Amending Section 21 And Section 51 Of The National Internal Revenue Code, As Amended

Case Overview and Summary

Summary of Presidential Decree No. 323

Tax on Income of Non-Resident Citizens from Foreign Sources
- Imposes a tax on the gross income of non-resident Filipino citizens from sources outside the Philippines, after deducting the following:
• Personal exemption allowance of $2,000 for single or legally separated individuals, or $4,000 for married individuals or heads of family (Section 21)
• Total amount of national income tax paid to the foreign country of residence (Section 21)

Tax Rates for Non-Resident Citizens
• The Philippine income tax on the adjusted gross income shall be computed based on the following schedule:
    - Not over $6,000: 1%
    - Over $6,000 but not over $20,000: 2%
    - Over $20,000: 3% (Section 21)

Definition of Non-Resident Citizen
• A non-resident citizen is one who establishes to the satisfaction of the Commissioner the fact of their physical presence abroad for an uninterrupted period that includes an entire taxable year (Section 21)

Supporting Documentation
• Non-resident citizens availing of the special tax rates must attach a copy of the income tax return filed with the government of their foreign country of residence (Section 21)

Installment Payments for Non-Resident Citizens
• When the tax due from a non-resident citizen exceeds $200, the taxpayer may elect to pay the tax in two equal installments (Section 51(a)(3))
• The first installment shall be paid when the return is filed, and the second installment on or before the 15th day of the 7th month following the close of the fiscal year (Section 51(a)(3))
• If any installment is not paid on time, the whole unpaid tax amount becomes due and payable, along with delinquency penalties (Section 51(a)(3))

Implementation and Effectivity
• The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, shall promulgate rules and regulations for the implementation of this Decree (Section 3)
• This Decree shall take effect on January 1, 1974, beginning with income earned for the taxable year 1973 (Section 4)
• All laws, rules, and regulations inconsistent with this Decree are repealed or amended accordingly (Section 5)