Law Summary

Introduction

Presidential Decree No. 1117, issued by President Ferdinand E. Marcos on April 15, 1977, amends Section 45 of the National Internal Revenue Code concerning the requirements for filing income tax returns.

Background and Rationale

• Purpose: The decree addresses the burden of filing income tax returns by individuals with no income, highlighting the administrative inefficiencies and costs associated with processing returns that yield little benefit.
• Statistics: In 1975, 1,185,340 returns were filed by individuals without income, prompting the need for reform.

Section 1: Amendment to Section 45(a) of the Tax Code

Legal Provision

• The amendment redefines the requirements for individuals obligated to file income tax returns based on income thresholds.

Key Definitions

• Gross Income: The total income from all sources before any deductions.
• Non-resident Alien: An individual who is not a citizen of the Philippines and does not reside therein.

Important Requirements

• Filing Threshold:
  • Individuals with a gross income of at least P1,800 must file an income tax return.
  • Applies to:
    • All Filipino citizens, regardless of residence.
    • All resident aliens, regardless of income source.
    • Non-resident aliens engaged in trade or business in the Philippines must file regardless of income amount.

Filing Procedures

• Where to File: Returns should be filed with:
  • The Commissioner
  • Regional Director
  • Revenue District Officer
  • Collection Agent
  • Authorized municipal treasurers or agent banks.
• When to File:
  • Returns for residents (citizens or aliens earning solely from salaries, wages, etc.) must be filed by March 15 of the following year.
  • All other individuals, including non-resident citizens, must file by April 15.

Special Provisions

• Married Couples: Only one consolidated return may be filed, but separate returns are allowed if impractical.
• Minor's Income: Income of unmarried minors from property received from a living parent must be included in the parent’s return, unless specific tax conditions are met.
• Disability Provisions: A duly authorized agent or guardian may file on behalf of a taxpayer unable to do so, assuming responsibility for accuracy.

Signature Validity

• A filed return signed by an individual is prima facie evidence that it was signed by them.

Section 2: Implementation

• The Secretary of Finance is tasked with issuing necessary rules and regulations for the effective implementation of the decree.

Section 3: Effectivity

• The provisions of the decree shall take effect for the calendar year ending December 31, 1976.

Key Takeaways

• The decree streamlines the filing process for income tax returns in the Philippines, relieving individuals without income from the obligation to file.
• Establishes specific income thresholds and filing deadlines, clarifying procedures for residents and non-residents.
• Introduces consolidated filing for married couples and special provisions for minors and individuals under disability.
• The effective date is retroactive to December 31, 1976, impacting subsequent tax filings.