Nirc Rbsi Salao

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    THENATIONAL INTERNAL

    REVENUE CODEOF THE PHILIPPINES

    (Pres. Decree No. 1158 as amendedup to Rep. Act No. 9504)

    By

    RBSI Editorial Staff

    Ernesto C. Salao, LL.B.ecsalao@rexpublishing.com.ph

    2009

    Third Edition

    with: An Act Creating the Court of Tax Appeals, as

    amended Revised Rules of the Court of Tax Appeals, as

    amended Attrition Act of 2005

    Republic Act No. 9480 Revenue Regulations No. 10-2008

    Book Store856 Nicanor Reyes, Sr. St.

    Tel. Nos.: 735-1364 736-05671977 C.M. Recto Avenue

    Tel. Nos.: 735-5527 735-5534Manila, Philippines

    www.rexpublishing.com.ph

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    Philippine Copyright, 2009

    by

    REX BOOK STORE, INC.

    ISBN 978-971-23-5278-2

    Any copy of this book without the corresponding number and signature of Atty. Ernesto C. Salao on this page either proceeds from an illegitimate source or is in possession of one who has no authority to dispose of the same.

    ALL RIGHTS RESERVED

    No. ________________

    84 P. Florentino St., Sta. Mesa Hts., Quezon CityTel. Nos.: 712-4101 712-4108

    Printed by:

    rex printing company, inc.typography & creative lithography

    ISBN 978-971-23-5278-2

    9 7 8 9 7 1 2 3 5 2 7 8 205-CO-00020

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    TABLE OF CONTENTS

    TITLE I ORGANIZATION AND FUNCTION OF THE BUREAU OF INTERNAL REVENUE

    Section 1. Title of the Code ............................................ 1Section 2. Powers and Duties of the Bureau of Internal Revenue ............................... 1Section 3. Chief officials of the Bureau of Internal Revenue ............................................... 2Section 4. Power of the Commissioner to interpret tax laws and to decide tax cases ........ 2Section 5. Power of the Commissioner to obtain information, and to summon/ examine, and take testimony of persons ............................................. 3Section 6. Power of the Commissioner to make assessments and prescribe additional requirements for tax administration and enforcement .................................. 4Section 7. Authority of the Commissioner to delegate power ................................................... 9Section 8. Duty of the commissioner to ensure the provision and distribution of forms, receipts, certificates, and appliances, and the acknowledgment of payment of taxes ................................................. 10Section 9. Internal Revenue Districts ........................... 11Section 10. Revenue Regional Director ......................... 11Section 11. Duties of Revenue District Officers and Other Internal Revenue Officers ........ 12Section 12. Agents and deputies for collection of National Internal Revenue Taxes .................................................... 13

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    Section 13. Authority of a Revenue Officer .................. 14Section 14. Authority of officers to administer Oaths and take testimony .................. 14Section 15. Authority of internal revenue officers to make arrests and seizures .............. 14Section 16. Assignment of Internal Revenue Officers involved in excise tax functions to establishments where articles subject to excise tax are produced or kept .................................................. 15Section 17. Assignment of Internal Revenue Officers and other employees to other duties ..................................... 15Section 18. Reports of violation of laws ........................ 16Section 19. Contents of commissioners annual report ................................................... 16Section 20. Submission of report and pertinent information by the commissioner ....... 16Section 21. Sources of revenue ...................................... 17

    TITLE II TAX ON INCOME

    Chapter I DEFINITIONS

    Section 22. Definitions ................................................... 19

    Chapter II GENERAL PRINCIPLES

    Section 23. General principles of income taxation in the Philippines ............................... 28

    Chapter III TAX ON INDIVIDUALS

    Section 24. Income tax rates ........................................ 30Section 25. Tax on nonresident alien individual ......... 35Section 26. Tax liability of members of General Professional Partnerships ................. 40

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    Chapter IV TAX ON CORPORATIONS

    Section 27. Rates of income tax on domestic corporations ........................................ 41Section 28. Rates of income tax on foreign corporations ......................................... 48Section 29. Imposition of improperly accumulated earnings tax ......................................... 56Section 30. Exemptions from tax on corporations ........ 58 Chapter V COMPUTATION OF TAXABLE INCOME

    Section 31. Taxable Income defined ............................. 61

    Chapter VI COMPUTATION OF GROSS INCOME

    Section 32. Gross income ............................................... 62Section 33. Special treatment of fringe benefit ........... 67

    Chapter VII ALLOWABLE DEDUCTIONS

    Section 34. Deductions from gross income .................. 71Section 35. Allowance of personal exemption for individual taxpayer ............................ 97Section 36. Items not deductible .................................. 99Section 37. Special provisions regarding income and deductions of insurance companies, whether domestic or foreign .............. 101Section 38. Losses from wash sales of stock or securities ............................................. 102Section 39. Capital gains and losses ............................ 103Section 40. Determination of amount and recognition of gain or loss ................... 106Section 41. Inventories ................................................. 112Section 42. Income from sources within the Philippines .......................................... 113

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    Chapter VIII ACCOUNTING PERIODS AND METHODS OF ACCOUNTING

    Section 43. General rule ............................................... 119Section 44. Period in which items of gross income included ............................................... 119Section 45. Period for which deductions and credits taken ................................................... 120Section 46. Change of accounting period ...................... 120Section 47. Final or adjustment returns for a period of less than twelve (12) months .......... 120Section 48. Accounting for long-term contracts ............ 121Section 49. Installment basis ........................................ 122Section 50. Allocation of income and deductions ......... 123

    Chapter IX RETURNS AND PAYMENT OF TAX

    Section 51. Individual returns ...................................... 125Section 52. Corporation returns ................................... 129Section 53. Extension of time to file returns ............... 130Section 54. Returns of receivers, trustees in bankruptcy or assignees ..................... 130Section 55. Returns of General Professional Partnerships ........................................ 131Section 56. Payment and assessment of income tax for individuals and corporations ........ 131Section 57. Withholding of tax at source ..................... 134Section 58. Returns and payment of taxes withheld at source .............................................. 135Section 59. Tax on profits collectible from owner or other persons ................................... 138

    Chapter X ESTATES AND TRUSTS

    Section 60. Imposition of tax ......................................... 140

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    Section 61. Taxable income .......................................... 142Section 62. Exemption allowed to estates and trusts .. 143Section 63. Revocable trusts .......................................... 143Section 64. Income for benefit of grantor ...................... 143Section 65. Fiduciary returns ....................................... 144Section 66. Fiduciaries indemnified against claims for taxes paid ....................................... 145

    Chapter XI OTHER INCOME TAX REQUIREMENTS

    Section 67. Collection of foreign payments .................. 146Section 68. Information at source as to income payments ............................................ 146Section 69. Return of information of brokers .............. 147Section 70. Returns of foreign corporations ................. 148Section 71. Disposition of income tax returns, publication of lists of taxpayers and filers ............................................. 149Section 72. Suit to recover tax based on false or fraudulent returns ............................. 149Section 73. Distribution of dividends or assets by corporations ........................................ 149

    Chapter XII QUARTERLY CORPORATE INCOME TAX

    ANNUAL DECLARATION AND QUARTERLY PAY-MENTS OF INCOME TAXES

    Section 74. Declaration of income tax for individuals .. 152Section 75. Declaration of quarterly corporate income tax .......................................... 153Section 76. Fiscal adjustment return ........................... 154Section 77. Place and time of filing and payment of quarterly corporate income tax ..... 155

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    Chapter XIII WITHHOLDING ON WAGES

    Section 78. Definitions .................................................. 156Section 79. Income tax collected at source ................... 158Section 80. Liability for tax ........................................... 162Section 81. Filing of return and payment of taxes withheld .............................................. 162Section 82. Return and payment in cases of government employees ...................... 163Section 83. Statements and returns ............................ 163

    TITLE III ESTATE AND DONORS TAXES

    Cha