Tax on Dividends Received by Individual Citizens or Residents (Section 1)
- Dividends from domestic corporations received by individual citizens or residents are subject to a final tax.
- Final tax rate imposed is 15% on the total amount of dividends.
- Tax to be collected and paid as prescribed under Sections 53 and 54 of the National Internal Revenue Code.
Tax on Dividends Received by Domestic or Resident Foreign Corporations (Section 2)
- Dividends received from domestic corporations by domestic or resident foreign corporations are subject to a final tax of 10%.
- Final tax collected and paid pursuant to Sections 53 and 54 of the Code.
- No tax imposed if recipient is exempt from income taxation.
- Preferential tax rates apply if recipient enjoys such treatment.
- Dividends taxed under this provision are excluded from gross income for recipient corporation.
- Interest paid or incurred on foreign indebtedness used to invest in domestic corporations is deductible from inter-corporate dividends before computing the 10% tax.
- Excess deductible interest may be deducted from other gross income, subject to further provisions.
- Deduction allowed only upon submission of authenticated foreign loan agreements specifying use of proceeds.
Inclusion of Dividends in Gross Income (Section 3)
- Dividends subjected to final tax under Sections 21 and 24 are excluded from gross income of the recipient.
Withholding Tax on Royalties (Section 4)
- Royalties paid to individuals residing in the Philippines, domestic corporations, or resident foreign corporations are subject to a 15% withholding tax.
- Exception: payments to mining claim owners or lessees pursuant to mining agreements.
- Withholding tax to be remitted by payor in the same manner as prescribed by Section 54.
- Tax withheld is credited against the income tax liability of the recipient.
Withholding Tax on Dividends (Section 5)
- Dividends taxable under Sections 21 and 24(c) shall be subject to withholding tax.
- Payor-corporation responsible for withholding and remittance as set forth in Section 54.
Effectivity (Section 6)
- Provisions apply to passive income earned starting January 1, 1981.