Publishing Presidential Decree No. 913, dated March 29, 1976, amending Section 24(c) of the National Internal Revenue Code, as amended by Presidential Decree No. 778

March 30, 1976 REVENUE MEMORANDUM CIRCULAR NO. 14-76 SUBJECT : Publishing Presidential Decree No. 9 13, dated March 29, 1976, amending Section 24(c) of the National Internal Revenue Co de, as amended by Presidential Decree No. 7 7 8 TO : All Internal Revenue Officers and others concerned For the information and guidance of all concerned, quoted hereunder are pertinent portions of Presidential Decree No. 913, amending Section 24 (c) of the National Internal Revenue Code, as amended by Presidential Decree No. 778: "SECTION 1. Section 24(c) of the National Internal Revenue Code is hereby amended to read as follows: "(c) Rate of tax on certain dividends . Dividends received by a domestic or resident foreign corporation from a domestic corporation liable to tax under this Code (1) shall be subject to a final tax at 10% on the total amount thereof, which shall be collected and paid as provided in Sections 53 and 54 of this Code, and (2) shall not be included in the determination of the gross income of the recipient corporation: Provided, however , That interest paid or incurred on indebtedness abroad by a domestic or resident foreign corporation, which indebtedness was incurred to provide funds for investment in a domestic corporation shall be allowed as a deduction from the intercorporate dividends before computing the 10% final tax. Any excess of the interest herein allowed as deduction from intercorporate dividends may be deducted from the other gross income of the recipient corporation, subject to the provisions of Section 30(b) of this Code. "The above deduction of interest from intercorporate dividends shall be allowed only if the recipient domestic or resident foreign corporation submits an authenticated copy of the foreign loan agreement stipulating the end-use of the loan proceeds and such other information as may be required for its determination. "The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, shall promulgate rules and regulations to implement the provisions of this paragraph." FEATURES OF THE AMENDMENT While dividends received by a domestic corporation or resident foreign corporation from a domestic corporation subject to tax under the National Internal Revenue Code is subject to a final tax of 10% on the total amount thereof, interest paid or incurred on indebtedness abroad, the proceeds of which are invested in shares of stock of the domestic corporation paying the dividends, shall be allowed as a deduction from the intercorporate dividend in computing the 10% final tax. Any excess of the interest herein allowed as deduction from the intercorporate dividends may be deducted from the other gross income of the recipient corporation, subject to the provisions of Section 30(b) of the Tax Code. The deduction of interest from intercorporate dividends shall be allowed only if the recipient domestic or resident foreign corporation submits to the Commissioner of Internal Revenue the following: 1. an authenticated copy of the foreign loan agreement stipulating the end-use of the proceeds of the loan and such other information as may be required for its determination; 2. a certification from the Central Bank of the Philippines that the loan proceeds were actually remitted to the Philippines for the purpose of investing the same at the original issue of shares of stock of any domestic corporation; and 3. other relevant information which may be required by the Commissioner. EFFECTIVITY The amendment takes effect immediately. All internal revenue officers and others concerned are enjoined to be guided accordingly and to give this circular as wide a publicity as possible. EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3