Article 12p. 12

NATIONAL INTERNAL REVENUE CODE TAXATION, TARIFF and CUSTOMS LAWS

percent (25%) of such income. Capital gains realized by a

nonresident alien individual not engaged in trade or

business in the Philippines from the sale of shares of

stock in any domestic corporation and real property shall

be

subject

to

the

income

tax

prescribed

under

Subsections (C) and (D) of Section 24.

(C) Alien Individual Employed by Regional or Area

Headquarters and Regional Operating Headquarters of

Multinational

Companies.

-

There

shall

be

levied,

collected and paid for each taxable year upon the gross

income received by every alien individual employed by

regional or area headquarters and regional operating

headquarters

established

in

the

Philippines

by

multinational companies as salaries, wages, annuities,

compensation,

remuneration and other emoluments,

such as honoraria and allowances, from such regional or

area headquarters and regional operating headquarters,

a tax equal to fifteen percent (15%) of such gross income:

Provided, however, That the same tax treatment shall

apply to Filipinos employed and occupying the same

position

as

those

of

aliens

employed

by

these

multinational companies. For purposes of this Chapter,

the term 'multinational company' means a foreign firm

or entity engaged in international trade with affiliates or

subsidiaries or branch offices in the Asia-Pacific Region

and other foreign markets. (as amended by RA No 10963)

(D) Alien Individual Employed by Offshore Banking

Units. - There shall be levied, collected and paid for each

taxable year upon the gross income received by every

alien

individual employed by offshore banking units

established

in

the

Philippines

as

salaries,

wages,

annuities,

compensation,

remuneration

and

other

emoluments, such as honoraria and allowances, from

such offshore banking units, a tax equal to fifteen percent

(15%) of such gross income: Provided, however, That the

same tax treatment shall apply to Filipinos employed and

occupying the same position as those of aliens employed

by these offshore banking units. (as amended by RA No

10963)

(E) Alien Individual Employed by Petroleum Service

Contractor and Subcontractor. [14] - An alien individual

who is a permanent resident of a foreign country but who

is employed and assigned in the Philippines by a foreign

service contractor or by a foreign service subcontractor

engaged in petroleum operations in the Philippines shall

be liable to a tax of fifteen percent (15%) of the salaries,

wages, annuities, compensation, remuneration and other

emoluments, such as honoraria and allowances, received

from

such

contractor

or

subcontractor:

Provided,

however, That the same tax treatment shall apply to a

Filipino employed and occupying the same position as an

alien employed by petroleum service contractor and

subcontractor.

Any income earned from all other sources within the

Philippines by the alien employees referred to under

Subsections (C), (D), and (E) hereof shall be subject to the

pertinent income tax, as the case may be, imposed under

this Code.

(as amended by RA No 10963)

(F)

The

preferential

tax

treatment

provided

in

Subsections (C), (D), and (E) of this Section shall not be

applicable

to

regional

headquarters (RHQs), regional

operating headquarters (ROHQs), offshore banking units

(OBUs)

or

petroleum

service

contractors

and

subcontractors

registering

with

the

Securities

and

Exchange

Commission

(SEC)

after

January

1,

2018:

Provided, however, That existing RHQs/ROHQs, OBUs or

petroleum

service

contractors

and

subcontractors

presently availing of preferential tax rates for qualified

employees shall continue to be entitled to avail of the

preferential tax rate for present and future qualified

employees. (as amended by RA No 10963)

SEC.

26.

Tax

Liability

of

Members

of

General

Professional

Partnerships.

-

A

general

professional

partnership as such shall not be subject to the income tax

imposed

under

this

Chapter.

Persons

engaging

in

business as partners in a general professional partnership

shall be liable for income tax only in their separate and

individual capacities.

For purposes of computing the distributive share of the

partners, the net income of the partnership shall be

computed in the same manner as a corporation.

Each partner shall report as gross income his distributive

share, actually or constructively received, in the net

income of the partnership.

CHAPTER IV TAX ON CORPORATIONS

SEC. 27. Rates of Income tax on Domestic Corporations.

-

(A) In General. - Except as otherwise provided in this

Code, an income tax of thirty-five percent (35%) is hereby

imposed upon the taxable income derived during each

taxable year from all sources within and without the

Philippines by every corporation, as defined in Section

22(B) of this Code and taxable under this Title as a

corporation, organized in, or existing under the laws of

the Philippines: Provided, That effective January 1, 2009,

the rate of income tax shall be thirty percent (30%). [15]

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 corporation for the period, divided

by twelve. [16]

Provided,

further,

That

the

President,

upon

the

recommendation

of

the

Secretary

of

Finance,

may

effective January 1, 2000, allow corporations the option to

be taxed at fifteen percent (15%) of gross income as

defined herein, after the following conditions have been

satisfied:

(1) A tax effort ratio of twenty percent (20%) of Gross

National Product (GNP);

(2) A ratio of forty percent (40%) of income tax

collection to total tax revenues;

(3) A VAT tax effort of four percent (4%) of GNP; and

(4) A 0.9 percent (0.9%) ratio of the Consolidated

Public Sector Financial Position (CPSFP) to GNP.

The option to be taxed based on gross income shall be

available only to firms whose ratio of cost of sales to gross

sales

or

receipts

from

all sources does not exceed

fifty-five percent (55%).

The election of the gross income tax option by the

corporation shall be irrevocable for three (3) consecutive

taxable years during which the corporation is qualified

under the scheme.

For purposes of this Section, the term ' gross income '

derived from business shall be equivalent to gross sales

less sales returns, discounts and allowances and cost of

goods sold. ' Cost of goods sold ' shall include all business

expenses directly incurred to produce the merchandise to

bring them to their present location and use.

For a trading or merchandising concern, ' cost of goods

sold ' shall include the invoice cost of the goods sold, plus

import duties, freight in transporting the goods to the

place

where

the

goods

are

actually

sold, including

insurance while the goods are in transit.

For

a

manufacturing

concern,

' cost

of

goods

manufactured

and

sold '

shall

include

all

costs

of

production of finished goods, such as raw materials used,

direct labor and manufacturing overhead, freight cost,

© Compiled by RGL

12 of 201