Article 22p. 22

NATIONAL INTERNAL REVENUE CODE TAXATION, TARIFF and CUSTOMS LAWS

from

taxable

income:

Provided,

That

the

contractor notifies the Commissioner at the

beginning of the depreciation period which

depreciation rate allowed by this Section will be

used.

(6) Depreciation Deductible by Nonresident Aliens

Engaged in Trade or Business or Resident Foreign

Corporations. - In the case of a nonresident alien

individual engaged in trade or business or resident

foreign corporation, a reasonable allowance for the

deterioration of Property arising out of its use or

employment or its non-use in the business trade or

profession

shall

be

permitted

only

when

such

property is located in the Philippines.

(G) Depletion of Oil and Gas Wells and Mines. -

(1) In General. - In the case of oil and gas wells or

mines,

a

reasonable allowance for depletion or

amortization

computed

in accordance with the

cost-depletion method shall be granted under rules

and regulations to be prescribed by the Secretary of

finance,

upon

recommendation

of

the

Commissioner. Provided, That when the allowance

for depletion shall equal the capital invested no

further allowance shall be granted: Provided, further,

That after production in commercial quantities has

commenced,

certain

intangible

exploration

and

development drilling costs: (a) shall be deductible in

the year incurred if such expenditures are incurred

for non-producing wells and/or mines, or (b) shall be

deductible in full in the year paid or incurred or at

the election of the taxpayer, may be capitalized and

amortized if such expenditures incurred are for

producing wells and/or mines in the same contract

area.

' Intangible costs in petroleum operations ' refers to

any cost incurred in petroleum operations which in

itself has no salvage value and which is incidental to

and

necessary

for

the

drilling

of

wells

and

preparation of wells for the production of petroleum:

Provided, That said costs shall not pertain to the

acquisition

or

improvement

of

property

of

a

character subject to the allowance for depreciation

except that the allowances for depreciation on such

property shall be deductible under this Subsection.

Any intangible exploration, drilling and development

expenses allowed as a deduction in computing

taxable income during the year shall not be taken

into consideration in computing the adjusted cost

basis for the purpose of computing allowable cost

depletion.

(2)

Election

to

Deduct

Exploration

and

Development Expenditures. - In computing taxable

income from mining operations, the taxpayer may

at his option, deduct exploration and development

expenditures accumulated as cost or adjusted basis

for cost depletion as of date of prospecting, as well

as exploration and development expenditures paid

or incurred during the taxable year: Provided, That

the

amount

deductible

for

exploration

and

development

expenditures

shall

not

exceed

twenty-five percent (25%) of the net income from

mining operations computed without the benefit of

any tax incentives under existing laws. The actual

exploration and development expenditures minus

twenty-five percent (25%) of the net income from

mining shall be carried forward to the succeeding

years until fully deducted.

The

election

by

the

taxpayer

to

deduct

the

exploration

and

development

expenditures

is

irrevocable

and shall be binding in succeeding

taxable years.

' Net income from mining operations ', as used in

this Subsection, shall mean gross income from

operations less ' allowable deductions ' which are

necessary

or

related

to

mining

operations.

' Allowable deductions ' shall include mining, milling

and

marketing

expenses,

and

depreciation

of

properties directly used in the mining operations.

This paragraph shall not apply to expenditures for

the acquisition or improvement of property of a

character which is subject to the allowance for

depreciation.

In no case shall this paragraph apply with respect to

amounts paid or incurred for the exploration and

development of oil and gas.

The

term

' exploration

expenditures '

means

expenditures paid or incurred for the purpose of

ascertaining the existence, location, extent or quality

of any deposit of ore or other mineral, and paid or

incurred before the beginning of the development

stage of the mine or deposit.

The

term

' development

expenditures '

means

expenditures

paid

or

incurred

during

the

development stage of the mine or other natural

deposits. The development stage of a mine or other

natural

deposit

shall

begin

at

the

time

when

deposits of ore or other minerals are shown to exist

in sufficient commercial quantity and quality and

shall

end

upon

commencement

of

actual

commercial extraction.

(3)

Depletion of Oil and Gas Wells and Mines

Deductible by a Nonresident Alien individual or

Foreign Corporation. - In the case of a nonresident

alien individual engaged in trade or business in the

Philippines

or

a

resident

foreign

corporation,

allowance for depletion of oil and gas wells or mines

under paragraph (1) of this Subsection shall be

authorized only in respect to oil and gas wells or

mines located within the Philippines.

(H) Charitable and Other Contributions. -

(1) In General. - Contributions or gifts actually paid

or made within the taxable year to, or for the use of

the Government of the Philippines or any of its

agencies

or

any

political

subdivision

thereof

exclusively for public purposes, or to accredited

domestic corporation or associations organized and

operated

exclusively

for

religious,

charitable,

scientific, youth and sports development, cultural or

educational purposes or for the rehabilitation of

veterans,

or

to social welfare institutions, or to

non-government organizations, in accordance with

rules and regulations promulgated by the Secretary

of

finance,

upon

recommendation

of

the

Commissioner, no part of the net [30] income of which

inures to the benefit of any private stockholder or

individual in an amount not in excess of ten percent

(10%) in the case of an individual, and five percent

(%) in the case of a corporation, of the taxpayer's

taxable income derived from trade, business or

profession as computed without the benefit of this

and the following subparagraphs.

(2)

Contributions

Deductible

in

Full.

-

Notwithstanding the provisions of the preceding

subparagraph,

donations

to

the

following

institutions or entities shall be deductible in full:

(a) Donations to the Government. - Donations

to the Government of the Philippines or to any

of

its

agencies

or

political

subdivisions,

including

fully-owned

government

corporations, exclusively to finance, to provide

for,

or

to

be

used

in

undertaking priority

activities in education, health, youth and sports

development, human settlements, science and

culture,

and

in

economic

development

according

to

a

National

Priority

Plan

determined

by the National Economic and

Development Authority (NEDA), In consultation

with

appropriate

government

agencies,

including its regional development councils

and

private

philanthropic

persons

and

institutions: Provided, That any donation which

is made to the Government or to any of its

© Compiled by RGL

22 of 201