Corporation and a Corporation Qualified to Do Business in the Philippines

February 25, 1958 BIR RULING NO. 152-58 Miss Virginia Yaptinchay Coordinator of Investments Central Bank of the Philippines Manila M a d a m : Hereunder are the answers to the queries, pertinent to this Office, propounded by Cott Beverage Corporation as requested in your letter dated October 30, 1957. cdt Query No . 4 Would you please give me a complete list of corporate taxes, both on a Philippine corporation and a corporation qualified to do business in the Philippines? Answer : Section 24 of the Tax Code provides that every corporation organized in or existing under the laws of the Philippines no matter how created or organized, is subject to corporate income tax upon its total net income from all sources equal to the sum of the following: 20% upon the amount by which such total net income does not exceed P100,000.00; and 28% upon the amount by which such total net income exceeds P100,000.00. Likewise, every corporation organized, authorized, or existing under the laws of any foreign country is subject to the above graduated rates of corporate income tax on its income from all sources within the Philippines. Query No . 5 What are the taxes on dividends to resident stockholders? Answer : Dividends received by a resident individual stockholder is subject to the individual rates of income tax tabulated on page 3 hereof. prll Query No . 6 What are the dividend taxes on stockholders residing in the United States? Answer : Under Section 22(b) of the Tax Code, every non-resident alien individual not engaged in trade or business within the Philippines or not having an office or place of business therein is subject to tax at the rate of 12% upon the entire net income received by him from all sources within the Philippines for each taxable year. However, the graduated rates established in Section 21 of the Tax Code shall apply, if the total net income from all sources within the Philippines of such non-resident alien individual exceeds P16,500.00 Query No . 7 What are the dividend taxes on the stock a corporation might own in other Companies? Answer : Dividends received by a domestic or resident foreign corporation from a domestic corporation subject to tax under our law or from a domestic corporation engaged in a new and necessary industry as defined under Republic Act No. 901, are taxable only to the extent of 25% thereof at the rates prescribed under Section 24 of the Tax Code. Query No . 8 What are the taxes on dividends payable in the United States? Answer : Dividends received by a non-resident alien individual constitute income subject to tax in accordance with Section 22(b) as answered in query No. 6. However, if dividends are payable to a foreign corporation, the provision of Section 24 of the Tax Code will apply, that is every corporation organized, authorized, or existing under the laws of any foreign country is subject to the graduated rates of corporate income tax on its income from all sources within the Philippines, as answered in query No. 4. cdta However, the pertinent provisions of Sections 22(b) and 24 of the Tax Code must be correlated to Sections 53(b) and 54 of the said Code providing for the deduction and withholding at source, in the case of a non-resident alien individual, not engaged in trade or business within the Philippines and not having an office or place of business, of a tax equal to 12% and in the case of a foreign corporation not engaged in trade or business within the Philippines and not having any office or place of business therein, a tax equal to 24%. Query No . 12 What are the income tax rates for individuals residing in the Philippines? What are the income tax rates on income payable from a Philippine corporation located in the Islands, to persons in the United States? Answer : Under Section 21 of the Tax Code, a resident of the Philippines is subject to the graduated rates of individual income tax upon his entire net income received from all sources, which ranges from 3% upon the amount by which such total net income does not exceed P2,000.00 to 60% upon the amount by which such total net income exceeds P2,000,000.00. The rates of individual income tax payable by a resident are show below: NOT EXCEEDING EXCEEDING BRACKET RATE OF TAX 2,000.00 2,000.00 3% 2,000.00 4,000.00 2,000.00 6% 4,000.00 6,000.00 2,000.00 9% 6,000.00 10,000.00 4,000.00 13% 10,000.00 20,000.00 10,000.00 17% 20,000.00 30,000.00 10,000.00 22% 30,000.00 40,000.00 10,000.00 26% 40,000.00 50,000.00 10,000.00 28% 50,000.00 60,000.00 10,000.00 30% 60,000.00 70,000.00 10,000.00 32% 70,000.00 80,000.00 10,000.00 34% 80,000.00 90,000.00 10,000.00 36% 90,000.00 100,000.00 10,000.00 38% XXX XXX XXX XXX Section 22 (a) and 22(b) of the Tax Code answers the last portion of this query. In accordance with Section 22(a) of the Tax Code, every non-resident alien individual engaged in trade or business within the Philippines or having an office or place of business therein is subject to income tax imposed by Section 21 of the said Code on his entire net income received from all sources within the Philippines. Under Section 22(b) of the Tax Code, every non-resident alien individual not engaged in trade or business within the Philippines or not having an office or place of business therein is subject to tax at the rate of 12% upon the entire net income received by him from all sources within the Philippines for each taxable year. However, the graduated rates established in Section 21 of the Tax Code shall apply if the total net income of such non-resident alien individual exceeds P16,500.00 from all sources within the Philippines. cdti Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue