Amendment to Section 7: Powers of the Commissioner to Obtain Information and Enforce Tax Compliance
- The Commissioner may examine books, papers, records, or data relevant to tax inquiries.
- Can obtain information from national and local government offices, including government-owned or controlled corporations and the Central Bank.
- Authorized to summon liable taxpayers, employees, or custodians of records to appear, produce documents, and give testimony under oath.
- Can order revenue officers to canvass districts or regions to identify persons liable for taxes and objects subject to tax.
Amendment to Section 16: Powers of the Commissioner to Make Assessments
- Upon filing, the Commissioner examines returns and assesses correct tax amounts; assessed taxes must be paid upon notice.
- Returns bearing official seals cannot be withdrawn but may be amended by filing an amended return.
- Commissioner can assess taxes on best evidence when reports are not filed or suspected false.
- Authority to create returns or amend them when returns are false, fraudulent, or not filed; such returns are prima facie evidence.
- May order inventory taking or surveillance during the taxable year if income declaration is suspected inaccurate, using findings for assessment.
- Can prescribe presumptive gross sales or receipts when violations or inaccuracies are found, creating prima facie basis for tax liabilities.
- Authorized to terminate tax periods if a taxpayer is retiring, leaving the country, or acts to obstruct tax collection; tax becomes immediately due.
- Commissioner may set fair market values of real properties by zones for tax computation, considering either Commissioner’s valuation or local assessors’ values—whichever is higher.
- Authorized to inquire into bank deposit accounts for estate and tax determinations, overriding certain confidentiality provisions; waiver required for compromise offers.
- May accredit and register tax agents and establish accreditation boards subject to rules and approval by the Minister of Finance.
Amendment to Section 19: National Internal Revenue Taxes Defined
- Enumerated national internal revenue taxes include income tax, estate and gift taxes, excise taxes, business taxes, documentary stamp taxes, mining taxes, and miscellaneous taxes.
- Miscellaneous taxes include taxes on banks, finance companies, insurance companies, franchises, amusements, forest product charges, tobacco inspection fees, and other taxes collected by the Bureau.
Amendment to Section 21(d): Tax on Interest from Bank Deposits
- Interest from Philippine currency bank deposits and yields from deposit substitutes, trust funds, and similar arrangements are subject to a final tax of 17.5%.
- Tax applies to citizens and resident alien individuals with payment provisions under Sections 51 and 52.
Amendment to Section 24(b)(2)(ii): Tax on Branch Profits Remittances
- Branch profits remitted to head office are subject to a 15% tax, except branches registered with the Export Processing Zone Authority.
- Branch profits remitted from petroleum operations head offices are taxed at 7.5%.
- Interests, dividends, rents, royalties, salaries, and other gains received by foreign corporations not effectively connected with Philippine trade are excluded from branch profits definition.
Amendments to Section 24(cc) Renumbered as 24(d) and Addition of 24(e): Interest and Royalties Taxation
- Interest on Philippine currency bank deposits and monetary benefits received by domestic or resident foreign corporations taxed at 17.5% final tax, with exemptions for foreign governments, certain financing institutions, and international institutions.
- Royalties subject to a 15% final tax with returns and payments as provided by law.
Addition to Section 29(c)(7): Prizes and Awards Exemption
- Prizes and awards recognizing religious, charitable, scientific, educational, artistic, literary, or civic achievement are exempt if:
- The recipient was selected without actively entering the contest.
- The recipient is not required to provide substantial future services.
Amendments to Section 30: Deductions and Allowable Expenses
- Private educational institutions may elect to deduct expenses as capital outlays or depreciation allowances for school facility expansions.
- General rules on allowable interest expense deductions for persons engaged in business or profession; complications addressed for branches and non-resident aliens with conditions.
- Losses claimed for estate tax purposes cannot be deducted again for income tax.
Amendment to Section 34(h): Taxation on Sale or Exchange of Capital Asset Real Property
- Sales, exchanges, or dispositions of real property by individuals, estates, and trusts taxed at 5% on gross selling price or fair market value, whichever is higher.
- Tax imposed is in lieu of income tax on gain from sale, with specific provisions for sales to governmental entities.
- Installment payment provisions detailed; failure to pay tax results in disqualification from installment method.
- Registration of documents transferring real property prohibited without certification of tax payment.
Amendment to Section 35(b): Basis of Property Acquired
- Cost basis for property acquired by purchase or fair market value as of acquisition date if inherited.
- For property acquired by gift or less than full consideration, basis to the transferee is the same as donor's or transferor's.
Amendment to Section 37(b): Allocation of Expenses to Income from Sources within the Philippines
- Deductions allowed against gross income from Philippine sources must be properly allocated and substantiated.
- Any remainder treated entirely as net income from Philippine sources.
Amendment to Section 51(a)(1): Payment and Assessment of Income Tax
- Tax must be paid at the time the return is filed.
- For tramp vessels, shipping/husbanding agents or captains must file return and pay tax before vessel departure.
- Bureau of Customs authorized to detain vessels until tax or bond is secured.
Amendment to Section 53(d)(1) Renumbered as Section 51(d)(1): Withholding Final Tax
- Banks and financial institutions must withhold 17.5% final tax on interest from deposits, deposit substitutes, trust funds, and similar arrangements.
Amendment to Section 58 Renumbered as Section 56: Estate and Trust Exemption
- Estates and trusts are allowed a tax exemption of Four Thousand Pesos.
Amendment to Section 76 Renumbered as Section 70: License Requirement for Collection of Foreign Payments
- Persons or entities undertaking collection of foreign payments must secure a license from the Commissioner.
- Subject to regulations for submission of required information.
Amendment to Section 101(a)(1)(C) Renumbered as Section 89: Claims Against Estate
- For loans incurred within three years before decedent's death, debt instrument must be notarized.
- Administrator/executor must submit a statement showing loan proceeds disposition.
Amendment to Section 103 Renumbered as Section 91: Estate Valuation
- Usufruct and annuities valued considering life expectancy based on American Tropical Experience Table.
- Estate appraised at fair market value as of death.
- Real property valued at the higher of Commissioner’s fair market value or local assessors’ schedule.
Amendment to Section 105 Renumbered as Section 93: Estate Tax Return Filing Time
- Estate tax returns must be filed within ninety days from decedent's death.
- Certified copy of partition schedule and court order to be furnished to Commissioner within thirty days after court order.
Title IV Amendments: Excise Taxes
General Provisions
- Excise taxes imposed on articles manufactured locally for domestic sale or imported, excluding exports without return.
- Specific taxes based on physical measurement; ad valorem taxes based on selling price or value.
Payment on Domestic Products
- Manufacturers/producers pay excise taxes before product removal, except certain petroleum products with 15-day payment grace.
- Gross selling price determined at wholesale level; minimum profit margin of 10% added if price is below cost.
- Manufacturers must file sworn statements detailing products and prices.
Payment on Imports
- Importers pay excise taxes before Customs release.
- Purchasers of tax-free imported articles reselling to non-exempt persons are liable for taxes, which are liens on the articles.
- Import excise tax rates match locally manufactured articles unless specified otherwise.
Tax Computation for Packages
- Fractions of proof liters taxed as whole or exempt accordingly.
Conditional Tax-Free Removal
- Regulated, permit-based tax-free withdrawal of wines and spirits for tobacco treatment.
- Denatured alcohol exempt from certain excise taxes but subject to other taxes.
- Petroleum products sold to foreign international carriers exempt from excise taxes if reciprocal exemptions apply.
Excise Tax on Alcohol Products
- Specific taxes imposed on distilled spirits based on raw materials and production methods.
- Ad valorem tax on compounded liquors at 4% of gross selling price.
- Wine taxes differentiated by type and alcohol content.
- Fermented liquors taxed by specific and ad valorem taxes.
Excise Tax on Tobacco Products
- Specific taxes imposed per kilogram on various tobacco forms.
- Cigars and cigarettes taxed based on wholesale or retail prices with tiered rates.
- Imported cigarettes taxed at a fixed rate.
Excise Tax on Petroleum Products
- Specific and/or ad valorem taxes imposed on refined mineral oils, fuels, and manufactured oils.
- Rates vary by product type and use.
Miscellaneous Articles
- Ad valorem and specific excise taxes imposed on matches, fireworks, coal, cinematographic films, videotapes, and saccharine.
Amendments to Time for Payment of Fixed Taxes and Fixed Taxes Rates
- Fixed taxes are due annually by the first month of the taxable year.
- New fixed tax rates imposed on various businesses and service providers, including dealers, manufacturers, forest operators, and automotive sectors.