Publishing the Changes Effected by the Internal Revenue Code of 1977

August 12, 1977 REVENUE MEMORANDUM CIRCULAR NO. 29-77 SUBJECT : Publishing the Changes Effected by the Internal Revenue Code of 1977 TO : All Internal Revenue Officers and others concerned For the information and guidance of all concerned, there is published below the changes introduced in Title V (Privilege Taxes on Business and Occupation), by the Internal Revenue Code of 1977, viz.: SECTION 192. Fixed taxes . (1) Persons subject to percentage tax . Unless otherwise provided, every person engaging in business on which the percentage tax is imposed shall pay a fixed annual tax of one hundred pesos. (2) Persons not subject to percentage tax . Every person who is not required to pay the percentage tax prescribed under this Title shall pay for each calendar year in which the person shall engage in business a fixed annual tax based upon his gross annual sales during the preceding calendar year, as follows: Twenty pesos, if the amount of the gross annual sales does not exceed two thousand four hundred pesos; Forty pesos, if the amount of the gross annual sales exceeds two thousand four hundred pesos but does not exceed ten thousand pesos; Eighty pesos, if the amount of the gross annual sales exceeds ten thousand pesos but does not exceed thirty thousand pesos; One hundred sixty pesos, if the amount of the gross annual sales exceeds thirty thousand pesos but does not exceed fifty thousand pesos; Two hundred fifty pesos, if the amount of the gross annual sales exceeds fifty thousand pesos but does not exceed seventy-five thousand pesos; Three hundred fifty pesos, if the amount of the gross annual sales exceeds seventy-five thousand pesos but does not exceed one hundred thousand pesos; Five hundred pesos, if the amount of the gross annual sales exceeds one hundred thousand pesos but does not exceed one hundred fifty thousand pesos; Nine hundred pesos, if the amount of the gross annual sales exceeds one hundred fifty thousand pesos but does not exceed three hundred thousand pesos; One thousand six hundred pesos, if the amount of the gross annual sales exceeds three hundred thousand pesos but does not exceed five hundred thousand pesos; Three thousand pesos, if the amount of the gross annual sales exceeds five hundred thousand pesos but does not exceed one million pesos; Five thousand pesos, if the amount of the gross annual sales exceeds one million pesos but does not exceed one million five hundred thousand pesos; Seven thousand pesos, if the amount of the gross annual sales exceeds one million five hundred thousand pesos but does not exceed two million pesos; Nine thousand pesos, if the amount of the gross annual sales exceeds two million pesos but does not exceed two million five hundred thousand pesos; Eleven thousand pesos, if the amount of the gross annual sales exceeds two million five hundred thousand pesos but does not exceed three million pesos; Fourteen thousand pesos, if the amount of the gross annual sales exceeds three million pesos but does not exceed four million pesos; Eighteen thousand pesos, if the amount of the gross annual sales exceeds four million pesos but does not exceed five million pesos; Twenty-two thousand pesos, if the amount of the gross annual sales exceeds five million pesos but does not exceed six million pesos; Twenty-six thousand pesos, if the amount of the gross annual sales exceeds six million pesos but does not exceed seven million pesos; Thirty thousand pesos, if the amount of the gross annual sales exceeds seven million pesos but does not exceed eight million pesos; Thirty-four thousand pesos, if the amount of the gross annual sales exceeds eight million pesos but does not exceed nine million pesos; Thirty-eight thousand pesos, if the amount of the gross annual sales exceeds nine million pesos but does not exceed ten million pesos. If the amount of the gross annual sales exceeds ten million pesos, the graduated fixed tax shall be thirty eight thousand pesos plus one thousand pesos for every one million pesos of gross sales or a fractional part thereof in excess of ten million pesos. If a merchant is engaged in two or more businesses, one or more of which is subject to, and the others exempt from, the percentage tax, he shall pay the graduated fixed annual tax provided above, based on the individual sales of his business not subject to the percentage tax under this Title. The initial graduated fixed annual tax to be paid by the person first engaging in business subject to the said tax shall be twenty pesos. xxx xxx xxx SECTION 193. Payment of percentage taxes . xxx xxx xxx (c) Flexibility Clause . In the interest of the national economy and the general welfare, and subject to the limitations herein prescribed, the President, upon recommendation of the Secretary of Finance and the National Economic Development Authority, is hereby empowered to revise the rates of percentage taxes, including any necessary change in the classification of the articles enumerated in Sections 194, 195, 196, 197, 198, 199 and 201. The existing rates may be increased by not more than 50% or decreased by not more than 10%. The above authority may be exercised by the President if any of the following conditions exists: (1) Economic conditions render it necessary to increase revenue, or to re-direct expenditure or consumption patterns by increasing or decreasing the rates of percentage tax on certain commodities; (2) Where, in the light of technological and social changes, it is necessary to classify new products or to re-classify certain articles subject to the sales tax on the basis of the changed concepts of essentiality or the degree of manufacturing done; or (3) Where it is necessary to counter an adverse action on the part of another country. SECTION 201. Percentage tax on sales of processed meat, milk and vegetables, fish and other sea foods, wheat flour and feeds . There shall be levied, assessed and collected once only on every original sale, barter, exchange and similar transaction either for nominal or valuable consideration, intended to transfer ownership of, or title to, the articles enumerated hereinbelow, a tax equivalent to five per centum of the gross selling price or gross value in money of the articles so sold, bartered, exchanged, or transferred, such tax to be paid by the manufacturer or producer: (a) Processed meat, milk and vegetables; fish and other sea foods; (b) Wheat flour; and (c) Poultry and animal feeds. Provided , however, That where the articles are manufactured out of materials subject to tax under this section, Section 199, or Section 203, the total cost of such materials, as duly established, shall be deductible from the gross selling price or gross value in money of the manufactured articles. For purposes of this section, processed meat, milk and vegetables, fish and other sea foods include such food products which have undergone the process of curing, canning, bottling or similar processes, but exclude such food products which have undergone only simple preserving processes such as freezing, drying, salting or smoking. Features of the Amendments Section 192 : Fixed taxes : This was formerly Section 182 of the Old Code. The fixed tax on persons engaged in business subject to percentage tax is increased from P50.00 to P100.00. The fixed tax on businesses engaged in by persons who are not subject to percentage tax is likewise modified. The bracketing of the gross annual sales for the purpose of determining the amount of the fixed tax is expanded from 15 brackets to 22 brackets with an increased fixed tax from P10.00 to P20.00 in the lower bracket and from P8,125 to P38,000 plus P1,000 for every P1 million of gross sales in excess of P10 million pesos at the top bracket, tabulated as follows: EXCEEDING BUT NOT EXCEEDING FIXED ANNUAL TAX P P2,400.00 P20.00 2,400.00 10,000.00 40.00 10,000.00 30,000.00 80.00 30,000.00 50,000.00 160.00 50,000.00 75,000.00 250.00 75,000.00 100,000.00 350.00 100,000.00 150,000.00 500.00 150,000.00 300,000.00 900.00 300,000.00 500,000.00 1,600.00 500,000.00 1,000,000.00 3,000.00 1,000,000.00 2,000,000.00 7,000.00 2,000,000.00 2,500,000.00 9,000.00 2,500,000.00 3,000,000.00 11,000.00 3,000,000.00 4,000,000.00 14,000.00 4,000,000.00 5,000,000.00 18,000.00 5,000,000.00 6,000,000.00 22,000.00 6,000,000.00 7,000,000.00 26,000.00 7,000,000.00 8,000,000.00 30,000.00 8,000,000.00 9,000,000.00 34,000.00 9,000,000.00 10,000,000.00 38,000.00 plus P1,000.00 for every P1,000,000.00 of gross sales in excess of P10,000,000.00 Section 193(c) : Flexibility clause :Section 193 was formerly Section 183 of the Old Code. The amendment consists in the addition of a new paragraph which provides that the President, in the interest of the national economy and general welfare, upon recommendation of the Secretary of Finance and the National Economic Development Authority is empowered to revise the rates of percentage taxes, including any necessary change in the classification of the articles enumerated in Sections 194, 195, 196, 197, 198, 199 and 201, if any of the following conditions exists: (1) Economic conditions render it necessary to increase revenue, or to re-direct expenditure or consumption patterns by increasing or decreasing the rates of percentage tax on certain commodities; (2) Where, in the light of technological and social changes, it is necessary to classify new products or to re-classify certain articles subject to the sales tax on the basis of the changed concepts of essentiality or the degree of manufacturing done; or (3) Where it is necessary to counter an adverse action on the part of another country. Section 201 : Processed fruits reclassified : This was formerly Section 186-B of the Old Code. Processed fruits such as fruits cocktails, peaches, cherries, pears, etc., are no longer considered basic essential commodities for the reason that such food products are consumed generally by those who are not actually poor. These food products are now reclassified under the higher category of ordinary articles which are subject to the sales tax of 7%. Fruits, however, "whether in their original state or not," that is, those that underwent simple preservative process such as freezing, drying, salting, smoking or stripping, remain exempt from tax as agricultural products. Effectivity The amendments took effect June 3, 1977, the date when Presidential Decree No. 1158 was approved. aisa dc Enforcement 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-P4519-F2828-A-8