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REPUBLIC ACT NO. 9294
AN ACT RESTORING THE TAX EXEMPTION OF OFFSHORE BANKING UNITS (OBUs)
AND FOREIGN CURRENCY DEPOSIT UNITS (FCDUs), AMENDING FOR THE PURPOSE
SECTION 27 (D) AND SECTION 28, PARAGRAPHS (A) (4) AND (A) (7) (b) OF
THE NATIONAL INTERNAL REVENUE CODE AS AMENDED.
Section 1. Sec. 27, paragraph (D) (3) of the National Internal
Revenue Code, as amended, is hereby further amended to read as
follows:
"Sec. 27. Rates of Income Tax on Domestic Corporations. -
"(D) Rates of Tax on Certain Passive Incomes. -
"(3) Tax on Income Derived under the Expanded Foreign Currency
Deposit System. - Income derived by a depository bank under the
expanded foreign currency deposit system from foreign currency
transactions with nonresidents, offshore banking units in the
Philippines, local commercial banks including branches of foreign
banks that may be authorized by the Bangko Sentral ng Pilipinas (BSP)
to transact business with foreign currency deposit system shall be
exempt from all taxes, except net income from such transactions as
may be specified by the Secretary of Finance, upon recommendation by
the Monetary Board to be subject to the regular income tax payable
by banks: Provided, however, That interest income from foreign
currency loans granted by such depository banks under said expanded
system to residents other than offshore banking units in the
Philippines or other depository banks under the expanded system
shall be subject to a final tax at the rate of ten percent (10%).
"Any income of nonresidents, whether individuals or corporations,
from transactions with depository banks under the expanded system
shall be exempt from income tax."
Sec. 2. Sec. 28, paragraph (A)(4) and (A)(7)(b) of the same Code are
hereby amended to read as follows:
"Sec. 28. Rates of Income Tax on Foreign Corporations. -
"(A) Tax on Resident Foreign Corporations. -
"(1) In General.-Except as otherwise provided in this Code, a
corporation organized, authorized, or existing under the laws of any
foreign country, engaged in trade or business within the
Philippines, shall be subject to an income tax equivalent to thirty
five percent (35%) of the taxable income derived in the preceding
taxable year from all sources within the Philippines: Provided. That
effective January 1, 1998, the rate of income tax shall be
thirty-four percent (34%); effective January 1, 1999, the rate shall
be thirty-three percent (33%); and effective January 1, 2000 and
thereafter, the rate shall be thirty-two percent (32%).
"In the case of corporations adopting the fiscal-year accounting
period the taxable income shall be computed without regard to the
specific date when sales, purchases and other transactions occur.
Their income and expenses for the fiscal year shall be deemed to
have been earned and spent equally for each month of the period.
"The reduced corporate income tax rates shall be applied on the
amount computed by multiplying the number of months covered by the
new rates within the fiscal year by the taxable income of the
corporation for the period, divided by twelve.
"Provided, however, That a resident foreign corporation shall be
granted the option to be taxed at fifteen percent (15%) on gross
income under the same conditions, as provided in Sec. 27(A).
"(2) Minimum Corporate Income Tax on Resident Foreign Corporations.
- A minimum corporate income tax of two percent (2%) of gross
income, as prescribed under Sec. 27(E) of this Code, shall be
imposed, under the same conditions, on a resident foreign
corporation taxable under paragraph (1) of this SubSec.
"(3) International Carrier. - An international carrier doing
business in the Philippines shall pay a tax of two and one-half
percent (2 1/2%) on this 'Gross Philippine Billings' as defined
hereunder:
"(a) International Air Carrier. - 'Gross Philippine Billings' refers
to the amount of gross revenue derived from carriage of persons,
excess baggage, cargo and mail originating from the Philippines in a
continuous and uninterrupted flight, irrespective of the place of
sale or issue and the place of payment of the ticket or passage
document: Provided, That tickets revalidated, exchanged and/or
indorsed to another international airline form part of the Gross
Philippine Billings if the passenger boards a plane in a port or
point in the Philippines: Provided, further, That for a flight which
originates from the Philippines, but transshipment of passenger
takes place at any port outside the Philippines on another airline,
only the aliquot portion of the cost of the ticket corresponding to
the leg flown from the Philippines to the point of transshipment
shall form part of Gross Philippine Billings.
"(b) International Shipping. - 'Gross Philippine Billings' means
gross revenue whether for passenger, cargo or mail originating from
the Philippines up to final destination, regardless of the place of
sale or payments of the passage or freight documents.
"(4) Offshore Banking Units. - The provisions of any law to the
contrary notwithstanding, income derived by offshore banking units
authorized by the Bangko Sentral ng Pilipinas (BSP), from foreign
currency transactions with nonresidents, other offshore banking
units, local commercial banks, including branches of foreign banks
that may be authorized by the Bangko Sentral ng Pilipinas (BSP) to
transact business with offshore banking units shall be exempt from
all taxes except net income from such transactions as may be
specified by the Secretary of Finance, upon recommendations of the
Monetary Board which shall be subject to the regular income tax
payable by banks: Provided, however, That any interest income
derived from foreign currency loans granted to residents other than
offshore banking units or local commercial banks, including local
branches of foreign banks that may be authorized by the BSP to
transact business with offshore banking units, shall be subject only
to a final tax at the rate of ten percent (10%).
"Any income of nonresidents, whether individuals or corporations,
from transactions with said offshore banking units shall be exempt
from income tax.
"(5) Tax on Branch Profits Remittances. - Any profit remitted by a
branch to its head office shall be subject to a tax of fifteen
percent (15%) which shall be based on the total profits applied or
carmarked for remittance without any deduction for the tax component
thereof (except those activities which are registered with the
Philippine Economic Zone Authority). The tax shall be collected and
paid in the same manner as provided in Sec. 57 and 58 of this Code:
Provided, That interests, dividends, rents, royalties, including
remuneration for technical services, salaries, wages, premiums,
annuities, emoluments or other fixed or determinable annual,
periodic or casual gains, profits, income and capital gains received
by a foreign corporation during each taxable year from all sources
within the Philippines shall not be treated as branch profits unless
the same are effectively connected with the conduct of its trade or
business in the Philippines.
"(6) Regional or Area Headquarters and Regional Operating
Headquarters of Multinational Companies. -
"(a) Regional or area headquarters as defined in Sec. 22(DD) shall
not be subject to income tax.
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