An Act Restoring the Tax Exemption of Offshore Banking Units (OBUs) and Foreign Currency Deposit Units (FCDUS), Amending for the Purpose Section 27 (D) (3) and Section 28, Paragraphs (A) (4) and (A) (7) (b) of the National Internal Revenue Code, as Amended ( Republic Act No. 9294 )
April 28, 2004
Law Summary: Republic Act No. 9294
Republic Act No. 9294 is an act that aims to restore the tax exemptions for Offshore Banking Units (OBUs) and Foreign Currency Deposit Units (FCDUs) in the Philippines. This Act amends specific sections of the National Internal Revenue Code to provide these exemptions. The primary goal is to enhance the competitiveness of the Philippine banking system by offering tax incentives to these specialized banking units.
The Act stipulates that income derived by depository banks from foreign currency transactions with nonresidents, OBUs, local commercial banks, and other depository banks under the expanded foreign currency deposit system shall be exempt from all taxes. However, interest income from foreign currency loans granted by these depository banks to residents, excluding OBUs and other depository banks, will be subjected to a final tax rate of ten percent (10%).
Additionally, the Act amends the tax rates applicable to foreign corporations engaged in business within the Philippines. Resident foreign corporations may opt to be taxed at fifteen percent (15%) of gross income under certain conditions. The Act also specifies the minimum corporate income tax and the tax rates for various types of nonresident foreign corporations, including those involved in cinematographic films, vessels, aircraft, and equipment leasing.
The Act includes a separability clause, ensuring that if any part of the Act is declared unconstitutional or invalid, the remaining provisions will continue to be in effect. Furthermore, it repeals or modifies any existing laws, decrees, orders, rules, and regulations that are inconsistent with its provisions. The Act took effect fifteen days after its publication in the Official Gazette or in two newspapers of general circulation.