CHAPTER III - TAX ON INDIVIDUALS

SEC. 24. Income Tax Rates.

(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien of the Philippines.

(1) An income tax is hereby imposed:

(a) On the taxable income defined in Section 31 of this Code, other than income subject to
tax under Subsections (B), (C) and (D) of this Section, derived for each taxable year from
all sources within and without the Philippines be every individual citizen of the Philippines
residing therein;

(b) On the taxable income defined in Section 31 of this Code, other than income subject to
tax under Subsections (B), (C) and (D) of this Section, derived for each taxable year from
all sources within the Philippines by an individual citizen of the Philippines who is residing
outside of the Philippines including overseas contract workers referred to in Subsection(C)
of Section 23 hereof; and

(c) On the taxable income defined in Section 31 of this Code, other than income subject to
tax under Subsections (b), (C) and (D) of this Section, derived for each taxable year from
all sources within the Philippines by an individual alien who is a resident of the Philippines.

The tax shall be computed in accordance with and at the rates established in the following
schedule:

Not over P10,000 5%

Over P10,000 but not over P30,000 P500+10% of the excess over
P10,000
Over P30,000 but not over P70,000 P2,500+15% of the excess over
P30,000
Over P70,000 but not over P140,000.. P8,500+20% of the excess over
P70,000
Over P140,000 but not over P250,000 P22,500+25% of the excess over
P140,000
Over P250,000 but not over P500,000 P50,000+30% of the excess over
P250,000
Over P500,000 P125,000+34% of the excess over P500,000
in 1998.
Provided, That effective January 1, 1999, the top marginal rate shall be thirty-three percent
(33%) and effective January 1, 2000, the said rate shall be thirty-two percent (32%).

For married individuals, the husband and wife, subject to the provision of Section 51 (D)
hereof, shall compute separately their individual income tax based on their respective total
taxable income: Provided, That if any income cannot be definitely attributed to or identified
as income exclusively earned or realized by either of the spouses, the same shall be divided
equally between the spouses for the purpose of determining their respective taxable
income.

(B) Rate of Tax on Certain Passive Income.

(1) Interests, Royalties, Prizes, and Other Winnings. - A final tax at the rate of twenty percent
(20%) is hereby imposed upon the amount of interest from any currency bank deposit and yield or
any other monetary benefit from deposit substitutes and from trust funds and similar
arrangements; royalties, except on books, as well as other literary works and musical compositions,
which shall be imposed a final tax of ten percent (10%); prizes (except prizes amounting to Ten
thousand pesos (P10,000) or less which shall be subject to tax under Subsection (A) of Section 24;
and other winnings (except Philippine Charity Sweepstakes and Lotto winnings), derived from
sources within the Philippines: Provided, however, That interest income received by an individual
 taxpayer (except a nonresident individual) from a depository bank under the expanded foreign
currency deposit system shall be subject to a final income tax at the rate of seven and one-half
percent (7 1/2%) of such interest income: Provided, further, That interest income from long-term
deposit or investment in the form of savings, common or individual trust funds, deposit substitutes,
investment management accounts and other investments evidenced by certificates in such form
prescribed by the Bangko Sentral ng Pilipinas (BSP) shall be exempt from the tax imposed under
this Subsection: Provided, finally, That should the holder of the certificate pre-terminate the deposit
or investment before the fifth (5th) year, a final tax shall be imposed on the entire income and shall
be deducted and withheld by the depository bank from the proceeds of the long-term deposit or
investment certificate based on the remaining maturity thereof:

Four (4) years to less than five (5) years - 5%;

Three (3) years to less than (4) years - 12%; and
Less than three (3) years - 20%
(2) Cash and/or Property Dividends - A final tax at the following rates shall be imposed upon the
cash and/or property dividends actually or constructively received by an individual from a domestic
corporation or from a joint stock company, insurance or mutual fund companies and regional
operating headquarters of multinational companies, or on the share of an individual in the
distributable net income after tax of a partnership (except a general professional partnership) of
which he is a partner, or on the share of an individual in the net income after tax of an association,
a joint account, or a joint venture or consortium taxable as a corporation of which he is a member
or co-venturer:

Six percent (6%) beginning January 1, 1998;

Eight percent (8%) beginning January 1, 1999;
Ten percent (10% beginning January 1, 2000.

Provided, however, That the tax on dividends shall apply only on income earned on or after January
1, 1998. Income forming part of retained earnings as of December 31, 1997 shall not, even if
declared or distributed on or after January 1, 1998, be subject to this tax.
(C) Capital Gains from Sale of Shares of Stock not Traded in the Stock Exchange. - The provisions of Section
39(B) notwithstanding, a final tax at the rates prescribed below is hereby imposed upon the net capital gains
realized during the taxable year from the sale, barter, exchange or other disposition of shares of stock in a
domestic corporation, except shares sold, or disposed of through the stock exchange.
Not over P100,000.. 5%
On any amount in excess of P100,000 10%
(D) Capital Gains from Sale of Real Property. -
(1) In General. - The provisions of Section 39(B) notwithstanding, a final tax of six percent (6%)
based on the gross selling price or current fair market value as determined in accordance with
Section 6(E) of this Code, whichever is higher, is hereby imposed upon capital gains presumed to
have been realized from the sale, exchange, or other disposition of real property located in the
Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional
sales, by individuals, including estates and trusts: Provided, That the tax liability, if any, on gains
from sales or other dispositions of real property to the government or any of its political
subdivisions or agencies or to government-owned or controlled corporations shall be determined
either under Section 24 (A) or under this Subsection, at the option of the taxpayer.

(2) Exception. - The provisions of paragraph (1) of this Subsection to the contrary notwithstanding,
capital gains presumed to have been realized from the sale or disposition of their principal residence
by natural persons, the proceeds of which is fully utilized in acquiring or constructing a new principal
residence within eighteen (18) calendar months from the date of sale or disposition, shall be
exempt from the capital gains tax imposed under this Subsection: Provided, That the historical cost
or adjusted basis of the real property sold or disposed shall be carried over to the new principal
residence built or acquired: Provided, further, That the Commissioner shall have been duly notified
by the taxpayer within thirty (30) days from the date of sale or disposition through a prescribed
return of his intention to avail of the tax exemption herein mentioned: Provided, still further, That
the said tax exemption can only be availed of once every ten (10) years: Provided, finally, that if
there is no full utilization of the proceeds of sale or disposition, the portion of the gain presumed to
have been realized from the sale or disposition shall be subject to capital gains tax. For this
purpose, the gross selling price or fair market value at the time of sale, whichever is higher, shall be
multiplied by a fraction which the unutilized amount bears to the gross selling price in order to
 determine the taxable portion and the tax prescribed under paragraph (1) of this Subsection shall
be imposed thereon.

SEC. 25. Tax on Nonresident Alien Individual. -

(A) Nonresident Alien Engaged in trade or Business Within the Philippines. -

(1) In General. - A nonresident alien individual engaged in trade or business in the Philippines shall
be subject to an income tax in the same manner as an individual citizen and a resident alien
individual, on taxable income received from all sources within the Philippines. A nonresident alien
individual who shall come to the Philippines and stay therein for an aggregate period of more than
one hundred eighty (180) days during any calendar year shall be deemed a 'nonresident alien doing
business in the Philippines'. Section 22 (G) of this Code notwithstanding.

(2) Cash and/or Property Dividends from a Domestic Corporation or Joint Stock Company, or
Insurance or Mutual Fund Company or Regional Operating Headquarter or Multinational Company,
or Share in the Distributable Net Income of a Partnership (Except a General Professional
Partnership), Joint Account, Joint Venture Taxable as a Corporation or Association., Interests,
Royalties, Prizes, and Other Winnings. - Cash and/or property dividends from a domestic
corporation, or from a joint stock company, or from an insurance or mutual fund company or from a
regional operating headquarter of multinational company, or the share of a nonresident alien
individual in the distributable net income after tax of a partnership (except a general professional
partnership) of which he is a partner, or the share of a nonresident alien individual in the net
income after tax of an association, a joint account, or a joint venture taxable as a corporation of
which he is a member or a co-venturer; interests; royalties (in any form); and prizes (except prizes
amounting to Ten thousand pesos (P10,000) or less which shall be subject to tax under Subsection
(B)(1) of Section 24) and other winnings (except Philippine Charity Sweepstakes and Lotto
winnings); shall be subject to an income tax of twenty percent (20%) on the total amount thereof:
Provided, however, that royalties on books as well as other literary works, and royalties on musical
compositions shall be subject to a final tax of ten percent (10%) on the total amount thereof:
Provided, further, That cinematographic films and similar works shall be subject to the tax provided
under Section 28 of this Code: Provided, furthermore, That interest income from long-term deposit
or investment in the form of savings, common or individual trust funds, deposit substitutes,
investment management accounts and other investments evidenced by certificates in such form
prescribed by the Bangko Sentral ng Pilipinas (BSP) shall be exempt from the tax imposed under
this Subsection: Provided, finally, that should the holder of the certificate pre-terminate the
deposit or investment before the fifth (5th) year, a final tax shall be imposed on the entire income
and shall be deducted and withheld by the depository bank from the proceeds of the long-term
deposit or investment certificate based on the remaining maturity thereof:

Four (4) years to less than five (5) years - 5%;

Three (3) years to less than four (4) years - 12%; and
Less than three (3) years - 20%.

(3) Capital Gains. - Capital gains realized from sale, barter or exchange of shares of stock in
domestic corporations not traded through the local stock exchange, and real properties shall be
subject to the tax prescribed under Subsections (C) and (D) of Section 24.
(B) Nonresident Alien Individual Not Engaged in Trade or Business Within the Philippines. - There shall be
levied, collected and paid for each taxable year upon the entire income received from all sources within the
Philippines by every nonresident alien individual not engaged in trade or business within the Philippines as
interest, cash and/or property dividends, rents, salaries, wages, premiums, annuities, compensation,
remuneration, emoluments, or other fixed or determinable annual or periodic or casual gains, profits, and
income, and capital gains, a tax equal to twenty-five percent (25%) of such income. Capital gains realized
by a nonresident alien individual not engaged in trade or business in the Philippines from the sale of shares
of stock in any domestic corporation and real property shall be subject to the income tax prescribed under
Subsections (C) and (D) of Section 24.

(C) Alien Individual Employed by Regional or Area Headquarters and Regional Operating Headquarters of
Multinational Companies. - There shall be levied, collected and paid for each taxable year upon the gross
income received by every alien individual employed by regional or area headquarters and regional operating
headquarters established in the Philippines by multinational companies as salaries, wages, annuities,
compensation, remuneration and other emoluments, such as honoraria and allowances, from such regional
or area headquarters and regional operating headquarters, a tax equal to fifteen percent (15%) of such
gross income: Provided, however, That the same tax treatment shall apply to Filipinos employed and
occupying the same position as those of aliens employed by these multinational companies. For purposes of
this Chapter, the term 'multinational company' means a foreign firm or entity engaged in international trade
with affiliates or subsidiaries or branch offices in the Asia-Pacific Region and other foreign markets.

(D) Alien Individual Employed by Offshore Banking Units. - There shall be levied, collected and paid for each
taxable year upon the gross income received by every alien individual employed by offshore banking units
established in the Philippines as salaries, wages, annuities, compensation, remuneration and other
emoluments, such as honoraria and allowances, from such off-shore banking units, a tax equal to fifteen
percent (15%) of such gross income: Provided, however, That the same tax treatment shall apply to
Filipinos employed and occupying the same positions as those of aliens employed by these offshore banking
units.

(E) Alien Individual Employed by Petroleum Service Contractor and Subcontractor. - An Alien individual who
is a permanent resident of a foreign country but who is employed and assigned in the Philippines by a
foreign service contractor or by a foreign service subcontractor engaged in petroleum operations in the
Philippines shall be liable to a tax of fifteen percent (15%) of the salaries, wages, annuities, compensation,
remuneration and other emoluments, such as honoraria and allowances, received from such contractor or
subcontractor: Provided, however, That the same tax treatment shall apply to a Filipino employed and
occupying the same position as an alien employed by petroleum service contractor and subcontractor.

Any income earned from all other sources within the Philippines by the alien employees referred to under
Subsections (C), (D) and (E) hereof shall be subject to the pertinent income tax, as the case may be,
imposed under this Code.

SEC. 26. Tax Liability of Members of General Professional Partnerships. - A general professional
partnership as such shall not be subject to the income tax imposed under this Chapter. Persons engaging in
business as partners in a general professional partnership shall be liable for income tax only in their
separate and individual capacities.

For purposes of computing the distributive share of the partners, the net income of the partnership shall be
computed in the same manner as a corporation.

Each partner shall report as gross income his distributive share, actually or constructively received, in the
net income of the partnership.