Article 13p. 13

NATIONAL INTERNAL REVENUE CODE TAXATION, TARIFF and CUSTOMS LAWS

insurance premiums and other costs incurred to bring

the raw materials to the factory or warehouse.

In the case of taxpayers engaged in the sale of service,

' gross income ' means gross receipts less sales returns,

allowances and discounts.

(B) Proprietary Educational Institutions and Hospitals. -

Proprietary educational institutions and hospitals which

are nonprofit shall pay a tax of ten percent (10%) on their

taxable income except those covered by Subsection (D)

hereof: Provided, that if the gross income from ' unrelated

trade, business or other activity ' exceeds fifty percent

(50%)

of

the

total

gross

income

derived

by

such

educational institutions or hospitals from all sources, the

tax prescribed in Subsection (A) hereof shall be imposed

on

the

entire taxable income. For purposes of this

Subsection, the term ' unrelated trade, business or other

activity ' means any trade, business or other activity, the

conduct of which is not substantially related to the

exercise or performance by such educational institution

or

hospital

of

its

primary

purpose

or

function.

A

' proprietary

educational

institution '

is

any

private

school

maintained

and

administered

by

private

individuals or groups with an issued permit to operate

from the Department of Education, Culture and Sports

(DECS)

[17] ,

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.

[18] - The provisions of

existing

special

or

general

laws

to

the

contrary

notwithstanding,

all

corporations,

agencies,

or

instrumentalities

owned

or

controlled

by

the

Government, except the Government Service Insurance

System (GSIS), the Social Security System (SSS), the

Philippine Health Insurance Corporation (PHIC), 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. (as amended by RA No

10963)

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

(1) Interest from Deposits and Yield or any other

Monetary Benefit from Deposit Substitutes and

from Trust Funds and Similar Arrangements, and

Royalties. — A final tax at the rate of twenty percent

(20%)

is

hereby

imposed

upon the amount of

interest on currency bank deposit and yield or any

other monetary benefit from deposit substitutes

and from trust funds and similar arrangements

received by domestic corporations, and royalties,

derived

from

sources

within

the

Philippines:

Provided, however, That interest income derived by a

domestic corporation from a depository bank under

the expanded foreign currency deposit system shall

be subject to a final income tax at the rate of fifteen

percent (15%) of such interest income.

(2) Capital Gains from the Sale of Shares of Stock

Not Traded in the Stock Exchange. — A final tax at

the rate of fifteen percent (15%) shall be imposed on

net capital gains realized during the taxable year

from the sale, exchange or other disposition of

shares of stock in a domestic corporation except

shares

sold

or

disposed

of

through

the

stock

exchange.

(as amended by RA No 10963)

Not over P 100,000

Amount in excess of P 100,000

5%

10%

(3) Tax on Income Derived under the Expanded

Foreign

Currency

Deposit

System.

-

Income

derived by a depository bank under the expanded

foreign

currency

deposit

system

from

foreign

currency transactions with non-residents, offshore

banking units in the Philippines, local commercial

banks including branches of foreign banks that may

be authorized by the Bangko Sentral ng Pilipinas

(BSP) to transact business with foreign currency

deposit system shall be exempt from all taxes,

except net income from such transactions as may

be specified by the Secretary of Finance, upon

recommendation by the Monetary Board to be

subject to the regular income tax payable by banks:

Provided,

however,

That

interest

income

from

foreign currency loans granted by such depository

banks under said expanded system to residents

other than offshore banking units in the Philippines

or other depository banks under the expanded

system, shall be subject to a final tax at the rate of

ten percent (10%). [20]

Any income of nonresidents, whether individuals or

corporations,

from

transactions

with

depository

banks under the expanded system shall be exempt

from income tax.

(4) Intercorporate Dividends. - Dividends received

by a domestic corporation from another domestic

corporation shall not be subject to tax.

(5) Capital Gains Realized from the Sale, Exchange

or Disposition of Lands and/or Buildings. - Afinal

tax of six percent (6%) is hereby imposed on the gain

presumed

to

have

been

realized

on

the

sale,

exchange or disposition of lands and/or buildings

which are not actually used in the business of a

corporation and are treated as capital assets, based

on the gross selling price of fair market value as

determined in accordance with Section 6(E) of this

Code, whichever is higher, of such lands and/or

buildings.

(E)

Minimum

Corporate

Income

Tax

on

Domestic

Corporations. -

(1)

Imposition of Tax. - A minimum corporate

income tax of two percent (2%) of the gross income

as of the end of the taxable year, as defined herein, is

hereby imposed on a corporation taxable under this

Title,

beginning

on

the

fourth

taxable

year

immediately

following

the

year

in

which

such

corporation commenced its business operations,

when the minimum income tax is greater than the

tax computed under Subsection (A) of this Section

for the taxable year.

(2)

Carry Forward of Excess Minimum Tax. - Any

excess of the minimum corporate income tax over

the

normal

income

tax

as

computed

under

Subsection

(A)

of

this

Section

shall be carried

forward and credited against the normal income tax

for the three (3) immediately succeeding taxable

years.

(3)

Relief from the Minimum Corporate Income

Tax Under Certain Conditions. - The Secretary of

Finance

is

hereby

authorized

to

suspend

the

imposition of the minimum corporate income tax on

any corporation which suffers losses on account of

prolonged

labor

dispute,

or

because

of

force

majeure, or because of legitimate business reverses.

The Secretary of Finance is hereby authorized to

promulgate,

upon

recommendation

of

the

Commissioner, the necessary rules and regulation

that shall define the terms and conditions under

which

he

may

suspend

the

imposition

of the

minimum corporate income tax in a meritorious

case.

(4)

Gross Income Defined. - For purposes of

applying

the

minimum

corporate

income

tax

provided under Subsection (E) hereof, the term

' gross income ' shall mean gross sales less sales

returns, discounts and allowances and cost of goods

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

expenses

directly

incurred

to

produce

the

merchandise to bring them to their present location

and use.

© Compiled by RGL

13 of 201