[ Act No. 2926, March 26, 1920 ]
AN ACT TO AMEND SEVERAL SECTIONS OF ACT NUMBERED TWENTY-EIGHT HUNDRED AND THIRTY-THREE, INCREASING THE NORMAL AND ADDITIONAL TAX RATES, AND FOR OTHER PURPOSES.
Be it enacted by the Senate and House of Representatives of the Philippines in
Legislature assembled and by the authority of the same:
Section 1. Section one of Act Numbered Twenty-eight hundred and thirty-three is hereby amended to read as follows:
"Section 1. (a) There shall be levied, assesed, collected, and paid annually upon the entire net income received in the preceding calendar year from all sources by every individual, a citizen or resident of the Philippine Islands, a tax of three per centum upon such income; and a like tax shall be levied, assesed, collected, and paid annually upon the entire net income received in the preceding calendar year from all sources within the Philippine Islands by every indidvidual, a nonresident alien, including interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise.
"(b) In addition to the income tax imposed by subdivision (a) of this section, herein referred to as the normal tax, there shall be levied, assessed, collected, and paid upon the total net income of every individual, or, in the case of a nonresident alien, the total net income received from all sources within the Philippine Islands, an additional income tax, herein referred to as the additional tax, of one-half of one per centum per annum upon the amount by which such total net income exceeds ten thousand pesos and does not exceed thirty thousand pesos; one and one-half per centum per annum upon the amount by which such total net income exceeds thirty thousand pesos and does not exceed forty thousand pesos; two per centum per annum upon the amount by which such total net income exceeds forty thousand pesos and does not exceed fifty thousand pesos; two and one-half per centum per annum upon the amount by which such total net income exceeds fifty thousand pesos and does not exceed sixty thousand pesos; three per centum per annum upon the amount by which such total net income exceeds sixty thousand pesos and does not exceed seventy thousand pesos; three and one-half per centum per annum upon the amount by which such total net income exceeds seventy thousand pesos and does not exceed eighty thousand pesos; four per centum per annum upon the amount by which such total net income exceeds eighty thousand pesos and does not exceed ninety thousand pesos; four and one-half per centum per annum upon the amount by which such total net income exceeds ninety thousand pesos and does not exceed one hundred thousand pesos; five per centum per annum upon the amount by which such total net income exceeds one hundred thousand pesos and does not exceed one hundred and twenty thousand pesos; five and one-half per centum per annum upon the amount by which such total net income exceeds one hundred and twenty thousand pesos and does not exceed one hundred and forty thousand pesos; six per centum per annum upon the amount by which such total net income exceeds one hundred and forty thousand pesos and does not exceed one hundred and sixty thousand pesos; six and one-half per centum per annum upon the amount by which such total net income exceeds one hundred and sixty thousand pesos and does not exceed two hundred thousand pesos; seven per centum per annum upon the amount by which such total net income exceeds two hundred thousand pesos and does not exceed two hundred and fifty thousand pesos; eight per centum per annum upon the amount by which such total net income exceeds two hundred and fifty thousand pesos and does not exceed three hundred thousand pesos; nine per centum per annum upon the amount by which such total net income exceeds three hundred thousand pesos and does not exceed four hundred thousand pesos; ten per centum per annum upon the amount by which such total net income exceeds four hundred thousand pesos and does not exceed five hundred thousand pesos; eleven per centum per annum upon the amount by which such total net income exceeds five hundred thousand pesosd and does not exceed seven hundred thousand pesos; twelve per centum per annum upon the amount by which such total net income exceeds seven hundred thousand pesos and does not exceed nine hundred thousand pesos; thirteen per centum per annum upon the amount by which such total net income exceeds nine hundred thousand pesos and does not exceeds one million two hundred thousand pesos; fourteen per centum per annum upon the amount by which such total net income exceeds one million two hundred thousand pesos and does not exceed one million five hundred thousand pesos; fifteen per centum per annum upon the amount by which such total net income exceeds one million five hundred thousand pesos and does not exceed two million pesos; sixteen per centum per annum upon the amount by which such total net income exceeds two million pesos does not exceed two million five hundred thousand pesos; seventeen per centum per annum upon the amount by which such total net income exceeds two million five hundred thousand pesos and does not exceed three million pesos; eighteen per centum per annum upon the amount by which such total net income exceeds three million pesos and does not exceed four million pesos; nineteen per centum per annum upon the amount by which such total net income exceeds four million pesos and does not exceed five million pesos; twenty per centum per annum upon the amount by which such total net income exceeds five million pesos.
"For the purposes of the additional tax there shall be included as income the income derived from dividends or net earnings subject to the tax established in subsection
(a) of section ten.
"All the provisions of this Law relating to the normal tax on individuals, so far as they are applicable and are not inconsistent with this subdivision and section three, shall apply to the imposition, levy, assessment, and collection of the additional tax imposed under this subdivision.
"(c) The foregoing normal and additional tax rates shall apply to the entire net income, except as hereinafter provided, received by every taxable person in the calendar year nineteen hundred and twenty and in each year thereafter."
Section 2. Subsection (c) of section two of the same Act is likewise amended, to read as follows, and a new subsection (d) is added at the end of said section two:
"(c) The gain derived or loss sustained from the sale or other disposition of propertyy, real, personal, or mixed, shall be determined in accordance with the following schedule:
"(1) In the case of property acquired before March first, nineteen hundred and thirteen, the fair market price or value of such property as of March first, nineteen hundred and thirteen.
"(2) In the case of property acquired on or before March first, nineteen hundred and thirteen, the fair market price or valueof such property as of the date of the acquisition thereof.
"(3) In the case of the exchange of one price of property for another, the property received in exchanged shall be considered as equivalent of money in a sum equal to its fair market value on the date on which the exchange was made.
"(d) Whenever, in the judgment of the Collector of Internal Revenue, the taking of an inventory of property is necessary in order to determine the income of a tax payer, the latter shall make an inventory in such form as said Collector may prescribed."
Section 3. The fourth, fifth, and seventh paragraphs of subsection (a) of section five of the same Act are hereby amended to read as follows:
"Fourth. Losses actually sustained during the year, incurred in his business or trade, or arising from fires, storms, shipwreck, or other casualty, and from theft, when such losses are not compensated for by insurance or otherwise.
"Fifth. In transactions entered into for profit but not connected with his business or trade the losses actually sustained therein during the year not compensated for by insurance or otherwise.
"Seventh. A reasonable allowance for deterioration of property arising out of its use or employment in the business or trade, or out of its not being used."
Section 4. The fourth, fifth, and seventh paragraphs of subsection (a) of section six of the same Act are hereby amended to read as follows:
"Fourth. Losses actually sustained during the year incurred in business or trade conducted by him within the Philippine Islands, and losses of property within the Philippine Islands arising from fires, storms, shipwreck, or other casualty, and from theft, when such losses are not compensated for by insurance or otherwise.
"Fifth. In transactions entered into for profit in the Philippine Islands but not connected with his business or trade, the losses actually sustained during the year not compensated for by insurance or otherwise.ℒαwρhi৷
"Seventh. A reasonable allowance for the deterioration of property within the Philippine Islands arising out of its use or employment, or its non-use, in the business or trade: (a) in the case of oil and gas wells a reasonable allowance for actual reduction in flow and production to be ascertained not by the flush flow, but by settled production or regular flow; (b) in the case of mines a reasonable allowance for depletion thereof not to exceed the market value in the mine of the product thereof which has been mined and sold during the year for which the return and computation are made, such reasonable allowance to be made in the case of both (a) and (b) under rules and regulations to be prescribed by the Collector of Internal Revenue with the approval of the Secretary of Finance: Provided, That when the allowance authorized in (a) and (b) shall equal the capital originally invested, or in case of purchase made prior to March first, nineteen hundred and thirteen, the fair market value as of that date, no further allowance shall be made. No deduction shall be allowed for any amount paid out for new buildings, permanent improvements, or betterments, made to increase the value of any property, or estate, and no reduction shall be made for any amount of expense of restoring property or making good the exhaustion thereof for which an allowance is or has been made."
Section 5. Section seven of the same Act is hereby amended to read as follows:
"Section 7. For the purpose of the normal tax only, there shall be allowed as an exemption in the nature of of a deduction from the amount of the net income of each citizen or resident of the Philippine Islands, ascertained as provided herein, the sum of four thousand pesos plus two thousand pesos additional if the person making the return be a married man with a wife living with him, or plus the sum of two thousand pesos additional if the person making the return be a married woman with a husband living with her or an unmarried man or woman with parents or one or more brothers or sisters dependednt upon him or her; but in no event shall this additional exemption of two thousand pesos be deducted by both: Provided,That only one deduction of six thousand pesos shall be made from the aggregate income of both husband and wife when living together: Provided, further, That if the person making the return is the head of a family there shall be an additional exemption of four hundred pesos for each legitimate, recognized natural or adopted child dependent upon such person, if a minor or incapable of self support because mentally or physically defective: Provided, further, That guardians or trustees shall be allowed to make this personal exemption as to income derived from the property of which such guardian or trustee has charge in favor of each ward or cestui que trust: Provided, further, That in no event shall a ward or cestui que trust be allowed a greater personal exemption than as provided in this section, from the amount of net income received from all sources. There shall also be allowed an exemption from the amount of the net income of estates of deceased citizens or residents of the Philippine Islands during the period of administration or settlement, and of trusts or other estates of citizens or residents of the Philippine Islands the income of which is not distributed annually or regularly under the provisions of subdivision (b) of section two, the sum of four thousand pesos, including such deductions as are allowed under section five.
"A non resident alien shall be entitled to the exemption provided inn this section when the income tax law in the country of which he is a subject or citizen allows similar exemption to citizens of the Philippines not residing in such country, provided said non resident alien file a true and accurate return of the total income received by him from all sources in the Philippine Islands, as required by this Act.
Section 6. Subsections (b) and (c) of section eight of the same Act are hereby amended to read as follows:
"(b) On or before the first day of March, nineteen hundred and twenty-one and the first day of March in each year thereafter, a true and accurate return under oath shall be made by each person of lawful age, except as hereinafter provided, having an income of four thousand pesos or over for the taxable year to the Collector of Internal Revenue or provincial treasurer of the province in which such person has his legal residence or principal place of business, of if there be no legal residence or place of business in the Philippine Islands, then with the Collector of internal Revenue, in such form as the latter, with the approval of the Secretary of Finance, shall prescribe, setting forth specially the gross amount of income from all separate sources, and from the total thereof deducting the aggregate items of allowances herein authorized: Provided, That the Collector of Internal Revenue shall have authority to grant a reasonable extension of time, in meritorious cases, for filing returns of income: Provided, further, That the aforesaid return may be made by an agent when by reason of illness, absence, or nonresidence the person liable for said return is unable to make and render the same, the agent assuming the responsibility of making the return and incurring penalties provided for erroneous, false or fraudulent returns.
"(c) Guardians, trustees, executors, administrators, receivers, conservators, and all persons, corporations, partnerships, joint-accounts (cuentas en participacion), or associations, acting in any fiduciary capacity, shall render a return of the income of the person, trust or estate for whom or which they act, and be subject to all the provisions of this Law which aspply to individuals. Such fiduciary shall make oath that he has sufficient knowledge of the affairs of such person, trust, or estate to enable him to make such return and that the same is, to the best of his knowledge and belief, true and correct, and be subject to all provisions of this Law which apply to individuals: Provided, That a return made by one of two or more joint fiduciaries med in the province where such fiduciary resides, under such regulations as the Collector of Internal Revenue with the approval of the Secretary of Finance may prescribe, shall be a sufficient compliance with the requirements of this paragraph: Provided, further, That no return of income not exceeding four thousand pesos shall be required except as in this Law otherwise provided."
Section 7. Section ten (a) of the same Act is hereby amended to read as follows:
"Section 10. (a) There shall be levied, assessed, collected, and paid annually upon the total net income received in the preceding calendar year from alll sources by every corporation, joint-stock company, partnership, joint-account (cuenta en participacion), association, or insurance company, organized in the Philippine Islands, no matter how created or organized, but not including duly registered general co-partnerships (companias colectivas), a tax of three per centum upon such income; and a like tax shall be levied, assessed, collected, and paid annually upon the total net income received in the preceding calendar year from all sources within the Philippine Islands by every corporation, joint-stock company, partnership, joint-account (cuenta en participacion),association, or insurance company, organized, authorized, or existing under the laws of any foreign country, including interest on bonds, notes, or other interest bearing obligations of residents, corporate or otherwise, and including the income derived from dividends or net profits subject to the tax established in this subsection.
The gain derived or loss sustained from the sale or other disposition by a corporation, joint-stock company, partnership, joint-account (cuenta en participacion), association, or insurance company, of property, real, personal, or mixed, shall be ascertained in accordance with subsections (c) and (d) of section two of Act Number Twenty-eight hundred and thirty-three, as amended by this Act.
"The foregoing tax rate shall apply to the net income received by every taxable corporation, joint-stock company, partnership, joint-account (cuenta en participacion), association, or insurance company, in the calendar year nineteen hundred and twenty, and in each year thereafter."
Section 8. Sunsection (e) of section thirteen of the same Act is hereby amended to read as follows:
"(e) All the provisions of this Law relating to the tax required to be deducted and withheld and paid to the internal revenue officer authorized to receive the same from the income of nonresident alien individuals from sources within the Philippine Islands shall be made applicable to the tax imposed by subdivision (a) of section ten upon the incomes described in subsection (b) of section nine, obtained by nonresident alienn firms, co-partnerships,companies, corporations, joint-stock companies, partnerships, and insurance companies, not engaged in business or trade within the Philippine Islands and not having any office or place of business therein."
Section 9. Section twenty-three of the same Act is hereby amended to read as follows:
"Section 23. All persons, corporations, partnerships, joint accounts (cuentas en participacion), general co-partnerships (companas colectivas), associations and insurance or mortgagors of real or personal property, trustees acting in any trust capacity, executors, administrators, receivers, conservators, and employers, making payment to another person, corporation, partnership, joint-account (cuenta en participacion), general co-partnership (compania colectiva), association, or insurance company of interests, rents, sdalaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable gains, profits and income, other than payments described in sections twenty-one and twenty-two, of three thousand pesos or more in any taxable year, or, in the case of such payments made by the Government of the Philippine Islands, the officers or employees of the Government having informations as to such payments and required to make returns in regard thereto, are hereby authorized and required to render a true and accurate return to the collector of Internal Revenue, under such rules and regulations and in such form and manner as may be prescribed by him with the approval of the Secretary of Finance, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment: Provided, That such returns shall be required, regardless of amounts in the case of payments of interest upon bonds and mortgages or deeds of trust or other similar obligations of corporations, joint-stock companies, partnerships, joint-accounts (cuentas en participacion), associations, and insurance companies, and in the case of collections of items, not payable in the Philippine Islands, of interest upon the bonds of foreign countries and interest from the bonds and dividends from the stock of foreign corporations by persons, corporations, partnerships, joint-accounts (cuentas en participacion), general co-partnerships (companias colectivas), or associations, undertaking as a matter of business or for profit or otherwise the collection of foreign payments of such interest or dividends by means of coupons or bills of exchange.
"The provisions of this section shall apply to the calendar year nineteen hundred and twenty and each calendar year thereafter."
Section 10. Subsection (b) of section twenty-five of the same Act is hereby amended to read as follows:
"(b) Any distribution made to the shareholders or members of a corporation, joint-stock company, partnership, joint account (cuenta en participacion), association, or insurance company in the year nineteen hundred and twenty, or subsequent tax years, shall be deemed to have been made from the most recently accumulated profits or surplus, and shall constitute a part of the annual income of the distributee for the year in which received, and shall be taxed to the distributee at the rates prescribed by law for the years in which such profits or surplus were received: Provided, That in the case of stock dividends, the tax thereon shall be collected in accordance with the rates prescribed by law for the years in which the earnings or profits distributed in the shape of such dividends were accumulated: Provided, further, That nothing herein shall be construed as taxing any earnings or profits accrued prior to March first, nineteen hundred and thirteen, but such earnings or profits may be distributed in stock dividends or otherwise, exempt from the tax, after the distribution of earnings and profits accrued since March first, nineteen hundred and thirteen, has been made."
Section 11. This Act shall take effect on January first, nineteen hundred and twenty-one, except the second paragraph of section seven of Act Numbered Twenty-eight hundred and thirty-three, as amended by section five of this Act, which shall take effect as of January first, nineteen hundred and twenty.
Approved, March 26, 1920.
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