Anti-Accumulation Tax on Certain Business Entities
- Repeals former section 3 and imposes a 25% tax on undistributed accumulated profits of corporations, joint-stock companies, partnerships, joint accounts, or associations (except banks and insurance companies).
- Targets entities created or used to avoid surtax by accumulating profits instead of distribution.
- The tax is additional to existing income taxes under section ten.
Personal Exemptions for Taxpayers
- Allows personal exemptions from net income: 2,000 pesos base, plus 2,000 additional for married individuals or those supporting certain dependents.
- Only one combined deduction of 4,000 pesos for married couples not legally separated.
- Additional exemptions: 500 pesos for each legitimate, recognized natural, or adopted dependent child under 21 or incapacitated.
- Guardians/trustees may claim exemptions for wards, but the ward cannot claim more than allowed.
- Estates and trusts get a 2,000 pesos exemption during administration or if income is not regularly distributed.
- Non-resident aliens can claim exemptions equivalent to those granted to Philippine residents, subject to filing true income returns.
Income Tax Return Filing Requirements
- Requires persons of lawful age with gross income of 2,000 pesos or more to file an income tax return by March 1 each year.
- Returns must detail gross income from all sources and authorized deductions.
- Married persons file either a consolidated or separate returns to be consolidated for tax purposes.
- Collector of Internal Revenue may grant extensions for return filing in meritorious cases.
- Returns may be filed by authorized representatives if taxpayer cannot file due to illness, absence, or nonresidence.
Corporate Income Tax
- Levies a 6% tax on total net income of corporations, joint-stock companies, partnerships, joint accounts, associations, and insurance companies organized in the Philippines.
- Also applies a like tax on income within the Philippines received by foreign entities, including interest on Philippine residents’ obligations.
- Income already taxed under the normal tax is exempt from this corporate tax.
- Gains or losses from sale or disposition of property are treated according to specified subsections of the original Act.
Penalties for Tax Noncompliance
- Failure to pay tax, file returns, or supply required information results in a less grave felony, punishable by fines between 40 to 2,000 pesos, or imprisonment up to six months, or both.
- False or fraudulent returns intending to evade tax incur penalties of fines up to 4,000 pesos, imprisonment up to one year, or both.
- No penalties or recollection imposed if tax has been properly paid by the taxpayer or withholding agent, unless the failure was fraudulent.
Reporting and Record-Keeping Requirements for Corporations
- Corporations and similar entities must render detailed, sworn returns on payments of dividends or profits upon request from the Collector of Internal Revenue.
- Must include names and addresses of stockholders/members, capital or shares owned, source years, and gains or earnings.
- Penalty for failure to keep accurate records or provide required information is an additional tax of 10% of dividends or profits distributed.
- Resident foreign corporations deriving majority income from foreign sources are exempt from this additional amount.
Effective Date and Application
- The amendments take effect upon approval.
- Applies retroactively to income received from January 1, 1936, onward.