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TABLE OF CONTENTS

TITLE I- Organization and Function of the Bureau of Internal Revenue

TITLE II- Tax on Income

Chapter I Definition

Chapter II !eneral "rinciple

Chapter III Tax on Individual

Chapter I# Tax on Corporation

Chapter # Computation of Taxa$le Income

Chapter #I Computation of !ro Income

Chapter #II %llo&a$le Deduction

Chapter #III %ccounting "eriod and 'ethod of %ccounting

Chapter I( Return and "a)ment of Tax

Chapter ( E tate and Tru tChapter (I Other Income Tax Re*uirement

Chapter (II +uarterl) Corporate Income Tax %nnual Declaration and +uarterl)"a)ment of Income Taxe

Chapter (III ,ithholding on ,age

TITLE III E tate and Donor Taxe

Chapter I E tate Tax

Chapter II Donor Tax

TITLE I# #alue %dded Tax Chapter I Impo ition of Tax

Chapter II Compliance Re*uirement

TITLE # Other "ercentage Taxe

TITLE #I Exci e Tax on Certain !ood

Chapter I !eneral "rovi ion

Chapter II Exemption or Conditional Tax Free Removal of Certain %rticle

Chapter III Exci e Tax on %lcohol "roduct

Chapter I# Exci e Tax on To$acco "roduct

Chapter #Exci e Tax on "etroleum "roduct

Chapter #I Exci e Tax on 'i cellaneou %rticle

Chapter #II Exci e Tax on 'ineral "roduct

Chapter #III %dmini trative "rovi ion Regulating Bu ine of "er on Dealing in%rticle .u$/ect to Exci e Tax

TITLE #II Documentar) .tamp Tax

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009 TITLE #III Remedie

Chapter I Remedie in !eneral

Chapter II Civil Remedie for Collection of Taxe

Chapter III "rote ting an % e ment0 Refund0 etc1

TITLE I( Compliance Re*uirement

Chapter I 2eeping of Boo3 of %ccount and Record

Chapter II %dmini trative "rovi ion

Chapter III Rule and Regulation

TITLE ( .tatutor) Offen e and "enaltie

Chapter I %ddition to the Tax

Chapter II Crime 0 Other Offen e and Forfeiture

Chapter III "enaltie Impo ed on "u$lic Officer

Chapter I# Other "enal "rovi ion

TITLE (I %llotment of Internal Revenue

Chapter I % Di po ition and %llotment of 4ational Internal Revenue in !eneral

Chapter II .pecial Di po ition of Certain 4ational Internal Revenue Taxe

TITLE (II Over ight Committee

TITLE (III Repealing "rovi ion

TITLE (I# Final "rovi ion

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009

Section 4. The .ecretar) of Finance hall0 upon recommendation of theCommi ioner of Internal Revenue0 promulgate and pu$li h the nece ar) rule andregulation for the effective implementation of thi %ct1

Section 5. Transitory Provisions Deferment of the Effectivit) of the Impo ition of #%T onCertain .ervice 1 The effectivit) of the impo ition of the value added tax on ervice apre cri$ed in .ection 567a8 and 7$8 of Repu$lic %ct 4o1 69590 a amended $) Repu$lic%ct1 :;>>0 unle Congre deemother&i e? "rov ided0 That the aid ervice hall continue to pa) the applica$le taxpre cri$ed under the pre ent provi ion of the 4ational Internal Revenue Code0 aamended1

Section 6. Separability Clause. If an) provi ion of thi %ct i u$ e*uentl) declareduncon titutional0 the validit) of the remaining provi ion hereof hall remain in full forceand effect1

Section 7. Repealing Clauses.

7%8 The provi ion of .ection 56 of Repu$lic %ct 4o1 6>@90 other&i e 3no&n a the AThriftBan3 %ct of 5>> A hall continue to $e in force and effect onl) until Decem$er =505>>>1

Effective anuar) 50 ;@@@0 all thrift $an3 0 &hether in operation a of that date orthereafter0 hall no longer en/o) tax exemption a provided under .ection 56 of R1%1 4o16>@90 there$) u$/ecting all thrift $an3 to taxe 0 fee and charge in the ame mannerand at the ame rate a $an3 and other financial intermediarie 1

7B8 The provi ion of the 4ational Internal Revenue Code0 a amended0 and all otherla& 0 including charter of government o&ned or controlled corporation 0 decree 0order 0 or regulation or part thereof0 that are incon i tent &ith thi %ct are here$) repealed or amended accordingl)1

Section 8. Effectivity Thi %ct hall ta3e effect on anuar) 50 5>>:1

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009TITLE 1

ORGANIZATION AND FUNCTION OF THE BIR

Section 1. Title of the Code. Thi Code hall $e 3no&n a the 4IRC 5>>6

Section . Powers and duties of the Bureau of Internal Revenue. The Bureau of InternalRevenue hall $e under the upervi ion and control of the Department of Finance and itpo&er and dutie hall comprehend the a e ment and collection of all national internal

revenue taxe 0 fee 0 and charge 0 and the enforcement of all forfeiture 0 penaltie 0 andfine connected there&ith0 including the execution of /udgment in all ca e decided init favor $) the Court of Tax %ppeal and the ordinar) court 1 The Bureau hall giveeffect to and admini ter the upervi or) and police po&er conferred to it $) thi Code orother la& 1

Section !. Chief Officials of the Bureau of Internal Revenue. The Bureau of InternalRevenue hall have a chief to $e 3no&n a Commi ioner of Internal Revenue0 hereinafterreferred to a the Commi ioner and four 7

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009per on lia$le for tax or re*uired to file a return0 oran) officer or emplo)ee of uch per on0 oran) per on having po e ion0 cu tod)0 or care of the $oo3 of account and other accounting record containing entrie relatingto the $u ine of the per on lia$le for tax0 oran) other per on0

to appear $efore the Commi ioner or hi dul) authorized repre entative at atime and place pecified in the ummon and

to produce uch $oo3 0 paper 0 record 0 or other data0 and to give te timon)

7D8 To ta3e uch te timon) of the per on concerned0 under oath0 ama) $e relevant or material to uch in*uir) and

7E8 To cau e revenue officer and emplo)ee to ma3e a canva from time to time of an) revenue di trict or region and in*uire after and concerning all per on therein&ho ma) $e lia$le to pa) an) internal revenue tax0 and all per on o&ning or havingthe care0 management or po e ion of an) o$/ect &ith re pect to &hich a tax iimpo ed1

The provi ion of the foregoing paragraph not&ith tanding0 not in / i n t i # Sectio n# &) ) $e con trued a granting the Commi ioner the authorit) to in*uire into $an3depo it other than a provided for in .ection 97F8 of thi Code1

Section 6. Power of the Co issioner to $a%e assess ents and Prescribe additional Re&uire ents for Ta! 'd inistration and Enforce ent.

A0 Examination of Returns and Determination of Tax Due. %fter a return ha $een fileda re*uired under the provi ion of thi Code0 the Commi ioner or hi dul) authorizedrepre entative ma) authorize the examination of an) taxpa)er and the a e ment of thecorrect

amount of tax? ,o*i"e"2 o3e*e, T &t -&i)%,e to file a return hall not prevent theCommi ioner from authorizing the examination of an) taxpa)er1

The tax or an) deficienc) tax o a e ed hall $e paid upon notice and demand from theCommi ioner or from hi dul) authorized repre entative1

%n) return0 tatement of declaration filed in an) office authorized to receive the amehall not $e &ithdra&n? "rovided0 T & t 3it i n t ,ee ! 0 e&, # -,o ' t e "&t e o - #%c

-i)in / 0 the ame ma) $e modified0 changed0 or amended? "rovided0 further0 T & t n onotic e -o , &%"i t or inve tigation of uch return0 tatement or declaration ha in themeantime $een actuall) erved upon the taxpa)er1

B8 (ailure to Sub it Re&uired Returns) State ents) Reports and other #ocu ents. ,hen areport re*uired $) la& a a $a i for the a e ment of an) national internal revenue taxhall not $e forthcoming &ithin the time fixed $) la& or rule and regulation or &hen

there i ,eo n t o e)ie* e t & t &n #%c ,e$o, t i # -&)#e 2 inco'$)et e o , e,,oneo%# 0 theCommi ioner hall a e the proper tax on the 7e#t e*i"enc e o7t&in&7)e.

In ca e a per on fail to file a re*uired return or other document at the timepre cri$ed $) la&0 or &illfull) or other&i e file a fal e or fraudulent return or otherdocument0 the Commi ioner hall ma3e or amend the return from hi o&n3no&ledge and from uch information a he can o$tain through te timon) orother&i e0 &hich hall $e $,i' & -&ci e co,,ec t &n " #%--icien t -o , &) ) )e/& ) $%,$o#e#.

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009 7C8 Authorit y t o Condu t In!entor y takin" , sur!ei##an e an d t o Pres rib e Presum$ti! e %ros s Sa#e s an d Re ei$ts . The Commi ioner ma)0 at an) time during thetaxa$le )ear0 order inventor) ta3ing of good of an) taxpa)er a a $a i for determininghi internal revenue tax lia$ilitie 0 or ma) place the $u ine operation of an) per on0natural or /uridical0 under o$ ervation or urveillance if there i rea on to $elieve that

uch per on i not declaring hi correct income0 ale or receipt for internal revenue taxpurpo e 1 The finding ma) $e u ed a the $a i for a e ing the taxe for the othermonth or *uarter of the ame or different taxa$le )ear and uch a e ment hall 7e

"ee'e " $,i' & -&ci e co,,ect 1

,hen it i found that a per on ha failed to i ue receipt and invoice in violation of there*uirement of .ection 55= and ;=6 of thi Code0 or &hen there i rea on to $elievethat the $oo3 of account or other record do not correctl) reflect the declaration madeor to $e made in a return re*uired to $e filed under the provi ion of thi Code0 theCommi ioner0 after ta3ing into account the ale 0 receipt 0 income or ot e , t&(& ) e eo - ot e , $e,#on # en/&/e " i n #i'i)& , %#ine##e # %n"e , #i'i)& , #it%&tion # o ,ci,c%'#t&nce # o , &-te , con#i"e,in/ ot e , ,e)e*&n t in-o,'&tio n ma) pre cri$e aminimum amount of uch gro receipt 0 ale and taxa$le $a e0 and uch amount opre cri$ed hall $e prima facie correct for purpo e of determining the internal revenue taxlia$ilitie of uch per on1

D 0 Authorit y t o Terminat e Taxab# e Period . ,hen it hall come to the 3no&ledge of theCommi ionerthat a taxpa)er i retiring from $u ine u$/ect to tax0 ori intending to leave the "hilippine or toremove hi propert) there from orto hide or conceal hi propert)0 ori performing an) act tending to o$ truct the proceeding for the collection of thetax for the pa t or current *uarter or )ear or to render the ame totall) or partl) ineffective unle uch proceeding are $egun immediatel)0

the Commi ioner hall declare the tax period of uch taxpa)er terminated at an) time andhall end the taxpa)er a notice of uch deci ion0 together &ith a re*ue t for the immediate

pa)ment of the tax for the period o declared terminated and the tax for the preceding )ear or *uarter0 or uch portion thereof a ma) $e unpaid0 and aid taxe hall $e dueand pa)a$le immediatel) and hall $e u$/ect to all the penaltie hereafter pre cri$ed0unle paid &ithin the time fixed in the demand made $) the Commi ioner1

7E8 'uthority of the Co issioner to Prescribe Real Property *alues. The Commi ioner ihere$) authorized to divide the "hilippine into different zone or area and hall0 uponcon#%)t&tion 3it co'$etent &$$,&i#e,# ot -,o' t e $,i*&te &n" $% )ic #ecto,# 0determine the fair mar3et value of real propertie located in each zone or area1 Forpurpo e of computing an) internal revenue tax0 the value of the propert) hall $e0&hichever i the higher of

758 the fair mar3et value a determined $) the Commi ioner0 or

7;8 the fair mar3et value a ho&n in the chedule of value of the "rovincial and Cit)% e or 1

F 0 A%t o,it o - t e Co''i##ione , t o in %i, e int o B&n 9 De$o#i t Acco%nt# 14ot&ith tanding an) contrar) provi ion of Repu$lic %ct 4o1 5

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7;8 an) taxpa)er &ho ha filed an application for compromi e of hi tax lia$ilit)under .ec1 ;@< 7%8 7;8 of thi Code $) rea on of financial incapacit) to pa) hi taxlia$ilit)1

In ca e a taxpa)er file an application to compromi e the pa)ment of hi tax lia$ilitie onhi claim that hi financial po ition demon trate a clear ina$ilit) to pa) the tax a e ed0hi application hall not $e con idered unle and until he &aive in &riting hi privilegeunder Repu$lic act 4O1 5>:0 the Commi ioner hallcreate n&tion& ) &n " ,e/ion& ) &cc,e"it&tio n o&,"# 0 the mem$er of &hich hall erve forthree 7=8 )ear 0 and hall de ignate from among the enior official of the Bureau0 one 758chairman and t&o 7;8 mem$er for each $oard0 u$/ect to uch rule and regulation athe .ecretar) of Finance hall promulgate upon the recommendation of theCommi ioner1

Individual and general profe ional partner hip and their repre entative &ho are deniedaccreditation $) the Commi ioner andGor the national and regional accreditation $oardma) &$$e& ) #%c "eni& ) t o t e Sec,et&, o - Fin&nce 0 &ho hall rule on the appeal&ithin ixt) 79@8 da) from receipt of uch appeal1 Failure of the .ecretar) of Finance torule on the %ppeal &ithin the pre cri$ed period hall $e deemed a approval of theapplication for accreditation of the appellant1

H 0 A%t o,it o - t e Co''i##ione , t o ,e#c,i e A""ition& ) ,oce"%,& ) o ,Doc%'ent&, Re %i,e'ent# . The Commi ioner ma) pre cri$e the manner of compliance &ith an) documentar) or procedural re*uirement in connection &ith the

u$mi ion or preparation of financial tatement accompan)ing the tax return 1

Sectio n 7 . Authorit y o f th e Commissione r t o De#e"at e Power . The Commi ioner

ma) delegate the po&er ve ted in him under the pertinent provi ion of thi Code to an) or uch u$ordinate official &ith the ran3 e*uivalent to a "i*i#io n c ie - o , i/ e, 2u$/ect to uch limitation and re triction a ma) $e impo ed under rule and

regulation to $e promulgated $) the .ecretar) of finance0 upon recommendation of the Commi ioner?

"rovided0 Ho&ever0 That the follo&ing po&er of the Commi ioner # &)) not e "e)e/&te":

7a8 The po&er to recommend the promulgation of rule and regulation $) the.ecretar) of Finance

7$8 The po&er to i ue ruling of fir t impre ion or to rever e0 revo3e or modif) an)

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009exi ting ruling of the Bureau

7c8 The po&er to compromi e or a$ate0 under .ec1 ;@< 7%8 and 7B8 of thi Code0 an) tax lia$ilit)? "rovided0 ho&ever0 That a e ment i ued $) the regional officeinvolving $a ic deficienc) taxe of Five hundred thou and pe o 7" @@0@@@8 or le 0and minor criminal violation 0 a ma) $e determined $) rule and regulation to $epromulgated $) the .ecretar) of finance0 upon recommendation of theCommi ioner0 di covered $) regional and di trict official 0 ma) $e compromi ed $) a

,e/ion& ) e*&)%&tio n o&, " &hich hall $e compo ed of theRegional Director a Chairman0the % i tant Regional Director0the head of the Legal0% e ment and Collection Divi ion andthe Revenue Di trict Officer having /uri diction over the taxpa)er0 amem$er and

7d8 The po&er to a ign or rea ign internal revenue officer to e ta$li hment &herearticle u$/ect to exci e tax are produced or 3ept1

Section 8. D%t o- t e Co''i##ione, to En#%,e t e ,o*i#ion &n" Di#t,i %tion o- -o,'#2 Recei$t#2 Ce,ti-ic&te#2 &n" A$$)i&nce#2 &n" t e Ac9no3)e"/'ent o-

& 'ent o- T&(e#.A0 ,o*i#ion &n" Di#t,i %tion to ,o$e, O--ici&)# 1 It hall $e the dut) of the

Commi ioner0 among other thing 0 to pre cri$e0 provide0 and di tri$ute to the properofficial the re*ui ite licen e internal revenue tamp 0 la$el all other form 0 certificate 0$ond 0 record 0 invoice 0 $oo3 0 receipt 0 in trument 0 appliance and apparatu u ed inadmini tering the la& falling &ithin the /uri diction of the Bureau1 For thi purpo e0internal revenue tamp 0 trip tamp and la$el hall $e cau ed $) the Commi ioner to$e printed &ith ade*uate ecurit) feature 1

Internal revenue tamp 0 &hether of a $ar code or fu on de ign0 hall $e firml) andcon picuou l) affixed on each pac3 of cigar and cigarette u$/ect to exci e tax in themanner and form a pre cri$ed $) the Commi ioner0 upon approval of the .ecretar) of

Finance1B0 Recei$t# -o, & 'ent ;&"e. It hall $e the dut) of the Commi ioner or hi dul)

authorized repre entative or an authorized agent $an3 to &hom an) pa)ment of an) taxi made under the provi ion of thi Code to ac3no&ledge the pa)ment of uch tax0expre ing the amount paid and the particular account for &hich uch pa)ment &amade in a form and manner pre cri$ed therefor $) the Commi ioner1

Sectio n < . Interna # Re!enu e Distri ts . ,ith the approval of the .ecretar) of Finance0the Commi ioner hall divide the "hilippine into uch num$er of revenue di trict ama) form time to time $e re*uired for admini trative purpo e 1 Each of the e di trict

hall $e under the upervi ion of a Revenue Di trict Officer1

Section 1=. Revenue Regional #irector. nder rule and regulation 0 policie andtandard formulated $) the Commi ioner0 &ith the approval of the .ecretar) of Finance0

the Revenue Regional director hall0 &ithin the region and di trict office under hi /uri diction0 amongother ?

7a8 Implement la& 0 policie 0 plan 0 program 0 rule and regulation of the department or agencie in the regional area

7$8 %dmini ter and enforce internal revenue la& 0 and rule and regulation 0 includingthe a e ment and collection of all internal revenue taxe 0 charge and fee 1

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 20097c8 I ue Letter of authorit) for the examination t a x p a ) e r &ithin the region

7d8 "rovide economical0 efficient and effective ervice to the people in the area

7e8 Coordinate &ith regional office or other department $ureau and agencie in the

area

7f8 Coordinate &ith local government unit in the area

7g8 Exerci e control and upervi ion over the officer and emplo)ee &ithin the regionand

7h8 "erform uch other function a ma) $e provided $) la& and a ma) $e delegated$) the Commi ioner1

Section 11. Duties of Re!enue Distri t Offi ers and Other Interna# Re!enue Offi ers . It hall $e the dut) of ever) Revenue Di trict Officer or other internal revenueofficer and emplo)ee to en ure that all la& 0 and rule and regulation affecting nationalinternal revenue are faithfull) executed and complied &ith0 and to aid in the prevention0detection and puni hment of fraud of delin*uencie in connection there&ith1

It hall $e the dut) of ever) Revenue Di trict Officer to examine the efficienc) of allofficer and emplo)ee of the Bureau of Internal Revenue under hi upervi ion0 and toreport in &riting to the Commi ioner0 through the Regional Director0 an) neglect of dut)0 incompetenc)0 delin*uenc)0 or malfea ance in office of an) internal revenue officerof &hich he ma) o$tain 3no&ledge0 &ith a tatement of all the fact and an) evidence

u taining each ca e1

Section 1 . 'gents and #eputies for Collection of +ational Internal Revenue Ta!es. The follo&ing are here$) con tituted agent of the Commi ioner?

7a8 The Commi ioner of Cu tom and hi u$ordinate &ith re pect to the collection

of national internal revenue taxe on imported good

7$8 The head of the appropriate government office and hi u$ordinate &ith re pect

to the collection of energ) tax and

7c8 Ban3 dul) accredited $) the Commi ioner &ith re pect to receipt of pa)mentinternal revenue taxe authorized to $e made thru $an31

%n) officer or emplo)ee of an authorized agent $an3 a igned to receive internal revenuetax pa)ment and tran mit tax return or document to the Bureau of Internal Revenue

hall $e u$/ect to the ame anction and penaltie pre cri$ed in .ection ;9> and ;6@of thi Code1

Section 1!. Authority of a Re!enue Offi es . u$/ect to the rule and regulation to$e pre cri$ed $) the .ecretar) of Finance0 upon recommendation of the Commi ioner0a Revenue Officer a igned to perform a e ment function in an) di trict ma) 2 $%,#%&n tt o & Lette , o- A%t o,it i##%e " t e Re*en% e Re/ion& ) Di,ecto, 0

examine taxpa)er &ithin the /uri diction of the di trict in order to collect thecorrect amount of tax0 orto recommend the a e ment of an) deficienc) tax due in the ame manner that

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009the aid act could have $een performed $) the Revenue Regional Directorhim elf1

Section 14. Authority of Offi ers to Administer Oaths and Take Testimony .

The Commi ioner0Deput) Commi ioner 0.ervice Chief 0

% i tant .ervice Chief 0Revenue Regional Director 0% i tant Revenue Regional Director 0Chief and % i tant Chief of Divi ion 0Revenue Di trict Officer 0

pecial deputie of the Commi ioner0internal revenue officer andan) other emplo)ee of the Bureau thereunto e peciall) deputized $) theCommi ioner

hall have the po&er to admini ter oath andto ta3e te timon) in an) official matter or inve tigation conducted $) them

regarding matter &ithin the /uri diction of the Bureau1

Section 15. Authority of Interna# Re!enue Offi ers to &ake Arrests and Sei'ures . The Commi ioner0 the Deput) Commi ioner 0 the Revenue Regional Director 0 theRevenue Di trict Officer and other internal revenue officer hall have authorit) to ma3earre t and eizure for the violation of an) penal la&0 rule or regulation admini tered $) the Bureau of Internal Revenue1

%n) per on o arre ted hall $e forth&ith $rought $efore a court0 there to $e dealt &ithaccording to la&1

Section 16. Assi"nment of Interna# Re!enue Offi ers In!o#!ed in Ex ise Tax (un tions to Estab#ishments )here Arti #es sub*e t to Ex ise Tax are Produ ed or +e$t . The Commi ioner hall emplo)0 a ign0 or rea ign internal revenue officerinvolved in exci e tax function 0 a often a the exigencie of the revenue ervice ma) re*uire0 to e ta$li hment or place &here article u$/ect to exci e tax are produced or3ept? "rovided0 That an internal revenue officer a igned to an) uch e ta$li hment hallin no ca e ta) in hi a ignment for more than t&o 7;8 )ear 0 u$/ect to rule andregulation to $e pre cri$ed $) the .ecretar) of Finance0 upon recommendation of theCommi ioner1

Section 17. Assi"nment of Interna# Re!enue Offi ers and Other Em$#oyees to Other Duties. The Commi ioner ma)0 u$/ect to the provi ion of .ection 59 and the la& oncivil ervice0 a &ell a the rule and regulation to $e pre cri$ed $) the .ecretar) of Finance upon the recommendation of the Commi ioner0 a ign or rea ign internalrevenue officer and emplo)ee of the Bureau of Internal Revenue0 &ithout change intheir official ran3 and alar)0 to other or pecial dutie connected &ith the enforcement oradmini tration of the revenue la& a the exigencie of the ervice ma) re*uire? "rovided0

That internal revenue officer a igned to perform a e ment or collect ion function hallnot remain in the ame a ignment for more than three 7=8 )ear "rovided0 further0 Thata ignment of internal revenue officer and emplo)ee of the Bureau to pecial dutie

hall not exceed one 758 )ear1

Section 18. Re$orts of !io#ation of aws. ,hen an internal revenue officer di coverevidence of a violation of thi Code or of an) la&0 rule or regulation admini tered $) the

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009Bureau of Internal Revenue of uch character a to &arrant the in titution of criminalproceeding 0

he hall immediatel) report the fact to the Commi ioner through hi immediateuperior0 giving the name and addre of the offender and the name of the

&itne e if po i$le?

"rovided0 T & t i n %,/en t ce# 0 the Revenue Regional director or Revenue Di trict

Officer0 a the ca e ma) $e0 ma) end the report to the corre ponding pro ecutingofficer in the latter ca e0 a cop) of hi report hall $e ent to the Commi ioner1

Section 1@ hereof0 through the Chairmen of the Committee on ,a) and 'ean of the.enate and Hou e of Repre entative 0 a report on the exerci e of hi po&er pur uantto the aid ection0 ever) ix 798 month of each calendar )ear1

Section 1. Sources of Revenue. The follo&ing taxe 0 fee and charge are deemed

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009national internal revenue taxe ?

7a8 Income tax

7$8 E tate and donor taxe

7c8#alue added tax

7d8 Other "ercentage taxe

7e8 Exci e taxe

7f8 Documentar) tamp taxe and

7g8 .uch other taxe a are or hereafter ma) $e impo ed and collected $) the Bureauof Internal Revenue1

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TITLE II

TA? INCO;E CHA TER I DEFINITIONS

Section . #efinitions

,hen u ed in thi Title?

7%8 The term per on mean an individual0 a tru t0 e tate or corporation1

7B8 The term corporation hall include partner hip 0 n o '&tte , o 3 c,e&te " ororganized0 /oint toc3 companie 0 /oint account 7cuenta en participacion80 a ociation0or in urance companie 0 % t "oe # no t inc)%" e /ene,& ) $,o-e##ion& ) $&,tne,# i$ # &n "& +oin t *ent%, e o, con#o,ti% ' -o,'e " -o , t e $%,$o# e o - %n"e,t&9in /

con truction pro/ect orengaging in petroleum0 coal0 geothermal and other energ) operation pur uant

to an operating con ortium agreement under a ervice contract &ith the!overnment1

!eneral profe ional partner hip are partner hip formed $) per on for the olepurpo e of exerci ing their common profe ion0 no part of the income of &hich iderived from engaging in an) trade or $u ine 1

7C8 The term dome tic0 &hen applied to a corporation0 mean created or organized in the"hilippine or under it la& 1

7D8 The term foreign0 &hen applied to a corporation0 mean a corporation &hich i notdome tic1

7E8 The term nonre ident citizen mean ?

758 % citizen of the "hilippine &ho e ta$li he to the ati faction of the Commi ionerthe fact of hi $ #ic& ) $,e#enc e & ,o& " 3it & "e-init e intentio n t o ,e#i" et e,ein 1

7;8 % citizen of the "hilippine &ho leave the "hilippine during the taxa$le )ear tore ide a$road0 either a an immigrant or for emplo)ment on & $e,'&nen t 7i#.

7=8 % citizen of the "hilippine &ho &or3 and derive income from a$road and&ho e emplo)ment thereat re*uire him to $e ph) icall) pre ent a$road 'o# t o - t eti' e "%,in / t e t&(& ) e 6e&,.

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 20097F8 The term re ident alien mean an individual &ho e re idence i &ithin the"hilippine and &ho i not a citizen thereof1

7!8 The term nonre ident alien mean an individual &ho e re idence i not &ithinthe "hilippine and &ho i not a citizen thereof1

7H8 The term re ident foreign corporation applie to a foreign corporation engagedin trade or $u ine &ithin the "hilippine 1

7I8 The term nonre ident foreign corporation applie to a foreign corporation notengaged in trade or $u ine &ithin the "hilippine 1

7 8 The term fiduciar) mean a guardian0 tru tee0 executor0 admini trator0 receiver0con ervator or an) per on acting in an) fiduciar) capacit) for an) per on1

728 The term &ithholding agent mean an) per on re*uired to deduct and&ithhold an) tax under the provi ion of .ection 61

7L8 The term hare of toc3 hall include hare of toc3 of a corporation0 &arrantandGor option to purcha e hare of toc30 a &ell a unit of participation in apartner hip 7except general profe ional partner hip 80 /oint toc3 companie 0 /ointaccount 0 /oint venture taxa$le a corporation 0 a ociation and recreation oramu ement clu$ 7 uch a golf0 polo or imilar clu$ 80 and mutual fund certificate 1

7'8 The term hareholder hall include holder of a hareG of toc30 &arrantGandGor optionG to purcha e hare of toc3 of a corporation0 a &ell a a holder of aunit of participation in a partner hip 7except general profe ional partner hip 8 in a

/oint toc3 compan)0 a /oint account0 a taxa$le /oint venture0 a mem$er of ana ociation0 recreation or amu ement clu$ 7 uch a golf0 polo or imilar clu$ 8 and aholder of a mutual fund certificate0 a mem$er in an a ociation0 /oint toc3 compan)0 orin urance compan)1

748 The term taxpa)er mean an) per on u$/ect to tax impo ed $) thi Title1

7O8 The term including and include 0 &hen u ed in a definition contained in thi Title0 # &) ) no t e "ee'e " t o e(c)%" e ot e , t in/# ot e,3i# e 3it i n t e 'e&nin / of the term defined1

7"8 The term taxa$le )ear mean the calendar )ear0 or the fi cal )ear ending during uchcalendar )ear0 upon the $a i of &hich the net income i computed under thi Title1

Taxa$le )ear include 0 in the ca e of a return made for a fractional part of a )earunder the provi ion of thi Title or under rule and regulation pre cri$ed $) the.ecretar) of Finance0 upon recommendation of the commi ioner0 the period for &hich

uch return i made1

7+8 The term fi cal )ear mean an accounting period of t&elve 75;8 month ending onthe la t da) of an) month other than Decem$er1

7R8 The term paid or incurred and paid or accrued hall $e con trued according tothe method of accounting upon the $a i of &hich the net income i computed underthi Title1

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7.8 The term trade or $u ine include the performance of the function of a pu$lic office1

7T8 The term ecuritie mean hare of toc3 in a corporation and right to u$ cri$efor or to receive uch hare 1 The term include $ond 0 de$enture 0 note or certificate 0or other evidence or inde$tedne 0 i ued $) an) corporation0 including tho e i ued $) a government or political u$divi ion thereof0 &ith intere t coupon or in regi tered form1

7 8 The term "e&)e , i n #ec%,itie# mean a merchant of toc3 or ecuritie 0 &hether anindividual0 partner hip or corporation0 &ith an e ta$li hed place of $u ine 0 regularl) engaged in the purcha e of ecuritie and the re ale thereof to cu tomer that i 0 one&ho0 a a merchant0 $u) ecuritie and re ell them to cu tomer &ith a vie& to thegain and profit that ma) $e derived therefrom1

7#8 The term $an3 mean ever) $an3ing in titution0 a defined in .ection ; of Repu$lic%ct 4o1 ==60 a amended0 other&i e 3no&n a the !eneral $an3ing %ct1 % $an3 ma) either $e a

commercial $an30a thrift $an30a development $an30a rural $an3 or

pecialized government $an31

7,8 The term non $an3 financial intermediar) mean a financial intermediar)0 a definedin .ection ;7D87C8 of Repu$lic %ct 4o1 ==60 a amended0 other&i e 3no&n a the !eneralBan3ing %ct0 authorized $) the 7B."8 to perform 8% i 7&n9in/ &cti*itie# 1

7(8 The term *ua i $an3ing activitie mean $orro&ing fund from t&ent) 7;@8 or moreper onal or corporate lender at an) one time0 through

the i uance0endor ement0 oracceptance of de$t in trument of an) 3ind other than depo it for the $orro&ero&n account0 or

through the i uance of certificate of a ignment or imilar in trument 0 &ithrecour e0 or of repurcha e agreement for purpo e of relending or purcha ingreceiva$le andother imilar o$ligation ?

"rovided0 ho&ever0 That commercial0 indu trial and other non financial companie 0 &hich$orro& fund through an) of the e mean for the limited purpo e of financin g thei r o& nneed o r th e need o f their agent o r dealer 0 SHALL NOT $e con idered a performing*ua i $an3ing function 1

7J8 The term depo it u$ titute hall mean an alternative from of o$taining fund fromthe pu$lic 7the term pu$lic mean $orro&ing from t&ent) 7;@8 or more individual orcorporate lender at an) one time8 other than depo it 0 through the

1$

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009i uance0endor ement0 oracceptance of de$t in trument for the $orro&er o&n account0 for the purpo e of relending or purcha ing of receiva$le and other o$ligation 0 orfinancing their o&n need or the need of their agent or dealer1

The e in trument ma) include0 $ut need not $e limited to $an3er acceptance 0promi or) note 0 repurcha e agreement 0 including rever e repurcha e agreemententered into $) and $et&een the B." and an) authorized agent $an30 certificate of a ignment or participation and imilar in trument &ith recour e? "rovided0 ho&ever0

That de$t in trument i ued for inter$an3 call loan &ith maturit) of not 'o,e t &n -i*e50 da) to cover deficienc) in re erve again t depo it lia$ilitie 0 including tho e $et&een

or among $an3 and *ua i $an3 0 hall not $e con idered a depo it u$ titute de$tin trument 1

7K8 The term ordinar) income include an) gain from the ale or exchange of propert) &hich i not a capital a et or propert) de cri$ed in .ection =>7%87581 %n) gain from the

ale or exchange of propert) &hich i treated or con idered0 under other provi ion of thi Title0 a ordinar) income hall $e treated a gain from the ale or exchange of propert) &hich i not a capital a et a defined in .ection =>7%87581 The term ordinar)

lo include an) lo from the ale or exchange of propert) &hich i not a capital a et1%n) lo from the ale or exchange of propert) &hich i treated or con idered0 under otherprovi ion of thi Title0 a ordinar) lo hall $e treated a lo from the ale or exchangeof propert) &hich i not a capital a et1

7%%8 The term ran3 and file emplo)ee hall mean all emplo)ee &ho are holding neithermanagerial nor upervi or) po ition a defined under exi ting provi ion of the La$or Codeof the "hilippine 0 a amended1

7BB8 The term mutual fund compan) hall mean an open end and clo e end inve tmentcompan) a defined under the Inve tment Compan) %ct1

7CC8 The term trade0 $u ine or profe ion hall not include performance of

ervice $) the taxpa)er a an emplo)ee17DD8 The term ,e/ion&) o, &,e& e&" %&,te,# hall mean a $ranch e ta$li hed in the"hilippine $) multinational companie and &hich head*uarter do not earn or deriveincome from the "hilippine and &hich act a

upervi or)0communication andcoordinating center for their

o affiliate 0o u$ idiarie 0 oro $ranche in the % ia "acific Region and other foreign mar3et 1

7EE8 The term regional operating head*uarter hall mean a $ranch e ta$li hed in the

"hilippine $) multinational companie &hich are engaged in an) of the follo&ingervice ?general admini tration and planning$u ine planning and coordination

ourcing and procurement of ra& material and componentcorporate finance advi or) ervicemar3eting control and ale promotiontraining and per onnel managementlogi tic ervicere earch and development ervice and product developmenttechnical upport and maintenance

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009data proce ing and communication and$u ine development1

7FF8 The term long term depo it or inve tment certificate hall refer to certificate of timedepo it or inve tment in the form of aving 0 common or individual tru t fund 0 depo it

u$ titute 0 inve tment management account and other inve tment &ith a maturit) period of not )e## t &n -i*e 50 e&,# 0 the form of &hich hall $e pre cri$ed $) the Bang3o.entral ng "ilipina 7B."8 and i ued $) $an3 onl) 7not $) non$an3 financial

intermediarie and finance companie 8 to individual in denomination of Ten thou andpe o 7"5@0@@@8 and other denomination a ma) $e pre cri$ed $) the B."1

7!!8 the term tatutor) minimum &age earner hall refer to rate fixed $) the Regional Tripartite ,age and "roductivit) Board0 a defined $) the Bureau of La$or and Emplo)ment.tati tic 7BLE.8 of the Department of La$or and Emplo)ment 7DOLE8

A7HH8 the term minimum &age earner hall refer to a &or3er in the private ector paid thetatutor) minimum &age0 or to an emplo)ee in the pu$lic ector &ith compen ation income of

not more than the tatutor) minimum &age in the non-agricultural ector &here heG he ia igned1A

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CHA TER IIGENERAL RINCI LES

Section !. %enera# Prin i$#es of In ome Taxation in the Phi#i$$ines. Except &henother&i e provided in thi Code?

7%8 % citizen of the "hilippine re iding therein i taxa$le on all incomederived from ource &ithin and &ithout the "hilippine

7B8 % nonre ident citizen i taxa$le onl) on income derived from ource&ithin the "hilippine

7C8 %n individual citizen of the "hilippine &ho i &or3ing and deriving income froma$road a an over ea contract &or3er i taxa$le onl) on income derived from

ource &ithin the "hilippine ?

"rovided0 That a eaman &ho i a citizen of the "hilippine and &horeceive compen ation for ervice rendered & ,o&" & 'e' e, o- t eco'$)e'ent o- & *e##e) en/&/e" e(c)%#i*e) in inte,n&tion&) t,&"e hall$e treated a an over ea contract &or3er

7D8 %n alien individual0 &hether a re ident or not of the "hilippine 0 i taxa$le onl)on income derived from ource &ithin the "hilippine

7E8 % dome tic corporation i taxa$le on all income derived from ource &ithin and&ithout the "hilippine and

7F8 % foreign corporation0 &hether engaged or not in trade or $u ine in the"hilippine 0 i taxa$le onl) on income derived from ource &ithin the "hilippine 1

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CHA TER III TA? ON INDIBIDUALS

Section 4. Inco e Ta! Rates.

7%8R&te# o- Inco'e T&( on In"i*i"%&) Citi@en &n" In"i*i"%&) Re#i"ent A)ien o- t ei)i$$ine#.

758 %n income tax i here$) impo ed?

7a8 On the taxa$le income defined in .ection =5 of thi Code0 other thanincome u$/ect to tax under .u$ ection 7B80 7C8 and 7D8 of thi .ection0derived for each taxa$le )ear from all ource &ithin and &ithout the"hilippine $e ever) individual citizen of the "hilippine re iding therein

Section !1. T&(& )e Inco'e De-ine". The term taxa$le incomemean the pertinent item of gro income pecified in thi Code0 lethe deduction andGor per onal and additional exemption 0 if an)0authorized for uch t)pe of income $) thi Code or other pecial la& 1

7B8 Rate of Tax on Certain "a ive Income1

7C8 Capital !ain from .ale of .hare of .toc3 not Traded in the.toc3 Exchange

7D8 Capital !ain from .ale of Real "ropert)

7$8 On the taxa$le income defined in .ection =5 of thi Code0 other than incomeu$/ect to tax under .u$ ection 7B80 7C8 and 7D8 of thi .ection0 derived for each

taxa$le )ear from all ource &ithin the "hilippine $) an individual citizen ofthe "hilippine &ho i re iding out ide of the "hilippine including over eacontract &or3er referred to in .u$ ection7C8 of .ection ;= hereof and

7c On the taxa$le income defined in .ection =5 of thi code0 other than incomeu$/ect to tax under .u$ ection 7B80 7C8 and 7D8 of thi .ection0 derived for each

taxa$le )ear from all ource &ithin the "hilippine $) an individual alien &ho ia re ident of the "hilippine 1

Rates of Tax on Taxable Income of Individuals. - The tax shall be computed in accordance withand at the rates established in the following schedule:

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"Not over P ! !!! ........ #$

"%ver P ! !!! but not over P&! !!! ........ P#!!' !$ of the excess over P ! !!!

"%ver P&! !!! but not over P(! !!! ........ P) #!!' #$ of the excess over P&! !!!

"%ver P(! !!! but not over P *! !!! ........ P+ #!!')!$ of the excess over P(! !!!

"%ver P *! !!! but not over P)#! !!! . .. .. ... P)) #!! ')#$ of the excess over P *! !!!

"%ver P)#! !!! but not over P#!! !!! . .. .. ... P#! !!! '&!$ of the excess over P)#! !!!

"%ver P#!!! !!! ........ P )# !!!'&)$ of the excess over P#!! !!!

(or arried individuals) the husband and wife) sub-ect to the provision of Section / 0#1 hereof) shall co pute separately their individual inco e ta! based on their

respective total ta!able inco e2 Provided) that if any inco e cannot be definitely attributed to or identified as inco e e!clusively earned or reali3ed by either of the spouses) the sa e shall be divided e&ually between the spouses for the purpose

of deter ining their respective ta!able inco e.

4Provided) That ini u wage earners as defined in Section 55 0661 of this Code shall be e!e pt fro the pay ent of inco e ta! on their ta!able inco e2 Provided)

further) That the holiday pay) overti e pay) night shift differential pay and ha3ard pay received by such ini u wage earners shall li%ewise be e!e pt

fro inco e ta!. their respective ta!able inco e.

7B8 Rate of Tax on Certain "a ive Income1

758 Inte,e#t#2 Ro &)tie#2 ,i@e#2 &n" Ot e, innin/#. % final tax at the rate of t&ent) percent 7;@ 8 i here$) impo ed upon the amount of intere t from an) currenc) $an3 depo it and )ield or an) other monetar) $enefit from depo it

u$ titute and from tru t fund and imilar arrangement ro)altie 0 except on$oo3 0 a &ell a other literar) &or3 and mu ical compo ition 0 &hich hall $eimpo ed a final tax of ten percent 75@ 8 prize 7except prize amounting to Tenthou and pe o 7"5@0@@@8 or le &hich hall $e u$/ect to tax under .u$ ection7%8 of .ection ;< and other &inning 7except "hilippine Charit) .&eep ta3eand Lotto &inning 80 derived from ource &ithin the "hilippine ? "rovided0ho&ever0 That intere t income received $) an individual taxpa)er 7except anonre ident individual8 from a depo itor) $an3 under the expanded foreigncurrenc) depo it ) tem hall $e u$/ect to a final income tax at the rate of

even and one half percent 76 5G; 8 of uch intere t income? "rovided0 further0 That intere t income from longterm depo it or inve tment in the form of aving 0common or individual tru t fund 0 depo it u$ titute 0 inve tment managementaccount and other inve tment evidenced $) certificate in uch form

pre cri$ed $) the Bang3o .entral ng "ilipina 7B."8 hall $e exempt from the taximpo ed under thi .u$ ection? "rovided0 finall)0 That hould the holder of thecertificate pre terminate the depo it or inve tment $efore the fifth 7 th8 )ear0 afinal tax hall $e impo ed on the entire income and hall $e deducted and&ithheld $) the depo itor) $an3 from the proceed of the long term depo it orinve tment certificate $a ed on the remaining maturit) thereof?

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 20097; 0 C &n" o, ,o$e,t Di*i"en"# % final tax at the follo&ing rate hall $eimpo ed upon the ca h andGor propert) dividend actuall) or con tructivel) received $) an individual from a dome tic corporation or from a /oint toc3compan)0 in urance or mutual fund companie and regional operatinghead*uarter of multinational companie 0 or on the hare of an individual in thedi tri$uta$le net income after tax of a partner hip e(ce$t & /ene,&)$,o-e##ion&) $&,tne,# i$0 of &hich he i a partner0 or on the hare of anindividual in the net income after tax of an a ociation0 a /oint account0 or a

/oint venture or con ortium taxa$le a a corporation of &hich he i a mem$er orcoventurer?

.ix percent 79 8 $eginning anuar) 50 5>>: Eight percent 7: 8 $eginning anuar) 50 5>>> Ten percent 75@ $eginning anuar) 50 ;@@@1 "rovided0ho&ever0 That the tax on dividend hall appl) onl) on income earned on or after

anuar) 50 5>>:1 Income forming part of retained earning a of Decem$er =505>>6 hall not0 even if declared or di tri$uted on or after anuar) 50 5>>:0 $e

u$/ect to thi tax1

C0 C&$it&) G&in# -,o' S&)e o- S &,e# o- Stoc9 not T,&"e" in t e Stoc9 E(c &n/e 1 Theprovi ion of .ection =>7B8 not&ith tanding0 a final tax at the rate pre cri$ed $elo& i here$)impo ed upon the net capital gain realized during the taxa$le )ear from the ale0 $arter0

exchange or other di po ition of hare of toc3 in a dome tic corporation0 except hare old0or di po ed of through the toc3 exchange1

4ot over "5@@0@@@ MMMMMMMMMMM11

On an) amount in exce of "5@@0@@@ MMMM 5@

D0 C&$it&) G&in# -,o' S&)e o- Re&) ,o$e,t .

10 In Gene,&). The provi ion of .ection =>7B8 not&ith tanding0 a final tax of ix percent 79 8 $a ed on the gro elling price or current fair mar3et value a

determined in accordance &ith .ection 97E8 of thi Code0 &hichever i higher0 ihere$) impo ed upon capital gain pre umed to have $een realized from the

ale0 exchange0 or other di po ition of real propert) located in the "hilippine 0cla ified a capital a et 0 including pacto de retro ale and other form of conditional ale 0 $) individual 0 including e tate and tru t ? "rovided0 Thatthe tax lia$ilit)0 if an)0 on gain from ale or other di po ition of real propert) to the government or an) of it political u$divi ion or agencie or togovernment o&ned or controlled corporation hall $e determined either under.ection ;< 7%8 or under thi .u$ ection0 at the option of the taxpa)er1

0 E(ce$tion 1 The provi ion of paragraph 758 of thi .u$ ection to thecontrar) not&ith tanding0 capital gain pre umed to have $een realized from the

ale or di po ition of their principal re idence $) natural per on 0 the proceedof &hich i full) utilized in ac*uiring or con tructing a ne& principal re idence&ithin eighteen 75:8 calendar month from the date of ale or di po ition0 hall

$e exempt from the capital gain tax impo ed under thi .u$ ection? "rovided0 That the hi torical co t or ad/u ted $a i of the real propert) old or di po ed

hall $e carried over to the ne& principal re idence $uilt or ac*uired? "rovided0further0 That the Commi ioner hall have $een dul) notified $) the taxpa)er&ithin thirt) 7=@8 da) from the date of ale or di po ition through a pre cri$edreturn of hi intention to avail of the tax exemption herein mentioned? "rovided0

till further0 That the aid tax exemption can onl) $e availed of once ever) ten75@8 )ear ? "rovided0 finall)0 that if there i no full utilization of the proceed of

ale or di po ition0 the portion of the gain pre umed to have $een realized fromthe ale or di po ition hall $e u$/ect to capital gain tax1 For thi purpo e0 thegro elling price or fair mar3et value at the time of ale0 &hichever i higher0

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009hall $e multiplied $) a fraction &hich the unutilized amount $ear to the groelling price in order to determine the taxa$le portion and the tax pre cri$ed

under paragraph 758 of thi .u$ ection hall $e impo ed thereon1

Section 5. T&( on Non,e#i"ent A)ien In"i*i"%&).

A0 Non,e#i"ent A)ien En/&/e" in t,&"e o, B%#ine## it in t e i)i$$ine#.

10 In Gene,&) 1

% nonre ident alien individual engaged in trade or $u ine in the "hilippinehall $e u$/ect to an income tax in the ame manner a an individual citizen

and a re ident alien individual0 on taxa$le income received from all ource&ithin the "hilippine 1

% nonre ident alien individual &ho hall come to the "hilippine and ta) therein for an aggregate period of 'o,e t &n one %n",e" ei/ t 18=0 "& #"%,in/ &n c&)en"&, )ear hall $e deemed a nonre ident alien doing $u inein the "hilippine 1 .ection ;; 7!8 of thi Code not&ith tanding1

0 C &n" o, ,o$e,t Di*i"en"# -,o' & Do'e#tic Co,$o,&tion o, ointStoc9 Co'$&n 2 o, In#%,&nce o, ;%t%&) F%n" Co'$&n o, Re/ion&)O$e,&tin/ He&" %&,te, o, ;%)tin&tion&) Co'$&n 2 o, S &,e in t eDi#t,i %t& )e Net Inco'e o- & &,tne,# i$ E(ce$t & Gene,&) ,o-e##ion&)

&,tne,# i$02 oint Acco%nt2 oint ent%,e T&(& )e & Co,$o,&tion o,A##oci&tion.2 Inte,e#t#2 Ro &)tie#2 ,i@e#2 &n" Ot e, innin/#.

Ca h andGor propert) dividend from a dome tic corporation0 or from a /ointtoc3 compan)0 or from an in urance or mutual fund compan) or from a

regional operating head*uarter of multinational compan)0 or the hare of anonre ident alien individual in the di tri$uta$le net income after tax of apartner hip 7except a general profe ional partner hip8 of &hich he i a partner0or the hare of a nonre ident alien individual in the net income after tax of ana ociation0 a /oint account0 or a /oint venture taxa$le a a corporation of &hichhe i a mem$er or a co venturer intere t ro)altie 7in an) form8 and prize7except prize amounting to Ten thou and pe o 7"5@0@@@8 or le &hich hall $e

u$/ect to tax under .u$ ection 7B8758 of .ection ;

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009i'$o#e" on the entire income and hall $e deducted and &ithheld $) thedepo itor) $an3 from the proceed of the long term depo it or inve tmentcertificate $a ed on the remaining maturit) thereof?

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009head*uarter and regional operating head*uarter e ta$li hed in the"hilippine $) multinational companie a

alarie 0&age 0annuitie 0compen ation0remuneration andother emolument 0 uch a

honoraria and allo&ance 0

from uch regional or area head*uarter and regionaloperating head*uarter 0

& t&( e %&) to -i-teen $e,cent 15>0 o- #%c /,o## inco'e:

"rovided0 ho&ever0 That the #&'e t&( t,e&t'ent hall appl) to Filipinoemplo)ed and occup)ing the ame po ition a tho e of alien emplo)ed $) the emultinational companie 1

For purpo e of thi Chapter0 the term multinational compan) mean a foreignfirm or entit) engaged in international trade &ith affiliate or u$ idiarie or$ranch office in the % ia "acific Region and other foreign mar3et 1

D0 A)ien In"i*i"%&) E'$)o e" O--# o,e B&n9in/ Unit#.

There hall $e levied0 collected and paid for each taxa$le )ear upon the gro incomereceived $) ever) alien individual emplo)ed $) off hore $an3ing unit e ta$li hed inthe "hilippine a alarie 0 &age 0 annuitie 0 compen ation0 remuneration and otheremolument 0 uch a honoraria and allo&ance 0 from uch off hore $an3ing unit 0 atax e*ual to fifteen percent 75 8 of uch gro income? "rovided0 ho&ever0 That the

ame tax treatment hall appl) to Filipino emplo)ed and occup)ing the amepo ition a tho e of alien emplo)ed $) the e off hore $an3ing unit 1

E0 A)ien In"i*i"%&) E'$)o e" et,o)e%' Se,*ice Cont,&cto, &n"S% cont,&cto, 1

%n %lien individual &ho i a permanent re ident of a foreign countr) $ut &ho iemplo)ed and a igned in the "hilippine $) a foreign ervice contractor or $) a foreign

ervice u$contractor engaged in petroleum operation in the "hilippine hall $elia$le to a tax of -i-teen $e,cent 15>0 of the alarie 0 &age 0 annuitie 0compen ation0 remuneration and other emolument 0 uch a honoraria andallo&ance 0 received from uch contractor or u$contractor?

"rovided0 ho&ever0 That the ame tax treatment hall appl) to a Filipino emplo)ed andoccup)ing the ame po ition a an alien emplo)ed $) petroleum ervice contractor and

u$contractor1

%n) income earned from all other ource &ithin the "hilippine $) the alienemplo)ee referred to under .u$ ection 7C80 7D8 and 7E8 hereof hall $e u$/ect to thepertinent income tax0 a the ca e ma) $e0 impo ed under thi Code1

Section 6. T&( Li& i)it o- ;e' e,# o- Gene,&) ,o-e##ion&) &,tne,# i$# 1 % generalprofe ional partner hip a uch hall not $e u$/ect to the income tax impo ed under thi

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009Chapter1

"er on engaging in $u ine a partner in a general profe ional partner hip hall $e lia$lefor income t&( on) in t ei, #e$&,&te &n" in"i*i"%&) c&$&citie# 1

For purpo e of computing the di tri$utive hare of the partner 0 the net income of thepartner hip hall $e computed in the ame manner a a corporation1

Each partner hall report a gro income hi di tri$utive hare0 actuall) or con tructivel) received0 in the net income of the partner hip1

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CHA TER I TA? ON COR ORATIONS

Section 7. Rates of In ome tax on Domesti Cor$orations .

(A' In %enera# .

Except a other&i e provided in thi Code0 an income tax of thirt) five percent 7= 8i here$) impo ed upon the taxa$le income derived during each taxa$le )ear from all

ource &ithin and &ithout the "hilippine $) ever) corporation0 a defined in.ection ;; 7B8 of thi Code and taxa$le under thi Title a a corporation0 organizedin0 or exi ting under the la& of the "hilippine ?

"rovided0 That effective anuar) 50 5>>:0

the rate of income tax hall $e thirt) four percent 7=< 8 effective anuar) 50 5>>>0the rate hall $e thirt) three percent 7== 8 and effective anuar) 50 ;@@@and thereafter0 the rate hall $e thirt) t&o percent 7=; 81

In the ca e of corporation adopting the fi cal )ear accounting period0 thetaxa$le income hall $e computed &ithout regard to the pecific date &hen

pecific ale 0 purcha e and other tran action occur1 Their income andexpen e for the fi cal )ear hall $e deemed to have $een e&,ne" &n" #$ente %&)) -o, e&c 'ont o- t e $e,io" 1

The reduced corporate income tax rate hall $e applied on the amount computed $) multipl)ing the num$er of month covered $) the ne& rate &ithin the fi cal )ear $) the taxa$le income of the corporation for the period0 divided $) t&elve1

"rovided0 further0 That the "re ident0 upon the recommendation of the .ecretar) of Finance0 ma) effective anuar) 50 ;@@@0 &))o3 co,$o,&tion# t e o$tion to et&(e" &t -i-teen $e,cent 15>0 o- /,o## inco'e "e-ine" herein0 after the

-o))o3in / con"ition # &* e 7een #&ti#-ie":

758 % tax effort ratio of t&ent) percent 7;@ 8 of !ro 4ational "roduct 7!4"87;8 % ratio of fort) percent 7

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 20097ross sales"ess2 'd-ust ents +et SalesSales returns Sales discounts and allowances and+et Sales "ess2 Cost of 7oods Sold

7ross Inco e

Co t of good old hall include all $u ine expen e directl) incurred to produce the merchandi e to $ring them to their pre entlocation and u e1

Fo , & t,&"in / o , 'e,c &n"i#in / conce,n 0

co t of good old hall include the

invoice co t of the good old0 pluimport dutie 0freight in tran porting the good to the place &here the goodare actuall) old0including in urance &hile the good are in tran it1

Fo , & '&n%-&ct%,in / conce,n 0

co t of good manufactured and old hall include

all co t of production of fini hed good 0 uch ara& material u ed0direct la$or andmanufacturing overhead0freight co t0

In urance premium and other co t incurred to $ring thera& material to the factor) or &arehou e1

In t e ce o- t&($& e,# en/&/e" in t e #&)e o- #e,*ice 0

gro income mean

!ro ReceiptLe %d/u tment

.ale return 0

.ale allo&ance and di count 14et !ro Receipt

( ' ,o$,iet&, E"%c&tion&) In#tit%tion# &n" Ho#$it&)#.

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"roprietar) educational in titution and ho pital &hich are nonprofit hallpa) a tax of ten percent 1=> 0 o n t ei , t&(& ) e income except tho ecovered $) .u$ ection 7D8 hereof?

"rovided0 that if the gro income from unrelated trade0 $u ine or otheractivit) e(cee" # -i-t $e,cen t 5=> 0 o - t e tot& ) /,o# # inco' e derived $)

uch educational in titution or ho pital from all ource 0 the tax

pre cri$ed in .u$ ection 7%8 hereof hall $e impo ed on the enti, e t&(& ) einco'e 1

For purpo e of thi .u$ ection0 the term unrelatedtrade0 $u ine or other activit) mean an) trade0$u ine or other activit)0 the conduc t o f whic h i s not substantiall y relate d t o th e e!ercis e o r perfor anc e b y suc h educationa l institutio n o r hospita l o f it s

pri ar y purpos e o r function 1 %

,o$,iet&, e"%c&tion&) in#tit%tion i an) private chool maintained andadmini tered $) private individual or group &ith an i ued permit tooperate from the Department of Education0 Culture and .port 7DEC.80 orthe Commi ion on Higher Education 7CHED80 or the Technical Educationand .3ill Development %uthorit) 7TE.D%80 a the ca e ma) $e0 inaccordance &ith exi ting la& and regulation 1

C0 Go*e,n'ent o3ne" o, Cont,o))e" Co,$o,&tion#2 A/encie# o,In#t,%'ent&)itie# 1

The provi ion of exi ting pecial or general la& to the contrar) not&ith tanding0 &)) co,$o,&tion#2 &/encie#2 o, in#t,%'ent&)itie# o3ne"o, cont,o))e" t e Go*e,n'ent 0 hall pa) uch rate of tax upon theirtaxa$le income a are impo ed $) thi .ection upon corporation ora ociation engaged in imilar $u ine 0 indu tr)0 or activit)1

E(E'"TED are

!overnment .ervice In urance .) tem 7!.I.80.ocial .ecurit) .) tem 7...80"hilippine Health In urance Corporation 7"HIC80"hilippine Charit) .&eep ta3e Office 7"C.O8 and"hilippine %mu ement and !aming Corporation 7"%!COR8

D0 R&te# o- T&( on Ce,t&in #i*e Inco'e# 1

10 Inte,e#t -,o' De$o#it# &n" ie)" o, &n ot e, ;onet&, Bene-it -,o'De$o#it S% #tit%te# &n" -,o' T,%#t F%n"# &n" Si'i)&, A,,&n/e'ent#2 &n"Ro &)tie# 1

% final tax at the rate of t&ent) percent => 0 i here$) impo ed upon theamount of intere t on currenc) $an3 depo it and )ield or an) othermonetar) $enefit from depo it u$ titute and from tru t fund and

2&

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009imilar arrangement received $) dome tic corporation 0 and ro)altie 0

derived from ource &ithin the "hilippine ?

"rovided0 ho&ever0 That intere t income derived $) a dome tic corporationfrom a depo itor) $an3 under the e($&n"e " -o,ei/ n c%,,enc "e$o#i t# #te ' hall $e u$/ect to a final income tax at the rate of 7 1 > of uchintere t income1

7 0 C&$it&) G&in# -,o' t e S&)e o- S &,e# o- Stoc9 Not T,&"e" in t e Stoc9E(c &n/e 1

% final tax at the rate pre cri$ed $elo& hall $e impo ed on net capital gainrealized during the taxa$le )ear from the ale0 exchange or other di po ition of

hare of toc3 in a dome tic corporation except hare old or di po ed of through the toc3 exchange?

4ot over "5@@0@@@MMMMMMM11MMMM1%mount in exce of "5@@0@@@ MMMMM11 5@

!0 T&( on Inco'e De,i*e" %n"e, t e E($&n"e" Fo,ei/n C%,,enc De$o#itS #te'.

Income derived $) a depo itor) $an3 under the expanded foreign currenc) depo it) tem from foreign currenc) tran action &ith local commercial $an3 0

including $ranche of foreign $an3 that ma) $e authorized $) the B." totran act $u ine &ith foreign currenc) depo itor) ) tem unit and otherdepo itor) $an3 under the expanded foreign currenc) depo it ) tem0 includingintere t income from foreign currenc) loan granted $) uch depo itor) $an3under aid expanded foreign currenc) depo it ) tem to re ident 0 hall $e

u$/ect to a final income tax at the rate o- ten $e,cent 1=>0 o- #%c inco'e.%n) income of nonre ident 0 &hether individual or corporation 0 fromtran action &ith depo itor) $an3 under the expanded ) tem hall $e exemptfrom income tax1

40 Inte,co,$o,&te Di*i"en"#.

Dividend received $) a dome tic corporation from another dome tic corporationhall not $e u$/ect to tax1

7 8 Capital !ain Realized from the .ale0 Exchange or Di po ition of LandandGor Building 1

% final tax of ix percent 79 8 i here$) impo ed on the gain pre umed to have$een realized on the ale0 exchange or di po ition of land andGor $uilding&hich are not &ct%&)) %#e" in t e %#ine## o- & co,$o,&tion &n" &,et,e&te" c&$it&) #et#2 $a ed on the gro elling price or fair mar3et valuea determined in accordance &ith .ection 97E8 of thi Code0 &hichever i# i/ e, 2o - uch land andGor $uilding 1

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009E0 ;ini'%' Co,$o,&te Inco'e T&( on Do'e#tic Co,$o,&tion#.

10 I'$o#ition o- T&(.

% minimum corporate income tax of t3 o $e,cen t >0 of the gro income a of the end of the taxa$le )ear0 a defined herein0 i here$) impo ed on acorporation taxa$le under thi Title0 e/innin / o n t e -o%,t t&(& ) e e& ,

i''e"i&te)6 follo&ing the )ear in &hich uch corporation commenced it$u ine operation 0 &hen the minimum income tax i greater than the taxcomputed under .u$ ection 7%8 of thi .ection for the taxa$le )ear1

0 C&,, Fo,3&," o- E(ce## ;ini'%' T&(.

%n) exce of the minimum corporate income tax over the normal income tax acomputed under .u$ ection 7%8 of thi .ection hall $e carried for&ard andcredited again t the normal income tax for the t ,e e !0 i''e"i&te) #%ccee"in/t&(& )e 6e&,#.

!0 Re)ie- -,o' t e ;ini'%' Co,$o,&te Inco'e T&( Un"e, Ce,t&inCon"ition#.

The Sec,et&, o - Fin&nc e i # e,e &%t o,i@e " to #%#$en " the impo ition of the minimum corporate income tax on an) corporation &hich uffer lo e onaccount of

o prolonged la$or di pute0 or $ecau e ofo force ma/eure0 or $ecau e ofo Legitimate $u ine rever e 1

The .ecretar) of Finance i here$) authorized to promulgate0 uponrecommendation of the Commi ioner0 the nece ar) rule and regulation that

hall define the term and condition under &hich he ma) u pend theimpo ition of the minimum corporate income tax in a meritoriou ca e1

40 G,o## Inco'e De-ine".

For purpo e of appl)ing the minimum corporate income tax provided under.u$ ection 7E8 hereof0 the term gro income hall mean gro ale le alereturn 0 di count and allo&ance and co t of good old1 ACo t of good old

hall include all $u ine expen e directl) incurred to produce the merchandi eto $ring them to their pre ent location and u e1

Fo , & t,&"in / o , 'e,c &n"i#in / conce,n 0

Co t of good old hall include the

Invoice co t of the good old0 plu%dd? %d/u tment

Import dutieFreight in tran porting the good to the place &here the good areactuall) old including in urance &hile the good are in tran it1

#0

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009Fo , & '&n%-&ct%,in / conce,n 0

co t of good manufactured and old hall include

%ll co t of production of fini hed good 0 uch a

ra& material u ed0direct la$or and

manufacturing overhead0freight co t0in urance premium andother co t incurred to $ring the ra& material to the factor) or&arehou e1

I n t e c e o - t&($& e, # en/&/e " i n t e #&) e o - #e,*ic e 0

gro income mean

!ro receiptLe ? %d/u tment

.ale return 0

.a le %llo&ance 0 di count andCo t of ervice 1

Co t of ervice hall mean

all direct co t and expen e nece aril ) incurred to provide theervice re*uired $) the cu tomer and client including

7%8 alarie and emplo)ee $enefit of per onnel0 con ultant andpeciali t directl) rendering the ervice and

7B8 co t of facilitie directl) utilized in providing the ervice uch adepreciation or rental of e*uipment u ed and co t of upplie ?

"rovided0 ho&ever0 That in the ca e of $an3 0 co t of ervice hallinc)%"e inte,e#t e($en#e.

Section 8. Rates of Inco e Ta! on (oreign Corporations.

A0 T&( on Re#i"ent Fo,ei/n Co,$o,&tion#.

758 In 7eneral.

Except a other&i e provided in thi Code0 a corporation organized0

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009authorized0 or exi ting under the la& of an) foreign countr)0 engaged intrade or $u ine &ithin the "hilippine 0 hall $e u$/ect to an income taxe*uivalent to thirt) five percent 7= 8 of the taxa$le income derived in thepreceding taxa$le )ear from all ource &ithin the "hilippine ? provided0 Thateffective anuar) 50 5>>:0 the rate of income tax hall $e thirt) four percent7=< 8 effective anuar) 50 5>>>0 the rate hall $e thirt) three percent 7== 80and effective anuar) 50 ;@@@ and thereafter0 the rate hall $e thirt) t&opercent 7=; 81

In t e ce o- co,$o,&tion# &"o$tin/ t e -i#c&) e&, &cco%ntin/ $e,io" 0the taxa$le income hall $e computed &ithout regard to the pecific date&hen ale 0 purcha e and other tran action occur1 Their income andexpen e for the fi cal )ear hall $e deemed to have $een earned and pente*uall) for each month of the period1

The reduced corporate income tax rate hall $e applied on the amountcomputed $) multipl)ing the num$er of month covered $) the ne& rate&ithin the fi cal )ear $) the taxa$le income of the corporation for the period0divided $) t&elve1

"rovided0 ho&ever0 That a re ident foreign corporation hal l $e granted theoption to $e taxed at fifteen percent 75 8 on gro income under the amecondition 0 a provided in .ection ;6 7%81

0 ;ini'%' Co,$o,&te Inco'e T&( on Re#i"ent Fo,ei/n Co,$o,&tion#.

% minimum corporate income tax of t&o percent 7; 8 of gro income0 apre cri$ed under .ection ;6 7E8 of thi Code0 hall $e impo ed0 under the

ame condition 0 on a re ident foreign corporation taxa$le under paragraph758 of thi .u$ ection1

!0 Inte,n&tion&) C&,,ie,.

%n international carrier doing $u ine in the "hilippine hall pa) a tax of t3 o &n " on e &) - $e,cen t 1 > 0 on it !ro "hilippine Billing adefined hereunder?

&0 Inte,n&tion&) Ai, C&,,ie,. G,o## i)i$$ine Bi))in/# Refer to the amount of gro revenue derived from

carriage of per on 0exce $aggage0cargo and mail

originating from the "hilippine in a contin%o% # &n " %ninte,,%$te "-)i/ t 2

irre pective of the place of ale or i ue and the place of pa)ment of the tic3et or pa age document?

"rovided0 That tic3et revalidated0 exchanged andGor indor ed to anotherinternational airline form part of the !ro "hilippine Billing if the$#en/e, o&,"# & $)&ne in & $o,t o, $oint in t e i)i$$ine# ?

"rovided0 further0 That for a flight &hich originate from the "hilippine 0$ut tran hipment of pa enger ta3e place at &n $o,t o%t#i"e t e

i)i$$ine# on &not e, &i,)ine2 onl) the &)i %o t $o,tio n of the co t of the tic3et corre ponding to the leg flo&n from the "hilippine to the point

#2

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009of tran hipment hall form part of !ro "hilippine Billing 1

0 Inte,n&tion&) S i$$in/. G,o## i)i$$ine Bi))in/# mean grorevenue &hether for pa enger0 cargo or mail originating from the"hilippine up to final de tination0 regardle of the place of ale orpa)ment of the pa age or freight document 1

40 O--# o,e B&n9in/ Unit# 1

The provi ion of an) la& to the contrar) not&ith tanding0 income derived$) off hore $an3ing unit authorized $) the B." to tran act $u ine &ithoff hore $an3ing unit 0 including an) intere t income derived from foreigncurrenc) loan granted to re ident 0 hall $e u$/ect to a final income taxat the rate of te n $e,cen t 1=> 0 o- #%c inco'e 1

%n) income of nonre ident 0 &hether individual or corporation 0 fromtran action &ith aid off hore $an3ing unit hall $e exempt from incometax1

50 T&( on B,&nc ,o-it# Re'itt&nce# 1

%n) profit remitted $) a $ranch to it head office hall $e u$/ect to a taxof fifteen 75 8 &hich hall $e $a ed on the total profit applied orearmar3ed for remittance &ithout an) deduction for the tax componentthereof 7except tho e activitie &hich are regi tered &ith the "hilippineEconomic Kone %uthorit)81 The tax hall $e collected and paid in the amemanner a provided in .ection 6 and : of thi Code? provided0 thatintere t 0 dividend 0 rent 0 ro)altie 0 including remuneration for technical

ervice 0 alarie 0 &age premium 0 annuitie 0 emolument or other fixed ordetermina$le annual0 periodic or ca ual gain 0 profit 0 income and capitalgain received $) a foreign corporation during each taxa$le )ear from all

ource &ithin the "hilippine hall not $e treated a $ranch profit unlethe ame are effectivel) connected &ith the conduct of it trade or $u ine

in the "hilippine 1

60 Re/ion&) o, A,e& He&" %&,te,# &n" Re/ion&) O$e,&tin/ He&" %&,te,# o-;%)tin&tion&) Co'$&nie#.

7a8 Regional or area head*uarter a defined in .ection ;;7DD8 hall not $eu$/ect to income tax1

7$8 Regional operating head*uarter a defined in .ection ;;7EE8 hall pa) atax of ten percent 75@ 8 of their taxa$le income1 7

70 T&( on Ce,t&in Inco'e# Recei*e" & Re#i"ent Fo,ei/n Co,$o,&tion.

&0 Inte,e#t -,o' De$o#it# &n" ie)" o, &n ot e, ;onet&, Bene-it -,o'De$o#it S% #tit%te#2 T,%#t F%n"# &n" Si'i)&, A,,&n/e'ent# &n" Ro &)tie#.

Intere t from an) currenc) $an3 depo it and )ield or an) other monetar) $enefitfrom depo it u$ titute and from tru t fund and imilar arrangement andro)altie derived from ource &ithin the "hilippine hall $e u$/ect to a final

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009income tax at the rate of t3ent $e,cent =>0 of uch intere t?

"rovided0 ho&ever0 That intere t income derived $) a re ident foreigncorporation from a depo itor) $an3 under the expanded foreign currenc) depo it

) tem hall $e u$/ect to a final income tax at the rate of even and one half percent 76 5G; 8 of uch intere t income1

0 Inco'e De,i*e" %n"e, t e E($&n"e" Fo,ei/n C%,,enc De$o#it S #te'.

Income derived $) a depo itor) $an3 under the expanded foreign currenc) depo it) tem from foreign currenc) tran action &ith local commercial $an3 including

$ranche of foreign $an3 that ma) $e authorized $) the Bang3o .entral ng"ilipina 7B."8 to tran act $u ine &ith foreign currenc) depo it ) tem unit 0including intere t income from foreign currenc) loan granted $) uchdepo itor) $an3 under aid expanded foreign currenc) depo it ) tem tore ident 0 hall $e u$/ect to a final income tax at the rate of ten percent 71=>0o- #%c inco'e.

%n) income of nonre ident 0 &hether individual or corporation 0 fromtran action &ith depo itor) $an3 under the expanded ) tem hall $e exemptfrom income tax1

c0 C&$it&) G&in# -,o' S&)e o- S &,e# o- Stoc9 Not T,&"e" in t e Stoc9E(c &n/e.

% final tax at the rate pre cri$ed $elo& i here$) impo ed upon the net capitalgain realized during the taxa$le )ear from the ale0 $arter0 exchange or otherdi po ition of hare of toc3 in a dome tic corporation except hare old ordi po ed of through the toc3 exchange?

4ot over "5@@0@@@ MMMMMM1MMMMMMOn an) amount in exce of "5@@0@@@ MM1 5@

7d8 Inte,co,$o,&te Di*i"en"# 1

Dividend received $) a re ident foreign corporation from a dome tic corporationlia$le to tax under thi Code hall not $e u$/ect to tax under thi Title1

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B0 T&( on Non,e#i"ent Fo,ei/n Co,$o,&tion.

10 In %enera#. Except a other&i e provided in thi Code0 a foreign corporationnot engaged in trade or $u ine in the "hilippine hall pa) a tax e*ual to thirt) five percent 7= 8 of the gro income received during each taxa$le )ear from all

ource &ithin the "hilippine 0 uch a intere t 0 dividend 0 rent 0 ro)altie 0alarie 0 premium E?CE T rein urance premium 80 annuitie 0 emolument or

other fixed or determina$le annual0 periodic or ca ual gain 0 profit and income0and capital gain 0 except capital gain u$/ect to tax under u$paragraph 7C8and 7d8?

"rovided0

That effective 50 5>>:0 the rate of income tax hall $e thirt )four percent7=< 8 effective anuar) 50 5>>>0 The rate hall $e thirt) three percent7== 8 and0 effective anuar) 50 ;@@@ and thereafter0 the rate hall $e thirt) t&o percent 7=; 81

7 0 -onresiden t Cinemato"ra$hi (i# m Owner , esso r o r Distributor .

% cinematographic film o&ner0 le or0 or di tri$utor hall pa) a tax of t&ent)fivepercent 5> 0 o - it # /,o# # inco' e from all ource &ithin the "hilippine 1

7! 0 -onresiden t Owne r o r esso r o f esse# s Chartere d b y Phi#i$$in e -ationa#s .

% nonre ident o&ner or le or of ve el hall $e u$/ect to a tax of four and onehalf percent 4 1 > 0 o - /,o# # ,ent&)# 0 lea e or charter fee from lea e orcharter to Filipino citizen or corporation 0 a approved $) the 'aritimeIndu tr) %uthorit)1

4 0 -onresiden t Owne r o r esso r o f Air raft , &a hinerie s an d Othe r

E/ui$ment .

Rental 0 charter and other fee derived $) a nonre ident le or of aircraft0machinerie and other e*uipment hall $e u$/ect to a tax of even and onehalf percent 7 1 > 0 o- /,o# # ,ent&) # o , -ee#.

50 Tax on Certain In omes Re ei!ed by a -onresident (orei"n Cor$oration.

&0Interest on (orei"n oans .

% final &ithholding tax at the rate of t&ent) percent 7;@ 8 i here$) impo ed on the amount of intere t on foreign loan contracted on orafter %ugu t 50 5>:9

7$8 Inter or$orate Di!idends .

% final &ithholding tax at the rate of fifteen percent 75 8 i here$) impo ed on the amount of ca h andGor propert) dividend receivedfrom a dome tic corporation0 &hich hall $e collected and paid a

RO IDE D I n .ection 6 7%8 of thi Code0 u$/ect to the conditionthat the countr) in &hich the nonre ident foreign corporation idomiciled0 hall allo& a credit again t the tax due from the

#$

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009nonre ident foreign corporation taxe deemed to have $een paid inthe "hilippine e*uivalent to t&ent) percent 7;@ 8 for 5>>60nineteen percent 75> 8 for 5>>:0 eighteen percent 75: 8 for 5>>>0and eventeen percent 756 8 thereafter0 &hich repre ent thedifference $et&een the regular income tax of thirt) five percent7= 8 in 5>>60 thirt) four percent 7=< 8 in 5>>:0 and thirt) threepercent 7== 8 in 5>>>0 and thirt) t&o percent 7=; 8 thereafter oncorporation and the fifteen percent 75 8 tax on dividend a

provided in thi u$paragraph

7c0 Ca$ita# %ains from Sa#e of Shares of Sto k not Traded in the Sto k Ex han"e.

% final tax at the rate pre cri$ed $elo& i here$) impo ed upon the netcapital gain realized during the taxa$le )ear from the ale0 $arter0exchange or other di po ition of hare of toc3 in a dome tic corporation0except hare old0 or di po ed of through the toc3 exchange?

4ot over "5@@0@@@ MMMM11MMMMMMM

On an) amount in exce of "5@@0@@@ MMMM 5@ Section

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758 Income exempt from tax7;8 Income excluded from gro income7=8 Income u$/ect to final tax and7

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 20097 8 Farmer or other mutual t)phoon or fire in urance compan)0 mutual ditch orirrigation compan)0 mutual or cooperative telephone compan)0 or li3e organization of a purel) local character0 the income of &hich con i t olel) of a e ment 0 due 0 andfee collected from mem$er for the ole purpo e of meeting it expen e and

728 Farmer 0 fruit gro&er 0 or li3e a ociation organized and operated a a aleagent for the purpo e of mar3eting the product of it mem$er and turning $ac3 tothem the proceed of ale 0 le the nece ar) elling expen e on the $a i of the

*uantit) of produce fini hed $) them4ot&ith tanding the provi ion in the preceding paragraph 0 the income of &hatever3ind and character of the foregoing organization from an) of their propertie 0 real orper onal0 or from an) of their activitie conducted for profit regardle of thedi po ition made of uch income0 hall $e u$/ect to tax impo ed under thi Code1

CHA TER CO; UTATION OF TA?ABLE INCO;E

Section !1. Taxab#e In ome Defined . The term taxa$le income mean the pertinentitem of gro income pecified in thi Code0 le the deduction andGor per onal and

additional exemption 0 if an)0 authorized for uch t)pe of income $) thi Code or otherpecial la& 1

CHA TER I CO; UTATION GROSS INCO;E

Section ! . %ross In ome .

7%87eneral #efinition. Except &hen other&i e provided in thi Title0 gro incomemean all income derived from &hatever ource0 including 7$ut not limited to8 thefollo&ing item ?

758 Compen ation for ervice in &hatever form paid0 including0 $ut not limitedto fee 0 alarie 0 &age 0 commi ion 0 and imilar item

7;8 !ro income derived from the conduct of trade or $u ine or the exerci e of aprofe ion

7=8 !ain derived from dealing in propert)

78 "rize and ,inning

75@8 "en ion

7558 "artner di tri$utive hare from the net income of the general profe ionalpartner hip1

#&

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B0Ex #usions from %ross In ome . The follo&ing item hall not $e included in groincome and hall $e exempt from taxation under thi title?

758 Life In urance1 The proceed of life in urance policie paid to the heir or$eneficiarie upon the death of the in ured0 &hether in a ingle um or other&i e0$ut if uch amount are held $) the in urer under an agreement to pa) intere tthereon0 the intere t pa)ment hall $e included in gro income1

7;8 %mount Received $) In ured & # Ret%, n o - ,e'i%' . The amount received $) the in ured0 a a return of premium paid $) him under life in urance0 endo&ment0or annuit) contract 0 either during the term or at the maturit) of the term mentionedin the contract or upon urrender of the contract1

7=8 !ift 0 Be*ue t 0 and Devi e 1 The value of propert) ac*uired $) gift0 $e*ue t0devi e0 or de cent? "rovided0 ho&ever0 T &t inco' e -,o ' #%c propert)0 a &ell agift0 $e*ue t0 devi e or de cent of income from an) propert)0 in ca e of tran fer of divided intere t0 hall $e included in gro income1

7

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7d8 "a)ment of $enefit due or to $ecome due to an) per on re iding in the"hilippine under the la& of the nited .tate admini tered $) the nited .tate#eteran %dmini tration1

7e8 Benefit received from or en/o)ed under the .ocial .ecurit) .) tem inaccordance &ith the provi ion of Repu$lic %ct 4o1 :;:;

7f8 Benefit received from the !.I. under Repu$lic %ct 4o1 :;>50 includingretirement gratuit) received $) government official and emplo)ee 1

768 'i cellaneou Item 1

&0 Inco'e De,i*e" Fo,ei/n Go*e,n'ent 1 Income derived from inve tmentin the "hilippine in loan 0 toc3 0 $ond or other dome tic ecuritie 0 or fromintere t on depo it in $an3 in the "hilippine $)

7i8 foreign government 07ii8 financing in titution o&ned0 controlled0 or en/o)ing refinancingfrom foreign government 0 and7iii8 international or regional financial in titution e ta$li hed $) foreign government 1

0 Inco'e De,i*e" t e Go*e,n'ent o, it# o)itic&) S% "i*i#ion# 1 Incomederived from an) pu$lic utilit) or from the exerci e of an) e ential governmentalfunction accruing to the !overnment of the "hilippine or to an) political

u$divi ion thereof1

c0 ,i@e# &n" A3&,"# 1 "rize and a&ard made primaril) in recognition of religiou 0 charita$le0 cientific0 educational0 arti tic0 literar)0 or civic achievement$ut onl) if?

7i8 The recipient &a elected &ithout an) action on hi part to enter theconte t or proceeding and

7ii8 The recipient i not re*uired to render u$ tantial future ervice a a

condition to receiving the prize or a&ard17d8 "rize and %&ard in port Competit ion1 %ll prize and a&ard granted toathlete in local and international port competition and tournament &hetherheld in the "hilippine or a$road and #&nctione " t ei , n&tion& ) #$o,t ##oci&tion#.

e 0 1!t ;ont & &n " Ot e , Bene-it# 1 !ro $enefit received $) official andemplo)ee of pu$lic and private entitie ? "rovided0 ho&ever0 That the total exclu ion underthi u$paragraph hall not exceed Thirt) thou and pe o 7"=@0@@@8 &hich hall cover?

7i8 Benefit received $) official and emplo)ee of the national and localgovernment pur uant to Repu$lic %ct 4o1 99:9

7ii8 Benefit received $) emplo)ee pur uant to "re idential Decree 4o1: 50 a amended $) 'emorandum Order 4o1 ;:0 dated %ugu t 5=0 5>:9

7iii8 Benefit received $) official and emplo)ee not covered $) "re idential decree 4o1 : 50 a amended $) 'emorandum Order 4o1;:0 dated %ugu t 5=0 5>:9 and

7iv8 Other $enefit uch a productivit) incentive and Chri tma $onu ?

40

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Notes of ALS Student Number 2006-0419 (Taxa on Class Second Term Tr! Sem C" 2009"rovided0 further0 That the ceiling of Thirt) thou and pe o 7"=@0@@@8ma) $e increa ed through rule and regulation i ued $) the .ecretar) of Finance0 upon recommendation of the Commi ioner0 after con ideringamong other 0 the effect on the ame of the inflation rate at the end of thetaxa$le )ear1

7f8 !.I.0 ...0 'edicare and Other Contri$ution 1 !.I.0 ...0 'edicareand "ag i$ig contri$ution 0 and union due of individual 1

7g8 !ain from the .ale of Bond 0 De$enture or other Certificate ofInde$tedne 1

!ain realized from the ame or exchange or retirement of $ond 0de$enture or other certificate of inde$tedne &ith a maturit) o - 'o, e t & n-i* e 5 0 6e&,#.

7h8 !ain from Redemption of .hare in 'utual Fund1 !ain realized $) theinve tor upon redemption of hare of toc3 in a mutual fund compan) adefined in .ection ;; 7BB8 of thi Code1

Section !!. S$e ia# Treatment of (rin"e 0enefit .

7%8I position of Ta!. % final tax of thirt) four percent 7=< 8 effective anuar) 505>>: thirt) three percent 7== 8 effective anuar) 50 5>>> and thirt) t&o percent7=; 8 effective anuar) 50 ;@@@ and thereafter0 i here$) impo ed on the gro ed -up monetar) value of fringe $enefit furni hed or granted to the emplo)ee 7exceptran3 and file emplo)ee a defined herein8 $) the emplo)er0 &hether an individual ora corporation 7unle the -,in/ e ene-i t i # ,e %i,e " t e n&t%, e o- 2 o , nece##&,t o t e t,&"e 2 %#ine# # o , $,o-e##io n o - t e e'$)o e, 2 o , 3 e n t e -,in/ e ene-i ti # -o , t e con*enienc e o , &"*&nt&/ e o - t e e'$)o e,0 .

T e t& ( e,ei n i'$o#e " i # $& & ) e t e e'$)o e , &hich tax hall $e paid in theame manner a provided for under .ection 6 7%8 of thi Code1 The /,o##e " % $

'onet&, value of the fringe $enefit hall $e determined $) dividing the actualmonetar) value of the fringe $enefit $) ixt) ix percent 799 8 effective anuar) 505>>: ixt) even percent 796 8 effective anuar) 50 5>>> and ixt) eight percent

68> 0 e--ecti* e &n%&, 1 2 == = and thereafter?

"rovided0 ho&ever0 That fringe $enefit furni hed to emplo)ee and taxa$le under.u$ ection 7B80 7C80 7D8 and 7E8 of .ection ; hall $e taxed at the applica$le rateimpo ed thereat?

"rovided0 further0 That the gro ed p value of the fri

ra 8424_1997 (part i)

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