Amendments to Section 23 and Section 45 of the NIRC of 1977, As Amended

January 19, 1985

EXECUTIVE ORDER NO. 999

FURTHER AMENDING SUBPARAGRAPHS (a), (b) AND (c) OF SECTION TWENTY-THREE AND SUBPARAGRAPHS (a) AND (d) OF SECTION 45 OF THE NATIONAL INTERNAL REVENUE CODE OF 1977, AS AMENDED

WHEREAS, the recent devaluation of the peso has adversely affected its purchasing power; cIHDaE

WHEREAS, in view of such devaluation, there is a need to provide much-needed tax relief to our taxpayers by raising the present level of personal and additional exemptions to approximate the minimum requirement for subsistence;

WHEREAS, there is likewise a need to grant an additional exemption to provide tax relief to working spouses whose incomes are aggregated for income tax purposes;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, pursuant to Section 23(e) and Section 290-B, as amended, of the National Internal Revenue Code of 1977, as amended, do hereby direct and order that:

SECTION 1. Subparagraphs (a), (b) and (c) of Section 23 of the National Internal Revenue Code, as amended, are hereby further amended to read as follows: SaCIDT

"SEC. 23. Amount of personal exemptions allowable to individuals. — For the purpose of the tax provided in this Title, there shall be allowed in the nature of a deduction from the amount of gross compensation income and/or net income, as the case may be the following personal exemptions:

"(a) Personal exemption of single individuals. — The sum of Four Thousand Pesos (P4,000.00) if the person making the return is single or a married person judicially decree as legally separated from his or her spouse.

"(b) Personal exemption of married persons or heads of family. — The sum of Eight Thousand Five Hundred Pesos (P8,500.00), if the person making the return is a married person or Five Thousand Five Hundred Pesos (P5,500.00), if the person making the return is the head of a family: Provide, That only one basic exemption of Eight Thousand Five Hundred Pesos (P8,500.00) shall be made from the aggregate income of both husband and wife when not legally separated.

"(c) Additional exemption.

1. For dependents. — The sum of Three Thousand Pesos (P3,000.00) for each legitimate, recognized natural, or adopted child wholly dependent upon and living with the taxpayer if such dependents are not more than twenty-one years of age, unmarried, and not gainfully employed or if they are incapable of self-support because of mental and physical defect. The additional exemption under this subsection shall be allowed only if the person making the return is either married, married but judicially decreed as legally separated or head of family: Provided, however, That the additional exemptions may be claimed by any one of the legally separated spouses on whom the child is wholly dependent upon as provided in this subsection: Provided, further, That the total number of dependents for which additional exemptions may be claimed shall not exceed four dependents: Provided, finally, That an additional exemption of One Thousand Pesos (P1,000.00) shall be allowed for each child who otherwise qualified as dependent prior to January 1, 1980. EICScD

2. For taxpayers with gross compensation income not exceeding P20,000.00. — The sum of Four Thousand Pesos (P4,000.00) if the gross compensation income of single individuals, married persons or heads of family does not exceed Twenty Thousand Pesos (P20,000.00).

In the case of an individual who derives compensation and other incomes, the amount of personal and additional exemptions granted under this Section shall be deducted first from the gross compensation income. Any excess of the basic personal exemption allowed under paragraphs (a) and (b), and additional exemptions for dependents under paragraph (c) hereof shall be deducted from other income.

"For the purpose of this Section, the term 'head of family' means an unmarried man or woman with one or both parents, or with one or more brothers, sisters, or with one or more legitimate, recognized natural, or adopted children living with and dependent upon him or her for their chief support, where such brothers, sisters, or children are not more than twenty-one years of age, unmarried, and not gainfully employed, or where such children are incapable of self-support because of mental or physical defect.

SECTION 2. Subparagraphs (a) and (d) Section 45 of the National Internal Revenue Code, as amended, are hereby further amended as follows:

"SEC. 45. Individual returns. — (a) Requirements. — (1) The following individuals are required to file an income tax return, if they have a gross income of at least P4,000.00 for the taxable year:

(A) Every Filipino citizen, whether residing in the Philippines or abroad, and

(B) Every alien residing in the Philippines, regardless of whether the gross income was derived from sources within or outside the Philippines. AcaEDC

(2) Regardless of amount, every non-resident alien engaged in trade or business in the Philippines shall file an income tax return.

The income tax return shall be filed in duplicate, and shall set forth specifically the gross amount of income from all sources, except that of non-resident aliens engaged in trade or business in the Philippines which shall contain only such income derived from sources within the Philippines: Provided, however, That in the case of an individual with compensation income taxable under Section 21 (a) and where the tax withheld thereon is final, a simplified return shall be filed with the Bureau of Internal Revenue either directly or through the employer.

(3) Notwithstanding the provisions of the preceding paragraphs, an individual (except a non-resident alien engaged in trade or business in the Philippines) whose gross compensation income as defined under Section 28 (b) does not exceed his personal exemption of P4,000 if he/she is single or P8,500 if he/she is married or P5,500 if he/she is head of family, is not required to file an income tax return."

"(d) Husband and Wife. — In the case of married persons who are not judicially decreed as legally separated, whether citizens, resident or non-resident aliens, only one consolidated return for the taxable year shall be filed by either spouse to cover the income of both spouses, but where it is impracticable for the spouses to file one consolidated return, each spouse may file his separate return of income, but the returns so filed shall be consolidated for the purpose of the tax prescribed under this Title."

SECTION 3. The Minister of Finance, upon recommendation of the Commissioner of Internal Revenue, shall promulgate the necessary rules and regulations to implement this Order.

SECTION 4. All laws, decrees, executive orders, rules and regulations and other issuances or parts thereof which are inconsistent with this Order are hereby repealed, amended or modified accordingly.

SECTION 5. This Order shall take effect immediately upon its approval and shall cover incomes earned in taxable year 1985.

DONE in the City of Manila, this 19th day of January, in the year of Our Lord, Nineteen Hundred and Eighty-Five.

Published in the Official Gazette, Vol. 81 No. 6 page 473 on February 11, 1985.