Publishing Republic Acts Nos. 3825 and 3841, Amending Section 22(b), Section 24(b)(1) and Section 54, All of the Tax Code

October 17, 1963 REVENUE MEMORANDUM CIRCULAR NO. 33-63 SUBJECT : Publishing Republic Acts Nos. 3825 and 3841, Amending Section 22(b), Section 24(b)(1) and Section 54, All of the Tax Code TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, there are quoted hereunder the pertinent provisions of Republic Acts Nos. 3825 and 3841: "(Republic Act No. 3825) "SECTION 1. Subparagraph (1), paragraph (b) of Section twenty-four of the National Internal Revenue Code, as amended, is further amended to read as follows: '(b) Tax on foreign corporations . (1) Nonresident corporations . There shall be levied, collected, and paid for each taxable year, in lieu of the tax imposed by the preceding paragraph, upon the amount received by every foreign corporation not engaged in trade or business within the Philippines, from all sources within the Philippines, as interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income, a tax equal to thirty per centum of such amount: Provided, however, That premiums shall not include reinsurance premiums.' "SEC. 2. Section fifty-four of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: 'Section 54. Payment of corporation income tax at source . In the case of foreign corporations, subject to taxation under this Title not engaged in trade or business within the Philippines and not having any office or place of business therein, there shall be deducted and withheld at the source in the same manner and upon the same items as is provided in Section fifty-three a tax equal to thirty per centum thereof, and such tax shall be returned and paid in the same manner and subject to the same conditions as provided in that section: Provided, however, that no such deduction or withholding shall be required in the case of reinsurance premiums ceded to foreign insurance corporations not engaged in trade or business in the Philippines and having no office or place of business therein.' "(Republic Act No. 3841) "SECTION 1. Subsection (b) of Section twenty-two of Commonwealth Act Numbered Four hundred sixty-six, as amended, is hereby further amended to read as follows: '(b) Non-resident alien not engaged in trade or business within the Philippines . There shall be levied, collected and paid for each taxable year upon the entire income received from all sources within the Philippines by every non-resident alien individual not engaged in trade or business within the Philippines as interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable annual or periodical or casual gains, profits and income, and capital gains a tax equal to twenty per centum of such income: Provided, That if the total income received by such non-resident alien individual from all sources within the Philippines exceeds twenty-three thousands eight hundred pesos, the rates established in Section twenty-one shall apply, but in no case shall the tax imposed under this subsection be less than twenty per centum of the total income.' "SEC. 2. Subsection (b)(1) of Section twenty-four of the same Act, as amended, is further amended to read as follows: '(b) Tax on foreign corporation . (1) Non-resident corporations . There shall be levied, collected and paid for each taxable year, in lieu of the tax imposed by the preceding paragraph, upon the amount received by every foreign corporation not engaged in trade or business within the Philippines, from all sources within the Philippines, as interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable annual or periodical or casual gains, profits and income, and capital gains, a tax equal to thirty per centum of such amount.' cdta Features of the Amendments Sections 22(b) and 24(b)(1) of the Tax Code, as amended, further clarify the taxability of casual gains derived by non-resident clients and foreign corporations not engaged in trade or business within the Philippines. Republic Act No. 3825 amended Section 24(b)(1) and also Section 54 by exempting reinsurance premiums received by non-resident foreign corporations from income tax as well as withholding tax. The absence in Section 24(b)(1) of the term "capital gains" as taxable income of non-resident foreign corporations not engaged in trade or business within the Philippines gave rise to doubts on the taxability of the same. In order, therefore, to remove this doubt, said section 24(b)(1) has been amended by inserting the words "capital gains". Section 4 of Republic Act No. 3841 has not been reproduced because it refers solely to Section 3 of the original bill relating to the conditional exemption of capital gains, which was vetoed by the President. Effectivity Republic Acts Nos. 3825 and 3841 took effect on January 23, 1963. Enforcement and Publicity Internal revenue Officers and others charged with the enforcement of internal revenue laws are hereby requested to give this circular as wide a publicity as possible. aisadc (SGD.) RAMON T. OBEN Acting Commissioner of Internal Revenue