Publishing Certain Sections of Title VIII, the National Internal Revenue Code, as amended by P.D. No. 69

January 9, 1973 REVENUE MEMORANDUM CIRCULAR NO. 08-73 For the information and guidance of all concerned, there is published below certain sections of Title VIII of the National Internal Revenue Code, as amended by Presidential Decree No. 69, viz.: TITLE VIII Miscellaneous Taxes SEC. 249. Tax on Banks . There shall be collected a tax of five per centum on the gross receipts derived by all banks doing business in the Philippines from interests, discounts, dividends, commissions, profits from exchange, royalties, rentals of property, real and personal, and all other items treated as gross income under section twenty-nine of this Code. This tax shall also be collected from other financial intermediaries on their gross receipts derived from quasi-banking activities as herein defined. "Bank" as herein used, indicates every incorporated or other bank, and every person, association, or company having a place of business where credits are opened by the deposit or collection of money or currency subject to be paid or remitted upon draft, check or order, or where money is advanced or loaned on stocks, bonds, bullion, bills of exchange or promissory notes, are received for discount or for sale. Quasi-banking activities shall refer to borrowing funds from twenty or more personal or corporate lenders at any one time, through the issuance, endorsement or acceptance of debt instruments of any kind other than deposits for the borrower's own account, or through the issuance of certificates of assignment or similar instruments, with recourse, or of repurchase agreements for purposes of relending or purchasing receivables and other similar obligations. SEC. 249-A. Tax on Finance Companies . There shall be collected a tax of five per centum on the gross receipts derived by all finance companies doing business in the Philippines from interests, discounts, and all other items treated as gross income under this Code. As used in this section "finance companies" refers to corporations or partnerships other than a bank, or insurance company, primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial or agricultural enterprises whether by granting direct loans or by discounting or factoring commercial papers or accounts receivables for profit, buying and selling contracts, leases, chattel mortgages and other evidences of indebtedness arising out of one or more of the steps in the distribution and sale of commodities. SEC. 250. Time for Payment of Tax . Increase of tax in case of Delinquency . The tax imposed in sections 249 and 249-A shall be payable at the end of each calendar quarter and it shall be the duty of every bank or finance company, within twenty days after the end of each calendar quarter, to make a true and complete return of the amount of gross income derived during the preceding calendar quarter and pay the tax due thereon, and, if the tax is not paid within the time prescribed herein, the amount of the tax shall be increased by twenty-five per centum , the increment to be a part of the tax. In case of willful neglect to file the return within the period prescribed herein, or in case a false or fraudulent return is willfully made, there shall be added to the tax or to the deficiency tax in case any payment has been made on the basis of such return before the discovery of the falsity or fraud, a surcharge of fifty per centum of the amount. The amount so added to any tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the falsity or fraud, in which case the amount so added shall be collected in the same manner as the tax. SEC. 256. Time for Payment of Tax . Increase of Tax in case of Delinquency . The tax on insurance companies shall be due within twenty-days after the end of each calendar quarter. It shall be the duty of every insurance company to make a true and complete return of the amount of gross premiums derived during the preceding calendar quarter and pay the tax due thereon and if the tax is not paid within the time prescribed herein the amount of the tax shall be increased by twenty-five per centum , the increment to be part of the tax. In case of willful neglect to file the return within the period prescribed herein, or in case a false or fraudulent return is willfully made, there shall be added to the tax or to the deficiency tax in case any payment has been made on the basis of such return before the discovery of the falsity or fraud a surcharge of fifty per centum of the amount. The amount so added to the tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the falsity or fraud, in which case the amount so added shall be collected in the same manner as the tax. SEC. 260. Amusement Taxes . There shall be collected from the proprietor, lessees or operator of theaters, cinematographs, concert halls, circuses and other places of amusement the following rates: (a) When the amount paid for admission is one peso or less, twenty per cent; (b) When the amount paid for admission exceeds one peso, thirty per cent. In the case of theaters or cinematographs, the taxes herein prescribed shall first be deducted and withheld by the proprietors, lessees, or operators of the theaters or cinematographs and paid to the Commissioner before the gross receipts are divided between the proprietors, lessees, or operators of the theaters or cinematographs and the distributors of the cinematographic films. In the case of cabarets, day and night clubs, JAI-ALAI and race tracks, there shall be collected from the proprietor, lessee or operator a tax equivalent to twenty per centum and in the case of cockpits, ten per centum of their gross receipts irrespective of whether or not any amount is charged or paid for admission. For the purpose of amusement tax, the term gross receipts embraces all the receipts of the proprietor, lessee or operator of the amusement place. The holding of operas, concerts, recitals, dramas, painting and art exhibitions, flower shows, musical programs, literary and oratorical presentations, except fashion shows, film exhibitions and radio or phonographic records thereof, shall be exempt from the payment of the taxes imposed in this section. The taxes imposed herein shall be payable at the end of each quarter and it shall be the duty of the proprietor, lessee, or operator concerned, within twenty days after the end of each quarter, to make a true and complete return of the amount of the gross receipts derived during the preceding quarter and pay the tax due thereon. If the tax is not paid within the time prescribed above, the amount of the tax shall be increased by twenty-five per centum , the increment to be part of the tax. In case of willful neglect to file the return within the period prescribed herein, or in case a false or fraudulent return is willfully made, there shall be added to the tax or to the deficiency tax, in case any payment has been made on the basis of the return before the discovery of the falsity or fraud, a surcharge of fifty per centum of its amount. The amount so added to any tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the falsity or fraud, in which case, the amount so assessed shall be collected in the same manner as the tax. As used in this section "other places of amusements" refers to those places where one seeks admission to entertain himself by seeing or viewing the show or performance, but does not include those places where one seeks admission to entertain himself by direct participation. SEC. 261. Amusement Tax Payable by Charitable Institutions . This section is hereby repealed. SEC. 302. Inspection Fee . For inspection made in accordance with this Chapter, there shall be collected a fee of fifty centavos for each thousand cigars or fraction thereof; ten centavos for each thousand cigarettes or fraction thereof; two centavos for each kilogram of leaf tobacco or fraction thereof; and three centavos for each kilogram or fraction thereof, of scrap and other manufactured tobacco. The inspection fee on cigars, cigarettes and other tobacco products shall be paid by the manufacturer, producer or owner within ten days after the end of each month while the inspection fee on leaf tobacco, scrap and other manufactured tobacco shall be paid immediately before removal from the establishment of the wholesaler, manufacturer, or redrying plant. In case of imported leaf tobacco and products thereof, the inspection fee shall be paid by the importer before removal from customs' custody. If the inspection fee is not paid within the time specified above, the amount of the fee shall be increased by twenty-five per centum , the increment to be part of the fee . Fifty per centum of the tobacco inspection fee shall accrue to the Tobacco Inspection Fund created by Section 12 of Act No. 2613, as amended by Act No. 3179 and fifty per centum shall accrue to the Cultural Center of the Philippines. FEATURES OF THE AMENDMENTS Amendment to Section 249 : Tax on Banks . The amendment to this section placed within the purview of the 5% bank tax the gross receipts of financial intermediaries derived from quasi-banking activities. Quasi-banking activities are defined by the amendment. The amendment also deleted the paragraph providing for the payment of 1% interest per month on the reserve deficiencies of banks, this interest being already provided for by the Central Bank Act and enforced by the said Bank. Amendment to Section 249-A : Tax on Finance Companies . The amendment to this section merely increased the rate of tax on the gross income of finance companies, from 1% to 5%. Amendment to Section 250 : Time for Payment of Tax . The amendment to this section consists of the second paragraph and provides for the payment of 50% surcharge, where a bank or finance company willfully neglects to file the required quarterly return of their taxable receipts or where they filed a false or fraudulent return, the surcharge to be applied on the tax or deficiency tax, as the case may be. Amendment to Section 256 : Time for Payment of Tax . The amendment made the tax on insurance companies now payable also quarterly for uniformity. As in the case of banks and finance companies, the amendment now also provides for the payment of 50% surcharge in cases of willful neglect to file return or in cases of false or fraudulent returns. Amendments to Section 260 : Amusement Taxes . The amendment repealed the entire second paragraph of the section resulting in the removal of the 50% exemption from the amusement tax previously extended to boxing exhibitions; the proviso limiting the maximum tax imposable by local governments on said exhibitions to 5% and the other proviso repealing all laws and ordinances in contravention therewith. Boxing exhibitions are now, therefore, subject to the amusement tax to the full amount thereof. The amendment furthermore subject the jai-alais to the 20% tax on gross receipts prescribed in the fourth paragraph of the section which is now the third paragraph, and repealed the proviso therein to the effect that in the case of race tracks, the tax is in addition to the privilege tax prescribed in Section 182 A (3) (cc), being a superfluity. The fifth paragraph, now the fourth paragraph, was also amended by removing "circuses" from the exemption provision thereof and excepted "fashion shows" from the purview of the exemption therein provided. The sixth paragraph, now the fifth paragraph, as amended, now provides for the payment of the tax quarterly and no longer monthly as previously provided. Finally, the amendment added a new paragraph to the section now constituting the seventh paragraph thereof defining "other places of amusement." Under the definition, a place where one seeks admission to entertain himself by direct participation, such as bowling, and billiard halls, resorts, golf links and similar places are no longer subject to the amusement tax prescribed in this section. An amusement place now clearly appears to comprise only of those where one seeks admission only as audience or spectator. Amendment to Section 261 : Amusement Tax Payable by Charitable Institutions . This section was repealed. Amendment to Section 302 : Inspection Fee . The amendment among others, increased the inspection fees as follows: From To 1. Cigars P.30 P.50 2. Cigarettes P.03 P.10 3. Leaf Tobacco P.50 per 100 kilos. 02 per kilo 4. Scrap and other manufactured tobacco P.01 P.03 The amendment furthermore expressly specified scrap tobacco as subject to inspection fee. The other amendment which is contained in the second paragraph prescribes the time within which the fees should be paid and specifying the persons liable thereto. On leaf tobacco, the fee is payable within ten days after the end of each month; on scrap and other manufactured tobacco immediately upon removal from the taxpayer's establishment; and in the case of imported leaf tobacco or products thereof, before removal from customs custody. The amendment consisting of the third paragraph provides for the imposition of 25% surcharge if the fees are not paid on time. Finally, the former second paragraph of this section, which is now the last paragraph thereof, was amended by allocating 50% of the fees to the Tobacco Inspection Fund and 50% to the general fund. Before the amendment, the entire fees were allotted solely to the Tobacco Inspection Fund. EFFECTIVITY All of the amendments to Title VIII of the National Internal Revenue Code take effect on January 1, 1973. ENFORCEMENT All internal revenue officers are enjoined to be guided accordingly and to give this Circular as wide a publicity as possible. aisa dc MISAEL P. VERA Commissioner of Internal Revenue APPROVED: CESAR VIRATA Secretary of Finance