TITLE I ORGANIZATION AND FUNCTION OF THE BUREAU OF INTERNAL REVENUESECTION 1. Title of the Code. - Ths Code sha be known as the Natona Interna Revenue Code of1997.SEC. 2. Poe!" #$d d%tie" of the B%!e#% of I$te!$#l Re&e$%e. - The Bureau of Interna Revenuesha be under the supervson and contro of the Department of Fnance and ts powers and dutes shacomprehend the assessment and coecton of a natona nterna revenue taxes, fees, and charges,and the enforcement of a forfetures, penates, and nes connected therewth, ncudng the executonof |udgments n a cases decded n ts favor by the Court of Tax Appeas and the ordnary courts. TheBureau sha gve ehect to and admnster the supervsory and poce powers conferred to t by thsCode or other aws.SEC. '. Chief O()i#l" of the B%!e#% of I$te!$#l Re&e$%e. - The Bureau of Interna Revenue shahaveachef to beknownas Commssoner of Interna Revenue, herenafter referredtoas theCommssoner and four (4) assstant chefs to be known as Deputy Commssoners.SEC. *. Poe! of the Co++i""io$e! to I$te!,!et T#- L#" #$d to De)ide T#- C#"e".- Thepowertonterprettheprovsonsofths Codeandothertaxawsshabeundertheexcusveandorgna |ursdcton of the Commssoner, sub|ect to revew by the Secretary of Fnance.The power to decde dsputed assessments, refunds of nterna revenue taxes, fees or other charges,penates mposed n reaton thereto, or other matters arsng under ths Code or other aws or portonsthereof admnstered by the Bureau of Interna Revenue s vested n the Commssoner, sub|ect to theexcusve appeate |ursdcton of the Court of Tax Appeas.SEC. .. Poe! of the Co++i""io$e! to O/t#i$ I$fo!+#tio$0 #$d to S%++o$0 E-#+i$e0 #$dT#1e Te"ti+o$2 of Pe!"o$".- In ascertanng the correctness of any return, or n makng a returnwhen none has been made, or n determnng the abty of any person for any nterna revenue tax, orn coectng any such abty, or n evauatng tax compance, the Commssoner s authorzed:(A) To examne any book, paper, record, or other data whch may be reevant or matera to suchnqury;(B) To Obtan on a reguar bass from any person other than the person whose nterna revenue taxabty s sub|ect to audt or nvestgaton, or from any omce or omcer of the natona and ocagovernments, government agences andnstrumentates, ncudngtheBangkoSentra ngPpnas and government-owned or -controed corporatons, any nformaton such as, but notmted to, costs and voume of producton, recepts or saes and gross ncomes of taxpayers,and the names, addresses, and nanca statements of corporatons, mutua fund companes,nsurance companes, regona operatng headquarters of mutnatona companes, |ontaccounts, assocatons, |ont ventures of consorta and regstered partnershps, and thermembers;(C) To summon the person abe for tax or requred to e a return, or any omcer or empoyee ofsuch person, or any person havng possesson, custody, or care of the books of accounts andother accountng records contanng entres reatng to the busness of the person abe for tax,or any other person, to appear before the Commssoner or hs duy authorzed representatve ata tme and pace speced n the summons and to produce such books, papers, records, or otherdata, and to gve testmony;(D) To take such testmony of the person concerned, under oath, as may be reevant or matera tosuch nqury; and(E) To cause revenue omcers and empoyees to make a canvass from tme to tme of any revenuedstrct or regon and nqure after and concernng a persons theren who may be abe to payany nterna revenue tax, and a persons ownng or havng the care, management or possessonof any ob|ect wth respect to whch a tax s mposed.The provsons of the foregong paragraphs notwthstandng, nothng n ths Secton sha be construedas grantng the Commssoner the authorty to nqure nto bank deposts other than as provded for nSecton 6(F) of ths Code.SEC. 3. Poe! of the Co++i""io$e! to 4#1e #""e""+e$t" #$d P!e")!i/e #dditio$#lRe5%i!e+e$t" fo! T#- Ad+i$i"t!#tio$ #$d E$fo!)e+e$t. -(A) Examnaton of Returns and Determnaton of Tax Due. - After a return has been ed as requredunder the provsons of ths Code, the Commssoner or hs duy authorzed representatve mayauthorze the examnaton of any taxpayer and the assessment of the correct amount of tax:Provded, however; That faure toeareturnsha not prevent theCommssoner fromauthorzng the examnaton of any taxpayer. The tax or any decency tax so assessed sha be pad upon notce and demand fromtheCommssoner or from hs duy authorzed representatve.Anyreturn, statement of decaraton ed nanyomce authorzed to receve the same shanot bewthdrawn: Provded, That wthnthree(3) yearsfromthedateof suchng, thesamemaybemoded,changed, oramended:Provded,further,That nonotce foraudtornvestgatonofsuchreturn, statement or decaraton has n the meantme been actuay served upon the taxpayer.(B) Faure to Submt Requred Returns, Statements, Reports and other Documents. - When a reportrequred by aw as a bass for the assessment of any natona nterna revenue tax sha not beforthcomng wthn the tme xed by aws or rues and reguatons or when there s reason tobeeve that any such report s fase, ncompete or erroneous, the Commssoner sha assessthe proper tax on the best evdence obtanabe.In case a person fas to e a requred return or other document at the tme prescrbed by aw, orwfuy or otherwse es a fase or frauduent return or other document, the Commssoner sha makeor amendthereturn fromhsownknowedgeandfromsuchnformaton as hecan obtanthroughtestmony or otherwse, whch sha be prma face correct and sumcent for a ega purposes.(C) Authorty toConductInventory-takng, surveanceand toPrescrbePresumptveGrossSaesand Recepts. - The Commssoner may, at any tme durng the taxabe year, order nventory-takng of goods of any taxpayer as a bass for determnng hs nterna revenue tax abtes, ormaypacethebusnessoperatonsof anyperson, natura or|urdca, underobservatonorsurveance f there s reason to beeve that such person s not decarng hs correct ncome,saes or recepts for nterna revenue tax purposes. The ndngs may be used as the bass forassessng the taxes for the other months or quarters of the same or dherent taxabe years andsuch assessment sha be deemed prma face correct.When t s found that a person has faed to ssue recepts and nvoces n voaton of the requrementsof Sectons 113 and 237 of ths Code, or when there s reason to beeve that the books of accounts orother records do not correcty reect the decaratons made or to be made n a return requred to beed under the provsons of ths Code, the Commssoner, after takng nto account the saes, recepts,ncome or other taxabe base of other persons engaged n smar busnesses under smar stuatons orcrcumstancesorafterconsderngotherreevantnformatonmayprescrbeamnmumamountofsuch gross recepts, saes and taxabe base, and such amount so prescrbed sha be prma face correctfor purposes of determnng the nterna revenue tax abtes of such person.(D) Authorty to Termnate Taxabe Perod. _ When t sha come to the knowedge of theCommssoner that a taxpayer s retrng from busness sub|ect to tax, or s ntendng to eavethePhppnesortoremovehspropertytherefromortohdeorconcea hsproperty, orsperformng any act tendng to obstruct the proceedngs for the coecton of the tax for the pastor current quarter or year or torender thesametotayor partynehectveunesssuchproceedngsarebegunmmedatey, theCommssonersha decarethetaxperodof suchtaxpayer termnated at any tme and sha send the taxpayer a notce of such decson, togetherwth a request for the mmedate payment of the tax for the perod so decared termnated andthe tax for the precedng year or quarter, or such porton thereof as may be unpad, and sadtaxes sha be due and payabe mmedatey and sha be sub|ect to a the penates hereafterprescrbed, uness pad wthn the tme xed n the demand made by the Commssoner.(E) Authorty of the Commssoner to Prescrbe Rea Property Vaues. - The Commssoner s herebyauthorzed to dvde the Phppnes nto dherent zones or areas and sha, upon consutatonwth competent apprasers both from the prvate and pubc sectors, determne the far marketvaue of rea propertes ocated n each zone or area. For purposes of computng any nternarevenue tax, the vaue of the property sha be, whchever s the hgher of;(1) the far market vaue as determned by the Commssoner, or(2) thefar market vaueas shownntheschedueof vaues of theProvnca andCtyAssessors.(F) Authortyof theCommssonertonqurentoBankDepostAccounts. -Notwthstandnganycontrary provson of Repubc Act No. 1405 and other genera or speca aws, the Commssoners hereby authorzed to nqure nto the bank deposts of:(1) a decedent to determne hs gross estate; and(2) any taxpayer who has ed an appcaton for compromse of hs tax abty under Sec. 204(A) (2) of ths Code by reason of nanca ncapacty to pay hs tax abty.In case a taxpayer es an appcaton to compromse the payment of hs tax abtes on hs cam thaths nanca poston demonstrates a cear nabty to pay the tax assessed, hs appcaton sha not beconsdered uness and unt he waves n wrtng hs prvege under Repubc act NO. 1405 or underother genera or speca aws, and such waver sha consttute the authorty of the Commssoner tonqure nto the bank deposts of the taxpayer.(G) Authorty to Accredt and Regster Tax Agents. - The Commssoner sha accredt and regster,basedontherprofessona competence, ntegrtyandmora tness, ndvduasandgeneraprofessona partnershps and ther representatves who prepare and e tax returns, statements,reports, protests, and other papers wth or who appear before, the Bureau for taxpayers. Wthnone hundred twenty (120) days from |anuary 1, 1998, the Commssoner sha create natonaand regona accredtaton boards, the members of whch sha serve for three (3) years, andshadesgnate fromamongthe senor omcas of the Bureau, one(1) charman and two (2)members for each board, sub|ect to such rues and reguatons as the Secretary of Fnance shapromugate upon the recommendaton of the Commssoner.Indvduas and genera professona partnershps and ther representatves who are denedaccredtaton by the Commssoner and/or the natona and regona accredtaton boards may appeasuch dena to the Secretary of Fnance, who sha rue on the appea wthn sxty (60) days from receptof such appea. Faure of the Secretary of Fnance to rue on the Appea wthn the prescrbed perodsha be deemed as approva of the appcaton for accredtaton of the appeant.(H) Authorty of the Commssoner to Prescrbe Addtona Procedura or Documentary Requrements.- The Commssoner may prescrbe the manner of compance wth any documentary orprocedura requrement n connecton wth the submsson or preparaton of nanca statementsaccompanyng the tax returns.SEC. 6. 7 A%tho!it2 of the Co++i""io$e! to Dele8#te Poe!.- The Commssoner may deegatethepowersvestednhmunderthepertnent provsonsof thsCodetoanyorsuchsubordnateomcas wth the rank equvaent to a dvson chef or hgher, sub|ect to such mtatons and restrctonsas may be mposed under rues and reguatons to be promugated by the Secretary of nance, uponrecommendaton of the Commssoner: Provded, However, That the foowng powers of theCommssoner sha not be deegated:(a) The power to recommend the promugaton of rues and reguatons by the Secretary of Fnance;(b) The power to ssue rungs of rst mpresson or to reverse, revoke or modfy any exstng rungof the Bureau;(c) The power to compromse or abate, under Sec. 204 (A) and (B) of ths Code, any tax abty:Provded, however, That assessments ssued by the regona omces nvovng basc decencytaxes of Fve hundred thousand pesos (P500,000) or ess, and mnor crmna voatons, as maybe determned by rues and reguatons to be promugated by the Secretary of nance, uponrecommendatonof theCommssoner, dscoveredbyregona anddstrct omcas, maybecompromsed by a regona evauaton board whch sha be composed of the Regona Drectoras Charman, the Assstant Regona Drector, the heads of the Lega, Assessment and CoectonDvsons and the Revenue Dstrct Omcer havng |ursdcton over the taxpayer, as members;and(d) Thepower toassgnor reassgnnterna revenueomcerstoestabshmentswhereartcessub|ect to excse tax are produced or kept.SEC. 9. D%t2of theCo++i""io$e! toE$"%!etheP!o&i"io$#$dDi"t!i/%tio$of fo!+"0Re)ei,t"0 Ce!ti:)#te"0 #$d A,,li#$)e"0 #$d the A)1$oled8+e$t of P#2+e$t of T#-e". -(A) Provson and Dstrbuton to Proper Omcas. - It sha be the duty of the Commssoner, amongother thngs, to prescrbe, provde, and dstrbute to the proper omcas the requste censesnterna revenuestamps, abesa otherforms, certcates, bonds, records, nvoces, books,recepts, nstruments, appances and apparatus used n admnsterng the aws fang wthn the|ursdcton of the Bureau. For ths purpose, nterna revenue stamps, strp stamps and abessha becausedbytheCommssonertobeprntedwthadequatesecurtyfeatures.Internarevenuestamps, whether of abar codeor fusondesgn, sha bermyandconspcuousyamxed on each pack of cgars and cgarettes sub|ect to excse tax n the manner and form asprescrbed by the Commssoner, upon approva of the Secretary of Fnance.(B) Recepts for Payment Made. - It sha be the duty of the Commssoner or hs duy authorzedrepresentatve or an authorzed agent bank to whom any payment of any tax s made under theprovson of ths Code to acknowedge the payment of such tax, expressng the amount pad andthepartcuaraccountforwhchsuchpaymentwasmadenaformandmannerprescrbedtherefor by the Commssoner.SEC. ;. 7 I$te!$#l Re&e$%eDi"t!i)t".- Wth the approva of the Secretary of Fnance, theCommssoner sha dvde the Phppnes nto such number of revenue dstrcts as may form tme totme be requred for admnstratve purposes. Each of these dstrcts sha be under the supervson of aRevenue Dstrct Omcer.SEC. 1he!e A!ti)le" "%/?e)t to E-)i"e T#- #!e P!od%)ed o! @e,t.- TheCommssoner sha empoy, assgn, or reassgn nterna revenue omcers nvoved n excse taxfunctons, as often as the exgences of the revenue servce may requre, to estabshments or paceswhere artces sub|ect to excse tax are produced or kept: Provded, That an nterna revenue omcerassgned to any such estabshment sha n no case stay n hs assgnment for more than two (2) years,sub|ect to rues and reguatons to be prescrbed by the Secretary of Fnance, upon recommendaton ofthe Commssoner.SEC. 16. A""i8$+e$t of I$te!$#l Re&e$%e O()e!" #$d Othe! E+,lo2ee" to Othe! D%tie".-The Commssoner may, sub|ect to the provsons of Secton 16 and the aws on cv servce, as we asthe rues and reguatons to be prescrbed by the Secretary of Fnance upon the recommendaton of theCommssoner, assgn or reassgn nternarevenue omcers and empoyees of the Bureau of InternaRevenue, wthout change n ther omca rank and saary, to other or speca dutes connected wth theenforcement or admnstratonof therevenueawsastheexgencesof theservcemayrequre:Provded, That nterna revenue omcers assgned to perform assessment or coecton functon sha notreman n the same assgnment for more than three (3) years; Provded, further, That assgnment ofnterna revenue omcers and empoyees of the Bureau to speca dutes sha not exceed one (1) year.SEC. 19. Re,o!t" of &iol#tio$ of L#".- When an nterna revenue omcer dscovers evdence of avoaton of ths Code or of any aw, rue or reguatons admnstered by the Bureau of Interna Revenueof such character as to warrant the nsttuton of crmna proceedngs, he sha mmedatey report thefacts to the Commssoner through hs mmedate superor, gvng the name and address of the ohenderandthenamesof thewtnessesf possbe: Provded, Thatnurgentcases, theRevenueRegonadrector or Revenue Dstrct Omcer, as the case may be, may send the report to the correspondngprosecutng omcer n the atter case, a copy of hs report sha be sent to the Commssoner.SEC. 1;. Co$te$t" of Co++i""io$e!A" A$$%#l Re,o!t.- The annua Report of the Commssonersha contan detaed statements of the coectons of the Bureau wth speccatons of the sources ofrevenuebytypeof tax, bymannerof payment, byrevenueregonandbyndustrygroupandtsdsbursements by casses of expendtures.In case the actua coecton exceeds or fas short of target as set n the annua natona budget byfteen percent (15%) or more, the Commssoner sha expan the reason for such excess or shortfa.SEC. 2ABLE DEDUCTIONS 7 ASEC. '*. Ded%)tio$"f!o+G!o""I$)o+e.- Exceptfortaxpayersearnngcompensatonncomearsng from persona servces rendered under an empoyer-empoyee reatonshp where no deductonssha beaowedunderthsSectonother thanundersubsecton(M) hereof, ncomputngtaxabencome sub|ect to ncome tax under Sectons 24 (A); 25 (A); 26; 27 (A), (B) and (C); and 28 (A) (1),there sha be aowed the foowng deductons from gross ncome;CAD E-,e$"e". -C1D O!di$#!2 #$d Ne)e""#!2 T!#de0 B%"i$e"" o! P!ofe""io$#l E-,e$"e".-(a) In Genera. - There sha be aowed as deducton from gross ncome a the ordnary and necessaryexpenses pad or ncurred durng the taxabe year n carryng on or whch are drecty attrbutabeto, the deveopment, management, operaton and/or conduct of the trade, busness or exercse ofa professon, ncudng:() Areasonabeaowanceforsaares, wages, andotherformsof compensatonforpersonaservces actuay rendered, ncudng the grossed-upmonetary vaue of frnge benetfurnshed or granted by the empoyer to the empoyee: Provded, That the na tax mposedunder Secton 33 hereof has been pad;() A reasonabe aowance for trave expenses, here and abroad, whe away from home n thepursut of trade, busness or professon;() A reasonabe aowance for rentas and/or other payments whch are requred as a condtonfor the contnued use or possesson, for purposes of the trade, busness or professon, ofproperty to whch the taxpayer has not taken or s not takng tte or n whch he has noequty other than that of a essee, user or possessor;(v) A reasonabe aowance for entertanment, amusement and recreaton expenses durng thetaxabe year, that are drecty connected to the deveopment, management and operaton ofthetrade, busnessor professonof thetaxpayer, or that aredrectyreatedtoor nfurtherance of the conduct of hs or ts trade, busness or exercse of a professon not toexceed such cengs as the Secretary of Fnance may, by rues and reguatons prescrbe,upon recommendaton of the Commssoner, takng nto account the needs as we as thespeca crcumstances, nature and character of the ndustry, trade, busness, or professon ofthe taxpayer: Provded, That any expense ncurred for entertanment, amusement orrecreaton that s contrary to aw, moras pubc pocy or pubc order sha n no case beaowed as a deducton.(b) Substantaton Requrements. - No deducton from gross ncome sha be aowed under Subsecton(A) hereof uness the taxpayer sha substantate wth sumcent evdence, such as omca receptsorotheradequaterecords: ()theamountof theexpensebengdeducted, and()thedrectconnecton or reaton of the expense beng deducted to the deveopment, management,operaton and/or conduct of the trade, busness or professon of the taxpayer.(c) Brbes, Kckbacks and Other Smar Payments. - No deducton from gross ncome sha be aowedunder Subsecton(A) hereof for anypayment made, drectyor ndrecty, toanomca orempoyee of the natona government, or to an omca or empoyee of any oca government unt,or to an omca or empoyee of a government-owned or -controed corporaton, or to an omca orempoyee or representatve of a foregn government, or to a prvate corporaton, generaprofessona partnershp, or a smar entty, f the payment consttutes a brbe or kckback.C2D E-,e$"e" Allo#/letoP!iteEd%)#tio$#l I$"tit%tio$".- Inaddtonto the expensesaowabe as deductons under ths Chapter, a prvate educatona nsttuton, referred to underSecton 27 (B) of ths Code, may at ts opton eect ether: (a) to deduct expendtures otherwseconsderedascapta outaysof deprecabeassetsncurreddurngthetaxabeyear for theexpanson of schoo factes or (b) to deduct aowance for deprecaton thereof under Subsecton(F) hereof.CBD I$te!e"t.-C1D I$ Ge$e!#l.- The amount of nterest pad or ncurred wthn a taxabe year on ndebtedness nconnecton wth the taxpayer's professon, trade or busness sha be aowed as deducton fromgross ncome: Provded, however, That the taxpayer's otherwse aowabe deducton for nterestexpense sha be reduced by an amount equa to the foowng percentages of the nterest ncomesub|ected to na tax:Forty-onepercent (41%) begnnng|anuary1, 1998;Thrty-nnepercent (39%) begnnng|anuary1,1999; andThrty-eght percent (38%) begnnng |anuary 1, 2000;C2D E-)e,tio$".- No deducton sha be aowed n respect of nterest under the succeedngsubparagraphs:(a) If wthnthetaxabeyearanndvdua taxpayerreportngncomeonthecashbassncursanndebtedness on whch an nterest s pad n advance through dscount or otherwse: Provded,That such nterest sha be aowed a a deducton n the year the ndebtedness s pad: Provded,further, Thatf thendebtednessspayabenperodcamortzatons, theamountof nterestwhchcorrespondstotheamountof theprncpa amortzedorpaddurngtheyearsha beaowed as deducton n such taxabe year;(b)If both the taxpayer and the person to whom the payment has been made or s to be made arepersons speced under Secton 36 (B); or(c)If the ndebtedness s ncurred to nance petroeum exporaton.C'D O,tio$#l T!e#t+e$t of I$te!e"t E-,e$"e.- At the opton of the taxpayer, nterest ncurred toacqure property used n trade busness or exercse of a professon may be aowed as a deductonor treated as a capta expendture.CCD T#-e". -C1D I$ Ge$e!#l.-Taxespadorncurredwthn thetaxabeyear n connectonwththetaxpayer'sprofesson, trade or busness, sha be aowed as deducton, except(a) The ncome tax provded for under ths Tte;(b) Income taxes mposed by authorty of any foregn country; but ths deducton sha be aowed n thecase of a taxpayer who does not sgnfy n hs return hs desre to have to any extent the benetsof paragraph (3) of ths subsecton (reatng to credts for taxes of foregn countres);(c) Estate and donor's taxes; and(d) Taxesassessedaganst oca benetsof akndtendngtoncreasethevaueof thepropertyassessed.Provded, That taxes aowed under ths Subsecton, when refunded or credted, sha be ncuded aspart of grossncomentheyear of recept totheextent of thencometaxbenet of saddeducton.C2D Li+it#tio$" o$ Ded%)tio$".- In the case of a nonresdent aen ndvdua engaged n trade orbusness n the Phppnes and a resdent foregn corporaton, the deductons for taxes provdedn paragraph (1) of ths Subsecton (C) sha be aowed ony f and to the extent that they areconnected wth ncome from sources wthn the Phppnes.C'D C!edit A8#i$"t T#- fo! T#-e" of Fo!ei8$ Co%$t!ie". - If the taxpayer sgnes n hs return hsdesre to have the benets of ths paragraph, the tax mposed by ths Tte sha be credted wth:(a) Ctzen and Domestc Corporaton. - In the case of a ctzen of the Phppnes and of a domestccorporaton, the amount of ncome taxes pad or ncurred durng the taxabe year to any foregncountry; and(b) PartnershpsandEstates. - Inthecaseof anysuchndvdua whosamember of ageneraprofessona partnershp or a benecary of an estate or trust, hs proportonate share of suchtaxes of the genera professona partnershp or the estate or trust pad or ncurred durng thetaxabe year to a foregn country, f hs dstrbutve share of the ncome of such partnershp ortrust s reported for taxaton under ths Tte.An aen ndvdua and a foregn corporaton sha not be aowed the credts aganst the tax for thetaxes of foregn countres aowed under ths paragraph.C*D Li+it#tio$" o$ C!edit.- The amount of the credt taken under ths Secton sha be sub|ect toeach of the foowng mtatons:(a) The amount of the credt n respect to the tax pad or ncurred to any country sha not exceed thesameproportonof thetaxaganst whchsuchcredt staken, whchthetaxpayer'staxabencome from sources wthn such country under ths Tte bears to hs entre taxabe ncome forthe same taxabe year; and(b) The tota amount of the credt sha not exceed the same proporton of the tax aganst whch suchcredt s taken, whch the taxpayer's taxabe ncome from sources wthout the Phppnes taxabeunder ths Tte bears to hs entre taxabe ncome for the same taxabe year.C.DAd?%"t+e$t"o$P#2+e$tofI$)%!!edT#-e".- If accruedtaxeswhenpaddherfromtheamounts camed as credts by the taxpayer, or f any tax pad s refunded n whoe or n part, thetaxpayer sha notfy the Commssoner; who sha redetermne the amount of the tax for the yearor years ahected, and the amount of tax due upon such redetermnaton, f any, sha be pad bythe taxpayer upon notce and demand by the Commssoner, or the amount of tax overpad, fany, sha be credted or refunded to the taxpayer. In the case of such a tax ncurred but not pad,theCommssoner asacondtonprecedent totheaowanceof thscredt mayrequrethetaxpayer to gve a bond wth suretes satsfactory to and to be approved by the Commssoner nsuch sum as he may requre, condtoned upon the payment by the taxpayer of any amount oftaxfounddueuponanysuchredetermnaton. Thebondheren prescrbedshacontansuchfurther condtons as the Commssoner may requre.C3D Ee#! i$ >hi)h C!edit T#1e$. - The credts provded for n Subsecton (C)(3) of ths Secton may, atthe opton of the taxpayer and rrespectve of the method of accountng empoyed n keepng hsbooks, betakenntheyear whchthetaxesof theforegncountrywerencurred, sub|ect,however, to the condtons prescrbed n Subsecton (C)(5) of ths Secton. If the taxpayer eects totake such credts n the year n whch the taxes of the foregn country accrued, the credts for asubsequent years sha be taken upon the same bass and no porton of any such taxes sha beaowed as a deducton n the same or any succeedng year.C6DP!oof of C!edit".- The credts provded n Subsecton (C)(3) hereof sha be aowed ony f thetaxpayer estabshes to the satsfacton of the Commssoner the foowng:(a) The tota amount of ncome derved from sources wthout the Phppnes;(b) The amount of ncome derved from each country, the tax pad or ncurred to whch s camed as acredt under sad paragraph, such amount to be determned under rues and reguatonsprescrbed by the Secretary of Fnance; and(c) A other nformaton necessary for the vercaton and computaton of such credts.CDD Lo""e". -C1DI$Ge$e!#l.- Lossesactuaysustaneddurngthetaxabeyear andnot compensatedfor bynsurance or other forms of ndemnty sha be aowed as deductons:(a) If ncurred n trade, professon or busness;(b) Of property connected wth the trade, busness or professon, f the oss arses from res, storms,shpwreck, or other casuates, or from robbery, theft or embezzement.The Secretary of Fnance, upon recommendaton of the Commssoner, s hereby authorzed topromugate rues and reguatons prescrbng, among other thngs, the tme and manner by whchthe taxpayer sha submt a decaraton of oss sustaned from casuaty or from robbery, theft orembezzement durng the taxabe year: Provded, however, That the tme mt to be so prescrbedn the rues and reguatons sha not be ess than thrty (30) days nor more than nnety (90) daysfrom the date of dscovery of the casuaty or robbery, theft or embezzement gvng rse to theoss.(c) No oss sha be aowed as a deducton under ths Subsecton f at the tme of the ng of the return,such oss has been camed as a deducton for estate tax purposes n the estate tax return.C2D P!oof of Lo"".- In the case of a nonresdent aen ndvdua or foregn corporaton, the ossesdeductbesha bethoseactuaysustaneddurngtheyear ncurrednbusness, tradeorexercse of a professon conducted wthn the Phppnes, when such osses are not compensatedfor by nsurance or other forms of ndemnty. The secretary of Fnance, upon recommendaton ofthe Commssoner, s hereby authorzed to promugate rues and reguatons prescrbng, amongotherthngs, thetmeandmannerbywhchthetaxpayersha submt adecaratonof osssustaned fromcasuaty or fromrobbery, theft or embezzement durngthe taxabe year:Provded, That the tme to be so prescrbed n the rues and reguatons sha not be ess thanthrty (30) days nor more than nnety (90) days from the date of dscovery of the casuaty orrobbery, theft or embezzement gvng rse to the oss; andC'D Net O,e!#ti$8 Lo"" C#!!27O&e!.- The net operatng oss of the busness or enterprse for anytaxabeyearmmedateyprecedngthecurrenttaxabeyear, whchhadnotbeenprevousyohset as deducton from gross ncome sha be carred over as a deducton from gross ncome forthenext three(3) consecutvetaxabeyears mmedateyfoowngtheyear of suchoss:Provded, however, That any net oss ncurred n a taxabe year durng whch the taxpayer wasexempt from ncome tax shanot be aowed as a deducton under ths Subsecton: Provded,further, That a net operatng oss carry-over sha be aowed ony f there has been no substantachange n the ownershp of the busness or enterprse n that -() Notessthanseventy-vepercent(75%)nnomna vaueof outstandngssuedshares., f thebusness s n the name of a corporaton, s hed by or on behaf of the same persons; or() Notess than seventy-ve percent (75%) of the pad up capta of the corporaton, f the busness s nthe name of a corporaton, s hed by or on behaf of the same persons."Forpurposesof thssubsecton, theterm'not operatngoss' sha meantheexcessof aowabededucton over gross ncome of the busness n a taxabe year.Provded, That for mnesotherthano andgaswes, anetoperatngosswthout thebenetofncentvesprovdedforunderExecutveOrderNo. 226, asamended, otherwseknownastheOmnbus Investments Code of 1987, ncurred n any of the rst ten (10) years of operaton maybecarredoverasadeductonfromtaxabencomeforthenextve(5) yearsmmedateyfoowng the year of such oss. The entre amount of the oss sha be carred over to the rst oftheve(5) taxabe yearsfoowng the oss, and any porton ofsuchoss whchexceeds, thetaxabe ncome of such rst year sha be deducted n ke manner form the taxabe ncome of thenext remanng four (4) years.C*D C#,it#l Lo""e". -(a) Lmtaton. - Loss fromsaesorExchangesofcapta assetssha beaowed onytotheextentprovded n Secton 39.(b) Securtes Becomng worthess. - If securtes as dened n Secton 22 (T) become worthess durngthe taxabe year and are capta assets, the oss resutng therefrom sha, for purposes of thsTte, be consdered as a oss from the sae or exchange, on the ast day of such taxabe year, ofcapta assets.C.D Lo""e"F!o+>#"hS#le"of Sto)1o!Se)%!itie".- Lossesfrom'washsaes' of stockorsecurtes as provded n Secton 38.C3D >#8e!i$8 Lo""e".- Losses from wagerng transactons sha b aowed ony to the extent of thegans from such transactons.C6D A/#$do$+e$t Lo""e". -(a) Intheevent acontract areawherepetroeumoperatonsareundertakenspartayor whoyabandoned, a accumuated exporaton and deveopment expendtures pertanng thereto shabe aowed as a deducton: Provded, That accumuated expendtures ncurred n that area pror to|anuary 1, 1979 sha be aowed as a deducton ony from any ncome derved from the samecontract area. In a cases, notces of abandonment sha be ed wth the Commssoner.(b) In case a producng we s subsequenty abandoned, the unamortzed costs thereof, as we as theundeprecated costs of equpment drecty used theren , sha be aowed as a deducton n theyear suchwe, equpment or factysabandonedbythecontractor: Provded, That f suchabandonedwe sreenteredandproductonsresumed, or f suchequpment or factysrestoredntoservce, thesadcostssha bencudedaspartof grossncomentheyearofresumpton or restoraton and sha be amortzed or deprecated, as the case may be.CED B#d De/t". -C1DI$ Ge$e!#l.-Debtsduetothetaxpayeractuayascertanedtobeworthessandchargedohwthn the taxabe year except those not connected wth professon, trade or busness and thosesustaned n a transacton entered nto between partes mentoned under Secton 36 (B) of thsCode: Provded, Thatrecoveryof baddebtsprevousyaowedasdeductonntheprecedngyears sha be ncuded as part of the gross ncome n the year of recovery to the extent of thencome tax benet of sad deducton.C2D Se)%!itie" Be)o+i$8 >o!thle"".- If securtes, as dened n Secton 22 (T), are ascertaned tobe worthess and charged oh wthn the taxabe year and are capta assets, the oss resutngtherefrom sha, n the case of a taxpayer other than a bank or trust company ncorporated underthe aws of the Phppnes a substanta part of whose busness s the recept of deposts, for thepurpose of ths Tte, be consdered as a oss from the sae or exchange, on the ast day of suchtaxabe year, of capta assets.CFD De,!e)i#tio$. -C1D Ge$e!#l R%le. - There sha be aowed as a deprecaton deducton a reasonabe aowance for theexhauston, wear and tear (ncudng reasonabe aowance for obsoescence) of property used nthetradeorbusness. Inthecaseof propertyhedbyonepersonforfewthremandertoanother person, the deducton sha be computed as f the fe tenant were the absoute owner ofthe property and shabe aowed to the fe tenant. In the case of property hed n trust, theaowabe deducton sha be apportoned between the ncome benecares and the trustees naccordance wth the pertnent provsons of the nstrument creatng the trust, or n the absence ofsuch provsons, on the bass of the trust ncome aowabe to each.(2) U"e of Ce!t#i$ 4ethod" #$d R#te". - The term 'reasonabe aowance' as used n the precedngparagraph sha ncude, but not mted to, an aowance computed n accordance wth rues andreguatons prescrbed by the Secretary of Fnance, upon recommendaton of the Commssoner,under any of the foowng methods:(a) The straght-ne method;(b) Decnng-baance method, usng a rate not exceedng twce the ratewhchwoudhavebeenusedhadtheannua aowancebeencomputedunder themethoddescrbed n Subsecton (F) (1);(c) The sum-of-the-years-dgt method; and(d) any other methodwhch may be prescrbed by the Secretary of Fnance upon recommendaton of the Commssoner.C'D A8!ee+e$t #" to U"ef%l Life o$ >hi)h De,!e)i#tio$ R#te i" B#"ed. - Where under rues andreguatons prescrbed by the Secretary of Fnance upon recommendaton of the Commssoner,thetaxpayer andtheCommssoner haveenteredntoanagreement nwrtngspeccaydeang wth the usefu fe and rate of deprecaton of any property, the rate so agreed upon shabebndngonboththetaxpayer andthenatona Government ntheabsenceof factsandcrcumstances not taken nto consderaton durng the adopton of such agreement. Theresponsbty of estabshng the exstence of such facts and crcumstances sha rest wth theparty ntatng the modcaton. Any change n the agreed rate and usefu fe of the deprecabeproperty as speced n the agreement sha not be ehectve for taxabe years pror to the taxabeyear n whch notce n wrtng by certed ma or regstered ma s served by the party ntatngsuch change to the other party to the agreement:Provded, however, that where the taxpayer has adopted such usefu fe and deprecaton rate for anydeprecabe and camed the deprecaton expenses as deducton from hs gross ncome, wthoutany wrtten ob|ecton on the part of the Commssoner or hs duy authorzed representatves, theaforesad usefu fe and deprecaton rate so adopted by the taxpayer for the aforesaddeprecabe asset sha be consdered bndng for purposes of ths Subsecton.C*D De,!e)i#tio$ of P!o,e!tie" U"ed i$ Pet!ole%+ O,e!#tio$". - An aowance for deprecaton nrespect of a propertes drecty reated to producton of petroeum ntay paced n servce n ataxabe year sha be aowed under the straght-ne or decnng-baance method of deprecatonat the opton of the servce contractor.However, f the servce contractor ntay eects the decnng-baance method, t may at anysubsequent date, shft to the straght-ne method.The usefu fe of propertes used n or reated to producton of petroeum sha be ten (10) years of suchshorter fe as may be permtted by the Commssoner.Propertes not used drecty n the producton of petroeum sha be deprecated under the straght-nemethod on the bass of an estmated usefu fe of ve (5) years.C.DDe,!e)i#tio$ of P!o,e!tie"U"ed i$ 4i$i$8 O,e!#tio$".-anaowancefordeprecatonnrespectof a propertesusednmnngoperatonsotherthanpetroeumoperatons, sha becomputed as foows:(a) At the norma rate of deprecaton f the expected fe s ten (10) years or ess; or(b) Deprecated over any number of years between ve (5) years and the expected fe f the atter smorethanten(10) years, andthedeprecatonthereonaowedasdeductonfromtaxabencome: Provded, That the contractor notes the Commssoner at the begnnng of thedeprecaton perod whch deprecaton rate aowed by ths Secton w be used.(6) Deprecaton Deductbe by Nonresdent Aens Engaged n Trade or Busness or Resdent ForegnCorporatons. -Inthecaseof anonresdentaenndvdua engagedntradeorbusnessorresdent foregn corporaton, a reasonabe aowance for the deteroraton of Property arsng outof ts use or empoyment or ts non-use n the busness trade or professon sha be permtted onywhen such property s ocated n the Phppnes.CGD De,letio$ of Oil #$d G#" >ell" #$d 4i$e". -C1D I$ Ge$e!#l.- In the case of o and gas wes or mnes, a reasonabe aowance for depeton oramortzatoncomputednaccordancewththecost-depetonmethodsha begrantedunderrues and reguatons to be prescrbed by the Secretary of nance, upon recommendaton of theCommssoner. Provded, That when the aowance for depeton sha equa the capta nvestednofurtheraowancesha begranted: Provded, further, Thatafterproductonncommercaquantteshascommenced, certanntangbeexporatonanddeveopment drngcosts: (a)sha be deductbe n the year ncurred f such expendtures are ncurred for non-producng wesand/or mnes, or (b) sha be deductbe n fu n the year pad or ncurred or at the eecton of thetaxpayer, may be captazed and amortzed f such expendtures ncurred are for producng wesand/or mnes n the same contract area.'Intangbe costs n petroeum operatons' refers to any cost ncurred n petroeum operatons whch ntsef has no savage vaue and whch s ncdenta to and necessary for the drng of wes andpreparaton of wes for the producton of petroeum: Provded, That sad costs sha not pertan tothe acquston or mprovement of property of a character sub|ect to the aowance fordeprecatonexcept thatthe aowances fordeprecatononsuchpropertysha bedeductbeunder ths Subsecton.Any ntangbe exporaton, drng and deveopment expenses aowed as a deducton n computngtaxabe ncome durng the year sha not be taken nto consderaton n computng the ad|ustedcost bass for the purpose of computng aowabe cost depeton.C2D Ele)tio$toDed%)tE-,lo!#tio$#$dDe&elo,+e$tE-,e$dit%!e".- Incomputngtaxabencome frommnng operatons, the taxpayer may at hs opton, deduct exporaton anddeveopment expendtures accumuated as cost or ad|usted bass for cost depeton as of date ofprospectng,as weas exporaton and deveopment expendtures pad or ncurred durng thetaxabe year: Provded, That the amount deductbe for exporaton and deveopmentexpendtures sha not exceed twenty-ve percent (25%) of the net ncome frommnngoperatons computed wthout the benet of any tax ncentves under exstng aws. The actuaexporaton and deveopment expendtures mnus twenty-ve percent (25%) of the net ncomefrom mnng sha be carred forward to the succeedng years unt fuy deducted.The eecton by the taxpayer to deduct the exporaton and deveopment expendtures s rrevocabeand sha be bndng n succeedng taxabe years.'Net ncomefrommnngoperatons', as usednths Subsecton, sha meangross ncomefromoperatons ess 'aowabedeductons' whcharenecessaryor reatedtomnngoperatons.'Aowabe deductons' sha ncude mnng, mng and marketng expenses, and deprecaton ofpropertes drecty used n the mnng operatons. Ths paragraph sha not appy to expendturesfor the acquston or mprovement of property of a character whch s sub|ect to the aowance fordeprecaton.In no case sha ths paragraph appy wth respect to amounts pad or ncurred for the exporaton anddeveopment of o and gas.The term'exporaton expendtures' means expendtures pad or ncurred for the purpose ofascertanng the exstence, ocaton, extent or quaty of any depost of ore or other mnera, andpad or ncurred before the begnnng of the deveopment stage of the mne or depost.Theterm'deveopmentexpendtures' meansexpendturespadorncurreddurngthedeveopmentstage of the mne or other natura deposts. The deveopment stage of a mne or other naturadepostsha begnatthetmewhendepostsof oreorothermnerasareshowntoexstnsumcent commerca quantty and quaty and sha end upon commencement of actuacommerca extracton.C'D De,letio$ of Oil #$d G#" >ell" #$d 4i$e" Ded%)ti/le /2 # No$!e"ide$t Alie$ i$di&id%#l o!Fo!ei8$Co!,o!#tio$.- Inthecaseof anonresdent aenndvdua engagedntradeorbusness n the Phppnes or a resdent foregn corporaton, aowance for depeton of o and gaswes or mnes under paragraph (1) of ths Subsecton sha be authorzed ony n respect to oand gas wes or mnes ocated wthn the Phppnes.CHD Ch#!it#/le #$d Othe! Co$t!i/%tio$". -C1D I$ Ge$e!#l. - Contrbutons or gfts actuay pad or made wthn the taxabe year to, or for the useof the Government of the Phppnes or any of ts agences or any potca subdvson thereofexcusvey for pubc purposes, or to accredted domestc corporaton or assocatons organzedandoperatedexcusveyfor regous, chartabe, scentc, youthandsports deveopment,cutura or educatona purposes or for the rehabtatonof veterans, or to soca wefarensttutons, or to non-government organzatons, n accordance wth rues and reguatonspromugated by the Secretary of nance, upon recommendaton of the Commssoner, no part ofthenetncomeof whchnurestothebenetof anyprvatestockhoderorndvdua nanamount not n excess of ten percent (10%) n the case of an ndvdua, and ve percent (%) n thecase of a corporaton, of the taxpayer's taxabe ncome derved from trade, busness or professonas computed wthout the benet of ths and the foowng subparagraphs.C2D Co$t!i/%tio$" Ded%)ti/le i$ F%ll.- Notwthstandng the provsons of the precedngsubparagraph, donatons to the foowng nsttutons or enttes sha be deductbe n fu;(a) Donatons to the Government. - Donatons to the Government of the Phppnes or to any of tsagences or potca subdvsons, ncudng fuy-owned government corporatons, excusvey tonance, to provde for, or to be used n undertakng prorty actvtes n educaton, heath, youthand sports deveopment, human settements, scence and cuture, and n economc deveopmentaccordngtoaNatona PrortyPandetermnedbytheNatona EconomcandDeveopmentAuthorty (NEDA),Inconsutaton wth approprategovernment agences, ncudngtsregonadeveopment councsandprvatephantrophcpersonsandnsttutons: Provded, That anydonaton whch s made to the Government or to any of ts agences or potca subdvsons notn accordance wth the sad annua prorty pan sha be sub|ect to the mtatons prescrbed nparagraph (1) of ths Subsecton;(b) Donatons toCertanForegnInsttutonsor Internatona Organzatons. - donatonstoforegnnsttutons or nternatona organzatons whch are fuy deductbe n pursuance of or ncompance wth agreements, treates, or commtments entered nto by the Government of thePhppnes and the foregn nsttutons or nternatona organzatons or n pursuance of specaaws;(c)Donatons toAccredtedNongovernmentOrganzatons.-theterm'nongovernmentorganzaton'means a non prot domestc corporaton:(1) Organzedandoperatedexcusveyfor scentc, research, educatona, character-budngandyouthandsports deveopment, heath, soca wefare, cutura or chartabepurposes, or acombnatonthereof, nopartofthenetncomeofwhchnurestothebenetof anyprvatendvdua;(2) Whch, not ater than the 15th day of the thrd month after the cose of the accredtednongovernment organzatons taxabe year n whch contrbutons are receved, makes utzatondrecty for the actve conduct of the actvtes consttutng the purpose or functon for whch t sorganzed andoperated, unessanextendedperod sgranted bytheSecretaryofFnance naccordancewththeruesandreguatonstobepromugated, uponrecommendatonof theCommssoner;(3) The eve of admnstratve expense of whch sha, on an annua bass, conform wth the rues andreguatons to be prescrbed by the Secretary of Fnance, upon recommendaton of theCommssoner, but n no case to exceed thrty percent (30%) of the tota expenses; and(4) The assets of whch, n the even of dssouton, woud be dstrbuted to another nonprot domestccorporaton organzed for smar purpose or purposes, or to the state for pubc purpose, or woudbe dstrbuted by a court to another organzaton to be used n such manner as n the |udgment ofsad court sha best accompsh the genera purpose for whch the dssoved organzaton wasorganzed.Sub|ecttosuchtermsandcondtonsasmaybeprescrbedbytheSecretaryof Fnance, theterm'utzaton' means:() Any amount n cash or n knd (ncudng admnstratve expenses) pad or utzed to accompsh oneor more purposes for whch the accredted nongovernment organzaton was created ororganzed.() Any amount pad to acqure an asset used (or hed for use) drecty n carryng outoneor morepurposesfor whchtheaccredtednongovernment organzatonwascreatedororganzed.An amount set asde for a specc pro|ect whch comes wthn one or more purposes of the accredtednongovernment organzaton may be treated as a utzaton, but ony f at the tme such amounts set asde, the accredted nongovernment organzaton has estabshed to the satsfacton of theCommssoner that theamount w bepadfor thespecc pro|ect wthnaperodto beprescrbed n rues and reguatons to be promugated by the Secretary of Fnance, uponrecommendaton of the Commssoner, but not to exceed ve (5) years, and the pro|ect s onewhch can be better accompshed by settng asde such amount than by mmedate payment offunds.C'D V#l%#tio$.-Theamount ofanychartabe contrbuton ofpropertyother than moneysha bebased on the acquston cost of sad property.*D P!oof of Ded%)tio$". - Contrbutons or gfts sha be aowabe as deductons ony f vered underthe rues and reguatons prescrbed by the Secretary of Fnance, upon recommendaton of theCommssoner.CID Re"e#!)h #$d De&elo,+e$t. -C1DI$Ge$e!#l.- ataxpayer maytreat researchor deveopment expendtureswhcharepadorncurred by hm durng the taxabe year n connecton wth hs trade, busness or professon asordnary and necessary expenses whch are not chargeabe to capta account. The expendturesso treated sha be aowed as deducton durng the taxabe year when pad or ncurred.C2D A+o!ti=#tio$ of Ce!t#i$ Re"e#!)h #$d De&elo,+e$t E-,e$dit%!e".- At the eecton of thetaxpayer and n accordance wth the rues and reguatons to be prescrbed by the Secretary ofFnance,uponrecommendaton ofthe Commssoner,the foowngresearchanddeveopmentexpendtures may be treated as deferred expenses:(a) Pad or ncurred by the taxpayer n connecton wth hs trade, busness or professon;(b) Not treatedas expenses under paragraph 91) hereof; and(c) Chargeabe to capta account but notchargeabe to property of a character whch s sub|ect to deprecaton or depeton.In computng taxabe ncome, such deferred expenses sha be aowed as deducton rataby dstrbutedover a perod of not ess than sxty (60) months as may be eected by the taxpayer (begnnngwth the month n whch the taxpayer rst reazes benets from such expendtures).The eecton provded by paragraph (2) hereof may be made for any taxabe year begnnng after theehectvty of ths Code, but ony f made not ater than the tme prescrbed by aw for ng thereturn for such taxabe year. The method so eected, and the perod seected by the taxpayer,sha be adhered to n computng taxabe ncome for the taxabe year for whch the eecton smadeandfora subsequenttaxabeyearsunesswththeapprova of theCommssoner, achange to a dherent method s authorzed wth respect to a part or a of such expendtures. Theeecton sha not appy to any expendture pad or ncurred durng any taxabe year for whch thetaxpayer makes the eecton.C'D Li+it#tio$" o$ ded%)tio$. - Ths Subsecton sha not appy to:(a) Any expendture for the acquston or mprovement of and, or for the mprovement of property tobe usednconnectonwthresearchanddeveopment of acharacter whchs sub|ect todeprecaton and depeton; and(b) Any expendture pad or ncurred for the purpose of ascertanng the exstence, ocaton, extent, orquaty of any depost of ore or other mnera, ncudng o or gas.CFDPe$"io$T!%"t".- Anempoyer estabshngor mantanngapensontrust toprovdefor thepayment of reasonabe pensons to hs empoyees sha be aowed as a deducton (n addton to thecontrbutons to such trust durng the taxabe year to cover the penson abty accrung durng theyear, aowed as a deducton under Subsecton (A) (1) of ths Secton ) a reasonabe amount transferredor pad nto such trust durng the taxabe year n excess of such contrbutons, but ony f such amount(1)has not theretofore been aowed as a deducton, and (2) s apportoned n equa parts over a perodof ten (10) consecutve years begnnng wth the year n whch the transfer or payment s made.C@D Additio$#l Re5%i!e+e$t"fo!Ded%)ti/ilit2of Ce!t#i$P#2+e$t".- Anyamount padorpayabe whch s otherwse deductbe from, or taken nto account n computng gross ncome or forwhch deprecaton or amortzaton may be aowed under ths Secton, sha be aowed as a deductonony f t s shown that the tax requred to be deducted and wthhed therefrom has been pad to theBureau of Interna Revenue n accordance wth ths Secton 58 and 81 of ths Code.CLD O,tio$#l St#$d#!d Ded%)tio$.- In eu of the deductons aowed under the precedngSubsectons, an ndvdua sub|ect to tax under Secton 24, other than a nonresdent aen, may eect astandarddeducton nan amount not exceedng ten percent (10%) of hs gross ncome.Uness thetaxpayer sgnesnhsreturnhsntentontoeect theoptona standarddeducton, hesha beconsdered as havngavaedhmsefofthe deductonsaowedntheprecedngSubsectons.Sucheecton when made n the return sha be rrevocabe for the taxabe year for whch the return s made:Provded, That an ndvdua who s entted to and camed for the optona standard deducton sha notbe requred to submt wth hs tax return such nanca statements otherwse requred under ths Code:Provded, further, That except when the Commssoner otherwse permts, the sad ndvdua sha keepsuch records pertanng to hs gross ncome durng the taxabe year, as may be requred by the ruesand reguatons promugated by the Secretary of Fnance, upon recommendaton of the Commssoner.C4D P!e+i%+P#2+e$t" o$ He#lth #$dGo! Ho",it#li=#tio$ I$"%!#$)e of #$ I$di&id%#lT#-,#2e!.- the amount of premums not to exceed Two thousand four hundred pesos (P2,400) perfamy or Two hundred pesos (P200) a month pad durng the taxabe year for heath and/orhosptazaton nsurance taken by the taxpayer for hmsef, ncudng hs famy, sha be aowed as adeducton from hs gross ncome: Provded, That sad famy has a gross ncome of not more than Twohundredftythousandpesos (P250,000) forthe taxabe year:Provded,nay, Thatn thecaseofmarred taxpayers, ony the spouse camng the addtona exempton for dependents sha be enttedto ths deducton.Notwthstandng the provson of the precedng Subsectons, The Secretary of Fnance, uponrecommendaton of the Commssoner, after a pubc hearng sha have been hed for ths purpose,may prescrbe by rues and reguatons, mtatons or cengs for any of the temzed deductons underSubsectons(A) to(|) of thsSecton: Provded, That for purposesof determnngsuchcengsormtatons, the Secretary of Fnance sha consder the foowng factors: (1) adequacy of the prescrbedmts on the actua expendture requrements of each partcuar ndustry; and (2)ehects of naton onexpendture eves: Provded, further, That no cengs shafurther be mposed on tems of expenseaready sub|ect to cengs under present aw.SEC. '.. Allo#$)e of Pe!"o$#l E-e+,tio$ fo! I$di&id%#l T#-,#2e!. -CAD I$ Ge$e!#l.- For purposes of determnng the tax provded n Secton 24 (A) of ths Tte, theresha be aowed a basc persona exempton as foows:For sngendvdua or marredndvdua |udcaydecreedas egayseparatedwthnoquaeddependents P20,000For Head of Famy P25,000For each marred ndvdua P32,000In the case of marred ndvduas where ony one of the spouses s dervng gross ncome, ony suchspouse sha be aowed the persona exempton.For purposes of ths paragraph, the term 'head of famy' means an unmarred or egay separated manorwomanwthoneorbothparents, orwthoneormorebrothersorssters, orwthoneormoreegtmate, recognzed natura or egay adopted chdren vng wth and dependent upon hm for therchef support, where such brothers or ssters or chdren are not more than twenty-one (21) years ofage, unmarred and not ganfuy empoyed or where such chdren, brothers or ssters, regardess ofage are ncapabe of sef-support because of menta or physca defect.CBDAdditio$#lE-e+,tio$ fo!De,e$de$t".-Theresha beaowedanaddtona exemptonofEght thousand pesos (P8,000) for each dependent not exceedng four (4).The addtona exempton for dependent sha be camed by ony one of the spouses n the case ofmarred ndvduas.In the case of egay separated spouses, addtona exemptons may be camed ony by the spousewho has custody of the chd or chdren: Provded, That the tota amount of addtona exemptons thatmay be camed by both sha not exceed the maxmum addtona exemptons heren aowed.For purposes of ths Subsecton, a 'dependent' means a egtmate, egtmate or egay adopted chdchey dependent upon and vng wth the taxpayer f such dependent s not more than twenty-one(21) years of age, unmarred and not ganfuy empoyed or f such dependent, regardess of age, sncapabe of sef-support because of menta or physca defect.CCD Ch#$8e of St#t%".- If the taxpayer marres or shoud have addtona dependent(s) as denedabove durng the taxabe year, the taxpayer may cam the correspondng addtona exempton, as thecase may be, n fu for such year.Ifthetaxpayerdesdurngthetaxabeyear, hsestatemayst camthepersona andaddtonaexemptons for hmsef and hs dependent(s) as f he ded at the cose of such year.If the spouse or any of the dependents des or f any of such dependents marres, becomes twenty-one(21) years od or becomes ganfuy empoyed durng the taxabe year, the taxpayer may st cam thesame exemptons as f the spouse or any of the dependents ded, or as f such dependents marred,became twenty-one (21) years od or became ganfuy empoyed at the cose of such year.CDD Pe!"o$#l E-e+,tio$Allo#/letoNo$!e"ide$t Alie$I$di&id%#l.- Anonresdent aenndvdua engagedntrade, busnessorntheexercseof aprofessonnthePhppnessha beentted to a persona exempton n the amount equa to the exemptons aowed n the ncome tax awn the country of whch he s a sub|ect - or ctzen, to ctzens of the Phppnes not resdng n suchcountry, not to exceed the amount xed n ths Secton as exempton for ctzens or resdent of thePhppnes: Provded,That sad nonresdent aen shoude atrue and accurate return of the totancome receved by hm from a sources n the Phppnes, as requred by ths Tte.CHAPTER VII 7 ALLO>ABLE DEDUCTIONS 7 BSEC. '3. Ite+" $ot Ded%)ti/le.7CAD Ge$e!#l R%le. - In computng net ncome, no deducton sha n any case be aowed n respect to -(1) Persona, vng or famy expenses;(2) Any amount pad out for new budngs or for permanent mprovements, or betterments made toncrease the vaue of any property or estate;ThsSubsectonsha not appytontangbedrnganddeveopment costsncurrednpetroeumoperatons whch are deductbe under Subsecton (G) (1) of Secton 34 of ths Code.(3) Any amount expended n restorng property or n makng good the exhauston thereof for whch anaowance s or has been made; or(4) Premums pad on any fe nsurance pocy coverng the fe of any omcer or empoyee, or of anypersonnancay nterestednany tradeor busness carredonby the taxpayer, ndvdua orcorporate, when the taxpayer s drecty or ndrecty a benecary under such pocy.CBD Lo""e" f!o+ S#le" o! E-)h#$8e" of P!o,e!t2. - In computng net ncome, no deductons sha nany case be aowed n respect of osses from saes or exchanges of property drecty or ndrecty -(1)Betweenmembersofafamy. Forpurposesofthsparagraph, thefamyof anndvdua shancude ony hs brothers and ssters (whether by the whoe or haf-bood), spouse, ancestors, and neadescendants; or(2) Except n the case of dstrbutons n qudaton, between an ndvdua and corporaton more thanfty percent (50%) n vaue of the outstandng stock of whch s owned, drecty or ndrecty, by or forsuch ndvdua; or(3) Except n the case of dstrbutons n qudaton, between two corporatons more than fty percent(50%) n vaue of the outstandng stock of whch s owned, drecty or ndrecty, by or for the samendvdua f ether oneof suchcorporatons, wthrespect tothetaxabeyear of thecorporatonprecedngthedateof thesaeof exchangewasundertheawappcabetosuchtaxabeyear, apersona hodng company or a foregn persona hodng company;(4) Between the grantor and a ducary of any trust; or(5) Between the ducary of and the ducary of a trust and the ducary of another trust f the sameperson s a grantor wth respect to each trust; or(6) Between a ducary of a trust and benecary of such trust.SEC. '6. S,e)i#l P!o&i"io$"Re8#!di$8I$)o+e#$dDed%)tio$"of I$"%!#$)eCo+,#$ie"0>hethe! Do+e"ti) o! Fo!ei8$. 7CAD S,e)i#l Ded%)tio$ Alloed to I$"%!#$)e Co+,#$ie".- In the case of nsurance companes,whether domestc or foregn dong busness n the Phppnes, the net addtons, f any, requred by awto be made wthn the year to reserve funds and the sums other than dvdends pad wthn the year onpocy and annuty contracts may be deducted from ther gross ncome: Provded, however, That thereeased reserve be treated as ncome for the year of reease.CBD 4%t%#l I$"%!#$)e Co+,#$ie". - In the case of mutua re and mutua empoyers' abty andmutua workmen's compensaton and mutua casuaty nsurance companes requrng ther members tomake premum deposts to provde for osses and expenses, sad companes sha not return as ncomeany porton of the premum deposts returned to ther pocyhoders, but sha return as taxabe ncomea ncome receved by them from a other sources pus such porton of the premum deposts as areretaned by the companes for purposes other than the payment of osses and expenses andrensurance reserves.CCD 4%t%#l 4#!i$e I$"%!#$)e Co+,#$ie". -Mutua marnensurancecompanes shancude nther return ofgross ncome,gross premums coected and receved by them ess amounts pad topocyhoders on account of premums prevousy pad by them and nterest pad upon those amountsbetween the ascertanment and payment thereof.CDDA""e""+e$t I$"%!#$)eCo+,#$ie".- Assessment nsurancecompanes, whether domestcorforegn, maydeduct fromther grossncometheactua depost of sumswththeomcersof theGovernment of the Phppnes pursuant to aw, as addtons to guarantee or reserve funds.SEC. '9. Lo""e" f!o+ >#"h S#le" of Sto)1 o! Se)%!itie". 7(A) In the case of any oss camed to have been sustaned from any sae or other dsposton of sharesof stock or securtes where t appears that wthn a perod begnnng thrty (30) days before the date ofsuch sae or dsposton and endng thrty (30) days after such date, the taxpayer has acqured (bypurchase or by exchange upon whch the entre amount of gan or oss was recognzed by aw), or hasenteredntoacontact or optonsotoacqure, substantaydentca stockor securtes, thennodeducton for the oss sha be aowed under Secton 34 uness the cam s made by a deaer n stockor securtes and wth respect to a transacton made n the ordnary course of the busness of suchdeaer.(B) If the amount of stock or securtes acqured (or covered by the contract or opton to acqure) s essthan the amount of stock or securtes sod or otherwse dsposed of, then the partcuar shares of stockor securtes, the oss form the sae or other dsposton of whch s not deductbe, sha be determnedunder ruesandreguatonsprescrbedbytheSecretaryof Fnance, uponrecommendatonof theCommssoner.(C) If the amount of stock or securtes acqured (or covered by the contract or opton to acqure whch)resuted n the non-deductbty of the oss, sha be determned under rues and reguatons prescrbedby the Secretary of Fnance, upon recommendaton of the Commssoner.SEC. ';. C#,it#l G#i$" #$d Lo""e". 7CAD De:$itio$". - As used n ths Tte -C1D C#,it#l A""et". - the term 'capta assets' means property hed by the taxpayer (whether or notconnected wth hs trade or busness), but does not ncude stock n trade of the taxpayer or otherproperty of a knd whch woud propery be ncuded n the nventory of the taxpayer f on hand atthe cose of the taxabe year, or property hed by the taxpayer prmary for sae to customers ntheordnarycourseof hstradeorbusness, orpropertyusednthetradeorbusness, of acharacter whch s sub|ect to the aowance for deprecaton provded n Subsecton (F) of Secton34; or rea property used n trade or busness of the taxpayer.C2DNetC#,it#l G#i$. -Theterm'netcapta gan' meanstheexcessof thegansfromsaesorexchanges of capta assets over the osses from such saes or exchanges.C'DNetC#,it#l Lo"". -Theterm'netcapta oss' meanstheexcessof theossesfromsaesorexchanges of capta assets over the gans from such saes or exchanges.CBD Pe!)e$t#8e T#1e$ i$to A))o%$t. - In the case of a taxpayer, other than a corporaton, ony thefoowng percentages of the gan or oss recognzed upon the sae or exchange of a capta asset shabe taken nto account n computng net capta gan, net capta oss, and net ncome:(1)Onehundredpercent (100%) f thecapta asset hasbeenhedfor not morethantweve(12)months; and(2)Ffty percent (50%) f the capta asset has been hed for more than tweve (12) months;CCD Li+it#tio$ o$ C#,it#l Lo""e". - Losses from saes or exchanges of capta assets sha be aowedony to the extent of the gans from such saes or exchanges. If a bank or trust company ncorporated under the aws of thePhppnes, a substanta part of whose busness s the recept of deposts, ses any bond, debenture,note, or certcate or other evdence of ndebtedness ssued by any corporaton (ncudng one ssuedby a government or potca subdvson thereof), wth nterest coupons or n regstered form, any ossresutng from such sae sha not be sub|ect to the foregong mtaton and sha not be ncuded ndetermnng the appcabty of such mtaton to other osses.CDD Net C#,it#l Lo"" C#!!27o&e!. - If any taxpayer, other than a corporaton, sustans n any taxabeyear a net capta oss, such oss (n an amount not n excess of the net ncome for such year) sha betreated n the succeedng taxabe year as a oss from the sae or exchange of a capta asset hed fornot more than tweve (12) months.CED Reti!e+e$t of Bo$d"0 Et). - For purposes of ths Tte, amounts receved by the hoder upon theretrement of bonds, debentures, notes or certcates or other evdences of ndebtedness ssued by anycorporaton(ncudngthosessuedbyagovernment or potca subdvsonthereof) wthnterestcoupons or n regstered form, sha be consdered as amounts receved n exchange therefor.CFD G#i$" o! lo""e" f!o+ Sho!t S#le"0 Et). - For purposes of ths Tte -(1) Gans or osses from short saes of property sha be consdered as gans or osses from saes orexchanges of capta assets; and(2) Gans or osses attrbutabe to the faure to exercse prveges or optons to buy or se propertysha be consdered as capta gans or osses.SEC. *ithi$ the Phili,,i$e".7CAD G!o"" I$)o+e F!o+ So%!)e" >ithi$ the Phili,,i$e". - The foowng tems of gross ncomesha be treated as gross ncome from sources wthn the Phppnes:C1D I$te!e"t". - Interests derved from sources wthn the Phppnes, and nterests on bonds, notes orother nterest-bearng obgaton of resdents, corporate or otherwse;C2D Di&ide$d". - The amount receved as dvdends:(a) from a domestc corporaton; and(b) from a foregn corporaton, uness ess than fty percent (50%) of the gross ncome of such foregncorporatonforthethree-yearperodendngwththecoseof tstaxabeyearprecedngthedecaratonof suchdvdendsorforsuchpartof suchperodasthecorporatonhasbeennexstence) was derved from sources wthn the Phppnes as determned under the provsons ofths Secton; but ony n an amount whch bears the same raton to such dvdends as the grossncome of the corporaton for such perod derved from sources wthn the Phppnes bears to tsgross ncome from a sources.C'D Se!&i)e". - Compensaton for abor or persona servces performed n the Phppnes;C*D Re$t#l" #$d !o2#ltie". - Rentas and royates from property ocated n the Phppnes or from anynterest n such property, ncudng rentas or royates for -(a) The use of or the rght or prvege to use n the Phppnes any copyrght, patent, desgn or mode,pan, secret formua or process, goodw, trademark, trade brand or other ke property or rght;(b) The use of, or the rght to use n the Phppnes any ndustra, commerca or scentc equpment;(c) The suppy of scentc, technca, ndustra or commerca knowedge or nformaton;(d) The suppy of any assstance that s ancary and subsdary to, and s furnshed as a means ofenabng the appcaton or en|oyment of, any such property or rght as s mentoned n paragraph(a), any such equpment as s mentoned n paragraph (b) or any such knowedge or nformatonas s mentoned n paragraph (c);(e)Thesuppyof servcesbyanonresdentpersonorhsempoyeenconnectonwththeuseofproperty or rghts beongng to, or the nstaaton or operaton of any brand, machnery or otherapparatus purchased from such nonresdent person;(f) Technca advce, assstanceor servcesrenderednconnectonwthtechnca management oradmnstraton of any scentc, ndustra or commerca undertakng, venture, pro|ect or scheme;and(g) The use of or the rght to use:() Moton pcture ms;() Fms or vdeo tapes for use n connecton wth teevson; and() Tapes for use n connecton wth rado broadcastng.C.D S#le of Re#l P!o,e!t2.- gans, prots and ncome from the sae of rea property ocated n thePhppnes; andC3D S#le of Pe!"o$#l P!o,e!t2.- gans; prots and ncome from the sae of personaproperty, asdetermned n Subsecton (E) of ths Secton.CBD T#-#/le I$)o+e F!o+ So%!)e" >ithi$ the Phili,,i$e". 7C1D Ge$e!#l R%le. - From the tems of gross ncome speced n Subsecton (A) of ths Secton, theresha be deducted the expenses, osses and other deductons propery aocated thereto and aratabe part of expenses, nterests, osses and other deductons ehectvey connected wth thebusness or trade conducted excusvey wthn the Phppnes whch cannot dentey beaocated to some tems or cass of gross ncome: Provded, That such tems of deductons shabeaowedonyffuysubstantatedbya thenformatonnecessaryfortscacuaton. Theremander, f any, sha be treated n fu as taxabe ncome from sources wthn the Phppnes.C2D E-)e,tio$. - No deductons for nterest pad or ncurred abroad sha be aowed from the tem ofgross ncomespeced n subsecton(A) uness ndebtedness was actuay ncurred to provdefunds for use n connecton wth the conduct or operaton of trade or busness n the Phppnes.CCD G!o"" I$)o+e F!o+ So%!)e" >itho%t the Phili,,i$e". - The foowng tems of gross ncomesha be treated as ncome from sources wthout the Phppnes:(1) Interests other than those derved from sources wthn the Phppnes as provded n paragraph (1)of Subsecton (A) of ths Secton;(2) Dvdends other than those derved from sources wthn the Phppnes as provded n paragraph (2)of Subsecton (A) of ths Secton;(3) Compensaton for abor or persona servces performed wthout the Phppnes;(4) Rentasorroyatesfrompropertyocatedwthout thePhppnesorfromanynterest nsuchproperty ncudng rentas or royates for the use of or for the prvege of usng wthout the Phppnes,patents, copyrghts, secret processes and formuas, goodw, trademarks, trade brands, franchses andother ke propertes; and(5) Gans, prots and ncome from the sae of rea property ocated wthout the Phppnes.CDD T#-#/le I$)o+e F!o+ So%!)e" >itho%t the Phili,,i$e".-Fromthe temsofgrossncomespecednSubsecton(C)ofthsSectontheresha bedeductedtheexpenses, osses, andotherdeductons propery apportoned or aocated thereto and a ratabe part of any expense, oss or otherdeducton whchcannot dentey be aocatedto some tems or casses of gross ncome. Theremander, f any, sha be treated n fu as taxabe ncome from sources wthout the Phppnes.CED I$)o+e F!o+ So%!)e" P#!tl2 >ithi$#$d P#!tl2 >itho%t the Phili,,i$e".-Itemsofgrossncome, expenses, osses and deductons, other than those speced n Subsectons (A) and (C) of thsSecton, sha be aocated or apportoned to sources wthn or wthout the Phppnes, under the ruesand reguatons prescrbed by the Secretary of Fnance, upon recommendaton of the Commssoner.Where tems of gross ncome are separatey aocated to sources wthn the Phppnes, there sha bededucted (for the purpose of computng the taxabe ncome therefrom) the expenses, osses and otherdeductons propery apportoned or aocated thereto and a ratabe part of other expenses, osses orother deductons whch cannot dentey be aocated to some tems or casses of gross ncome. Theremander, f any, sha be ncuded n fu as taxabe ncome from sources wthn the Phppnes. In thecase of gross ncome derved from sources party wthn and party wthout the Phppnes, the taxabencome may rst be computed by deductng the expenses, osses or other deductons apportoned oraocated thereto and a ratabe part of any expense, oss or other deducton whch cannot dentey beaocated to some tems or casses of gross ncome; and the porton of such taxabe ncome attrbutabeto sources wthn the Phppnes may be determned by processes or formuas of generaapportonment prescrbedbytheSecretaryof Fnance. Gans, protsandncomefromthesaeofpersona property produced (n whoe or n part) by the taxpayer wthn and sod wthout thePhppnes, or produced (n whoe or n part) by the taxpayer wthout and sod wthn the Phppnes,sha be treated as derved party from sources wthn and party from sources wthout the Phppnes.Gans, prots and ncome derved from the purchase of persona property wthn and ts sae wthoutthe Phppnes, or from the purchase of persona property wthout and ts sae wthn the Phppnessha be treated as derved entrey form sources wthn the country n whch sod: Provded, however,That gan from the sae of shares of stock n a domestc corporaton sha be treated as derved entreyformsourceswthn thePhppnesregardess ofwherethesad sharesaresod.The transferby anonresdent aenor aforegncorporatontoanyoneof anyshareof stockssuedbyadomestccorporaton sha not be ehected or made n ts book uness:(1) the transferor has ed wth the Commssoner a bond condtoned upon the future payment by hmof any ncome tax that may be due on the gans derved from such transfer, or(2) the Commssoner has certed that the taxes, f any, mposed n ths Tte and due on the ganreazedfromsuchsaeortransferhavebeenpad. Itsha bethedutyof thetransferor andthecorporaton the shares of whch are sod or transferred, to advse the transferee of ths requrement.CFD De:$itio$". - As used n ths Secton the words 'sae' or 'sod' ncude 'exchange' or 'exchanged';and the word 'produced' ncudes 'created', 'fabrcated,' 'manufactured', 'extracted,' 'processed', 'cured'or 'aged.'CHAPTER I 7 DEFINITIONSSEC. 22. De:$itio$" - When used n ths Tte:(A) The term A,e!"o$A means an ndvdua, a trust, estate or corporaton.(B) The term A)o!,o!#tio$A sha ncude partnershps, no matter how created or organzed, |ont-stockcompanes, |ont accounts (cuentas en partcpacon), assocaton, or nsurance companes, but does notncude genera professona partnershps and a |ont venture or consortum formed for the purpose ofundertakng constructon pro|ects or engagng n petroeum, coa, geotherma and other energyoperatons pursuant to an operatng consortumagreement under a servce contract wth theGovernment. AGe$e!#l ,!ofe""io$#l ,#!t$e!"hi,"Aare partnershps formed by persons for the soepurposeof exercsngther commonprofesson, nopart of thencomeof whchs dervedfromengagng n any trade or busness.(C) The term Ado+e"ti)0A when apped to a corporaton, means created or organzed n the Phppnesor under ts aws.(D) The term Afo!ei8$0A when apped to a corporaton, means a corporaton whch s not domestc.(E) The term A$o$!e"ide$t )iti=e$A means:(1) A ctzen of the Phppnes who estabshes to the satsfacton of the Commssoner the fact of hsphysca presence abroad wth a dente ntenton to resde theren.(2) A ctzen of the Phppnes who eaves the Phppnes durng the taxabe year to resde abroad,ether as an mmgrant or for empoyment on a permanent bass.(3) A ctzen of the Phppnes who works and derves ncome from abroad and whose empoymentthereat requres hm to be physcay present abroad most of the tme durng the taxabe year.(4) Actzenwhohas beenprevousyconsderedas nonresdent ctzenandwhoarrves nthePhppnes at any tme durng the taxabe year to resde permanenty n the Phppnes sha kewse betreated as a nonresdent ctzen for the taxabe year n whch he arrves n the Phppnes wth respectto hs ncome derved from sources abroad unt the date of hs arrva n the Phppnes.(5) The taxpayer sha submt proof to the Commssoner to show hs ntenton of eavng the PhppnestoresdepermanentyabroadortoreturntoandresdenthePhppnesasthecasemaybeforpurpose of ths Secton.(F) The term A!e"ide$t #lie$A means an ndvdua whose resdence s wthn thePhppnes and who s not a ctzen thereof.(G) The term A$o$!e"ide$t #lie$Ameans an ndvdua whose resdence s not wthn the Phppnesand who s not a ctzen thereof.(H) The term A!e"ide$t fo!ei8$ )o!,o!#tio$Aappesto a foregn corporaton engaged n tradeorbusness wthn the Phppnes.(I) The term A$o$!e"ide$t fo!ei8$ )o!,o!#tio$Aappes to a foregn corporaton not engaged n tradeor busness wthn the Phppnes.(|) The term A:d%)i#!2Ameans a guardan, trustee, executor, admnstrator, recever, conservator orany person actng n any ducary capacty for any person.(K) The term Aithholdi$8 #8e$tAmeans any person requred to deduct and wthhod any tax underthe provsons of Secton 57.(L) The term A"h#!e" of "to)1A sha ncude shares of stock of a corporaton, warrants and/or optonsto purchase shares of stock, as we as unts of partcpaton n a partnershp (except generaprofessona partnershps), |ont stock companes, |ont accounts, |ont ventures taxabe as corporatons,assocatons and recreaton or amusement cubs (such as gof, poo or smar cubs), and mutua fundcertcates.(M) The term A"h#!eholde!' sha ncude hoders of a share/s of stock, warrant/s and/or opton/s topurchase shares of stock of a corporaton, as we as a hoder of a unt of partcpaton n a partnershp(except generaprofessonapartnershps) na |ontstock company, a|ont account,a taxabe |ontventure, a member of an assocaton, recreaton or amusement cub (such as gof, poo or smar cubs)andahoder of amutua fundcertcate, amember nanassocaton, |ont-stockcompany, ornsurance company.(N) The term At#-,#2e!A means any person sub|ect to tax mposed by ths Tte.(O) The terms Ai$)l%di$8A and Ai$)l%de"A0 when used n a denton contaned n ths Tte, sha not bedeemed to excude other thngs otherwse wthn the meanng of the term dened.(P) The term At#-#/le 2e#!A means the caendar year, or the sca year endng durng such caendaryear, upon the bass of whch the net ncome s computed under ths Tte. 'Taxabe year' ncudes, nthe case of a return made for a fractona part of a year under the provsons of ths Tte or under ruesand reguatons prescrbed by the Secretary of Fnance, upon recommendaton of the commssoner, theperod for whch such return s made.(O) The term A:")#l 2e#!A means an accountng perod of tweve (12) months endng on the ast day ofany month other than December.(R) The terms A,#id o! i$)%!!edA and 'pad or accrued' sha be construed accordng to the method ofaccountng upon the bass of whch the net ncome s computed under ths Tte.(S) The term At!#de o! /%"i$e""A ncudes the performance of the functons of a pubc omce.(T)Theterm A"e)%!itie"Ameanssharesof stocknacorporatonandrghtstosubscrbeforortoreceve such shares. The term ncudes bonds, debentures, notes or certcates, or other evdence orndebtedness, ssued by any corporaton, ncudng those ssued by a government or potcasubdvson thereof, wth nterest coupons or n regstered form.(U) The term Ade#le! i$ "e)%!itie"A means a merchant of stocks or securtes, whether an ndvdua,partnershp or corporaton, wth an estabshed pace of busness, reguary engaged n the purchase ofsecurtes and the resae thereof to customers; that s, one who, as a merchant, buys securtes and re-ses them to customers wth a vew to the gans and prots that may be derved therefrom.(V) The term A/#$1A means every bankng nsttuton, as dened n Secton 2 of Repubc Act No. 337,as amended, otherwse known as the Genera bankng Act. A bank may ether be a commerca bank, athrft bank, a deveopment bank, a rura bank or specazed government bank.(W) ThetermA$o$7/#$1:$#$)i#l i$te!+edi#!2Ameans ananca ntermedary, as denednSecton 2(D)(C) of Repubc Act No. 337, as amended, otherwse known as the Genera Bankng Act,authorzed by the Bangko Sentra ng Ppnas (BSP) to perform quas-bankng actvtes.(X) The term A5%#"i7/#$1i$8 #)ti&itie"A means borrowng funds from twenty (20) or more persona orcorporate enders at any one tme, through the ssuance, endorsement, or acceptance of debtnstruments of any knd other than deposts for the borrower's own account, or through the ssuance ofcertcatesof assgnment or smar nstruments, wthrecourse, or of repurchaseagreements forpurposes of reendng or purchasng recevabes and other smar obgatons: Provded, however, Thatcommerca,ndustraand other non-nanca companes,whch borrowfunds through any of thesemeans for the mted purpose of nancng ther own needs or the needs of ther agents or deaers, shanot be consdered as performng quas-bankng functons.(Y) The term Ade,o"it "%/"tit%te"A sha mean an aternatve from of obtanng funds from the pubc(the term 'pubc' means borrowng from twenty (20) or more ndvdua or corporate enders at any onetme) other than deposts, through the ssuance, endorsement, or acceptance of debt nstruments fortheborrowers ownaccount, for thepurposeof reendngor purchasngof recevabes andotherobgatons, or nancng ther own needs or the needs of ther agent or deaer. These nstruments mayncude, but need not be mted to bankers' acceptances, promssory notes, repurchase agreements,ncudng reverse repurchase agreements entered nto by and between the Bangko Sentra ng Ppnas(BSP) and any authorzed agent bank, certcates of assgnment or partcpaton and smarnstruments wth recourse: Provded, however, That debt nstruments ssued for nterbank caoanswth maturty of not more than ve (5) days to cover decency n reserves aganst depost abtes,ncudng those between or among banks and quas-banks, sha not be consdered as depost substtutedebt nstruments.(Z) The term Ao!di$#!2 i$)o+eA ncudes any gan from the sae or exchange of property whch s not acapta asset or property descrbed n Secton 39(A)(1). Any gan from the sae or exchange of propertywhch s treated or consdered, under other provsons of ths Tte, as 'ordnary ncome' sha be treatedas gan from the sae or exchange of property whch s not a capta asset as dened n Secton 39(A)(1). The term 'ordnary oss'ncudes any oss from the sae or exchange of property whch s not acaptaasset. Any oss from the sae or exchange of property whch s treated or consdered, underother provsons of ths Tte, as 'ordnary oss' sha be treated as oss from the sae or exchange ofproperty whch s not a capta asset.(AA) The termA!#$1 #$d:lee+,lo2ee"Asha mean a empoyees who are hodng nethermanagera nor supervsorypostonasdenedunderexstngprovsonsof theLabor Codeof thePhppnes, as amended.(BB) The term A+%t%#l f%$d )o+,#$2Asha mean an open-end and cose-end nvestment companyas dened under the Investment Company Act.(CC) Theterm At!#de0 /%"i$e""o!,!ofe""io$Asha not ncudeperformanceof servcesbythetaxpayer as an empoyee.(DD) The term A!e8io$#l o! #!e# he#d5%#!te!"A sha mean a branch estabshed n the Phppnes bymutnatona companes and whch headquarters do not earn or derve ncome from the Phppnes andwhch act as supervsory, communcatons and coordnatng center for ther amates, subsdares, orbranches n the Asa-Pacc Regon and other foregn markets.(EE) The term A!e8io$#l o,e!#ti$8 he#d5%#!te!"Asha mean a branch estabshed n the Phppnesby mutnatona companes whch are engaged n any of the foowng servces: genera admnstratonandpannng; busnesspannngandcoordnaton; sourcngandprocurementof rawmaterasandcomponents; corporate nance advsory servces; marketng contro and saes promoton; tranng andpersonne management; ogstc servces; research and deveopment servces and productdeveopment; technca support and mantenance; data processng and communcatons; and busnessdeveopment.(FF) Theterm Alo$87te!+de,o"ito!i$&e"t+e$t)e!ti:)#te"Asha refer tocertcateof tmedepost or nvestment n the form of savngs, common or ndvdua trust funds, depost substtutes,nvestment management accounts and other nvestments wth a maturty perod of not ess than ve(5) years, the form of whch sha be prescrbed by the Bangko Sentra ng Ppnas (BSP) and ssued bybanks ony (not by nonbank nanca ntermedares and nance companes) to ndvduas ndenomnatons of Ten thousand pesos (P10,000) and other denomnatons as may be prescrbed by theBSP.CHAPTER II 7 GENERAL PRINCIPLESSEC. 2'.Ge$e!#l P!i$)i,le"ofI$)o+e T#-#tio$ i$the Phili,,i$e".-Exceptwhenotherwseprovded n ths Code:(A) A ctzen of the Phppnes resdng theren s taxabe on a ncome derved from sources wthn andwthout the Phppnes;(B) A nonresdent ctzen s taxabe ony on ncome derved from sources wthn the Phppnes;(C) Anndvdua ctzenof thePhppneswhosworknganddervngncomefromabroadasanoverseas contract worker s taxabeonyonncomedervedfromsources wthnthePhppnes:Provded, That a seaman who s a ctzen of the Phppnes and who receves compensaton for servcesrendered abroad as a member of the compement of a vesse engaged excusvey n nternatona tradesha be treated as an overseas contract worker;(D) An aen ndvdua, whether a resdent or not of the Phppnes, s taxabe ony on ncome dervedfrom sources wthn the Phppnes;(E) Adomestccorporatonstaxabeona ncomedervedfromsourceswthnandwthout thePhppnes; and(F) A foregn corporaton, whether engaged or not n trade or busness n the Phppnes, s taxabe onyon ncome derved from sources wthn the Phppnes.CHAPTER III 7 TAB ON INDIVIDUALSSEC. 2*. I$)o+e T#- R#te".(A) Rates of Income Tax on Indvdua Ctzen and Indvdua Resdent Aen of the Phppnes.(1) An ncome tax s hereby mposed:(a) On the taxabe ncome dened n Secton 31 of ths Code, other than ncome sub|ect to tax underSubsectons (B), (C) and (D) of ths Secton, derved for each taxabe year from a sources wthn andwthout the Phppnes be every ndvdua ctzen of the Phppnes resdng theren;(b) On the taxabe ncome dened n Secton 31 of ths Code, other than ncome sub|ect to tax underSubsectons (B), (C) and (D) of ths Secton, derved for each taxabe year from a sources wthn thePhppnes by an ndvdua ctzen of the Phppnes who s resdng outsde of the Phppnes ncudngoverseas contract workers referred to n Subsecton(C) of Secton 23 hereof; and(c) On the taxabe ncome dened n Secton 31 of ths Code, other than ncome sub|ect to tax underSubsectons (b), (C) and (D) of ths Secton, derved for each taxabe year from a sources wthn thePhppnes by an ndvdua aen who s a resdent of the Phppnes.The tax sha be computed n accordance wth and at the rates estabshed n the foowng schedue:Not over P10,000............. 5%Over P10,000 but not over P30,000...... P500+10% of the excess over P10,000Over P30,000 but not over P70,000...... P2,500+15% of the excess over P30,000Over P70,000 but not over P140,000....... P8,500+20% of the excess over P70,000Over P140,000 but not over P250,000..... P22,500+25% of the excess over P140,000Over P250,000 but not over P500,000..... P50,000+30% of the excess over P250,000Over P500,000 .............. P125,000+34% of the excess over P500,000 n 1998.Provded, That ehectve |anuary 1, 1999, the top margna rate sha be thrty-three percent (33%) andehectve |anuary 1, 2000, the sad rate sha be thrty-two percent (32%).For marred ndvduas, the husband and wfe, sub|ect to the provson of Secton 51 (D) hereof, shacompute separatey ther ndvdua ncome tax basedon ther respectve tota taxabe ncome:Provded, Thatf anyncomecannot bedenteyattrbutedtoordentedasncomeexcusveyearned or reazed by ether of the spouses, the same sha be dvded equay between the spouses forthe purpose of determnng ther respectve taxabe ncome.(B) Rate of Tax on Certan Passve Income.(1) Interests, Royates, Przes, and Other Wnnngs. - A na tax at the rate of twenty percent (20%) shereby mposed upon the amount of nterest from any currency bank depost and yed or any othermonetary benet from depost substtutes and from trust funds and smar arrangements; royates,except on books, as we as other terary works and musca compostons, whch sha be mposed ana tax of ten percent (10%); przes (except przes amountng to Ten thousand pesos (P10,000) or esswhch sha be sub|ect to tax under Subsecton (A) of Secton 24; and other wnnngs (except PhppneCharty Sweepstakes andLotto wnnngs), dervedfromsources wthnthe Phppnes: Provded,however, Thatnterestncomerecevedbyanndvdua taxpayer(exceptanonresdentndvdua)from a depostory bank under the expanded foregn currency depost system sha be sub|ect to a nancometaxattherateof sevenandone-haf percent(71/2%) of suchnterestncome: Provded,further, That nterest ncome from ong-term depost or nvestment n the form of savngs, common orndvduatrust funds, depost substtutes, nvestment management accounts and other nvestmentsevdenced by certcatesnsuchformprescrbedby theBangko SentrangPpnas(BSP)shabeexempt from the tax mposed under ths Subsecton: Provded, nay, That shoud the hoder of thecertcatepre-termnatethedepost or nvestment beforethefth(5th) year, ana taxsha bemposed on the entre ncome and sha be deducted and wthhed by the depostory bank from theproceeds of the ong-term depost or nvestment certcate based on the remanng maturty thereof:Four (4) years to ess than ve (5) years - 5%;Three (3) years to ess than (4) years - 12%; andLess than three (3) years - 20%(2) Cash and/or Property Dvdends - A na tax at the foowng rates sha be mposed upon the cashand/or property dvdends actuay or constructvey receved by an ndvdua froma domestccorporaton or from a |ont stock company, nsurance or mutua fund companes and regona operatngheadquartersof mutnatona companes, or ontheshareof anndvdua nthedstrbutabenetncome after tax of a partnershp (except a genera professona partnershp) of whch he s a partner,or on the share of an ndvdua n the net ncome after tax of an assocaton, a |ont account, or a |ontventure or consortum taxabe as a corporaton of whch he s a member or co-venturer:Sx percent (6%) begnnng |anuary 1, 1998;Eght percent (8%) begnnng |anuary 1, 1999;Ten percent (10% begnnng |anuary 1, 2000.Provded, however, That the tax on dvdends sha appy ony on ncome earned on or after |anuary 1,1998. Income formng part of retaned earnngs as of December 31, 1997 sha not, even f decared ordstrbuted on or after |anuary 1, 1998, be sub|ect to ths tax.(C) Capta Gans from Sae of Shares of Stock not Traded n the Stock Exchange. - The provsons ofSecton 39(B) notwthstandng, a na tax at the rates prescrbed beow s hereby mposed upon the netcapta gans reazed durng the taxabe year from the sae, barter, exchange or other dsposton ofshares of stocknadomestccorporaton, except shares sod, or dsposedof throughthestockexchange.Not over P100,000............. 5%On any amount n excess of P100,000.... 10%(D) Capta Gans from Sae of Rea Property. -(1) In Genera. - The provsons of Secton 39(B) notwthstandng, a na tax of sx percent (6%) basedon the gross seng prce or current far market vaue as determned n accordance wth Secton 6(E) ofths Code, whchever s hgher, s hereby mposed upon capta gans presumed to have been reazedfrom the sae, exchange, or other dsposton of rea property ocated n the Phppnes, cassed ascapta assets, ncudngpactoderetrosaesandother formsof condtona saes, byndvduas,ncudngestatesandtrusts: Provded, That thetaxabty, f any, ongansfromsaesor otherdspostons of reaproperty to the government or any of ts potcasubdvsons or agences or togovernment-owned or controed corporatons sha be determned ether under Secton 24 (A) or underths Subsecton, at the opton of the taxpayer.(2)Excepton.-Theprovsonsofparagraph(1) ofthsSubsectonto thecontrary notwthstandng,capta gans presumed to have been reazed from the sae or dsposton of ther prncpa resdence bynatura persons, theproceedsofwhchsfuyutzednacqurngorconstructnganewprncparesdence wthn eghteen (18) caendar months from the date of sae or dsposton, sha be exemptfrom the capta gans tax mposed under ths Subsecton: Provded, That the hstorca cost or ad|ustedbass of the rea property sod or dsposed sha be carred over to the new prncpa resdence but oracqured: Provded, further, That the Commssoner sha have been duy noted by the taxpayer wthnthrty (30) days from the date of sae or dsposton through a prescrbed return of hs ntenton to avaof the tax exempton heren mentoned: P!o&ided, st further, That the sad tax exempton can ony beavaed of once every ten (10) years: P!o&ided, nay, that f there s no fu utzaton of the proceedsof saeor dsposton, theportonof theganpresumedtohavebeenreazedfromthesaeordsposton sha be sub|ect to capta gans tax. For ths purpose, the gross seng prce or far marketvaue at the tme of sae, whchever s hgher, sha be mutped by a fracton whch the unutzedamount bears to the gross seng prce n order to determne the taxabe porton and the tax prescrbedunder paragraph (1) of ths Subsecton sha be mposed thereon.SEC. 2.. T#- o$ No$!e"ide$t Alie$ I$di&id%#l. 7(A) Nonresdent Aen Engaged n trade or Busness Wthn the Phppnes. -(1) In Genera. - A nonresdent aen ndvdua engaged n trade or busness n the Phppnes sha besub|ect to an ncome tax n the same manner as an ndvdua ctzen and a resdent aen ndvdua, ontaxabe ncome receved from a sources wthn the Phppnes. A nonresdent aen ndvdua who shacometo thePhppnesand stay theren foranaggregate perodof more than one hundred eghty(180) daysdurnganycaendar year sha bedeemeda'nonresdent aendongbusnessnthePhppnes'. Secton 22 (G) of ths Code notwthstandng.(2) Cash and/or Property Dvdends from a Domestc Corporaton or |ont Stock Company, or Insuranceor Mutua Fund Company or Regona Operatng Headquarter or Mutnatona Company, or Share n theDstrbutabe Net Income of a Partnershp (Except a Genera ProfessonaPartnershp), |ont Account,|ont Venture Taxabe as a Corporaton or Assocaton., Interests, Royates, Przes, and Other Wnnngs. -Cash and/or property dvdends from a domestc corporaton, or from a |ont stock company, or from annsurance or mutua fund company or from a regona operatng headquarter of mutnatona company,or the share of a nonresdent aen ndvdua n the dstrbutabe net ncome after tax of a partnershp(except a genera professona partnershp) of whch he s a partner, or the share of a nonresdent aenndvdua n the net ncome after tax of an assocaton, a |ont account, or a |ont venture taxabe as acorporaton of whch he s a member or a co-venturer; nterests; royates (n any form); and przes(except przes amountng to Ten thousand pesos (P10,000) or ess whch sha be sub|ect to tax underSubsecton (B)(1) of Secton 24) and other wnnngs (except Phppne Charty Sweepstakes and Lottownnngs); sha besub|ecttoan ncome taxoftwentypercent(20%)onthetotaamountthereof:Provded, however, that royates on books as weas other terary works, and royates on muscacompostons sha be sub|ect to a na tax of ten percent (10%) on the tota amount thereof: Provded,further, That cnematographc ms and smar works sha be sub|ect to the tax provded under Secton28 of ths Code: P!o&ided, furthermore, That nterest ncome from ong-term depost or nvestment nthe form of savngs, common or ndvdua trust funds, depost substtutes, nvestment managementaccountsandother nvestmentsevdencedbycertcatesnsuchformprescrbedbytheBangkoSentra ngPpnas(BSP)sha beexemptfromthetaxmposedunderthsSubsecton: P!o&ided,nay, that shoud the hoder of the certcate pre-termnate the depost or nvestment before the fth(5th) year, a na tax sha be mposed on the entre ncome and sha be deducted and wthhed by thedepostorybankfromthe proceedsoftheong-termdepostornvestmentcertcatebasedon theremanng maturty thereof:Four (4) years to ess than ve (5) years - 5%;Three (3) years to ess than four (4) years - 12%; andLess than three (3) years - 20%.(3) Capta Gans. - Capta gans reazed from sae, barter or exchange of shares of stock n domestccorporatons not traded through the oca stock exchange, and rea propertes sha be sub|ect to th