AN ACT RESTORING THE TAX EXEMPTION OF OFFSHORE BANKING UNITS (OBUS) AND FOREIGN CURRENCY DEPOSIT UNITS (FCDUS)
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AN ACT RESTORING THE TAX EXEMPTION OF OFFSHORE BANKING UNITS (OBUS) AND FOREIGN CURRENCY DEPOSIT UNITS (FCDUS)
Republic Act No. 9294
April 28, 2004
Case Overview and Summary
Summary of Republic Act No. 9294Tax Exemption for Offshore Banking Units (OBUs) and Foreign Currency Deposit Units (FCDUs)
- Income derived by depository banks under the expanded foreign currency deposit system from foreign currency transactions with nonresidents, OBUs, local commercial banks, and branches of foreign banks authorized by the Bangko Sentral ng Pilipinas (BSP) is exempt from all taxes, except net income specified by the Secretary of Finance upon recommendation by the Monetary Board. (Section 1, amending Section 27(D)(3))
- Interest income from foreign currency loans granted by depository banks to residents other than OBUs or other depository banks is subject to a final tax of 10%. (Section 1, amending Section 27(D)(3))
- Income of nonresidents from transactions with depository banks under the expanded system is exempt from income tax. (Section 1, amending Section 27(D)(3))
Tax Rates for Resident Foreign Corporations
- Resident foreign corporations engaged in trade or business in the Philippines are subject to an income tax rate of 32% on taxable income derived from Philippine sources, effective January 1, 2000, and thereafter. (Section 2, amending Section 28(A)(1))
- Resident foreign corporations have the option to be taxed at 15% on gross income under certain conditions. (Section 2, amending Section 28(A)(1))
- A minimum corporate income tax of 2% of gross income is imposed on resident foreign corporations. (Section 2, amending Section 28(A)(2))
- International carriers doing business in the Philippines are subject to specific tax rates on their gross Philippine billings. (Section 2, amending Section 28(A)(3))
- Income derived by OBUs from foreign currency transactions with nonresidents, other OBUs, local commercial banks, and authorized branches of foreign banks is exempt from all taxes, except net income specified by the Secretary of Finance upon recommendation by the Monetary Board. (Section 2, amending Section 28(A)(4))
- Interest income from foreign currency loans granted by OBUs to residents other than OBUs or local commercial banks is subject to a final tax of 10%. (Section 2, amending Section 28(A)(4))
- Income of nonresidents from transactions with OBUs is exempt from income tax. (Section 2, amending Section 28(A)(4))
- Profit remittances by a branch to its head office are subject to a 15% tax based on the total profits remitted, except for activities registered with the Philippine Economic Zone Authority. (Section 2, amending Section 28(A)(5))
- Regional or area headquarters are not subject to income tax, while regional operating headquarters of multinational companies pay a 10% tax on their taxable income. (Section 2, amending Section 28(A)(6))
- Interest from bank deposits, deposit substitutes, trust funds, and similar arrangements derived by a resident foreign corporation is subject to a final income tax of 20%, except for interest income from depository banks under the expanded foreign currency deposit system, which is subject to a final tax of 7.5%. (Section 2, amending Section 28(A)(7)(a))
- Income derived by a depository bank under the expanded foreign currency deposit system from foreign currency transactions with nonresidents, OBUs, local commercial banks, and other depository banks is exempt from all taxes, except net income specified by the Secretary of Finance upon recommendation by the Monetary Board. (Section 2, amending Section 28(A)(7)(b))
- Interest income from foreign currency loans granted by depository banks to residents other than OBUs or other depository banks is subject to a final tax of 10%. (Section 2, amending Section 28(A)(7)(b))
- Income of nonresidents from transactions with depository banks under the expanded system is exempt from income tax. (Section 2, amending Section 28(A)(7)(b))
- Capital gains from the sale, barter, exchange, or other disposition of shares of stock in a domestic corporation, except those traded on the stock exchange, are subject to a final tax of 5% on the first ₱100,000 and 10% on any amount in excess of ₱100,000. (Section 2, amending Section 28(A)(7)(c))
- Dividends received by a resident foreign corporation from a domestic corporation are not subject to tax. (Section 2, amending Section 28(A)(7)(d))
Tax Rates for Nonresident Foreign Corporations
- Nonresident foreign corporations not engaged in trade or business in the Philippines are subject to an income tax rate of 32% on gross income received from Philippine sources, effective January 1, 2000, and thereafter. (Section 2, amending Section 28(B)(1))
- Nonresident cinematographic film owners, lessors, or distributors are subject to a 25% tax on their gross income from Philippine sources. (Section 2, amending Section 28(B)(2))
- Nonresident owners or lessors of vessels chartered by Philippine nationals are subject to a 4.5% tax on gross rentals, lease, or charter fees. (Section 2, amending Section 28(B)(3))
- Nonresident owners or lessors of aircraft, machineries, and other equipment are subject to a 7.5% tax on gross rentals or fees. (Section 2, amending Section 28(B)(4))
- Interest on foreign loans contracted on or after August 1, 1996, by a nonresident foreign corporation is subject to a final withholding tax of 20%. (Section 2, amending Section 28(B)(5)(a))
- Cash and/or property dividends received by a nonresident foreign corporation from a domestic corporation are subject to a final withholding tax of 15%, subject to certain conditions. (Section 2, amending Section 28(B)(5)(b))
- Capital gains from the sale, barter, exchange, or other disposition of shares of stock in a domestic corporation by a nonresident foreign corporation, except those traded on the stock exchange, are subject to a final tax of 5% on the first ₱100,000 and 10% on any amount in excess of ₱100,000. (Section 2, amending Section 28(B)(5)(c))
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Law
AN ACT RESTORING THE TAX EXEMPTION OF OFFSHORE BANKING UNITS (OBUS) AND FOREIGN CURRENCY DEPOSIT UNITS (FCDUS)
Republic Act No. 9294
•April 28, 2004
Republic of the Philippines
Congress of the Philippines
Metro Manila
Twelfth CongressThird Regular Session
Begun and held in Metro Manila, on Monday, the twenty-eight day of July, two thousand three.
Republic Act No. 9294             April 28, 2004
AN ACT RESTORING THE TAX EXEMPTION OF OFFSHORE BANKING UNITS (OBUs) AND FOREIGN CURRENCY DEPOSIT UNITS (FCDUs), AMENDING FOR THE PURPOSE SECTION 27 (D) AND SECTION 28, PARAGRAPHS (A) (4) AND (A) (7) (b) OF THE NATIONAL INTERNAL REVENUE CODE AS AMENDED
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
Section 1. Section 27, paragraph (D) (3) of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:
"Sec. 27. Rates of Income Tax on Domestic Corporations. -
"(D) Rates of Tax on Certain Passive Incomes. -
"(3) Tax on Income Derived under the Expanded Foreign Currency Deposit System. - Income derived by a depository bank under the expanded foreign currency deposit system from foreign currency transactions with nonresidents,...
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