Amending Certain Sections Of The National Internal Revenue Code Of 1977

Case Overview and Summary

Summary of Presidential Decree No. 1705 Amending the National Internal Revenue Code of 1977

Definitions and Coverage
- Defines "Secretary of Finance" as "Minister of Finance" throughout the Code (Section 1)
- Covers government agencies, local governments, and government corporations possessing information on potential taxpayers (Section 2)
- Covers resident individuals, corporations, and partnerships for income tax purposes (Sections 24, 26, 53, 83)
- Covers estate tax for non-resident decedents with property in the Philippines (Section 101)
- Covers gift tax for donors domiciled in the Philippines (Section 125)

Income Tax Provisions
- Authorizes the Commissioner to assess tax based on best evidence if required reports are not filed or believed to be false (Section 16)
- Allows the Commissioner to conduct surveillance on business operations for up to 2 months to determine correct income (Section 16)
- Allows the Commissioner to terminate the tax period if the taxpayer intends to retire, leave the Philippines, or obstruct tax collection (Section 16)
- Requires taxpayers to respond to the Commissioner's notice of assessment findings within a prescribed period (Section 16)
- Provides rules for protesting assessments administratively and through the Court of Tax Appeals (Section 16)
- Imposes a 2.5% tax on gross Philippine billings of international carriers (Section 24)
- Imposes a 15% tax on branch profits remitted abroad, except for certain industries (Section 24)
- Provides rules for determining partners' distributive share of partnership income (Section 26)
- Allows deduction of excess electric energy consumption tax (Section 30)
- Provides rules for tax-free mergers, consolidations, and stock acquisitions (Section 35)
- Sets deadlines for filing individual income tax returns (Section 45)
- Allows corporations to designate their fiscal year (Section 46)
- Provides rules for installment payments of income tax by individuals and corporations (Sections 51, 84, 85, 86, 87, 88)
- Imposes a 10% withholding tax on dividends, royalties, and other payments to resident individuals and corporations (Section 53)
- Deems partnership net income as constructively received by partners for tax purposes (Section 83)

Estate and Gift Tax Provisions
- Clarifies transfers in contemplation of death subject to estate tax (Section 100)
- Requires non-resident decedents' representatives to include property in the Philippines in the estate tax return (Section 101)
- Sets the place for filing estate tax returns (Section 105)
- Imposes a 10% surcharge on unpaid estate tax (Section 113)
- Imposes ad valorem penalties for failure to file estate tax returns or filing false returns (Section 114)
- Allows withdrawal of up to ₱10,000 from a decedent's bank account without estate tax clearance (Section 118)
- Sets the time and place for filing gift tax returns (Section 125)
- Imposes ad valorem penalties for failure to file gift tax returns or filing false returns (Section 131)

Excise Tax and Other Tax Provisions
- Imposes penalties for unlawful use, recovery, or redistillation of denatured alcohol (Section 181)
- Imposes penalties for shipping or transporting liquor or tobacco products under false names or brands (Section 186)
- Requires payment of fixed taxes annually or before starting a business (Section 190)
- Imposes a 25% surcharge for late payment of fixed taxes (Section 190)
- Provides rates for fixed annual taxes based on gross annual sales (Section 192)
- Requires quarterly declarations and payments of percentage taxes (Section 193)
- Allows the President to impose a value-added tax of up to 20% on certain articles (Section 193)
- Provides rules for payment of percentage taxes on imported articles (Section 193)
- Authorizes the President to revise specific tax rates and adjust prices of cigars and cigarettes within certain limits (Section 158-A)
- Provides for forfeiture of unclaimed or uncashed refund checks after 5 years (Section 292)
- Requires preservation of books of accounts and other records for a certain period (Section 324)

Penalties and Offenses
- Imposes penalties for failure to pay taxes withheld, file returns, or render false returns by withholding agents (Section 54)
- Imposes interest and surcharges for late payment or underpayment of income tax (Sections 51, 88)
- Imposes ad valorem penalties for failure to file returns or filing false returns for income tax, estate tax, and gift tax (Sections 114, 131)
- Prescribes statutory offenses and penalties for officials and employees involved in tax enforcement (Section 330)