Law Summary
Tax Rates Imposed on Corporations
- Corporations are taxed at 20% on the portion of net income not exceeding PHP 100,000.
- A higher rate of 28% applies to income exceeding PHP 100,000.
- Building and Loan Associations, operating under specific sections of the Corporation Law, are taxed at 12% on their net income.
- Private educational institutions are taxed at a reduced rate of 10% on their total net income.
Special Provisions on Dividends
- Dividends received by domestic or resident foreign corporations from domestic corporations liable to the tax are subject to special consideration.
- For dividends from domestic corporations engaged in new and necessary industries (as defined under Republic Act No. 901), only 25% of such dividends are considered taxable income for the tax imposed.
Effective Date and Application
- The law applies retroactively to income received from January 1, 1954.
- It took effect immediately upon approval on June 17, 1954.
Key Legal Concepts and Provisions
- "Corporation" is broadly defined to include all corporations organized under Philippine laws.
- The exclusion of general co-partnerships clarifies the entities subject to tax.
- Differentiated tax rates provide for equitable taxation based on income levels.
- Reduced rates for specific institutions recognize their unique status (e.g., educational and financial institutions).
- Special dividend treatment reflects policy considerations for encouraging investment in certain industries.