Imposing Final Income Tax On Subcontractors And Alien Employees Of Service Contractors And Subcontractors Engaged In Petroleum Operations In The Philippines Under Presidential Decree No. 87
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Imposing Final Income Tax On Subcontractors And Alien Employees Of Service Contractors And Subcontractors Engaged In Petroleum Operations In The Philippines Under Presidential Decree No. 87
Presidential Decree No. 1354
April 21, 1978
Case Overview and Summary
Summary of Presidential Decree No. 1354Taxation of Subcontractors (Section 1):
- Subcontractors, whether domestic or foreign, entering into a contract with a service contractor engaged in petroleum operations in the Philippines shall be liable to a final income tax of 8% of their gross income derived from such contract.
- This 8% tax is in lieu of any and all taxes, whether national or local.
- However, any income received from other sources within and without the Philippines (for domestic subcontractors) and within the Philippines (for foreign subcontractors) shall be subject to the regular income tax under the National Internal Revenue Code.
- "Gross income" means all income earned or received as a result of the contract entered into by the subcontractor with a service contractor engaged in petroleum operations in the Philippines under Presidential Decree No. 87.
Taxation of Alien Employees (Section 2):
- Aliens who are permanent residents of a foreign country but employed and assigned in the Philippines by service contractors or subcontractors engaged in petroleum operations shall be liable to a final income tax of 15% on their salaries, wages, annuities, compensations, remunerations, and emoluments received from such contractors or subcontractors.
- Any income earned from other sources within the Philippines by these alien employees shall be subject to the regular income tax under the National Internal Revenue Code.
Manner of Collecting the Tax (Section 3):
- Service contractors shall deduct, withhold, and pay the 8% tax on subcontractors (Section 1) from the amounts paid to the subcontractors, in the same manner and conditions as provided in Section 54 of the National Internal Revenue Code.
- Service contractors shall also deduct, withhold, and pay the 15% tax on alien employees (Section 2) from the salaries, wages, annuities, compensations, remunerations, and emoluments paid to (1) their own alien employees and (2) the aliens employed by their foreign subcontractors, in the same manner and conditions as provided in Section 54 of the National Internal Revenue Code.
- Domestic subcontractors shall deduct, withhold, and pay the 15% tax on their alien employees (Section 2) from the salaries, wages, annuities, compensations, remunerations, and emoluments paid to their alien employees, in the same manner and conditions as provided in Section 54 of the National Internal Revenue Code.
Registration of Service Contracts (Section 4):
- All contracts relating to oil operations entered into between the service contractor and a subcontractor engaged in petroleum operations in the Philippines shall be registered with the Bureau of Energy Development.
Reimbursement of Operating Expenses (Section 5):
- The cost of subcontractors shall be considered as part of reimbursable operating expenses of the service contractor under Presidential Decree No. 87 only if (1) the contract has been properly registered with the Bureau of Energy Development and (2) the taxes due under this Decree have been withheld and paid in accordance with the provisions of Sections 53 and 54 of the National Internal Revenue Code.
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Executive Issuances
Presidential Decrees
petroleum operations
subcontractors
service contractors
alien employees
income tax
withholding tax
gross income
final income tax
registration
reimbursement
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Imposing Final Income Tax On Subcontractors And Alien Employees Of Service Contractors And Subcontractors Engaged In Petroleum Operations In The Philippines Under Presidential Decree No. 87
Presidential Decree No. 1354
•April 21, 1978
MALACAÑANGM a n i l a
PRESIDENTIAL DECREE No. 1354
IMPOSING FINAL INCOME TAX ON SUBCONTRACTORS AND ALIEN EMPLOYEES OF SERVICE CONTRACTORS AND SUBCONTRACTORS ENGAGED IN PETROLEUM OPERATIONS IN THE PHILIPPINES UNDER PRESIDENTIAL DECREE NO. 87
WHEREAS, foreign subcontractors involved in petroleum operations in the Philippines are taxable as resident foreign corporations;
WHEREAS, the said foreign subcontractors perform transitory activities during the taxable year and neither maintain regular office or fixed place of business nor keep books of accounts in the Philippines;
WHEREAS, the aliens employed by the said service contractors and by their subcontractors are likewise taxable on their income from Philippine sources;
WHEREAS, it is also difficult to determine whether the said aliens are resident aliens or nonresident aliens engaged or not engaged in trade or business in the Philippines which in turn make it difficult to determine their income tax;
WHEREAS, it is therefore necessary to simplify the method of taxing the said foreign subcontractors and the aliens involved in petroleum operations in the Philippines so as to insure the collection of...
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