IMPOSING A 15% TAX ON DIVIDENDS RECEIVED BY A DOMESTIC OR RESIDENT FOREIGN CORPORATION FROM A DOMESTIC CORPORATION, AMENDING SECTIONS 24, 29, 53 and 65 OF THE NATIONAL INTERNAL …

WHEREAS, it is imperative to adopt measures responsive to
the requirements of a developing economy foremost of which is the financing of
economic development programs; and

WHEREAS, in order to encourage more capital investment for
large projects, an appropriate tax be imposed on dividends in the same manner as
the tax imposed on interest on foreign loans;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers in me vested by the Constitution as
Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to
Proclamation No. 1081, dated September 21, 1972, and General Order No. 1, dated
September 22, 1972, as amended, do hereby order and decree as follows:

SECTION 1. The provisions of subsection (d) of Section 24 of
the National Internal Revenue Code are hereby transferred to a new Subsection
(e) added to said section and said Subsection (d) shall now read as follows:

“(d) Rate of tax on certain dividends. — Dividends received by a
domestic or resident foreign corporation from a domestic corporation liable to
tax under this Chapter shall be subject to tax at 15% on the total amount
thereof which shall be collected and paid as provided in Section 53 of this
Code.”

SEC. 2. — A new subsection is hereby added to Section 24 of
the National Internal Revenue Code to contain the former provisions of
Subsection (d) of the same Section amended to read as follows:

“(e) The provisions of existing special or general laws to the contrary
notwithstanding, all corporate taxpayers not specifically exempt under Sections
24(c) (1) and (d) and 27 of this Code shall pay the rates provided in this
Section. All corporations, agencies, or instrumentalities owned or controlled by
the Government, including the Government Service Insurance System and the Social
Security System but excluding educational institutions, shall pay such rate of
tax upon their taxable net income as are imposed by this Section upon
associations or corporations engaged in a similar business or
industry.”

SEC. 3. Subsection (e) of Section 29 of the National
Internal Revenue Code is hereby repealed.

SEC. 4. A new Subsection is hereby added to Section 53 of
the National Internal Revenue Code to be denominated as Subsection (d) and to
read as follows:

“(d) Withholding tax on certain dividends. — The tax imposed under
Section 24 (d) of this Code on dividends shall be withheld by the payor
corporation and paid to the Commissioner of Internal Revenue under appropriate
return at the same time that the dividends are paid to the recipient
corporations.”

SEC. 5. Subsection (a) of Section 65 of the National
Internal Revenue Code is hereby amended to read as follows:

“(a) Dividends (other than dividends subject to tax under Section 24 (d) of
this Code), interest (other than interest constituting rent as defined in
Subsection (g) hereof), royalties (other than mineral oil, or gas royalties),
and annuities. The term royalties, as herein used, includes income from
copyrights, patent, and other similar revenues.”

SEC. 6. Dividends already received and reported in the
corporation’s quarterly income tax return shall no longer be subject to the tax
imposed in Section 24 (d) of the National Internal Revenue Code as now amended
but considered as if it was subject thereto for purposes of Section 65 (a) of
the same Code as now amended.

SEC. 7. The Commissioner of Internal Revenue shall
promulgate the rules and regulations to implement this Decree subject to the
approval of the Secretary of Finance.

SEC. 8. This Decree takes effect immediately.

Done in the City of Manila, this 21st day of September, in the year of Our
Lord, nineteen hundred and seventy-three.

			(Sgd.) FERDINAND E. MARCOS President Republic of the Philippines
	By the President:
	(Sgd.) ROBERTO V. REYES
		Assistant Executive Secretary