Law Summary
Entities Liable to Residence Tax
- All corporations, domestic or resident foreign, doing business in the Philippines
- Annual residence tax of ₱5 plus an additional tax not exceeding ₱1,000 based on property and gross receipts
- Dividends excluded from gross receipts
- Definition of "corporation" includes joint-stock companies, partnerships, associations, insurance companies, etc.
- "Resident foreign" corporations defined as foreign entities engaged in business or maintaining offices in the Philippines
Issuance of Residence Certificates
- Issued upon payment of residence tax for liable persons and corporations
- Non-liable persons or entities may obtain certificates for twenty centavos
- Certificates for persons include detailed personal information and signatures
Tax Exemptions
- United States High Commissioner and staff
- U.S. military personnel stationed in the Philippines
- Civilian employees of U.S. military branches under U.S. orders
- Foreign diplomatic and consular representatives
- Transient visitors staying less than three months
Payment Deadlines and Penalties for Delinquency
- Taxes accrue on January 1 for residents
- Delinquency if unpaid by April 30 for those liable by April 10
- New residents or those becoming liable by June 30 have modified deadlines
- No tax obligation if arriving or becoming liable after July 1
- Corporations follow similar rules with deadline exceptions
- Penalty surcharge of 5% per month up to 25% for late payments
Requirement of Residence Certificate Presentation
- Required when acknowledging documents before notaries, assuming government positions, obtaining licenses, receiving public funds, or salary payments
- Public officials must demand certificate for businesses or corporations in official transactions
- Certificates valid for current year, with previous year accepted only in January or upon payment during the year
- Presentation not required for voter registration
Administrative Provisions
- Relevant laws on assessment, remission, collection, and refund of internal-revenue taxes apply unless inconsistent with this Act
Collection and Allocation of Tax Proceeds
- Collected by provincial/city treasurers
- Remitted to Collector of Internal Revenue
- Distributed based on population as follows:
- 25% to provincial general funds
- 25% to general funds of cities, municipalities, and districts
- 50% to school funds of cities, municipalities, and districts
- Sub-provinces receive shares proportional to the province
Rulemaking Authority
- Secretary of Finance empowered to promulgate necessary rules and regulations for effective enforcement
Prohibited Acts Regarding Residence Certificates
- Using or possessing another’s certificate with intent to defraud or deceive punishable by fine up to ₱200 or imprisonment up to six months
Falsification and Counterfeiting of Certificates
- Making, selling, using, altering, or possessing counterfeit or false certificates punishable by fines between ₱200 and ₱5,000, imprisonment from two months to five years, or both
General Penalties for Violations
- Violations without specific penalties subject to fines up to ₱300 or imprisonment up to six months, or both
- Delinquency in tax payments governed by special provisions
Effectivity
- The Act takes effect on January 1, 1940.