Policy

Section 2. Policy

The State shall develop the national economy towards global competitiveness by implementing tax policies that will attract investments. This will:

• enhance productivity
• generate employment
• develop the country
• create a more inclusive economic growth

This is while maintaining fiscal prudence and stability. To achieve these objectives, the State shall:

• (a) Improve the equity and efficiency of the corporate tax system by lowering the rate, widening the tax base, and reducing tax distortions and leakages;
• (b) Develop, subject to the provisions of this Act, a more responsive and globally•competitive tax incentives regime that is performance-based, targeted, time-bound, and transparent;
• (c) Provide support to business in their recovery from unforeseen events such as an outbreak of communicable diseases or a global pandemic, and strengthen the nation’s capability for similar circumstances in the future; and
• (d) Create a more equitable tax incentive system that will allow for inclusive growth and generation of jobs and opportunities in all the regions of the country, and ensure access and ease in the grant of these incentives especially for applicants in least developed areas.

Section 20. Submission of Report and Pertinent Information by the Commissioner

• (B) Submission of Tax-Related Information to the Department of Finance

The Commissioner shall, upon the order of the Secretary of Finance specifically identifying the needed information and justification for such order in relation to the grant of incentives under Title 13 furnish the Secretary pertinent information on the entities receiving incentives under this Code: Provided, however, That the Secretary and the relevant officers handling such specific information shall be covered by the provisions of Section 270 unless the taxpayer consents in writing to such disclosure.

• (C) Report to Oversight Committee

The Commissioner shall, with reference to Section 204 of this Code, submit to the Oversight Committee referred to in Section 290 hereof, through the Chairpersons of the Committees on Ways and Means of the Senate and House of Representatives, a report on the exercise of his powers pursuant to the said Section, every six (6) months of each calendar year."

Section 22. Definitions

• (B) ‘Corporation’ shall include:
  • one person corporations
  • partnerships, no matter how created or organized
  • joint-stock companies
  • joint accounts (cuentas en participation)
  • associations or insurance companies, but does not include general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating consortium agreement under a service contract with the Government.

‘General professional partnerships’ are partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business.

Section 25. Tax on Nonresident Alien Individual

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
  • Other Winnings.

Cash and/or property dividends from a domestic corporation, or from a joint stock company, or from an insurance or mutual fund company or from a regional operating headquarter of multinational company, or the share of a nonresident alien individual in the distributable net income after tax of a partnership (except a general professional partnership) of which he is a partner, or the share of a nonresident alien individual in the net income after tax of an association, a joint account, or a joint venture taxable as a corporation of which he is a member or a co-venturer; interests; royalties (in a.ny form); and prizes (except prizes amounting to P10,000) or less which shall be subject to tax under Subsection (B)(l) of Section 24) and other winnings (except winnings amounting to 10,000 pesos or less from Philippine Charity Sweepstakes Office (PCSO) games which shall be exempt); shall be subject to an income tax of twenty percent (20%) on the total amount thereof: Provided, however, That royalties on books as well as other literary works, and royalties on musical compositions shall be subject to a final tax of ten percent (10%) on the total amount thereof:

as long as cinematographic films and similar works shall be subject to the tax provided under Section 28 of this Code as long as interest income from long-term deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas shall be exempt from the tax imposed under this Subsection as long as should the holder of the certificate pre-terminate the deposit or investment before the 5th year, a final tax shall be imposed on the entire income and shall be deducted and withheld by the depository bank from the proceeds of the long-term deposit or investment certificate based on the remaining maturity thereof:

• 4 years to less than 5 years: 5%
• 3 years to less than 4 years: 12%
• Less than 3 years: 20%

Section 27. Rates of Income Tax on Domestic Corporations

“(A) In General, — Except as otherwise provided in this Code, an income tax rate of twenty-five percent (25%) effective July 1, 2020, is hereby imposed upon the taxable income derived during each taxable year from all sources within and without the Philippines by every corporation, as defined in Section 22(B) of this Code and taxable under this title as a corporation, organized in, or under the laws of the Philippines.

“Provided, That corporations with net taxable income not exceeding Five million pesos and with total assets not exceeding One hundred million pesos (P 100,000,000.00), excluding land on which the particular business entity’s ofice, plant, and equipment are situated during the taxable year for which the tax is imposed, shall be taxed at twenty percent (20%).

“In the case of corporations adopting the fiscal-year accounting period, the taxable income shall be computed without regard to the specific date when specific sales, purchases and other transactions occur. Their income and expenses for the fiscal year shall be deemed to have been earned and spent equally for each month of the period.

“The corporate income tax rate shall be applied on the amount computed by multiplying the number of months covered by the new rate within the fiscal year by the taxable income of the corporations for the period, divided by twelve.

“(B) Proprietary Educational Institutions and Hospitals. - Proprietary educational institutions and hospitals which are nonprofit shall pay a tax of ten percent (10%) on their taxable income except those covered by Subsection (D) hereof: Provided, That beginning July 1, 2020 until June 30, 2023, the tax rate herein imposed shall be one percent (1%): Provided, further, That if the gross income from ‘unrelated trade, business or other activity’ exceeds fifty percent (50%) of the total gross income derived by such educational or hospitals from all sources, the tax prescribed in Subsection (A) hereof shall be imposed on the en&e taxable income. For purposes of this Subsection, the term ‘unrelated trade, business or other activity’ means any trade, business or other activity, the conduct of which is not substantially related to the exercise or performance by such educational institution or hospital of its primary purpose or function. ‘Proprietary’ means a private hospital, or any private school maintained and administered by private individuals or groups with an issued permit to operate from the Department of Education (DepEd), or the Commission on Higher Education (CHED), or the Technical Education and Skills Development Authority (TESDA), as the case may be, in accordance with existing laws and regulations.

“(C) Government-owned or -Controlled Corporations, Agencies or Instrumentalities. - The provisions of existing special or general laws to the contrary notwithstanding, all corporations, agencies, or owned or controlled by the Government, except the Government Service Insurance System (GSIS), the Social Security System (SSS), the Home Development Mutual Fund (HDMF), the Philippine Health Insurance Corporation (PHIC), and the local water districts shall pay such rate of tax upon their taxable income as are imposed by this Section upon corporations or associations engaged in a similar business, industry, or activity.

“(D) Rates of Tax on Certain Passive Incomes. - x x x

“(4) Intercorporate Dividends. - Dividends received by a domestic corporation shall not be subject to tax under this title: Provided, That for foreign-sourced dividends to be exempt, the funds from such dividends actually received or remitted into the Philippines are reinvested in the business operations of the domestic corporation in the Philippines within the next taxable year from the time the foreign-sourced dividends were received and shall be limited to funding the working capital requirements, capital expenditures, dividend payments, investment in domestic subsidiaries, and infrastructure project: Provided, further, That the domestic corporation holds directly at least twenty percent (20%) of the outstanding shares of the foreign corporation and has held the shareholdings for a minimum of two (2) years at the time of the dividends distribution.

" “(E) Minimum Corporate Income Tax on Domestic Corporations.

“(1) Imposition of Tax. — A minimum corporate income tax of two percent (2%) of the gross income as of the end of the taxable yea.r, as defined herein, is hereby i.mposed on a corporation taxable under this title, beginning on the fourth taxable year immediately following the year in which such corporation commenced its business operations, when the minimum income tax is greater than the tax computed under Subsection (A) of this Section for the taxable year: Provided, That effective July 1, 2020 until June 30, 2023, the rate shall be one percent (1%).