Providing Fiscal Incentives By Amending Certain Provisions Of The National Internal Revenue Code, And For Other Purposes

MALACAÑANG
M a n i l a

PRESIDENTIAL DECREE No. 1739

PROVIDING FISCAL INCENTIVES BY AMENDING CERTAIN PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AND FOR OTHER PURPOSES

WHEREAS, studies and surveys indicate the need for more long-term funds to support the investment and credit requirements of industry and agriculture; and

WHEREAS, the laws restructuring the banking system to allow it to re-channel its resources to long-term investments require a complimentary change in the applicable tax structure to provide adequate incentives for long-term funds;

NOW, THEREFORE, I, FERDINAND E. MARCOS, by virtue of the powers vested in me by the Constitution, do hereby decree and order:

Section 1. Section 20 of the National Internal Revenue Code is hereby amended by adding the following definitions as follows:

"Sec. 20. (v) The term "bank" means every banking institution as defined in Section 2 of the General Banking Act, Republic Act 337, as amended. A bank may either be a commercial bank, a thrift bank, a development bank, a rural bank or...

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Summary of Presidential Decree No. 1739

Definitions
- Defines "bank", "non-bank financial intermediary", and "quasi-banking activities" (Section 1)

Tax on Interest from Bank Deposits and Deposit Substitutes
- Imposes a final tax of 15% on interest from savings deposits and 20% on interest from time deposits and deposit substitutes for individuals and corporations (Sections 2 and 3)
- Exempts interest income up to P800 per year or P200 per quarter for individuals (Section 2)
- Allows tax exemption or preferential tax treatment for eligible recipients (Sections 2 and 3)

Tax on Corporations
- Exempts banks, non-bank financial intermediaries, and corporations authorized to hold bank stocks from the additional tax on improperly accumulated profits (Section 5)
- Imposes a 10% tax on net capital gains from the sale of shares, except for shares in close corporations which are taxed at 10% up to P50,000 and 20% over P50,000 (Section 8)

Withholding Tax on Interest
- Requires banks and non-bank financial intermediaries to withhold the final tax on interest from deposits and deposit substitutes (Section 9)
- Allows refund or credit for tax-exempt or preferentially taxed recipients (Section 9)

Exclusions
- Excludes banks, non-bank financial intermediaries, and corporations authorized to hold bank stocks from the definition of "personal holding company" (Section 10)

Tax on Banks and Non-Bank Financial Intermediaries
- Imposes a percentage tax on gross receipts of banks and non-bank financial intermediaries based on the maturity period of lending activities and financial leasing income (Section 14)
- Exempts dividends and long-term lending activities over 7 years from the percentage tax (Section 14)

Tax on Finance Companies
- Imposes a 5% tax on gross receipts of finance companies and other non-quasi-banking financial intermediaries (Section 15)
- Applies a percentage tax on lending activities and financial leasing income based on maturity period, similar to banks and non-bank financial intermediaries (Section 15)

Other Provisions
- Repeals the percentage tax on securities dealers and lending investors (Section 13)
- Authorizes the Minister of Finance to issue implementing rules and regulations (Section 16)