos (P20.00).
(b) On each Five t housand pesos (P5,000), or f ract ional part t hereof in excess of Five t housand
pesos (P5,000), an addit ional t ax of T en pesos (P10.00).
On any mort gage, pledge, or deed of t rust , where t he same shall be made as a securit y f or t he
payment of a f luct uat ing account or f ut ure advances wit hout f ixed limit , t he document ary st amp t ax
on such mort gage, pledge or deed of t rust shall be comput ed on t he amount act ually loaned or given
at t he t ime of t he execut ion of t he mort gage, pledge or deed of t rust , addit ional document ary st amp
t ax shall be paid which shall be comput ed on t he basis of t he amount advanced or loaned at t he
rat es specif ied above: Provided, however, T hat if t he f ull amount of t he loan or credit , grant ed under
t he mort gage, pledge or deed of t rust shall be comput ed on t he amount act ually loaned or given at
t he t ime of t he execut ion of t he mort gage, pledge or deed of t rust . However, if subsequent
advances are made on such mort gage, pledge or deed of t rust , addit ional document ary st amp t ax
shall be paid which shall be comput ed on t he basis of t he amount advanced or loaned at t he rat es
specif ied above: Provided, however, T hat if t he f ull amount of t he loan or credit , grant ed under t he
mort gage, pledge or deed of t rust is specif ied in such mort gage, pledge or deed of t rust , t he
document ary st amp t ax prescribed in t his Sect ion shall be paid and comput ed on t he f ull amount of
t he loan or credit grant ed.
Section 196. Stamp tax on Deeds of Sale and Conveyances of Real Property. On all conveyances,
deeds, inst rument s, or writ ings, ot her t han grant s, pat ent s or original cert if icat es of adjudicat ion
deeds, inst rument s, or writ ings, ot her t han grant s, pat ent s or original cert if icat es of adjudicat ion
issued by t he Government , whereby any land, t enement , or ot her realt y sold shall be grant ed,
assigned, t ransf erred or ot herwise conveyed t o t he purchaser, or purchasers, or t o any ot her person
or persons designat ed by such purchaser or purchasers, t here shall be collect ed a document ary
st amp t ax, at t he rat es herein below prescribed, based on t he considerat ion cont ract ed t o be paid
f or such realt y or on it s f air market value det ermined in accordance wit h Sect ion 6(E) of t his Code,
whichever is higher: Provided, T hat when one of t he cont ract ing part ies is t he Government t he t ax
herein imposed shall be based on t he act ual considerat ion.
(a) When t he considerat ion, or value received or cont ract ed t o be paid f or such realt y af t er making
proper allowance of any encumbrance, does not exceed One t housand pesos (P1,000) f if t een pesos
(P15.00).
(b) For each addit ional One t housand Pesos (P1,000), or f ract ional part t hereof in excess of One
t housand pesos (P1,000) of such considerat ion or value, Fif t een pesos (P15.00).
When it appears t hat t he amount of t he document ary st amp t ax payable hereunder has been
reduced by an incorrect st at ement of t he considerat ion in any conveyance, deed, inst rument or
writ ing subject t o such t ax t he Commissioner, provincial or cit y T reasurer, or ot her revenue of f icer
shall, f rom t he assessment rolls or ot her reliable source of inf ormat ion, assess t he propert y of it s
t rue market value and collect t he proper t ax t hereon.
Section 197. Stamp Tax on Charter Parties and Similar Instruments. On every chart er part y, cont ract
or agreement f or t he chart er of any ship, vessel or st eamer, or any let t er or memorandum or ot her
writ ing bet ween t he capt ain, mast er or owner, or ot her person act ing as agent of any ship, vessel or
st eamer, and any ot her person or persons f or or relat ing t o t he chart er of any such ship, vessel or
st eamer, and on any renewal or t ransf er of such chart er, cont ract , agreement , let t er or
memorandum, t here shall be collect ed a document ary st amp t ax at t he f ollowing rat es:
(a) If t he regist ered gross t onnage of t he ship, vessel or st eamer does not exceed one t housand
(1,000) t ons, and t he durat ion of t he chart er or cont ract does not exceed six (6) mont hs, Five hundred
pesos (P500); and f or each mont h or f ract ion of a mont h in excess of six (6) mont hs, an addit ional t ax
of Fif t y pesos (P50.00) shall be paid.
(b) If t he regist ered gross t onnage exceeds one t housand (1,000) t ons and does not exceed t en
t housand (10,000) t ons, and t he durat ion of t he chart er or cont ract does not exceed six (6) mont hs,
One t housand pesos (P1,000); and f or each mont h or f ract ion of a mont h in excess of six (6) mont hs,
an addit ional t ax of One hundred pesos (P100) shall be paid.
(c) If t he regist ered gross t onnage exceeds t en t housand (10,000) t ons and t he durat ion of t he
chart er or cont ract does not exceed six (6) mont hs, One t housand f ive hundred pesos (P1,500); and
f or each mont h or f ract ion of a mont h in excess of six (6) mont hs, an addit ional t ax of One hundred
f if t y pesos (P150) shall be paid.
Section 198. Stamp Tax on Assignments and Renewals of Certain Instruments. Upon each and every
assignment or t ransf er of any mort gage, lease or policy of insurance, or t he renewal or cont inuance
of any agreement , cont ract , chart er, or any evidence of obligat ion or indebt edness by alt ering or
ot herwise, t here shall be levied, collect ed and paid a document ary st amp t ax, at t he same rat e as
t hat imposed on t he original inst rument .
Section 199. Documents and Papers Not Subject to Stamp Tax. T he provisions of Sect ion 173 t o t he
cont rary not wit hst anding, t he f ollowing inst rument s, document s and papers shall be exempt f rom t he
document ary st amp t ax:
(a) Policies of insurance or annuit ies made or grant ed by a f rat ernal or benef iciary societ y, order,
associat ion or cooperat ive company, operat ed on t he lodge syst em or local cooperat ion plan and
organized and conduct ed solely by t he members t hereof f or t he exclusive benef it of each member
and not f or prof it .
(b) Cert if icat es of oat hs administ ered t o any government of f icial in his of f icial capacit y or of
acknowledgment by any government of f icial in t he perf ormance of his of f icial dut ies, writ t en
appearance in any court by any government of f icial, in his of f icial capacit y; cert if icat es of t he
administ rat ion of oat hs t o any person as t o t he aut hent icit y of any paper required t o be f iled in court
by any person or part y t heret o, whet her t he proceedings be civil or criminal; papers and document s
f iled in court s by or f or t he nat ional, provincial, cit y or municipal government s; af f idavit s of poor
persons f or t he purpose of proving povert y; st at ement s and ot her compulsory inf ormat ion required
of persons or corporat ions by t he rules and regulat ions of t he nat ional, provincial, cit y or municipal
government s exclusively f or st at ist ical purposes and which are wholly f or t he use of t he bureau or
of f ice in which t hey are f iled, and not at t he inst ance or f or t he use or benef it of t he person f iling
t hem; cert if ied copies and ot her cert if icat es placed upon document s, inst rument s and papers f or t he
nat ional, provincial, cit y, or municipal government s, made at t he inst ance and f or t he sole use of
some ot her branch of t he nat ional, provincial, cit y or municipal government s; and cert if icat es of t he
assessed value of lands, not exceeding T wo hundred pesos (P200) in value assessed, f urnished by
t he provincial, cit y or municipal T reasurer t o applicant s f or regist rat ion of t it le t o land.
Section 200. Payment of Documentary Stamp Tax. (A) In General. T he provisions of President ial Decree No. 1045 not wit hst anding, any person liable t o
pay document ary st amp t ax upon any document subject t o t ax under T it le VII of t his Code shall f ile a
t ax ret urn and pay t he t ax in accordance wit h t he rules and regulat ions t o be prescribed by t he
Secret ary of Finance, upon recommendat ion of t he Commissioner.
(B) Time for Filing and Payment of the Tax. Except as provided by rules and regulat ions promulgat ed
by t he Secret ary of Finance, upon recommendat ion of t he Commissioner, t he t ax ret urn prescribed in
t his Sect ion shall be f iled wit hin t en (10) days af t er t he close of t he mont h when t he t axable
document was made, signed, issued, accept ed, or t ransf erred, and t he t ax t hereon shall be paid at
t he same t ime t he af oresaid ret urn is f iled.
(C) Where to File. Except in cases where t he Commissioner ot herwise permit s, t he af oresaid t ax
ret urn shall be f iled wit h and t he t ax due shall be paid t hrough t he aut horized agent bank wit hin t he
t errit orial jurisdict ion of t he Revenue Dist rict Of f ice which has jurisdict ion over t he residence or
principal place of business of t he t axpayer. In places where t here is no aut horized agent bank, t he
ret urn shall be f iled wit h t he Revenue Dist rict Of f icer, collect ion agent , or duly aut horized T reasurer of
t he cit y or municipalit y in which t he t axpayer has his legal residence or principal place of business.
(D) Exception. In lieu of t he f oregoing provisions of t his Sect ion, t he t ax may be paid eit her t hrough
purchase and act ual af f ixt ure; or by imprint ing t he st amps t hrough a document ary st amp met ering
machine, on t he t axable document , in t he manner as may be prescribed by rules and regulat ions t o
be promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he Commissioner.
Section 201. Effect of Failure to Stamp Taxable Document. An inst rument , document or paper which is
required by law t o be st amped and which has been signed, issued, accept ed or t ransf erred wit hout
being duly st amped, shall not be recorded, nor shall it or any copy t hereof or any record of t ransf er of
t he same be admit t ed or used in evidence in any court unt il t he requisit e st amp or st amps are af f ixed
t heret o and cancelled.
T IT LE VIII
REMEDIES
CHAPT ER I REMEDIES IN GENERAL
Section 202. Final Deed to Purchaser. In case t he t axpayer shall not redeem t he propert y as herein
provided t he Revenue Dist rict Of f icer shall, as grant or, execut e a deed conveying t o t he purchaser so
much of t he propert y as has been sold, f ree f rom all liens of any kind what soever, and t he deed shall
succint ly recit e all t he proceedings upon which t he validit y of t he sale depends.
Section 203. Period of Limitation Upon Assessment and Collection. Except as provided in Sect ion 222,
int ernal revenue t axes shall be assessed wit hin t hree (3) years af t er t he last day prescribed by law
f or t he f iling of t he ret urn, and no proceeding in court wit hout assessment f or t he collect ion of such
t axes shall be begun af t er t he expirat ion of such period: Provided, T hat in a case where a ret urn is
f iled beyond t he period prescribed by law, t he t hree (3)-year period shall be count ed f rom t he day t he
ret urn was f iled. For purposes of t his Sect ion, a ret urn f iled bef ore t he last day prescribed by law f or
t he f iling t hereof shall be considered as f iled on such last day.
Section 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. T he
Commissioner may (A) Compromise t he payment of any int ernal revenue t ax, when:
(1) A reasonable doubt as t o t he validit y of t he claim against t he t axpayer exist s; or
(2) T he f inancial posit ion of t he t axpayer demonst rat es a clear inabilit y t o pay t he assessed t ax.
T he compromise set t lement of any t ax liabilit y shall be subject t o t he f ollowing minimum amount s:
For cases of f inancial incapacit y, a minimum compromise rat e equivalent t o t en percent (10%) of t he
basic assessed t ax; and
For ot her cases, a minimum compromise rat e equivalent t o f ort y percent (40%) of t he basic
assessed t ax.
Where t he basic t ax involved exceeds One million pesos (P1,000.000) or where t he set t lement of f ered
is less t han t he prescribed minimum rat es, t he compromise shall be subject t o t he approval of t he
Evaluat ion Board which shall be composed of t he Commissioner and t he f our (4) Deput y
Commissioners.
(B) Abat e or cancel a t ax liabilit y, when:
(1) T he t ax or any port ion t hereof appears t o be unjust ly or excessively assessed; or
(2) T he administ rat ion and collect ion cost s involved do not just if y t he collect ion of t he amount due.
All criminal violat ions may be compromised except : (a) t hose already f iled in court , or (b) t hose
involving f raud.
(C) Credit or ref und t axes erroneously or illegally received or penalt ies imposed wit hout aut horit y,
ref und t he value of int ernal revenue st amps when t hey are ret urned in good condit ion by t he
purchaser, and, in his discret ion, redeem or change unused st amps t hat have been rendered unf it f or
use and ref und t heir value upon proof of dest ruct ion. No credit or ref und of t axes or penalt ies shall be
allowed unless t he t axpayer f iles in writ ing wit h t he Commissioner a claim f or credit or ref und wit hin
t wo (2) years af t er t he payment of t he t ax or penalt y: Provided, however, T hat a ret urn f iled showing
an overpayment shall be considered as a writ t en claim f or credit or ref und.
A T ax Credit Cert if icat e validly issued under t he provisions of t his Code may be applied against any
int ernal revenue t ax, excluding wit hholding t axes, f or which t he t axpayer is direct ly liable. Any request
f or conversion int o ref und of unut ilized t ax credit s may be allowed, subject t o t he provisions of
Sect ion 230 of t his Code: Provided, T hat t he original copy of t he T ax Credit Cert if icat e showing a
credit able balance is surrendered t o t he appropriat e revenue of f icer f or verif icat ion and cancellat ion:
Provided, f urt her, T hat in no case shall a t ax ref und be given result ing f rom availment of incent ives
grant ed pursuant t o special laws f or which no act ual payment was made.
T he Commissioner shall submit t o t he Chairmen of t he Commit t ee on Ways and Means of bot h t he
Senat e and House of Represent at ives, every six (6) mont hs, a report on t he exercise of his powers
under t his Sect ion, st at ing t herein t he f ollowing f act s and inf ormat ion, among ot hers: names and
addresses of t axpayers whose cases have been t he subject of abat ement or compromise; amount
involved; amount compromised or abat ed; and reasons f or t he exercise of power: Provided, T hat t he
said report shall be present ed t o t he Oversight Commit t ee in Congress t hat shall be const it ut ed t o
det ermine t hat said powers are reasonably exercised and t hat t he government is not unduly deprived
of revenues.
CHAPT ER II CIVIL REMEDIES FOR COLLECT ION OF T AXES
Section 205. Remedies for the Collection of Delinquent Taxes. T he civil remedies f or t he collect ion of
int ernal revenue t axes, f ees or charges, and any increment t heret o result ing f rom delinquency shall
be:
(a) By dist raint of goods, chat t els, or ef f ect s, and ot her personal propert y of what ever charact er,
including st ocks and ot her securit ies, debt s, credit s, bank account s and int erest in and right s t o
personal propert y, and by levy upon real propert y and int erest in right s t o real propert y; and
(b) By civil or criminal act ion.
Eit her of t hese remedies or bot h simult aneously may be pursued in t he discret ion of t he aut horit ies
charged wit h t he collect ion of such t axes: Provided, however, T hat t he remedies of dist raint and levy
shall not be availed of where t he amount of t ax involve is not more t han One hundred pesos (P100).
T he judgment in t he criminal case shall not only impose t he penalt y but shall also order payment of
t he t axes subject of t he criminal case as f inally decided by t he Commissioner.
T he Bureau of Int ernal Revenue shall advance t he amount s needed t o def ray cost s of collect ion by
means of civil or criminal act ion, including t he preservat ion or t ransport at ion of personal propert y
dist rained and t he advert isement and sale t hereof , as well as of real propert y and improvement s
t hereon.
Section 206. Constructive Distraint of the Property of A Taxpayer. T o saf eguard t he int erest of t he
Government , t he Commissioner may place under const ruct ive dist raint t he propert y of a delinquent
t axpayer or any t axpayer who, in his opinion, is ret iring f rom any business subject t o t ax, or is
int ending t o leave t he Philippines or t o remove his propert y t heref rom or t o hide or conceal his
propert y or t o perf orm any act t ending t o obst ruct t he proceedings f or collect ing t he t ax due or which
may be due f rom him.
T he const ruct ive dist raint of personal propert y shall be af f ect ed by requiring t he t axpayer or any
person having possession or cont rol of such propert y t o sign a receipt covering t he propert y
dist rained and obligat e himself t o preserve t he same int act and unalt ered and not t o dispose of t he
same ;in any manner what ever, wit hout t he express aut horit y of t he Commissioner.
In case t he t axpayer or t he person having t he possession and cont rol of t he propert y sought t o be
placed under const ruct ive dist raint ref uses or f ails t o sign t he receipt herein ref erred t o, t he revenue
of f icer ef f ect ing t he const ruct ive dist raint shall proceed t o prepare a list of such propert y and, in t he
presence of t wo (2) wit nessed, leave a copy t hereof in t he premises where t he propert y dist rained is
locat ed, af t er which t he said propert y shall be deemed t o have been placed under const ruct ive
dist raint .
Section 207. Summary Remedies. (A) Dist raint of Personal Propert y. Upon t he f ailure of t he person owing any delinquent t ax or
delinquent revenue t o pay t he same at t he t ime required, t he Commissioner or his duly aut horized
represent at ive, if t he amount involved is in excess of One million pesos (P1,000,000), or t he Revenue
Dist rict Of f icer, if t he amount involved is One million pesos (P1,000,000) or less, shall seize and
dist raint any goods, chat t els or ef f ect s, and t he personal propert y, including st ocks and ot her
securit ies, debt s, credit s, bank account s, and int erest s in and right s t o personal propert y of such
persons ;in suf f icient quant it y t o sat isf y t he t ax, or charge, t oget her wit h any increment t heret o
incident t o delinquency, and t he expenses of t he dist raint and t he cost of t he subsequent sale.
A report on t he dist raint shall, wit hin t en (10) days f rom receipt of t he warrant , be submit t ed by t he
dist raining of f icer t o t he Revenue Dist rict Of f icer, and t o t he Revenue Regional Direct or: Provided,
T hat t he Commissioner or his duly aut horized represent at ive shall, subject t o rules and regulat ions
promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he Commissioner, have t he
power t o lif t such order of dist raint : Provided, f urt her, T hat a consolidat ed report by t he Revenue
Regional Direct or may be required by t he Commissioner as of t en as necessary.
(B) Levy on Real Propert y. Af t er t he expirat ion of t he t ime required t o pay t he delinquent t ax or
delinquent revenue as prescribed in t his Sect ion, real propert y may be levied upon, bef ore
simult aneously or af t er t he dist raint of personal propert y belonging t o t he delinquent . T o t his end, any
int ernal revenue of f icer designat ed by t he Commissioner or his duly aut horized represent at ive shall
prepare a duly aut hent icat ed cert if icat e showing t he name of t he t axpayer and t he amount s of t he
t ax and penalt y due f rom him. Said cert if icat e shall operat e wit h t he f orce of a legal execut ion
t hroughout t he Philippines.
Levy shall be af f ect ed by writ ing upon said cert if icat e a descript ion of t he propert y upon which levy is
made. At t he same t ime, writ t en not ice of t he levy shall be mailed t o or served upon t he Regist er of
Deeds f or t he province or cit y where t he propert y is locat ed and upon t he delinquent t axpayer, or if
he be absent f rom t he Philippines, t o his agent or t he manager of t he business in respect t o which t he
liabilit y arose, or if t here be none, t o t he occupant of t he propert y in quest ion.
In case t he warrant of levy on real propert y is not issued bef ore or simult aneously wit h t he warrant of
dist raint on personal propert y, and t he personal propert y of t he t axpayer is not suf f icient t o sat isf y
his t ax delinquency, t he Commissioner or his duly aut horized represent at ive shall, wit hin t hirt y (30)
days af t er execut ion of t he dist raint , proceed wit h t he levy on t he t axpayers real propert y.
Wit hin t en (10) days af t er receipt of t he warrant , a report on any levy shall be submit t ed by t he
levying of f icer t o t he Commissioner or his duly aut horized represent at ive: Provided, however, T hat a
consolidat ed report by t he Revenue Regional Direct or may be required by t he Commissioner as of t en
as necessary: Provided, f urt her, T hat t he Commissioner or his duly aut horized represent at ive, subject
t o rules and regulat ions promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner, shall have t he aut horit y t o lif t warrant s of levy issued in accordance wit h t he
provisions hereof .
Section 208. Procedure for Distraint and Garnishment. T he of f icer serving t he warrant of dist raint
shall make or cause t o be made an account of t he goods, chat t els, ef f ect s or ot her personal
propert y dist rained, a copy of which, signed by himself , shall be lef t eit her wit h t he owner or person
f rom whose possession such goods, chat t els, or ef f ect s or ot her personal propert y were t aken, or at
t he dwelling or place of business of such person and wit h someone of suit able age and discret ion, t o
which list shall be added a st at ement of t he sum demanded and not e of t he t ime and place of sale.
St ocks and ot her securit ies shall be dist rained by serving a copy of t he warrant of dist raint upon t he
t axpayer and upon t he president , manager, t reasurer or ot her responsible of f icer of t he corporat ion,
company or associat ion, which issued t he said st ocks or securit ies.
Debt s and credit s shall be dist rained by leaving wit h t he person owing t he debt s or having in his
possession or under his cont rol such credit s, or wit h his agent , a copy of t he warrant of dist raint . T he
warrant of dist raint shall be suf f icient aut horit y t o t he person owning t he debt s or having in his
possession or under his cont rol any credit s belonging t o t he t axpayer t o pay t o t he Commissioner t he
amount of such debt s or credit s.
Bank account s shall be garnished by serving a warrant of garnishment upon t he t axpayer and upon
t he president , manager, t reasurer or ot her responsible of f icer of t he bank. Upon receipt of t he
warrant of garnishment , t he bank shall t un over t o t he Commissioner so much of t he bank account s
as may be suf f icient t o sat isf y t he claim of t he Government .
Section 209. Sale of Property Distrained and Disposition of Proceeds. T he Revenue Dist rict Of f icer or
his duly aut horized represent at ive, ot her t han t he of f icer ref erred t o in Sect ion 208 of t his Code shall,
according t o rules and regulat ions prescribed by t he Secret ary of Finance, upon recommendat ion of
t he Commissioner, f ort hwit h cause a not if icat ion t o be exhibit ed in not less t han t wo (2) public places
in t he municipalit y or cit y where t he dist raint is made, specif ying; t he t ime and place of sale and t he
art icles dist rained. T he t ime of sale shall not be less t han t went y (20) days af t er not ice. One place f or
t he post ing of such not ice shall be at t he Of f ice of t he Mayor of t he cit y or municipalit y in which t he
propert y is dist rained.
At t he t ime and place f ixed in such not ice, t he said revenue of f icer shall sell t he goods, chat t els, or
ef f ect s, or ot her personal propert y, including st ocks and ot her securit ies so dist rained, at public
auct ion, t o t he highest bidder f or cash, or wit h t he approval of t he Commissioner, t hrough duly
licensed commodit y or st ock exchanges.
In t he case of St ocks and ot her securit ies, t he of f icer making t he sale shall execut e a bill of sale
which he shall deliver t o t he buyer, and a copy t hereof f urnished t he corporat ion, company or
associat ion which issued t he st ocks or ot her securit ies. Upon receipt of t he copy of t he bill of sale,
t he corporat ion, company or associat ion shall make t he corresponding ent ry in it s books, t ransf er t he
st ocks or ot her securit ies sold in t he name of t he buyer, and issue, if required t o do so, t he
corresponding cert if icat es of st ock or ot her securit ies.
Any residue over and above what is required t o pay t he ent ire claim, including expenses, shall be
ret urned t o t he owner of t he propert y sold. T he expenses chargeable upon each seizure and sale
shall embrace only t he act ual expenses of seizure and preservat ion of t he propert y pending ;t he sale,
and no charge shall be imposed f or t he services of t he local int ernal revenue of f icer or his deput y.
Section 210. Release of Distrained Property Upon Payment Prior to Sale. If at any t ime prior t o t he
consummat ion of t he sale all proper charges are paid t o t he of f icer conduct ing t he sale, t he goods or
ef f ect s dist rained shall be rest ored t o t he owner.
Section 211. Report of Sale to Bureau of Internal Revenue. Wit hin t wo (2) days af t er t he sale, t he
of f icer making t he same shall make a report of his proceedings in writ ing t o t he Commissioner and
shall himself preserve a copy of such report as an of f icial record.
Section 212. Purchase by Government at Sale Upon Distraint. When t he amount bid f or t he propert y
under dist raint is not equal t o t he amount of t he t ax or is very much less t han t he act ual market value
of t he art icles of f ered f or sale, t he Commissioner or his deput y may purchase t he same in behalf of
t he nat ional Government f or t he amount of t axes, penalt ies and cost s due t hereon.
Propert y so purchased may be resold by t he Commissioner or his deput y, subject t o t he rules and
regulat ions prescribed by t he Secret ary of Finance, t he net proceeds t heref rom shall be remit t ed t o
t he Nat ional T reasury and account ed f or as int ernal revenue.
Section 213. Advertisement and Sale. Wit hin t went y (20) days af t er levy, t he of f icer conduct ing t he
proceedings shall proceed t o advert ise t he propert y or a usable port ion t hereof as may be necessary
t o sat isf y t he claim and cost of sale; and such advert isement shall cover a period of a least t hirt y (30)
days. It shall be ef f ect uat ed by post ing a not ice at t he main ent rance of t he municipal building or cit y
hall and in public and conspicuous place in t he barrio or dist rict in which t he real est at e lies and ;by
publicat ion once a week f or t hree (3) weeks in a newspaper of general circulat ion in t he municipalit y or
cit y where t he propert y is locat ed. T he advert isement shall cont ain a st at ement of t he amount of
t axes and penalt ies so due and t he t ime and place of sale, t he name of t he t axpayer against whom
t axes are levied, and a short descript ion of t he propert y t o be sold. At any t ime bef ore t he day f ixed
f or t he sale, t he t axpayer may discont inue all proceedings by paying t he t axes, penalt ies and
int erest . If he does not do so, t he sale shall proceed and shall be held eit her at t he main ent rance of
t he municipal building or cit y hall, or on t he premises t o be sold, as t he of f icer conduct ing t he
proceedings shall det ermine and as t he not ice of sale shall specif y.
Wit hin f ive (5) days af t er t he sale, a ret urn by t he dist raining or levying of f icer of t he proceedings shall
be ent ered upon t he records of t he Revenue Collect ion Of f icer, t he Revenue Dist rict of f icer and t he
be ent ered upon t he records of t he Revenue Collect ion Of f icer, t he Revenue Dist rict of f icer and t he
Revenue Regional Direct or. T he Revenue Collect ion Of f icer, in consult at ion wit h t he Revenue dist rict
Of f icer, shall t hen make out and deliver t o t he purchaser a cert if icat e f rom his records, showing t he
proceedings of t he sale, describing t he propert y sold st at ing t he name of t he purchaser and set t ing
out t he exact amount of all t axes, penalt ies and int erest : Provided, however, T hat in case t he
proceeds of t he sale exceeds t he claim and cost of sale, t he excess shall be t urned over t o t he
owner of t he propert y.
T he Revenue Collect ion Of f icer, upon approval by t he Revenue Dist rict Of f icer may, out of his
collect ion, advance an amount suf f icient t o def ray t he cost s of collect ion by means of t he summary
remedies provided f or in t his Code, including ;t he preservat ion or t ransport at ion in case of personal
propert y, and t he advert isement and subsequent sale, bot h in cases of personal and real propert y
including improvement s f ound on t he lat t er. In his mont hly collect ion report s, such advances shall be
ref lect ed and support ed by receipt s.
Section 214. Redemption of Property Sold. Wit hin one (1) year f rom t he dat e of sale, t he delinquent
t axpayer, or any one f or him, shall have t he right of paying t o t he Revenue Dist rict Of f icer t he amount
of t he public t axes, penalt ies, and int erest t hereon f rom t he dat e of delinquency t o t he dat e of sale,
t oget her wit h int erest on said purchase price at t he rat e of f if t een percent (15%) per annum f rom t he
dat e of purchase t o t he dat e of redempt ion, and such payment shall ent it le t he person paying t o t he
delivery of t he cert if icat e issued t o t he purchaser and a cert if icat e f rom t he said Revenue Dist rict
Of f icer t hat he has t hus redeemed t he propert y, and t he Revenue Dist rict Of f icer shall f ort hwit h pay
over t o t he purchaser t he amount by which such propert y has t hus been redeemed, and said propert y
t hereaf t er shall be f ree f orm t he lien of such t axes and penalt ies.
T he owner shall not , however, be deprived of t he possession of t he said propert y and shall be
ent it led t o t he rent s and ot her income t hereof unt il t he expirat ion of t he t ime allowed f or it s
redempt ion.
Section 215. Forfeiture to Government for Want of Bidder. In case t here is no bidder f or real propert y
exposed f or sale as herein above provided or if t he highest bid is f or an amount insuf f icient t o pay
t he t axes, penalt ies and cost s, t he Int ernal Revenue Of f icer conduct ing t he sale shall declare t he
propert y f orf eit ed t o t he Government in sat isf act ion of t he claim in quest ion and wit hin t wo (2) days
t hereaf t er, shall make a ret urn of his proceedings and t he f orf eit ure which shall be spread upon t he
records of his of f ice. It shall be t he dut y of t he Regist er of Deeds concerned, upon regist rat ion wit h
his of f ice of any such declarat ion of f orf eit ure, t o t ransf er t he t it le of t he propert y f orf eit ed t o t he
Government wit hout t he necessit y of an order f rom a compet ent court .
Wit hin one (1) year f rom t he dat e of such f orf eit ure, t he t axpayer, or any one f or him may redeem
said propert y by paying t o t he Commissioner or t he lat t ers Revenue Collect ion Of f icer t he f ull
amount of t he t axes and penalt ies, t oget her wit h int erest t hereon and t he cost s of sale, but if t he
propert y be not t hus redeemed, t he f orf eit ure shall become absolut e.
Section 216. Resale of Real Estate Taken for Taxes. T he Commissioner shall have charge of any real
est at e obt ained by t he Government of t he Philippines in payment or sat isf act ion of t axes, penalt ies
or cost s arising under t his Code or in compromise or adjust ment of any claim t heref ore, and said
Commissioner may, upon t he giving of not less t han t went y (20) days not ice, sell and dispose of t he
same of public auct ion or wit h prior approval of t he Secret ary of Finance, dispose of t he same at
privat e sale. In eit her case, t he proceeds of t he sale shall be deposit ed wit h t he Nat ional T reasury,
and an account ing of t he same shall rendered t o t he Chairman of t he Commission on Audit .
Section 217. Further Distraint or Levy. T he remedy by dist raint of personal propert y and levy on
realt y may be repeat ed if necessary unt il t he f ull amount due, including all expenses, is collect ed.
Section 218. Injunction not Available to Restrain Collection of Tax. No court shall have t he aut horit y t o
grant an injunct ion t o rest rain t he collect ion of any nat ional int ernal revenue t ax, f ee or charge
imposed by t his Code.
Section 219. Nature and Extent of Tax Lien. If any person, corporat ion, part nership, joint -account
(cuent as en part icipacion), associat ion or insurance company liable t o pay an int ernal revenue t ax,
neglect s or ref uses t o pay t he same af t er demand, t he amount shall be a lien in f avor of t he
Government of t he Philippines f rom t he t ime when t he assessment was made by t he Commissioner
unt il paid, wit h int erest s, penalt ies, and cost s t hat may accrue in addit ion t heret o upon all propert y
and right s t o propert y belonging t o t he t axpayer: Provided, T hat t his lien shall not be valid against
any mort gagee purchaser or judgment credit or unt il not ice of such lien shall be f iled by t he
Commissioner in t he of f ice of t he Regist er of Deeds of t he province or cit y where t he propert y of t he
t axpayer is sit uat ed or locat ed.
Section 220. Form and Mode of Proceeding in Actions Arising under this Code. Civil and criminal act ions
and proceedings inst it ut ed in behalf of t he Government under t he aut horit y of t his Code or ot her law
enf orced by t he Bureau of Int ernal Revenue shall be brought in t he name of t he Government of t he
Philippines and shall be conduct ed by legal of f icers of t he Bureau of Int ernal Revenue but no civil or
criminal act ion f or t he recovery of t axes or t he enf orcement of any f ine, penalt y or f orf eit ure under
t his Code shall be f iled in court wit hout t he approval of t he Commissioner.
Section 221. Remedy for Enforcement of Statutory Penal Provisions. T he remedy f or enf orcement of
st at ut ory penalt ies of all sort s shall be by criminal or civil act ion, as t he part icular sit uat ion may
require, subject t o t he approval of t he Commissioner.
Section 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.
(a) In t he case of a f alse or f raudulent ret urn wit h int ent t o evade t ax or of f ailure t o f ile a ret urn, t he
t ax may be assessed, or a preceeding in court f or t he collect ion of such t ax may be f iled wit hout
assessment , at any t ime wit hin t en (10) years af t er t he discovery of t he f alsit y, f raud or omission:
Provided, T hat in a f raud assessment which has become f inal and execut ory, t he f act of f raud shall
be judicially t aken cognizance of in t he civil or criminal act ion f or t he collect ion t hereof .
(b) If bef ore t he expirat ion of t he t ime prescribed in Sect ion 203 f or t he assessment of t he t ax, bot h
t he Commissioner and t he t axpayer have agreed in writ ing t o it s assessment af t er such t ime, t he t ax
may be assessed wit hin t he period agreed upon. T he period so agreed upon may be ext ended by
subsequent writ t en agreement made bef ore t he expirat ion of t he period previously agreed upon.
(c) Any int ernal revenue t ax which has been assessed wit hin t he period of limit at ion as prescribed in
paragraph (a) hereof may be collect ed by dist raint or levy or by a proceeding in court wit hin f ive (5)
years f ollowing t he assessment of t he t ax.
(d) Any int ernal revenue t ax, which has been assessed wit hin t he period agreed upon as provided in
paragraph (b) hereinabove, may be collect ed by dist raint or levy or by a proceeding in court wit hin t he
period agreed upon in writ ing bef ore t he expirat ion of t he f ive (5) -year period. T he period so agreed
upon may be ext ended by subsequent writ t en agreement s made bef ore t he expirat ion of t he period
previously agreed upon.
(e) Provided, however, T hat not hing in t he immediat ely preceding and paragraph (a) hereof shall be
const rued t o aut horize t he examinat ion and invest igat ion or inquiry int o any t ax ret urn f iled in
accordance wit h t he provisions of any t ax amnest y law or decree.
Section 223. Suspension of Running of Statute of Limitations. T he running of t he St at ut e of Limit at ions
provided in Sect ions 203 and 222 on t he making of assessment and t he beginning of dist raint or levy a
proceeding in court f or collect ion, in respect of any def iciency, shall be suspended f or t he period
during which t he Commissioner is prohibit ed f rom making t he assessment or beginning dist raint or
levy or a proceeding in court and f or sixt y (60) days t hereaf t er; when t he t axpayer request s f or a
reinvest igat ion which is grant ed by t he Commissioner; when t he t axpayer cannot be locat ed in t he
address given by him in t he ret urn f iled upon which a t ax is being assessed or collect ed: Provided,
t hat , if t he t axpayer inf orms t he Commissioner of any change in address, t he running of t he St at ut e
of Limit at ions will not be suspended; when t he warrant of dist raint or levy is duly served upon t he
t axpayer, his aut horized represent at ive, or a member of his household wit h suf f icient discret ion, and
t axpayer, his aut horized represent at ive, or a member of his household wit h suf f icient discret ion, and
no propert y could be locat ed; and when t he t axpayer is out of t he Philippines.
Section 224. Remedy for Enforcement of Forfeitures. T he f orf eit ure of chat t els and removable
f ixt ures of any sort shall be enf orced by t he seizure and sale, or dest ruct ion, of t he specif ic f orf eit ed
propert y. T he f orf eit ure of real propert y shall be enf orced by a judgment of condemnat ion and sale in
a legal act ion or proceeding, civil or criminal, as t he case may require.
Section 225. When Property to be Sold or Destroyed. Sales of f orf eit ed chat t els and removable
f ixt ures shall be ef f ect ed, so f ar as pract icable, in t he same manner and under t he same condit ions
as t he public not ice and t he t ime and manner of sale as are prescribed f or sales of personal propert y
dist rained f or t he non-payment of t axes.
Dist illed spirit s, liquors, cigars, cigaret t es, ot her manuf act ured product s of t obacco, and all apparat us
used I or about t he illicit product ion of such art icles may, upon f orf eit ure, be dest royed by order of
t he Commissioner, when t he sale of t he same f or consumpt ion or use would be injurious t o public
healt h or prejudicial t o t he enf orcement of t he law.
All ot her art icles subject t o excise t ax, which have been manuf act ured or removed in violat ion of t his
Code, as well as dies f or t he print ing or making of int ernal revenue st amps and labels which are in
imit at ion of or purport t o be lawf ul st amps, or labels may, upon f orf eit ure, be sold or dest royed in t he
discret ion of t he Commissioner.
Forf eit ed propert y shall not be dest royed unt il at least t went y (20) days af t er seizure.
Section 226. Disposition of funds Recovered in Legal Proceedings or Obtained from Forfeitures. all
judgment s and monies recovered and received f or t axes, cost s, f orf eit ures, f ines and penalt ies shall
be paid t o t he Commissioner or his aut horized deput ies as t he t axes t hemselves are required t o be
paid, and except as specially provided, shall be account ed f or and dealt wit h t he same way.
Section 227. Satisfaction of Judgment Recovered Against any Internal Revenue Officer. When an act ion
is brought against any Int ernal Revenue of f icer t o recover damages by reason of any act done in t he
perf ormance of of f icial dut y, and t he Commissioner is not if ied of such act ion in t ime t o make def ense
against t he same, t hrough t he Solicit or General, any judgment , damages or cost s recovered in such
act ion shall be sat isf ied by t he Commissioner, upon approval of t he Secret ary of Finance, or if t he
same be paid by t he person used shall be repaid or reimbursed t o him.
No such judgment , damages, or cost s shall be paid or reimbursed in behalf of a person who has act ed
negligent ly or in bad f ait h, or wit h willf ul oppression.
CHAPT ER III PROT EST ING AN ASSESSMENT , REFUND, ET C.
Section 228. Protesting of Assessment. When t he Commissioner or his duly aut horized
represent at ive f inds t hat proper t axes should be assessed, he shall f irst not if y t he t axpayer of his
f indings: provided, however, T hat a preassessment not ice shall not be required in t he f ollowing cases:
(a) When t he f inding f or any def iciency t ax is t he result of mat hemat ical error in t he comput at ion of
t he t ax as appearing on t he f ace of t he ret urn; or
(b) When a discrepancy has been det ermined bet ween t he t ax wit hheld and t he amount act ually
remit t ed by t he wit hholding agent ; or
(c) When a t axpayer who opt ed t o claim a ref und or t ax credit of excess credit able wit hholding t ax
f or a t axable period was det ermined t o have carried over and aut omat ically applied t he same
amount claimed against t he est imat ed t ax liabilit ies f or t he t axable quart er or quart ers of t he
succeeding t axable year; or
(d) When t he excise t ax due on exciseable art icles has not been paid; or
(e) When t he art icle locally purchased or import ed by an exempt person, such as, but not limit ed t o,
(e) When t he art icle locally purchased or import ed by an exempt person, such as, but not limit ed t o,
vehicles, capit al equipment , machineries and spare part s, has been sold, t raded or t ransf erred t o
non-exempt persons.
T he t axpayers shall be inf ormed in writ ing of t he law and t he f act s on which t he assessment is made;
ot herwise, t he assessment shall be void.
Wit hin a period t o be prescribed by implement ing rules and regulat ions, t he t axpayer shall be required
t o respond t o said not ice. If t he t axpayer f ails t o respond, t he Commissioner or his duly aut horized
represent at ive shall issue an assessment based on his f indings.
Such assessment may be prot est ed administ rat ively by f iling a request f or reconsiderat ion or
reinvest igat ion wit hin t hirt y (30) days f rom receipt of t he assessment in such f orm and manner as
may be prescribed by implement ing rules and regulat ions.
Wit hin sixt y (60) days f rom f iling of t he prot est , all relevant support ing document s shall have been
submit t ed; ot herwise, t he assessment shall become f inal.
If t he prot est is denied in whole or in part , or is not act ed upon wit hin one hundred eight y (180) days
f rom submission of document s, t he t axpayer adversely af f ect ed by t he decision or inact ion may
appeal t o t he Court of T ax Appeals wit hin t hirt y (30) days f rom receipt of t he said decision, or f rom
t he lapse of one hundred eight y (180)-day period; ot herwise, t he decision shall become f inal,
execut ory and demandable.
Section 229. Recovery of Tax Erroneously or Illegally Collected. no suit or proceeding shall be
maint ained in any court f or t he recovery of any nat ional int ernal revenue t ax hereaf t er alleged t o
have been erroneously or illegally assessed or collect ed, or of any penalt y claimed t o have been
collect ed wit hout aut horit y, of any sum alleged t o have been excessively or in any manner wrongf ully
collect ed wit hout aut horit y, or of any sum alleged t o have been excessively or in any manner
wrongf ully collect ed, unt il a claim f or ref und or credit has been duly f iled wit h t he Commissioner; but
such suit or proceeding may be maint ained, whet her or not such t ax, penalt y, or sum has been paid
under prot est or duress.
In any case, no such suit or proceeding shall be f iled af t er t he expirat ion of t wo (2) years f rom t he
dat e of payment of t he t ax or penalt y regardless of any supervening cause t hat may arise af t er
payment : Provided, however, T hat t he Commissioner may, even wit hout a writ t en claim t heref or,
ref und or credit any t ax, where on t he f ace of t he ret urn upon which payment was made, such
payment appears clearly t o have been erroneously paid.
Section 230. Forfeiture of Cash Refund and of Tax Credit. (A) Forfeiture of Refund. A ref und check or warrant issued in accordance wit h t he pert inent provisions
of t his Code, which shall remain unclaimed or uncashed wit hin f ive (5) years f rom t he dat e t he said
warrant or check was mailed or delivered, shall be f orf eit ed in f avor of t he Government and t he
amount t hereof shall revert t o t he general f und.
(B) Forfeiture of Tax Credit. A t ax credit cert if icat e issued in accordance wit h t he pert inent provisions
of t his Code, which shall remain unut ilized af t er f ive (5) years f rom t he dat e of issue, shall, unless
revalidat ed, be considered invalid, and shall not be allowed as payment f or int ernal revenue t ax
liabilit ies of t he t axpayer, and t he amount covered by t he cert if icat e shall revert t o t he general f und.
(C) Transitory Provision. For purposes of t he preceding Subsect ion, a t ax credit cert if icat e issued by
t he Commissioner or his duly aut horized represent at ive prior t o January 1, 1998, which remains
unut ilized or has a credit able balance as of said dat e, shall be present ed f or revalidat ion wit h t he
Commissioner or his duly aut horized represent at ive or on bef ore June 30, 1998.
Section 231. Action to Contest Forfeiture of Chattel. In case of t he seizure of personal propert y under
claim of f orf eit ure, t he owner desiring t o cont est t he validit y of t he f orf eit ure may, at any t ime bef ore
sale or dest ruct ion of t he propert y, bring an act ion against t he person seizing t he propert y or having
possession t hereof t o recover t he same, and upon giving proper bond, may enjoin t he sale; or af t er
t he sale and wit hin six (6) mont hs, he may bring an act ion t o recover t he net proceeds realized at t he
sale.
T IT LE IX
COMPLIANCE REQUIREMENT S
CHAPT ER I KEEPING OF BOOKS OF ACCOUNT S AND RECORDS
Section 232. Keeping of Books of Accounts. (A) Corporat ions, Companies, Part nerships or Persons Required t o Keep Books of Account s. All
corporat ions, companies, part nerships or persons required by law t o pay int ernal revenue t axes shall
keep a journal and a ledger or t heir equivalent s: Provided, however, T hat t hose whose quart erly sales,
earnings, receipt s, or out put do not exceed Fif t y t housand pesos (P50,000) shall keep and use
simplif ied set of bookkeeping records duly aut horized by t he Secret ary of Finance where in all
t ransact ions and result s of operat ions are shown and f rom which all t axes due t he Government may
readily and accurat ely be ascert ained and det ermined any t ime of t he year: Provided, f urt her, T hat
corporat ions, companies, part nerships or persons whose gross quart erly sales, earnings, receipt s or
out put exceed One hundred f if t y t housand pesos (P150,000) shall have t heir books of account s
audit ed and examined yearly by independent Cert if ied Public Account ant s and t heir income t ax
ret urns accompanied wit h a duly accomplished Account Inf ormat ion Form (AIF) which shall cont ain,
among ot hers, inf ormat ion lif t ed f rom cert if ied balance sheet s, prof it and loss st at ement s, schedules
list ing income-producing propert ies and t he corresponding income t heref rom and ot her relevant
st at ement s.
(B) Independent Cert if ied Public Account ant Def ined. T he t erm Independent Cert if ied Public
Account ant , as used in t he preceding paragraph, means an account ant who possesses t he
independence as def ined in t he rules and regulat ions of t he Board of Account ancy promulgat ed
pursuant t o President ial Decree No. 692, ot herwise known as t he Revised Account ancy Law.
Section 233. Subsidiary Books. All corporat ions, companies, part nerships or persons keeping t he
books of account s ment ioned in t he preceding Sect ion may, at t heir opt ion, keep subsidiary books as
t he needs of t heir business may require: Provided, T hat were such subsidiaries are kept , t hey shall
f orm part of t he account ing syst em of t he t axpayer and shall be subject t o t he same rules and
regulat ions as t o t heir keeping, t ranslat ion, product ion and inspect ion as are applicable t o t he journal
and t he ledger.
Section 234. Language in which Books are to be Kept; Translation. All such corporat ions, companies,
part nerships or persons shall keep t he books or records ment ioned in Sect ion 232 hereof in nat ive
language, English or Spanish: Provided, however, T hat if in addit ion t o said books or records t he
t axpayer keeps ot her books or records in a language ot her t han a nat ive language, English or
Spanish, he shall make a t rue and complet e t ranslat ion of all t he ent ries in suck ot her books or
records int o a nat ive language; English or Spanish, and t he said t ranslat ion must be made by t he
bookkeeper, or such t axpayer, or in his absence, by his manager and must be cert if ied under oat h as
t o it s correct ness by t he said bookkeeper or manager, and shall f orm an int egral part of t he af oresaid
books of account s. T he keeping of such books or records in any language ot her t han a nat ive
language, English or Spanish, is hereby prohibit ed.
Section 235. Preservation of Books and Accounts and Other Accounting Records. All t he books of
account s, including t he subsidiary books and ot her account ing records of corporat ions, part nerships,
or persons, shall be preserved by t hem f or a period beginning f rom t he last ent ry in each book unt il
t he last day prescribed by Sect ion 203 wit hin which t he Commissioner is aut horized t o make an
assessment . T he said books and records shall be subject t o examinat ion and inspect ion by int ernal
revenue of f icers: Provided, T hat f or income t ax purposes, such examinat ion and inspect ion shall be
made only once in a t axable year, except in t he f ollowing cases:
(a) Fraud, irregularit y or mist akes, as det ermined by t he Commissioner;

(b) T he t axpayer request s reinvest igat ion;
(c) Verif icat ion of compliance wit h wit hholding t ax laws and regulat ions;
(d) Verif icat ion of capit al gains t ax liabilit ies; and
(e) In t he exercise of t he Commissioners power under Sect ion 5(B) t o obt ain inf ormat ion f rom ot her
persons in which case, anot her or separat e examinat ion and inspect ion may be made. Examinat ion
and inspect ion of books of account s and ot her account ing records shall be done in t he t axpayers
of f ice or place of business or in t he of f ice of t he Bureau of Int ernal Revenue. All corporat ions,
part nerships or persons t hat ret ire f rom business shall, wit hin t en (10) days f rom t he dat e of
ret irement or wit hin such period of t ime as may be allowed by t he Commissioner in special cases,
submit t heir books of account s, including t he subsidiary books and ot her account ing records t o t he
Commissioner or any of his deput ies f or examinat ion, af t er which t hey shall be ret urned. Corporat ions
and part nerships cont emplat ing dissolut ion must not if y t he Commissioner and shall not be dissolved
unt il cleared of any t ax liabilit y.
Any provision of exist ing general or special law t o t he cont rary not wit hst anding, t he books of
account s and ot her pert inent records of t ax-exempt organizat ions or grant ees of t ax incent ives shall
be subject t o examinat ion by t he Bureau of Int ernal Revenue f or purposes of ascert aining compliance
wit h t he condit ions under which t hey have been grant ed t ax exempt ions or t ax incent ives, and t heir
t ax liabilit y, if any.
CHAPT ER II ADMINIST RAT IVE PROVISIONS
Section 236. Registration Requirements. (A) Requirements. Every person subject t o any int ernal revenue t ax shall regist er once wit h t he
appropriat e Revenue Dist rict Of f icer:
(1) Wit hin t en (10) days f rom dat e of employment , or
(2) On or bef ore t he commencement of business,or
(3) Bef ore payment of any t ax due, or
(4) Upon f iling of a ret urn, st at ement or declarat ion as required in t his Code.
T he regist rat ion shall cont ain t he t axpayers name, st yle, place of residence, business and such ot her
inf ormat ion as may be required by t he Commissioner in t he f orm prescribed t heref or.
A person maint aining a head of f ice, branch or f acilit y shall regist er wit h t he Revenue Dist rict Of f icer
having jurisdict ion over t he head of f ice, brand or f acilit y. For purposes of t his Sect ion, t he t erm
f acilit y may include but not be limit ed t o sales out let s, places of product ion, warehouses or st orage
places.
(B) Annual Registration Fee. An annual regist rat ion f ee in t he amount of Five hundred pesos (P500)
f or every separat e or dist inct est ablishment or place of business, including f acilit y t ypes where sales
t ransact ions occur, shall be paid upon regist rat ion and every year t hereaf t er on or bef ore t he last day
of January: Provided, however, T hat cooperat ives, individuals earning purely compensat ion income,
whet her locally or abroad, and overseas workers are not liable t o t he regist rat ion f ee herein imposed.
T he regist rat ion f ee shall be paid t o an aut horized agent bank locat ed wit hin t he revenue dist rict , or
t o t he Revenue Collect ion Of f icer, or duly aut horized T reasurer of t he cit y of municipalit y where each
place of business or branch is regist ered.
(C) Registration of Each Type of Internal Revenue Tax. Every person who is required t o regist er wit h
t he Bureau of Int ernal Revenue under Subsect ion (A) hereof , shall regist er each t ype of int ernal
revenue t ax f or which he is obligat ed, shall f ile a ret urn and shall pay such t axes, and shall updat es
such regist rat ion of any changes in accordance wit h Subsect ion (E) hereof .
(D) Transfer of Registration. In case a regist ered person decides t o t ransf er his place of business or
his head of f ice or branches, it shall be his dut y t o updat e his regist rat ion st at us by f iling an
applicat ion f or regist rat ion inf ormat ion updat e in t he f orm prescribed t heref or.
(E) Other Updates. Any person regist ered in accordance wit h t his Sect ion shall, whenever applicable,
updat e his regist rat ion inf ormat ion wit h t he Revenue Dist rict Of f ice where he is regist ered, specif ying
t herein any change in t ype and ot her t axpayer det ails.
(F) Cancellation of Registration. T he regist rat ion of any person who ceases t o be liable t o a t ax t ype
shall be cancelled upon f iling wit h t he Revenue Dist rict Of f ice where he is regist ered an applicat ion f or
regist rat ion inf ormat ion updat e in a f orm prescribed t heref or.
(G) Persons Commencing Business. Any person, who expect s t o realize gross sales or receipt s
subject t o value-added t ax in excess of t he amount prescribed under Sect ion 109(z) of t his Code f or
t he next 12-mont h period f rom t he commencement of t he business, shall regist er wit h t he Revenue
Dist rict Of f ice which has jurisdict ion over t he head of f ice or branch and shall pay t he annual
regist rat ion f ee prescribed in Subsect ion (B) hereof .
(H) Persons Becoming Liable to the Value-added Tax. Any person, whose gross sales or receipt s in any
12-mont h period exceeds t he amount prescribed under Subsect ion 109(z) of t his Code f or exempt ion
f rom t he value-added t ax shall regist er in accordance wit h Subsect ion (A) hereof , and shall pay t he
annual regist rat ion f ee prescribed wit hin t en (10) days af t er t he end of t he last mont h of t hat period,
and shall be liable t o t he value-added t ax commencing f rom t he f irst day of t he mont h f ollowing his
regist rat ion.
(I) Optional Registration of Exempt Person. Any person whose t ransact ions are exempt f rom valueadded t ax under Sect ion 109(z) of t his Code; or any person whose t ransact ions are exempt f rom t he
value-added t ax under Sect ion 109(a), (b), (c), and (d) of t his Code, who opt s t o regist er as a VAT
t axpayer wit h respect t o his export sales only, may updat e his regist rat ion inf ormat ion in accordance
wit h Subsect ion (E) hereof , not lat er t han t en (10) days bef ore t he beginning of t he t axable quart er
and shall pay t he annual regist rat ion f ee prescribed in Subsect ion (B) hereof .
In any case, t he Commissioner may, f or administ rat ive reasons, deny any applicat ion f or regist rat ion
including updat es prescribed under Subsect ion (E) hereof .
For purposes of T it le IV of t his Code, any person who has regist ered value-added t ax as a t ax t ype in
accordance wit h t he provisions of Subsect ion (C) hereof shall be ref erred t o as VAT -regist ered
person who shall be assigned only one T axpayer Ident if icat ion Number.
(J) Supplying of Taxpayer Identification Number (TIN). Any person required under t he aut horit y of t his
Code t o make, render or f ile a ret urn, st at ement or ot her document shall be supplied wit h or assigned
a T axpayer Ident if icat ion Number (T IN) which he shall indicat e in such ret urn, st at ement or document
f iled wit h t he Bureau of Int ernal Revenue f or his proper ident if icat ion f or t ax purposes, and which he
shall indicat e in cert ain document s, such as, but not limit ed t o t he f ollowing:
(1) Sugar quedans, ref ined sugar release order or similar inst rument s;
(2) Domest ic bills of lading;
(3) Document s t o be regist ered wit h t he Regist er of Deeds of Assessors Of f ice;
(4) Regist rat ion cert if icat e of t ransport at ion equipment by land, sea or air;
(5) Document s t o be regist ered wit h t he Securit ies and Exchange Commission;
(6) Building const ruct ion permit s;

(7) Applicat ion f or loan wit h banks, f inancial inst it ut ions, or ot her f inancial int ermediaries;
(8) Applicat ion f or mayors permit ;
(9) Applicat ion f or business license wit h t he Depart ment of T rade & Indust ry; and
(10) Such ot her document s which may hereaf t er be required under rules and regulat ions t o be
promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he Commissioner.
In cases where a regist ered t axpayer dies, t he administ rat or or execut or shall regist er t he est at e of
t he decedent in accordance wit h Subsect ion (A) hereof and a new T axpayer Ident if icat ion Number
(T IN) shall be supplied in accordance wit h t he provisions of t his Sect ion.
In t he case of a nonresident decedent , t he execut or or administ rat or of t he est at e shall regist er t he
est at e wit h t he Revenue Dist rict Of f ice where he is regist ered: Provided, however, T hat in case such
execut or or administ rat or is not regist ered, regist rat ion of t he est at e shall be made wit h t he
T axpayer Ident if icat ion Number (T IN) supplied by t he Revenue Dist rict Of f ice having jurisdict ion over
his legal residence.
Only one T axpayer ident if icat ion Number (T IN) shall be assigned t o a t axpayer. Any person who shall
secure more t han one T axpayer Ident if icat ion Number shall be criminally liable under t he provision of
Sect ion 275 on Violat ion of Ot her Provisions of t his Code or Regulat ions in General.
Section 237. Issuance of Receipts or Sales or Commercial Invoices. All persons subject t o an int ernal
revenue t ax shall, f or each sale or t ransf er of merchandise or f or services rendered valued at
T went y-f ive pesos (P25.00) or more, issue duly regist ered receipt s or sales or commercial invoices,
prepared at least in duplicat e, showing t he dat e of t ransact ion, quant it y, unit cost and descript ion of
merchandise or nat ure of service: Provided, however, T hat in t he case of sales, receipt s or t ransf ers
in t he amount of One hundred pesos (P100.00) or more, or regardless of t he amount , where t he sale
or t ransf er is made by a person liable t o value-added t ax t o anot her person also liable t o valueadded t ax; or where t he receipt is issued t o cover payment made as rent als, commissions,
compensat ions or f ees, receipt s or invoices shall be issued which shall show t he name, business
st yle, if any, and address of t he purchaser, cust omer or client : Provided, f urt her, T hat where t he
purchaser is a VAT -regist ered person, in addit ion t o t he inf ormat ion herein required, t he invoice or
receipt shall f urt her show t he T axpayer Ident if icat ion Number (T IN) of t he purchaser.
T he original of each receipt or invoice shall be issued t o t he purchaser, cust omer or client at t he t ime
t he t ransact ion is ef f ect ed, who, if engaged in business or in t he exercise of prof ession, shall keep
and preserve t he same in his place of business f or a period of t hree (3) years f rom t he close of t he
t axable year in which such invoice or receipt was issued, while t he duplicat e shall be kept and
preserved by t he issuer, also in his place of business, f or a like period.
T he Commissioner may, in merit orious cases, exempt any person subject t o int ernal revenue t ax
f rom compliance wit h t he provisions of t his Sect ion.
Section 238. Printing of Receipts or Sales or Commercial Invoices. All persons who are engaged in
business shall secure f rom t he Bureau of Int ernal Revenue an aut horit y t o print receipt s or sales or
commercial invoices bef ore a print er can print t he same.
No aut horit y t o print receipt s or sales or commercial invoices shall be grant ed unless t he receipt s or
invoices t o be print ed are serially numbered and shall show, among ot her t hings, t he name, business
st yle, T axpayer Ident if icat ion Number (T IN) and business address of t he person or ent it y t o use t he
same, and such ot her inf ormat ion t hat may be required by rules and regulat ions t o be promulgat ed by
t he Secret ary of Finance, upon recommendat ion of t he Commissioner.
All persons who print receipt or sales or commercial invoices shall maint ain a logbook/regist er of
t axpayers who availed of t heir print ing services. T he logbook/regist er shall cont ain t he f ollowing
inf ormat ion:
(1) Names, T axpayer Ident if icat ion Numbers of t he persons or ent it ies f or whom t he receipt s or sales
or commercial invoices were print ed; and
(2) Number of booklet s, number of set s per booklet , number of copies per set and t he serial numbers
of t he receipt s or invoices in each booklet .
Section 239. Sign to be Exhibited by Distiller, Rectifier, Compounder, Repacker and Wholesale Liquor
Dealer. Every person engaged in dist illing or rect if ying spirit s, compounding liquors, repacking wines
or dist illed spirit s, and every wholesale liquor dealer shall keep conspicuously on t he out side of his
place of business a sign exhibit ing, in let t ers not less t han six cent imet ers (6 cms.) high, his name or
f irm st yle, wit h t he words Regist ered Dist iller, Rect if ier of Spirit s, Compounder of Liquors,
Repacker of Wines or Dist illed Spirit s, or Wholesale Liquor Dealer, as t he case may be, and his
assessment number.
Section 240. Sign to be exhibited by manufacturer of Products of Tobacco. Every manuf act urer of
cigars, cigaret t es or t obacco, and every wholesale dealer in leaf t obacco or manuf act ured product s
of t obacco shall place and keep on out side of t he building wherein his business is carried on, so t hat it
can be dist inct ly seen, a sign st at ing his f ull name and business in let t ers not less t han six
cent imet ers (6 cms.) high and also giving his assessment number.
Section 241. Exhibition of Certificate of Payment at Place of Business. T he cert if icat e or receipt s
showing payment of t axes issued t o a person engaged in a business subject t o an annual regist rat ion
f ee shall be kept conspicuously exhibit ed in plain view in or at t he place where t he business is
conduct ed; and in case of a peddler or ot her persons not having a f ixed place of business, shall be
kept in t he possession of t he holder t hereof , subject t o product ion upon demand of any int ernal
revenue of f icer.
Section 242. Continuation of Business of Deceased Person. When any individual who has paid t he
annual regist rat ion f ee dies, and t he same business is cont inued by t he person or persons int erest ed
in his est at e, no addit ional payment shall be required f or t he residue of t he t erm which t he t ax was
paid: Provided, however, T hat t he person or persons int erest ed in t he est at e should, wit hin t hirt y (30)
days f rom t he deat h of t he decedent , submit t o t he Bureau of Int ernal Revenue or t he regional or
revenue Dist rict Of f ice invent ories of goods or st ocks had at t he t ime of such deat h.
T he requirement under t his Sect ion shall also be applicable in t he case of t ransf er of ownership or
change of name of t he business est ablishment .
Section 243. Removal of Business to Other Location. Any business f or which t he annual regist rat ion
f ee has been paid may, subject t o t he rules and regulat ions prescribed by t he Secret ary of Finance,
upon recommendat ion of t he Commissioner, be removed and cont inued in any ot her place wit hout
t he payment of addit ional t ax during t he t erm f or which t he payment was made.
CHAPT ER III RULES AND REGULAT IONS
Section 244. Authority of Secretary of Finance to Promulgate Rules and Regulations. T he Secret ary of
Finance, upon recommendat ion of t he Commissioner, shall promulgat e all needf ul rules and
regulat ions f or t he ef f ect ive enf orcement of t he provisions of t his Code.
Section 245. Specific Provisions to be Contained in Rules and Regulations. T he rules and regulat ions of
t he Bureau of Int ernal Revenue shall, among ot her t hins, cont ain provisions specif ying, prescribing or
def ining:
(a) T he t ime and manner in which Revenue Regional Direct or shall canvass t heir respect ive Revenue
Regions f or t he purpose of discovering persons and propert y liable t o nat ional int ernal revenue t axes,
and t he manner in which t heir list s and records of t axable persons and t axable object s shall be made
and kept ;
(b) T he f orms of labels, brands or marks t o be required on goods subject t o an excise t ax, and t he
manner in which t he labelling, branding or marking shall be ef f ect ed;
(c) T he condit ions under which and t he manner in which goods int ended f or export , which if not
export ed would be subject t o an excise t ax, shall be labelled, branded or marked;
(d) T he condit ions t o be observed by revenue of f icers respect ing t he inst it ut ions and conduct of legal
act ions and proceedings;
(e) T he condit ions under which goods int ended f or st orage in bonded warehouses shall be conveyed
t hit her, t heir manner of st orage and t he met hod of keeping t he ent ries and records in connect ion
t herewit h, also t he books t o be kept by Revenue Inspect ors and t he report s t o be made by t hem in
connect ion wit h t heir supervision of such houses;
(f ) T he condit ions under which denat ured alcohol may be removed and dealt in, t he charact er and
quant it y of t he denat uring mat erial t o be used, t he manner in which t he process of denat uring shall be
ef f ect ed, so as t o render t he alcohol suit ably denat ured and unf it f or oral int ake, t he bonds t o be
given, t he books and records t o be kept , t he ent ries t o be made t herein, t he report s t o be made t o
t he Commissioner, and t he signs t o be displayed in t he business ort by t he person f or whom such
denat uring is done or by whom, such alcohol is dealt in;
(g) T he manner in which revenue shall be collect ed and paid, t he inst rument , document or object t o
which revenue st amps shall be af f ixed, t he mode of cancellat ion of t he same, t he manner in which t he
proper books, records, invoices and ot her papers shall be kept and ent ries t herein made by t he
person subject t o t he t ax, as well as t he manner in which licenses and st amps shall be gat hered up
and ret urned af t er serving t heir purposes;
(h) T he condit ions t o be observed by revenue of f icers respect ing t he enf orcement of T it le III
imposing a t ax on est at e of a decedent , and ot her t ransf ers mort is causa, as well as on gif t s and
such ot her rules and regulat ions which t he Commissioner may consider suit able f or t he enf orcement
of t he said T it le III;
(i) T he manner in which t ax ret urns, inf ormat ion and report s shall be prepared and report ed and t he
t ax collect ed and paid, as well as t he condit ions under which evidence of payment shall be f urnished
t he t axpayer, and t he preparat ion and publicat ion of t ax st at ist ics;
(j) T he manner in which int ernal revenue t axes, such as income t ax, including wit hholding t ax, est at e
and donors t axes, value-added t ax, ot her percent age t axes, excise t axes and document ary st amp
t axes shall be paid t hrough t he collect ion of f icers of t he Bureau of Int ernal Revenue or t hrough duly
aut horized agent banks which are hereby deput ized t o receive payment s of such t axes and t he
ret urns, papers and st at ement s t hat may be f iled by t he t axpayers in connect ion wit h t he payment of
t he t ax: Provided, however, T hat not wit hst anding t he ot her provisions of t his Code prescribing t he
place of f iling of ret urns and payment of t axes, t he Commissioner may, by rules and regulat ions,
require t hat t he t ax ret urns, papers and st at ement s t hat may be f iled by t he t axpayers in connect ion
wit h t he payment of t he t ax. Provided, however, T hat not wit hst anding t he ot her provisions of t his
Code prescribing t he place of f iling of ret urns and payment of t axes, t he Commissioner may, by rules
and regulat ions require t hat t he t ax ret urns, papers and st at ement s and t axes of large t axpayers be
f iled and paid, respect ively, t hrough collect ion of f icers or t hrough duly aut horized agent banks:
Provided, f urt her, T hat t he Commissioner can exercise t his power wit hin six (6) years f rom t he
approval of Republic Act No. 7646 or t he complet ion of it s comprehensive comput erizat ion program,
whichever comes earlier: Provided, f inally, T hat separat e venues f or t he Luzon, Visayas and
Mindanao areas may be designat ed f or t he f iling of t ax ret urns and payment of t axes by said large
t axpayers.
For t he purpose of t his Sect ion, large t axpayer means a t axpayer who sat isf ies any of t he f ollowing
crit eria;
(1) Value-Added T ax (VAT ) Business est ablishment wit h VAT paid or payable of at least One
hundred t housand pesos (P100,000) f or any quart er of t he preceding t axable year;
(2) Excise t ax Business est ablishment wit h excise t ax paid or payable of at least One million pesos
(P1,000,000) f or t he preceding t axable year;
(3) Corporat e Income T ax Business est ablishment wit h annual income t ax paid or payable of at
least One million pesos (P1,000,000) f or t he preceding t axable year; and
(4) Wit hholding t ax Business est ablishment wit h wit hholding t ax payment or remit t ance of at least
One million pesos (P1,000,000) f or t he preceding t axable year.
Provided, however, T hat t he Secret ary of Finance, upon recommendat ion of t he Commissioner, may
modif y or add t o t he above crit eria f or det ermining a large t axpayer af t er considering such f act ors as
inf lat ion, volume of business, wage and employment levels, and similar economic f act ors.
T he penalt ies prescribed under Sect ion 248 of t his Code shall be imposed on any violat ion of t he
rules and regulat ions issued by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner, prescribing t he place of f iling of ret urns and payment s of t axes by large t axpayers.
Section 246. Non- Retroactivity of Rulings. Any revocat ion, modif icat ion or reversal of any of t he rules
and regulat ions promulgat ed in accordance wit h t he preceding Sect ions or any of t he rulings or
circulars promulgat ed by t he Commissioner shall not be given ret roact ive applicat ion if t he
revocat ion, modif icat ion or reversal will be prejudicial t o t he t axpayers, except in t he f ollowing cases:
(a) Where t he t axpayer deliberat ely misst at es or omit s mat erial f act s f rom his ret urn or any
document required of him by t he Bureau of Int ernal Revenue;
(b) Where t he f act s subsequent ly gat hered by t he Bureau of Int ernal Revenue are mat erially dif f erent
f rom t he f act s on which t he ruling is based; or
(c) Where t he t axpayer act ed in bad f ait h.
T IT LE X
ST AT UT ORY OFFENSES AND PENALT IES
CHAPT ER I ADDIT IONS T O T HE T AX
Section 247. General Provisions. (a) T he addit ions t o t he t ax or def iciency t ax prescribed in t his Chapt er shall apply t o all t axes, f ees
and charges imposed in t his Code. T he Amount so added t o t he t ax shall be collect ed at t he same
t ime, in t he same manner and as part of t he t ax.
(b) If t he wit hholding agent is t he Government or any of it s agencies, polit ical subdivisions or
inst rument alit ies, or a government -owned or cont rolled corporat ion, t he employee t hereof
responsible f or t he wit hholding and remit t ance of t he t ax shall be personally liable f or t he addit ions t o
t he t ax prescribed herein.
(c) t he t erm person, as used in t his Chapt er, includes an of f icer or employee of a corporat ion who as
such of f icer, employee or member is under a dut y t o perf orm t he act in respect of which t he violat ion
occurs.
Section 248. Civil Penalties. (A) T here shall be imposed, in addit ion t o t he t ax required t o be paid, a penalt y equivalent t o t went yf ive percent (25%) of t he amount due, in t he f ollowing cases:
(1) Failure t o f ile any ret urn and pay t he t ax due t hereon as required under t he provisions of t his Code
or rules and regulat ions on t he dat e prescribed; or
(2) Unless ot herwise aut horized by t he Commissioner, f iling a ret urn wit h an int ernal revenue of f icer
ot her t han t hose wit h whom t he ret urn is required t o be f iled; or
(3) Failure t o pay t he def iciency t ax wit hin t he t ime prescribed f or it s payment in t he not ice of
assessment ; or
(4) Failure t o pay t he f ull or part of t he amount of t ax shown on any ret urn required t o be f iled under
t he provisions of t his Code or rules and regulat ions, or t he f ull amount of t ax due f or which no ret urn is
required t o be f iled, on or bef ore t he dat e prescribed f or it s payment .
(B) In case of willf ul neglect t o f ile t he ret urn wit hin t he period prescribed by t his Code or by rules and
regulat ions, or in case a f alse or f raudulent ret urn is willf ully made, t he penalt y t o be imposed shall be
f if t y percent (50%) of t he t ax or of t he def iciency t ax, in case, any payment has been made on t he
basis of such ret urn bef ore t he discovery of t he f alsit y or f raud: Provided, T hat a subst ant ial
underdeclarat ion of t axable sales, receipt s or income, or a subst ant ial overst at ement of deduct ions,
as det ermined by t he Commissioner pursuant t o t he rules and regulat ions t o be promulgat ed by t he
Secret ary of Finance, shall const it ut e prima f acie evidence of a f alse or f raudulent ret urn: Provided,
f urt her, T hat f ailure t o report sales, receipt s or income in an amount exceeding t hirt y percent (30%)
of t hat declared per ret urn, and a claim of deduct ions in an amount exceeding (30%) of act ual
deduct ions, shall render t he t axpayer liable f or subst ant ial underdeclarat ion of sales, receipt s or
income or f or overst at ement of deduct ions, as ment ioned herein.
Section 249. Interest. (A) In General. T here shall be assessed and collect ed on any unpaid amount of t ax, int erest at t he
rat e of t went y percent (20%) per annum, or such higher rat e as may be prescribed by rules and
regulat ions, f rom t he dat e prescribed f or payment unt il t he amount is f ully paid.
(B) Deficiency Interest. Any def iciency in t he t ax due, as t he t erm is def ined in t his Code, shall be
subject t o t he int erest prescribed in Subsect ion (A) hereof , which int erest shall be assessed and
collect ed f rom t he dat e prescribed f or it s payment unt il t he f ull payment t hereof .
(C) Delinquency Interest. In case of f ailure t o pay:
(1) T he amount of t he t ax due on any ret urn t o be f iled, or
(2) T he amount of t he t ax due f or which no ret urn is required, or
(3) A def iciency t ax, or any surcharge or int erest t hereon on t he due dat e appearing in t he not ice and
demand of t he Commissioner, t here shall be assessed and collect ed on t he unpaid amount , int erest
at t he rat e prescribed in Subsect ion (A) hereof unt il t he amount is f ully paid, which int erest shall f orm
part of t he t ax.
(D) Interest on Extended Payment. If any person required t o pay t he t ax is qualif ied and elect s t o pay
t he t ax on inst allment under t he provisions of t his Code, but f ails t o pay t he t ax or any inst allment
hereof , or any part of such amount or inst allment on or bef ore t he dat e prescribed f or it s payment , or
where t he Commissioner has aut horized an ext ension of t ime wit hin which t o pay a t ax or a def iciency
t ax or any part t hereof , t here shall be assessed and collect ed int erest at t he rat e hereinabove
prescribed on t he t ax or def iciency t ax or any part t hereof unpaid f rom t he dat e of not ice and
demand unt il it is paid.
Section 250. Failure to File Certain Information Returns. In t he case of each f ailure t o f ile an
inf ormat ion ret urn, st at ement or list , or keep any record, or supply any inf ormat ion required by t his
Code or by t he Commissioner on t he dat e prescribed t heref or, unless it is shown t hat such f ailure is
due t o reasonable cause and not t o willf ul neglect , t here shall, upon not ice and demand by t he
Commisssioner, be paid by t he person f ailing t o f ile, keep or supply t he same, One t housand pesos
(1,000) f or each f ailure: Provided, however, T hat t he aggregat e amount t o be imposed f or all such
f ailures during a calendar year shall not exceed T went y-f ive t housand pesos (P25,000).
Section 251. Failure of a Withholding Agent to Collect and Remit Tax. Any person required t o wit hhold,
account f or, and remit any t ax imposed by t his Code or who willf ully f ails t o wit hhold such t ax, or
account f or and remit such t ax, or aids or abet s in any manner t o evade any such t ax or t he payment
t hereof , shall, in addit ion t o ot her penalt ies provided f or under t his Chapt er, be liable upon convict ion
t o a penalt y equal t o t he t ot al amount of t he t ax not wit hheld, or not account ed f or and remit t ed.
Section 252. Failure of a Withholding Agent to refund Excess Withholding Tax. Any employer/wit hholding
agent who f ails or ref uses t o ref und excess wit hholding t ax shall, in addit ion t o t he penalt ies provided
in t his T it le, be liable t o a penalt y t o t he t ot al amount of ref unds which was not ref unded t o t he
employee result ing f rom any excess of t he amount wit hheld over t he t ax act ually due on t heir ret urn.
CHAPT ER II CRIMES, OT HER OFFENSES AND FORFEIT URES
Section 253. General Provisions. (a) Any person convict ed of a crime penalized by t his Code shall, in addit ion t o being liable f or t he
payment of t he t ax, be subject t o t he penalt ies imposed herein: Provided, T hat payment of t he t ax
due af t er apprehension shall not const it ut e a valid def ense in any prosecut ion f or violat ion of any
provision of t his Code or in any act ion f or t he f orf eit ure of unt axed art icles.
(b) Any person who willf ully aids or abet s in t he commission of a crime penalized herein or who causes
t he commission of any such of f ense by anot her shall be liable in t he same manner as t he principal.
(c) If t he of f ender is not a cit izen of t he Philippines, he shall be deport ed immediat ely af t er serving
t he sent ence wit hout f urt her proceedings f or deport at ion. If he is a public of f icer or employee, t he
maximum penalt y prescribed f or t he of f ense shall be imposed and, in addit ion, he shall be dismissed
f rom t he public service and perpet ually disqualif ied f rom holding any public of f ice, t o vot e and t o
part icipat e in any elect ion. If t he of f ender is a Cert if ied Public Account ant , his cert if icat e as a
Cert if ied Public Account ant shall, upon convict ion, be aut omat ically revoked or cancelled.
(d) In t he case of associat ions, part nerships or corporat ions, t he penalt y shall be imposed on t he
part ner, president , general manager, branch manager, t reasurer, of f icer-in-charge, and t he
employees responsible f or t he violat ion.
(e) T he f ines t o be imposed f or any violat ion of t he provisions of t his Code shall not be lower t han t he
f ines imposed herein or t wice t he amount of t axes, int erest and surcharges due f rom t he t axpayer,
whichever is higher.
Section 254. Attempt to Evade or Defeat Tax. Any person who willf ully at t empt s in any manner t o
evade or def eat any t ax imposed under t his Code or t he payment t hereof shall, in addit ion t o ot her
penalt ies provided by law, upon convict ion t hereof , be punished by a f ine not less t han T hirt y
t housand (P30,000) but not more t han One hunderd t housand pesos (P100,000) and suf f er
imprisonment of not less t han t wo (2) years but not more t han f our (4) years: Provided, T hat t he
convict ion or acquit t al obt ained under t his Sect ion shall not be a bar t o t he f iling of a civil suit f or t he
collect ion of t axes.
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 t his Code or by
rules and regulat ions promulgat ed t hereunder t o pay any t ax make a ret urn, keep any record, or
supply correct t he accurat e inf ormat ion, who willf ully f ails t o pay such t ax, make such ret urn, keep
such record, or supply correct and accurat e inf ormat ion, or wit hhold or remit t axes wit hheld, or ref und
excess t axes wit hheld on compensat ion, at t he t ime or t imes required by law or rules and regulat ions
shall, in addit ion t o ot her penalt ies provided by law, upon convict ion t hereof , be punished by a f ine of
not less t han T en t housand pesos (P10,000) and suf f er imprisonment of not less t han one (1) year but
not more t han t en (10) years.

Any person who at t empt s t o make it appear f or any reason t hat he or anot her has in f act f iled a
ret urn or st at ement , or act ually f iles a ret urn or st at ement and subsequent ly wit hdraws t he same
ret urn or st at ement af t er securing t he of f icial receiving seal or st amp of receipt of int ernal revenue
of f ice wherein t he same was act ually f iled shall, upon convict ion t heref or, be punished by a f ine of not
less t han T en t housand pesos (P10,000) but not more t han T went y t housand pesos (P20,000) and
suf f er imprisonment of not less t han one (1) year but not more t han t hree (3) years.
Section 256. Penal Liability of Corporations. Any corporat ion, associat ion or general co-part nership
liable f or any of t he act s or omissions penalized under t his Code, in addit ion t o t he penalt ies imposed
herein upon t he responsible corporat e of f icers, part ners, or employees shall, upon convict ion f or each
act or omission, be punished by a f ine of not less t han Fif t y t housand pesos (P50,000) but not more
t han One hundred t housand pesos (P100,000).
Section 257. Penal Liability for Making False Entries, Records or Reports, or Using Falsified or Fake
Accountable Forms. (A) Any f inancial of f icer or independent Cert if ied Public Account ant engaged t o examine and audit
books of account s of t axpayers under Sect ion 232 (A) and any person under his direct ion who:
(1) Willf ully f alsif ies any report or st at ement bearing on any examinat ion or audit , or renders a report ,
including exhibit s, st at ement s, schedules or ot her f orms of account ancy work which has not been
verif ied by him personally or under his supervision or by a member of his f irm or by a member of his
st af f in accordance wit h sound audit ing pract ices; or
(2) Cert if ies f inancial st at ement s of a business ent erprise cont aining an essent ial misst at ement of
f act s or omission in respect of t he t ransact ions, t axable income, deduct ion and exempt ion of his
client ; or
(B) Any person who:
(1) Not being an independent Cert if ied Public Account ant according t o Sect ion 232(B) or a f inancial
of f icer, examines and audit s books of account s of t axpayers; or
(2) Of f ers t o sign and cert if y f inancial st at ement s wit hout audit ; or
(3) Of f ers any t axpayer t he use of account ing bookkeeping records f or int ernal revenue purposes not
in conf ormit y wit h t he requirement s prescribed in t his Code or rules and regulat ions promulgat ed
t hereunder; or
(4) Knowingly makes any f alse ent ry or ent ers any f alse or f ict it ious name in t he books of account s or
record ment ioned in t he preceding paragraphs; or
(5) Keeps t wo (2) or more set s of such records or books of account s; or
(6) In any way commit s an act or omission, in violat ion of t he provisions of t his Sect ion; or
(7) Fails t o keep t he books of account s or records ment ioned in Sect ion 232 in a nat ive language,
English or Spanish, or t o make a t rue and complet e t ranslat ion as required in Sect ion 234 of t his Code,
or whose books of account s or records kept in a nat ive language, English or Spanish, and f ound t o be
at mat erial variance wit h books or records kept by him in anot her language; or
(8) Willf ully at t empt s in any manner t o evade or def eat any t ax imposed under t his Code, or knowingly
uses f ake or f alsif ied revenue of f icial receipt s, Let t ers of Aut horit y, cert if icat es aut horizing
regist rat ion, T ax Credit Cert if icat es, T ax Debit Memoranda and ot her account able f orms shall, upon
convict ion f or each act or omission, be punished by a f ine not less t han Fif t y t housand pesos
(P50,000) but not more t han One hundred pesos (P100,000) and suf f er imprisonment of not less t han
t wo (2) years but not more t han six (6) years.
If t he of f ender is a Cert if ied Public Account ant , his cert if icat e as a Cert if ied Public Account ant shall
be aut omat ically revoked or cancelled upon convict ion.
In t he case of f oreigners, convict ion under t his Code shall result in his immediat e deport at ion af t er
serving sent ence, wit hout f urt her proceedings f or deport at ion.
Section 258. Unlawful Pursuit of Business. Any person who carries on any business f or which an
annual regist rat ion f ee is imposed wit hout paying t he t ax as required by law shall, upon convict ion f or
each act or omission, be punished by a f ine of not less t han Five t housand pesos (P5,000) but not
more t han T went y t housand pesos (P20,000) and suf f er imprisonment of not less t han six (6) mont hs
but not more t han t wo (2) years: Provided, T hat in t he case of a person engaged in t he business of
dist illing, rect if ying, repacking, compounding or manuf act uring any art icle subject t o excise t ax, he
shall, upon convict ion f or each act or omission, be punished by a f ine of not less t han T hirt y t housand
pesos (P30,000) but not more t han Fif t y t housand pesos (P50,000) and suf f er imprisonment of not
less t han t wo (2) years but not more t han f our (4) years.
Section 259. Illegal Collection of Foreign Payments. Any person who knowingly undert akes t he
collect ion of f oreign payment s as provided under Sect ion 67 of t his Code wit hout having obt ained a
license t heref or, or wit hout complying wit h it s implement ing rules and regulat ions, shall, upon
convict ion f or each act or omission, be punished by a f ine of not less t han T went y t housand pesos
(P20,000) but not more t han Fif t y t housand pesos (P50,000) and suf f er imprisonment of not less t han
one (1) year but not more t han t wo (2) years.
Section 260. Unlawful Possession of Cigarette Paper in Bobbins or Rolls, Etc. It shall be unlawf ul f or any
person t o have in his possession cigaret t e paper in bobbins or rolls, cigaret t e t ipping paper or
cigaret t e f ilt er t ips, wit hout t he corresponding aut horit y t heref or issued by t he Commissioner. Any
person, import er, manuf act urer of cigar and cigaret t es, who has been f ound guilt y under t his Sect ion,
shall, upon convict ion f or each act or omission, be punished by a f ine of not less t han T went y
t housand pesos (P20,000) but not more t han One hundred t housand pesos (P1000,000) and suf f er
imprisonment f or a t erm of not less t han six (6) years and one (1) day but not more t han t welve (12)
years.
Section 261. Unlawful Use of Denatured Alcohol. Any person who f or t he purpose of manuf act uring
any beverage, uses denat ured alcohol or alcohol specially denat ured t o be used f or mot ive power or
wit hdrawn under bond f or indust rial uses or alcohol knowingly misrepresent ed t o be denat ured t o be
unf it f or oral int ake or who knowingly sells or of f ers f or sale any beverage made in whole or in part
f rom such alcohol or who uses such alcohol f or t he manuf act ure of liquid medicinal preparat ions t aken
int ernally, or knowingly sells or of f ers f or sale such preparat ions cont aining as an ingredient such
alcohol, shall upon convict ion f or each act or omission be punished by a f ine of not less t han T went y
imprisonment f or a t erm of not less t han six (6) years and one (1) day but not more t han t welve (12)
years.
Any person who shall unlawf ully recover or at t empt t o recover by dist illat ion or ot her process any
denat ured alcohol or who knowingly sells or of f ers f or sale, conceals or ot herwise disposes of alcohol
so recovered or redist illed shall be subject t o t he same penalt ies imposed under t his Sect ion.
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, t ransport s
or removes spirit uous, compounded or f erment ed liquors, wines or any manuf act ured product s of
t obacco under any ot her t han t he proper name or brand known t o t he t rade as designat ing t he kind
and qualit y of t he cont ent s of t he cask, bot t le or package cont aining t he same or as an imit at ion of
any exist ing or ot herwise known product name or brand or causes such act t o be done, shall, upon
convict ion f or each act or omission, be punished by a f ine of not less t han T went y t housand pesos
(P20,000) but not more t han One hundred t housand pesos (P1000,000) and suf f er imprisonment of not
less t han six (6) years and one (1) day but not more t han t welve (12) years.
Section 263. Unlawf ul Possession or Removal of Art icles Subject t o Excise T ax wit hout Payment of
t he T ax. Any person who owns and/or is f ound in possession of import ed art icles subject t o excise
t ax, t he t ax on which has not been paid in accordance wit h law, or any person who owns and/or is
f ound in possession of import ed t ax-exempt art icles ot her t han t hose t o whom t hey are legally
issued shall be punished by:
(a) A f ine of not less t han One t housand pesos (P1,000) nor more t han T wo t housand pesos (P2,000)
and suf f er imprisonment of not less t han sixt y (60) days but not more t han one hundred (100) days, if
t he appraised value, t o be det ermined in t he manner prescribed in t he T arif f and Cust oms Code,
including dut ies and t axes, of t he art icles does not exceed One t housand pesos (P1,000).
(b) A f ine of not less t han T en t housand pesos (P10,000) but not more t han T went y t housand pesos
(P20,000) and suf f er imprisonment of not less t han t wo (2) years but not more t han f our (4) years, if
including dut ies and t axes, of t he art icles exceeds One t housand pesos (P1,000) but does not exceed
Fif t y t housand pesos (P50,000);
(c) A f ine of not less t han T hirt y t housand pesos (P30,000) but not more t han Sixt y t housand pesos
(P60,000) and suf f er imprisonment of not less t han f our (4) years but not more t han six (6) years, if
including dut ies and t axes of t he art icles is more t han Fif t y t housand pesos (P50,000) but does not
exceed One hundred f if t y t housand pesos (P150,000); or
(d) A f ine of not less t han Fif t y t housand pesos (P50,000) but not more t han One hundred t housand
pesos (P100,000) and suf f er imprisonment of not less t han t en (10) years but not more t han t welve
(12) years, if t he appraised value, t o be det ermined in t he manner prescribed in t he T arif f and
Cust oms Code, including dut ies and t axes, of t he art icles exceeds One hundred f if t y t housand pesos
(P150,000).
Any person who is f ound in possession of locally manuf act ured art icles subject t o excise t ax, t he t ax
on which has not been paid in accordance wit h law, or any person who is f ound in possession of such
art icles which are exempt f rom excise t ax ot her t han t hose t o whom t he same is lawf ully issued shall
be punished wit h a f ine of not less t han (10) t imes t he amount of excise t ax due on t he art icles f ound
but not less t han Five hundred pesos (P500) and suf f er imprisonment of not less t han t wo (2) years
but not more t han f our (4) years.
Any manuf act urer, owner or person in charge of any art icle subject t o excise t ax who removes or
allows or causes t he unlawf ul removal of any such art icles f rom t he place of product ion or bonded
warehouse, upon which t he excise t ax has not been paid at t he t ime and in t he manner required, and
any person who knowingly aids or abet s in t he removal of such art icles as af oresaid, or conceals t he
same af t er illegal removal shall, f or t he f irst of f ense, be punished wit h a f ine of not less t han t en (10)
t imes t he amount of excise t ax due on t he art icles but not less t han One t housand pesos (P1,000)
and suf f er imprisonment of not less t han one (1) year but not more t han t wo (2) years.
T he mere unexplained possession of art icles subject t o excise t ax, t he t ax on which has not been
paid in accordance wit h law, shall be punishable under t his Sect ion.
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 Sect ion 237 t o issue receipt s or sales or commercial
invoices, f ails or ref uses t o issue such receipt s of invoices, issues receipt s or invoices t hat do not
t ruly ref lect and/or cont ain all t he inf ormat ion required t o be shown t herein, or uses mult iple or double
receipt s or invoices, shall, upon convict ion f or each act or omission, be punished by a f ine of not less
t han One t housand pesos (P1,000) but not more t han Fif t y t housand pesos (P50,000) and suf f er
imprisonment of not less t han t wo (2) years but not more t han f our (4) years.
(b) Any person who commit s any of t he act s enumerat ed hereunder shall be penalized in t he same
manner and t o t he same ext ent as provided f or in t his Sect ion:

(1) Print ing of receipt s or sales or commercial invoices wit hout aut horit y f rom t he Bureau of Int ernal
Revenue; or
(2) Print ing of double or mult iple set s of invoices or receipt s; or
(3) Print ing of unnumbered receipt s or sales or commercial invoices, not bearing t he name, business
st yle, T axpayer Ident if icat ion Number, and business address of t he person or ent it y.
Section 265. Offenses Relating to Stamps. Any person who commit s any of t he act s enumerat ed
hereunder shall, upon convict ion t hereof , be punished by a f ine of not less t han T went y t housand
pesos (P20,000) but not more t han Fif t y t housand pesos (P50,000) and suf f er imprisonment of not
less t han f our (4) years but not more t han eight (8) years:
(a) making, import ing, selling, using or possessing wit hout express aut horit y f rom t he Commissioner,
any die f or print ing or making st amps, labels, t ags or playing cards;
(b) Erasing t he cancellat ion marks of any st amp previously used, or alt ering t he writ t en f igures or
let t ers or cancellat ion marks on int ernal revenue st amps;
(c) Possessing f alse, count erf eit , rest ored or alt ered st amps, labels or t ags or causing t he
commission of any such of f ense by anot her;
(d) Selling or of f ering f or sale any box or package cont aining art icles subject t o excise t ax wit h f alse,
spurious or count erf eit st amps or labels or selling f rom any such f raudulent box, package or cont ainer
as af orement ioned; or
(e) Giving away or accept ing f rom anot her, or selling, buying or using cont ainers on which t he st amps
are not complet ely dest royed.
Section 266. Failure to Obey Summons. Any person who, being duly summoned t o appear t o t est if y,
or t o appear and produce books of account s, records, memoranda or ot her papers, or t o f urnish
inf ormat ion as required under t he pert inent provisions of t his Code, neglect s t o appear or t o produce
such books of account s, records, memoranda or ot her papers, or t o f urnish such inf ormat ion, shall,
upon convict ion, be punished by a f ine of not less t han Five t housand pesos (P5,000) but not more
t han t en t housand pesos (P10,000) and suf f er imprisonment of not less t han one (1) year but not
more t han t wo (2) years.
Section 267. Declaration under Penalties of Perjury. Any declarat ion, ret urn and ot her st at ement
required under t his Code, shall, in lieu of an oat h, cont ain a writ t en st at ement t hat t hey are made
under t he penalt ies of perjury. Any person who willf ully f iles a declarat ion, ret urn or st at ement
cont aining inf ormat ion which is not t rue and correct as t o every mat erial mat t er shall, upon convict ion,
be subject t o t he penalt ies prescribed f or perjury under t he Revised Penal Code.
Section 268. Other Crimes and Offenses. (A) Misdeclarat ion or Misrepresent at ion of Manuf act urers Subject t o Excise T ax. Any manuf act urer
who, in violat ion of t he provisions of T it le VI of t his Code, misdeclares in t he sworn st at ement
required t herein or in t he sales invoice, any pert inent dat a or inf ormat ion shall be punished by a
summary cancellat ion or wit hdrawal of t he permit t o engage in business as a manuf act urer of art icles
subject t o excise t ax.
(B) Forf eit ure of Propert y Used in Unlicensed Business or Dies Used f or Print ing False St amps, Et c.
All chat t els, machinery, and removable f ixt ures of any sort used in t he unlicensed product ion of
art icles subject t o excise t ax shall be f orf eit ed. Dies and ot her equipment used f or t he print ing or
making of any int ernal revenue st amp, label or t ag which is in imit at ion of or purport s t o be a lawf ul
st amp, label or t ag shall also be f orf eit ed.
(C) Forf eit ure of Goods Illegally St ored or Removed. Unless ot herwise specif ically aut horized by t he
Commissioner, all art icles subject t o excise t ax should not be st ored or allowed t o remain in t he
dist illery warehouse, bonded warehouse or ot her place where made, af t er t he t ax t hereon has been
paid; ot herwise, all such art icles shall be f orf eit ed. Art icles wit hdrawn f rom any such place or f rom
cust oms cust ody or import ed int o t he count ry wit hout t he payment of t he required t ax shall likewise
be f orf eit ed.
CHAPT ER III PENALT IES IMPOSED ON PUBLIC OFFICERS
Section 269. Violations Committed by Government Enforcement Officers. Every of f icial, agent , or
employee of t he Bureau of Int ernal Revenue or any ot her agency of t he Government charged wit h t he
enf orcement of t he provisions of t his Code, who is guilt y of any of t he of f enses herein below
specif ied shall, upon convict ion f or each act or omission, be punished by a f ine of not less t han Fif t y
imprisonment of not less t han t en (10) years but not more t han f if t een (15) years and shall likewise
suf f er an addit ional penalt y of perpet ual disqualif icat ion t o hold public of f ice, t o vot e, and t o
part icipat e in any public elect ion:
(a) Ext ort ion or willf ul oppression t hrough t he use of his of f ice or willf ul oppression and harassment of
a t axpayer who ref used, declined, t urned down or reject ed any of his of f ers specif ied in paragraph (d)
hereof ;
(b) Knowingly demanding or receiving any f ee, ot her or great er sums t hat are aut horized by law or
receiving any f ee, compensat ion or reward, except as by law prescribed, f or t he perf ormance of any
dut y;
(c) Willf ully neglect ing t o give receipt s, as by law required, f or any sum collect ed in t he perf ormance
of dut y or willf ully neglect ing t o perf orm any ot her dut ies enjoined by law;
(d) Of f ering or undert aking t o accomplish, f ile or submit a report or assessment on a t axpayer wit hout
t he appropriat e examinat ion of t he books of account s or t ax liabilit y, or of f ering or undert aking t o
submit a report or assessment less t han t he amount due t he Government f or any considerat ion or
compensat ion, or conspiring or colluding wit h anot her or ot hers t o def raud t he revenues or ot herwise
violat e t he provisions of t his Code;
(e) Neglect ing or by design permit t ing t he violat ion of t he law by any ot her person;
(f ) Making or signing any f alse ent ry or ent ries in any book, or making or signing any f alse cert if icat e or
ret urn;
(g) Allowing or conspiring or colluding wit h anot her t o allow t he unaut horized ret rieval, wit hdrawal or
recall of any ret urn, st at ement or declarat ion af t er t he same has been of f icially received by t he
Bureau of Int ernal Revenue;
(h) Having knowledge or inf ormat ion of any violat ion of t his Code or of any f raud commit t ed on t he
revenues collect ible by t he Bureau of Int ernal Revenue, f ailure t o report such knowledge or
inf ormat ion t o t heir superior of f icer, or f ailure t o report as ot herwise required by law; and
(i) Wit hout t he aut horit y of law, demanding or accept ing or at t empt ing t o collect , direct ly or indirect ly,
as payment or ot herwise any sum of money or ot her t hing of value f or t he compromise, adjust ment
or set t lement of any charge or complaint f or any violat ion or alleged violat ion of t his Code.
Provided, T hat t he provisions of t he f oregoing paragraph not wit hst anding, any int ernal revenue
of f icer f or which a prima f acie case of grave misconduct has been est ablished shall, af t er due not ice
and hearing of t he administ rat ive case and subject t o Civil Service Laws, be dismissed f rom t he
revenue service: Provided, f urt her, T hat t he t erm grave misconduct , as def ined in Civil Service Law,
shall include t he issuance of f ake let t ers of aut horit y and receipt s, f orgery of signat ure, unsurpat ion
of aut horit y and habit ual issuance of unreasonable assessment s.
Section 270. Unlawful Divulgence of Trade Secrets. Except as provided in Sect ion 71 of t his Code and
Sect ion 26 of Republic Act No. 6388, any of f icer or employee of t he Bureau of Int ernal Revenue who
divulges t o any person or makes known in any ot her manner t han may be provided by law inf ormat ion
regarding t he business, income or est at e of any t axpayer, t he secret s, operat ion, st yle or work, or
apparat us of any manuf act urer or producer, or conf ident ial inf ormat ion regarding t he business of any
t axpayer, knowledge of which was acquired by him in t he discharge of his of f icial dut ies, shall upon
convict ion f or each act or omission, be punished by a f ine of not less t han Fif t y t housand pesos
(P50,000) but not more t han One hundred t housand pesos (P100,000), or suf f er imprisonment of not
less t han t wo (2) years but not more t han f ive (5) years, or bot h.
Section 271. Unlawful Interest of Revenue Law Enforcers in Business. Any int ernal revenue of f icer who
is or shall become int erest ed, direct ly or indirect ly, in t he manuf act ure, sale or import at ion of any
art icle subject t o excise t ax under T it le VI of t his Code or in t he manuf act ure or repair or sale, of any
die f or print ing, or making of st amps, or labels shall upon convict ion f or each act or omission, be
punished by a f ine of not less t han Five t housand pesos (P5,000) but not more t han T en t housand
pesos (P10,000), or suf f er imprisonment of not less t han t wo (2) years and one (1) day but not more
t han f our (4) years, or bot h.
Section 272. Violation of Withholding Tax Provision. Every of f icer or employee of t he Government of
t he Republic of t he Philippines or any of it s agencies and inst rument alit ies, it s polit ical subdivisions, as
well as government -owned or cont rolled corporat ions, including t he Bangko Sent ral ng Pilipinas (BSP),
who, under t he provisions of t his Code or rules and regulat ions promulgat ed t hereunder, is charged
wit h t he dut y t o deduct and wit hhold any int ernal revenue t ax and t o remit t he same in accordance
wit h t he provisions of t his Code and ot her laws is guilt y of any of f ense herein below specif ied shall,
upon convict ion f or each act or omission be punished by a f ine of not less t han Five t housand pesos
(P5,000) but not more t han Fif t y t housand pesos (P50,000) or suf f er imprisonment of not less t han six
(6) mont hs and one (1) day but not more t han t wo (2) years, or bot h:
(a) Failing or causing t he f ailure t o deduct and wit hhold any int ernal revenue t ax under any of t he
wit hholding t ax laws and implement ing rules and regulat ions;
(b) Failing or causing t he f ailure t o remit t axes deduct ed and wit hheld wit hin t he t ime prescribed by
law, and implement ing rules and regulat ions; and
(c) Failing or causing t he f ailure t o f ile ret urn or st at ement wit hin t he t ime prescribed, or rendering or
f urnishing a f alse or f raudulent ret urn or st at ement required under t he wit hholding t ax laws and rules
and regulat ions.
Section 273. Penalty for Failure to Issue and Execute Warrant. Any of f icial who f ails t o issue or
execut e t he warrant of dist raint or levy wit hin t hirt y (30) days af t er t he expirat ion of t he t ime
prescribed in Sect ion 207 or who is f ound guilt y of abusing t he exercise t hereof by compet ent
aut horit y shall be aut omat ically dismissed f rom t he service af t er due not ice and hearing.
CHAPT ER IV OT HER PENAL PROVISIONS
Section 274. Penalty for Second and Subsequent Offenses. In t he case of reincidence, t he maximum
of t he penalt y prescribed f or t he of f ense shall be imposed.
Section 275. Violation of Other Provisions of this Code or Rules and Regulations in General. Any person
who violat es any provision of t his Code or any rule or regulat ion promulgat ed by t he Depart ment of
Finance, f or which no specif ic penalt y is provided by law, shall, upon convict ion f or each act or
omission, be punished by a f ine of not more t han One t housand pesos (P1,000) or suf f er
imprisonment of not more t han six (6) mont hs, or bot h.
Section 276. Penalty for Selling, Transferring, Encumbering or in any way Disposing of Property Placed
under Constructive Distraint. Any t axpayer, whose propert y has been placed under const ruct ive
dist raint , who sells, t ransf ers, encumbers or in any way disposes of said propert y, or any part t hereof ,
wit hout t he knowledge and consent of t he Commissioner, shall, upon convict ion f or each act or
omission, be punished by a f ine of not less t han t wice t he value of t he propert y so sold, encumbered
or disposed of but not less t han Five T housand pesos (P5,000), or suf f er imprisonment of not less
t han t wo (2) years and one (1) day but not more t han f our (4) years, of bot h.
Section 277. Failure to Surrender Property Placed under Distraint and Levy. Any person having in his
possession or under his cont rol any propert y or right s t o propert y, upon which a warrant of
const ruct ive dist raint , or act ual dist raint and levy has been issued shall, upon demand by t he
Commissioner or any of his deput ies execut ing such warrant , surrender such propert y or right t o
propert y t o t he Commissioner or any of his deput ies, unless such propert y or right is, at t he t ime of
such demand, subject t o an at t achment or execut ion under any judicial process. Any person who f ails
or ref uses t o surrender any of such propert y or right shall be liable in his own person and est at e t o t he
Government in a sum equal t o t he value of t he propert y or right s not so surrendered but not
exceeding t he amount of t he t axes (including penalt ies and int erest ) f or t he collect ion of which such
warrant had been issued, t oget her wit h cost and int erest if any, f rom t he dat e of such warrant . In
addit ion, such person shall, upon convict ion f or each act or omission, be punished by a f ine of not less
t han Five t housand pesos (P5,000), or suf f er imprisonment of not less t han six (6) mont hs and one (1)
day but not more t han t wo (2) years, or bot h.
Section 278. Procuring Unlawful Divulgence of Trade Secrets. Any person who causes or procures an
of f icer or employee of t he Bureau of Int ernal Revenue t o divulge any conf ident ial inf ormat ion
regarding t he business, income or inherit ance of any t axpayer, knowledge of which was acquired by
him in t he discharge of his of f icial dut ies, and which it is unlawf ul f or him t o reveal, and any person who
publishes or print s in any manner what ever, not provided by law, any income, prof it , loss or
expendit ure appearing in any income t ax ret urn, shall be punished by a f ine of not more t han T wo
t housand pesos (P2,000), or suf f er imprisonment of not less t han six (6) mont hs nor more t han f ive (5)
years, or bot h.
Section 279. Confiscation and Forfeiture of the Proceeds or Instruments of Crime. In addit ion t o t he
penalt y Imposed f or t he violat ion of t he provisions of T it le X of t his Code, t he same shall carry wit h it
t he conf iscat ion and f orf eit ure in f avor of t he government of t he proceeds of t he crime or value of
t he goods, and t he inst rument s or t ools wit h which t he crime was commit t ed: Provided, however,
T hat if in t he course of t he proceedings, it is est ablished t hat t he inst rument s or t ools used in t he
illicit act belong t o a t hird person, t he same shall be conf iscat ed and f orf eit ed af t er due not ice and
hearing in a separat e proceeding in f avor of t he Government if such t hird person leased, let ,
chart ered or ot herwise ent rust ed t he same t o t he of f ender: Provided, f urt her, T hat in case t he lessee
subleased, or t he borrower, chart erer, or t rust ee allowed t he use of t he inst rument s or t ools t o t he
of f ender, such inst rument s or t ools shall, likewise, be conf iscat ed and f orf eit ed: Provided, f inally,
T hat propert y of common carriers shall not be subject t o f orf eit ure when used in t he t ransact ion of
t heir business as such common carrier, unless t he owner or operat or of said common carrier was, at
t he t ime of t he illegal act , a consent ing part y or privy t heret o, wit hout prejudice t o t he owners right of
recovery against t he of f ender in a civil or criminal act ion. Art icles which are not subject of lawf ul
commerce shall be dest royed.
Section 280. Subsidiary Penalty. If t he person convict ed f or violat ion of any of t he provisions of t his
Code has no propert y wit h which t o meet t he f ine imposed upon him by t he court , or is unable t o pay
such f ine, he shall be subject t o a subsidiary personal liabilit y at t he rat e of one (1) day f or each Eight
pesos and f if t y cent avos (P8.50) subject t o t he rules est ablished in Art icle 39 of t he Revised Penal
Code.
Section 281. Prescription for Violations of any Provision of this Code. All violat ions of any provision of
t his Code shall prescribe af t er Five (5) years.
Prescript ion shall begin t o run f rom t he day of t he commission of t he violat ion of t he law, and if t he
same be not known at t he t ime, f rom t he discovery t hereof and t he inst it ut ion of judicial proceedings
f or it s invest igat ion and punishment .
T he prescript ion shall be int errupt ed when proceedings are inst it ut ed against t he guilt y persons and
shall begin t o run again if t he proceedings are dismissed f or reasons not const it ut ing jeopardy.
T he t erm of prescript ion shall not run when t he of f ender is absent f rom t he Philippines.
Section 282. Informers 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 Violat ions of t he Nat ional Int ernal Revenue Code. Any person, except an int ernal revenue
of f icial or employee, or ot her public of f icial or employee, or his relat ive wit hin t he sixt h degree of
consanguinit y, who volunt arily gives def init e and sworn inf ormat ion, not yet in t he possession of t he
Bureau of Int ernal Revenue, leading t o t he discovery of f rauds upon t he int ernal revenue laws or
violat ions of any of t he provisions t hereof , t hereby result ing in t he recovery of revenues, surcharges
and f ees and/or t he convict ion of t he guilt y part y and/or t he imposit ion of any of t he f ine or penalt y,
shall be rewarded in a sum equivalent t o t en percent (10%) of t he revenues, surcharges or f ees
recovered and/or f ine or penalt y imposed and collect ed or One Million Pesos (P1,000,000) per case,
whichever is lower. T he same amount of reward shall also be given t o an inf ormer where t he of f ender
has of f ered t o compromise t he violat ion of law commit t ed by him and his of f er has been accept ed by
t he Commissioner and collect ed f rom t he of f ender: Provided, T hat should no revenue, surcharges or
f ees be act ually recovered or collect ed, such person shall not be ent it led t o a reward: Provided,
f urt her, T hat t he inf ormat ion ment ioned herein shall not ref er t o a case already pending or previously
invest igat ed or examined by t he Commissioner or any of his deput ies, agent s or examiners, or t he
Secret ary of Finance or any of his deput ies or agent s: Provided, f inally, T hat t he reward provided
herein shall be paid under rules and regulat ions issued by t he Secret ary of Finance, upon
(B) For Discovery and Seizure of Smuggled Goods. T o encourage t he public t o ext end f ull
cooperat ion in eradicat ing smuggling, a cash reward equivalent t o t en percent (10%) of t he f air
market value of t he smuggled and conf iscat ed goods or One Million Pesos (P1,000,000) per case,
whichever is lower, shall be given t o persons inst rument al in t he discovery and seizure of such
smuggled goods.
T he cash rewards of inf ormers shall be subject t o income t ax, collect ed as a f inal wit hholding t ax, at
a rat e of t en percent (10%).
T he Provisions of t he f oregoing Subsect ions not wit hst anding, all public of f icials, whet her incumbent
or ret ired, who acquired t he inf ormat ion in t he course of t he perf ormance of t heir dut ies during t heir
incumbency, are prohibit ed f rom claiming inf ormers reward.
T IT LE XI
ALLOT MENT OF INT ERNAL REVENUE
CHAPT ER 1 DISPOSIT ION AND ALLOT MENT OF NAT IONAL INT ERNAL REVENUE IN GENERAL
Section 283. Disposition of National Internal Revenue. Nat ional Int ernal revenue collect ed and not
applied as herein above provided or ot herwise specially disposed of by law shall accrue t o t he
Nat ional T reasury and shall be available f or t he general purposes of t he Government , wit h t he
except ion of t he amount s set apart by way of allot ment as provided f or under Republic Act No. 7160,
ot herwise known as t he Local Government Code of 1991.
In addit ion t o t he int ernal revenue allot ment as provided f or in t he preceding paragraph, f if t y percent
(50%) of t he nat ional t axes collect ed under Sect ions 106, 108 and 116 of t his Code in excess of t he
increase in collect ions f or t he immediat ely preceding year shall be dist ribut ed as f ollows:
(a) T went y percent (20%) shall accrue t o t he cit y or municipalit y where such t axes are collect ed and
shall be allocat ed in accordance wit h Sect ion 150 of Republic Act No. 7160, ot herwise known as t he
Local Government Code of 1991; and
(b) Eight y percent (80%) shall accrue t o t he Nat ional Government .

Section 284. Allotment for the Commission on Audit. One-half of one percent (1/2 of 1%) of t he
collect ions f rom t he nat ional int ernal revenue t axes not ot herwise accruing t o special account s in t he
general f und of t he nat ional government shall accrue t o t he Commission on Audit as a f ee f or audit ing
services rendered t o local government unit s, excluding maint enance, equipment , and ot her operat ing
expenses as provided f or in Sect ion 21 of President ial Decree No. 898.
T he Secret ary of Finance is hereby aut horized t o deduct f rom t he mont hly int ernal revenue t ax
collect ions an amount equivalent t o t he percent age as herein f ixed, and t o remit t he same direct ly t o
t he Commission on Audit under such rules and regulat ions as may be promulgat ed by t he Secret ary
of Finance and t he Chairman of t he Commission on Audit .
Section 285. Allotment for the Bureau of Internal Revenue. An amount equivalent t o f ive percent (5%)
of t he excess of act ual collect ions of nat ional int ernal revenue t axes over t he collect ion goal shall
accrue t o t he special f und of t he Bureau of Int ernal Revenue and shall be t reat ed as receipt s
aut omat ically appropriat ed. Said amount shall be ut ilized as incent ive bonus f or revenue personnel,
purchase of necessary equipment and f acilit ies f or t he improvement of t ax administ rat ion, as
approved by t he Commissioner: Provided, T hat t he President may, upon recommendat ion of t he
Commissioner, direct t hat t he excess be credit ed t o a Special Account in t he Nat ional T reasury t o be
held in t he reserve available f or dist ribut ion as incent ive bonus in t he subsequent years.
T he Secret ary of Finance is hereby aut horized t o t ransf er f rom t he T reasury an amount equivalent t o
t he percent age as herein f ixed and t o remit t he same direct ly t o t he Bureau of Int ernal Revenue
under such rules and regulat ions as may be promulgat ed by t he Secret ary of Finance.
CHAPT ER II SPECIAL DISPOSIT ION OF CERT AIN NAT IONAL INT ERNAL REVENUE T AXES
Section 286. Disposition of Proceeds of insurance Premium Tax. T went y-f ive percent (25%) of t he
premium t ax collect ed under Sect ion 123 of t his Code shall accrue t o t he Insurance Fund as
cont emplat ed in Sect ion 418 of President ial Decree No. 612 which shall be used f or t he purpose of
def raying t he expenses of t he Insurance Commission. T he Commissioner shall t urn over and deliver
t he said Insurance Fund t o t he Insurance Commissioner as soon as t he collect ion is made.
Section 287. Shares of Local Government Units in the Proceeds from the Development and Utilization of
the National Wealth. Local Government unit s shall have an equit able share in t he proceeds derived
f rom t he ut ilizat ion and development of t he nat ional wealt h, wit hin t heir respect ive areas, including
sharing t he same wit h t he inhabit ant s by way of direct benef it s.
(A) Amount of Share of Local Government Unit s. Local government unit s shall, in addit ion t o t he
int ernal revenue allot ment , have a share of f ort y percent (40%) of t he gross collect ion derived by t he
nat ional government f rom t he preceding f iscal year f rom excise t axes on mineral product s, royalt ies,
and such ot her t axes, f ees or charges, including relat ed surcharges, int erest s or f ines, and f rom it s
share in any co-product ion, joint vent ure or product ion sharing agreement in t he ut ilizat ion and
development of t he nat ional wealt h wit hin t heir t errit orial jurisdict ion.
(B) Share of t he Local Government s f rom Any Government Agency or Government -owned or
Cont rolled Corporat ion. Local Government Unit s shall have a share, based on t he preceding f iscal
year, f rom t he proceeds derived by any government agency or government -owned or cont rolled
corporat ion engaged in t he ut ilizat ion and development of t he nat ional wealt h based on t he f ollowing
f ormula, whichever will produce a higher share f or t he local government unit :
(1) One percent (1%) of t he gross sales or receipt s of t he preceding calendar year, or
(2) Fort y percent (40%) of t he excise t axes on mineral product s, royalt ies, and such ot her t axes, f ees
or charges, including relat ed surcharges, int erest s or f ines t he government agency or government owned or -cont rolled corporat ions would have paid if it were not ot herwise exempt .
(C) Allocat ion of Shares. T he share in t he preceding Sect ion shall be dist ribut ed in t he f ollowing
manner:
(1) Where t he nat ural resources are locat ed in t he province:
(a) Province t went y percent (20%)
(b) Component cit y/municipalit y f ort y-f ive percent (45%); and
(c) Barangay t hirt y-f ive percent (35%)
Provided, however, T hat where t he nat ural resources are locat ed in t wo (2) or more cit ies, t he
allocat ion of shares shall be based on t he f ormula on populat ion and land area as specif ied in
subsect ion (C)(1) hereof .
(2) Where t he nat ural resources are locat ed in a highly urbanized or independent component cit y:
(a) Cit y sixt y f ive percent (65%); and
(b) Barangay t hirt y f ive percent (35%)
Provided, however, T hat where t he nat ural resources are locat ed in t wo (2) or more cit ies, t he
allocat ion of shares shall be based on t he f ormula on populat ion and land area as specif ied in
subsect ion (c)(1) hereof .
Section 288. Disposition of Incremental Revenues. (A) Increment al Revenues f rom Republic Act No. 7660. T he increment al revenues f rom t he increase
in t he document ary st amp t axes under R.A. No. 7660 shall be set aside f or t he f ollowing purposes:
(1) In 1994 and 1995, t went y f ive percent (25%) t hereof respect ively, shall accrue t o t he Unif ied HomeLending Program under Execut ive Order No. 90 part icularly f or mass socialized housing program t o be
allocat ed as f ollows: f if t y percent (50%) f or mass-socialized housing; t hirt y percent (30%) f or t he
communit y mort gage program; and t went y percent (20%) f or land banking and development t o be
administ ered by t he Nat ional Housing Aut horit y: Provided, T hat no more t han one percent (1%) of t he
respect ive allocat ions hereof shall be used f or administ rat ive expenses;
(2) In 1996, t went y f ive percent (25%) t hereof t o be ut ilized f or t he Nat ional Healt h Insurance Program
t hat hereaf t er may be mandat ed by law;
(3) In 1994 and every year t hereaf t er, t went y f ive percent (25%) t hereof shall accrue t o a Special
Educat ion Fund t o be Administ ered by t he Depart ment of Educat ion, Cult ure and Sport s f or t he
const ruct ion and repair of school f acilit ies, t raining or t eachers, and procurement or product ion of
inst ruct ional mat erials and t eaching aids; and
(4) In 1994 and every year t hereaf t er, f if t y percent (50%) t hereof shall accrue t o a Special
Inf rast ruct ure Fund f or t he Const ruct ion and repair of roads, bridges, dams and irrigat ion, seaport s
and hydroelect ric and ot her indigenous power project s: Provided, however, T hat f or t he years 1994
and 1995, t hirt y percent (30%), and f or t he years 1996, 1997 and 1998, t went y percent (20%), of t his
f und shall be allocat ed f or depressed provinces as declared by t he President as of t he t ime of t he
ef f ect ivit y of R.A. No. 7660: Provided, f urt her, T hat availment s under t his f und shall be det ermined by
t he President on t he basis of equit y.
Provided, f inally, T hat in paragraphs (2), (3), and (4) of t his Sect ion, not more one percent (1%) of t he
allocat ed f unds t hereof shall be used f or administ rat ive expenses by t he implement ing agencies.
(B) Increment al Revenues f rom Republic Act No. 8240. Fif t een percent (15%) of t he increment al
revenue collect ed f rom t he excise t ax on t obacco product s under R.A. No. 8240 shall be allocat ed and
divided among t he provinces producing burley and nat ive t obacco in accordance wit h t he volume of
t obacco leaf product ion. T he f und shall be exclusively ut ilized f or programs in pursuit of t he f ollowing
object ives:
(1) Cooperat ive project s t hat will enhance bet t er qualit y of agricult ural product s and increase income
and product ivit y of f armers;
(2) Livelihood project s, part icularly t he development of alt ernat ive f arming syst em t o enhance
f armers income; and
(3) Agro-indust rial project s t hat will enable t obacco f armers t o be involved in t he management and
subsequent ownership of project s, such as post -harvest and secondary processing like cigaret t e
manuf act uring and by-product ut ilizat ion.
T he Depart ment of Budget and Management , in consult at ion wit h t he Oversight Commit t ee creat ed
under said R.A. No. 8240, shall issue t he corresponding rules and regulat ions governing t he allocat ion
and disbursement of t his f und.
Section 289. Special Financial Support to Beneficiary Provinces Producing Virginia Tobacco. T he
f inancial support given by t he Nat ional Government f or t he benef iciary provinces shall be const it ut ed
and collect ed f rom t he proceeds of f if t een percent (15%) of t he excise t axes on locally
manuf act ured Virginia-t ype of cigaret t es.
T he f unds allot t ed shall be divided among t he benef iciary provinces pro-rat a according t o t he volume
of Virginiat obacco product ion.
Product ion producingVirginiat obacco shall be t he benef iciary provinces under Republic Act No. 7171.
Provided, however, t hat t o qualif y as benef iciary under R.A. No. 7171, a province must have an
average annual product ion of Virginia leaf t obacco in an amount not less t han one million kilos:
Provided, f urt her, t hat t he Depart ment of Budget and Management (DBM) shall each year det ermine
t he benef iciary provinces and t heir comput ed share of t he f unds under R.A. No. 7171, ref erring t o t he
Nat ional T obacco Administ rat ion (NT A) records of t obacco accept ances, at t he t obacco t rading
cent ers f or t he immediat e past year.
T he Secret ary of Budget and Management is hereby direct ed t o ret ain annually t he said f unds
equivalent t o f if t een percent (15%) of excise t axes on locally manuf act ured Virginia t ype cigaret t es
t o be remit t ed t o t he benef iciary provinces qualif ied under R.A. No. 7171.
T he provision of exist ing laws t o t he cont rary not wit hst anding, t he f if t een percent (15%) share f rom
government revenues ment ioned in R.A. No. 7171 and due t o t heVirginiat obacco-producing provinces
shall be direct ly remit t ed t o t he provinces concerned.
Provided, T hat t his Sect ion shall be implement ed in accordance wit h t he guidelines of Memorandum
Circular No. 61-A dat ed November 28, 1993, which amended Memorandum Circular No. 61, ent it led
Prescribing Guidelines f or Implement ing Republic Act No. 7171, dat ed January 1, 1992.
Provided, f urt her, T hat in addit ion t o t he local government unit s ment ioned in t he above circular, t he
concerned of f icials in t he province shall be consult ed as regards t he ident if icat ion of project s t o be
f inanced.
T IT LE XII
OVERSIGHT COMMIT T EE
Section 290. Congressional Oversight Committee. A Congressional Oversight Commit t ee, hereinaf t er ref erred t o as t he Commit t ee, is hereby
const it ut ed in accordance wit h t he provisions of t his Code. T he Commit t ee shall be composed of t he
Chairmen of t he Commit t ee on Ways and Means of t he Senat e and House Represent at ives and f our
(4) addit ional members f rom each house, t o be designat ed by t he Speaker of t he House of
Represent at ives and t he Senat e President , respect ively.

T he Commit t ee shall, among ot hers, in aid of legislat ion:
(1) Monit or and ensure t he proper implement at ion of Republic Act No. 8240;
(2) Det ermine t hat t he power of t he Commissioner t o compromise and abat e is reasonably
exercised;
(3) Review t he collect ion perf ormance of t he Bureau of Int ernal Revenue; and
(4) Review t he implement at ion of t he programs of t he Bureau of Int ernal Revenue.
In f urt herance of t he hereinabove cit ed object ives, t he Commit t ee is empowered t o require of t he
Bureau of Int ernal Revenue, submission of all pert inent inf ormat ion, including but not limit ed t o:
indust ry audit s; collect ion perf ormance dat a; st at us report on criminal act ions init iat ed against
persons; and submission of t axpayer ret urns: Provided, however, T hat any ret urn or ret urn
inf ormat ion which can be associat ed wit h, or ot herwise ident if y, direct ly or indirect ly, a part icular
t axpayer shall be f urnished t he Commit t ee only when sit t ing in Execut ive Session unless such
t axpayer ot herwise consent s in writ ing t o such disclosure
T IT LE XIII
REPEALING PROVISIONS
Section 291. In General. All laws, decrees, execut ive orders, rules and regulat ions or part s t hereof
which are cont rary t o or inconsist ent wit h t his Code are hereby repealed, amended or modif ied
accordingly.
T IT LE XIV
FINAL PROVISIONS
Section 292. Separability Clause. If any clause, sent ence, paragraph or part of t his Code shall be
adjudged by any Court of compet ent jurisdict ion t o be invalid, such judgment shall not af f ect , impair
or invalidat e t he remainder of said Code, but shall be conf ined in it s operat ion t o t he clause,
sent ence, paragraph or part t hereof direct ly involved in t he cont roversy.

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Republic Act No.

Section 7. Authority of the Commissioner to Delegate Power. T he Commissioner may delegat e t he

int ernal revenue t axes:

Over P10,000 but not over

P500+10% of t he excess over P10,000

Over P30,000 but not over

P2,500+15% of t he excess over P30,000

Over P70,000 but not over

P8,500+20% of t he excess over P70,000

Over P140,000 but not over

P22,500+25% of t he excess over P140,000

Over P250,000 but not over

P50,000+30% of t he excess over P250,000

P125,000+34% of t he excess over P500,000

Less t han t hree (3) years 20%

On any amount in excess of

T hree (3) years t o less t han f our (4)

Less t han t hree (3) years -

On any amount in excess of

On any amount in excess of

t he net income of which inures t o t he benef it of any privat e st ock-holder, or individual;

be exempt f rom t axat ion under t his t it le:

necessary t o t he t rade, business or prof ession of t he employer, or when t he f ringe benef it is f or t he

provided in Sect ion 39.

under any of t he f ollowing met hods:

corporat ion organized f or similar purpose or purposes, or t o t he st at e f or public purpose, or would be

(3) Limitations on deduction. T his Subsect ion shall not apply t o:

shall be allowed a basic personal exempt ion as f ollows:

For Head of Family

For each married individual

f iscal year and t he dat e designat ed as t he close of t he new f iscal year.

recommendat ion of t he commissioner, shall, by rules and regulat ions, prescribe.

det erminat ion of t he amount of t axes t o be wit hheld.

If t he net est at e is:

If t he net gif t is:

t axes t heref rom.

Public ut ilit y bus Not exceeding 30 passengers

Exceeding 30 but not exceeding 50 passengers

T axis 1.Manilaand ot her cit ies

Car f or hire (wit h chauf f er)

Car f or hire (wit hout chauf f er)

(2) Over seven (7) years 0%

removed. T he t erm does not include broken leaf t obacco.

(c) Yacht s and ot her vessels int ended f or pleasure or sport s.

part t hereof , shall be collect ed.

(a) Fraud, irregularit y or mist akes, as det ermined by t he Commissioner;

(6) Building const ruct ion permit s;

not more t han t en (10) years.

manner and t o t he same ext ent as provided f or in t his Sect ion:

(b) Eight y percent (80%) shall accrue t o t he Nat ional Government .

Represent at ives and t he Senat e President , respect ively.

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