AMENDING SECTION 24b (c) OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED BY PRESIDENTIAL DECREE No. 778.

WHEREAS, it is the policy of the government to encourage the
foreign investments in the Philippines to augment domestic capital;

WHEREAS, some domestic corporations and resident foreign
corporations obtain loans from abroad to be used in acquiring equity
capital in other domestic corporations

WHEREAS, some intercorporate dividends are derived from
equity investments in domestic corporations financed with foreign
borrowings;

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

SECTION 1. Section 24 (c) of the National Internal Revenue
Code is hereby amended to read as follows:

“(c) Rate of tax on certain dividends. Dividends received
by a domestic or resident foreign corporation from a domestic
corporation liable to tax under this Code—

1. shall be subject to a final tax at 10% on the total
   amount thereof, which shall be collected and paid as provided in
   Sections 53 and 54 of this Code, and
2. shall not be included in the determination of the gross income
   of the recipient corporation: Provided, however, That interest
   paid or incurred on indebtedness abroad by a domestic or resident
   foreign corporation, which indebtedness was incurred to provide funds
   for investment in a domestic corporation shall be allowed as a deduction
   from the intercorporate dividends before computing the 10% final tax.
   Any excess of the interest herein allowed as deduction from
   intercorporate dividends may be deducted from the other gross income of
   the recipient corporation, subject to the provisions of Section 30(b)
   of this Code.

“The above deduction of interest from intercorporate dividends
shall be allowed only if the recipient domestic or resident foreign
corporation submits an authenticated copy of the foreign loan-agreement
stipulating the end-use of the loan proceeds and such other information
as may be required for its determination.

“The Secretary of Finance, upon recommendation of the Commissioner
of Internal Revenue, shall promulgate rules and regulations to
implement the provisions of this paragraph.”

SECTION 2. Effectivity.—This Decree shall take effect
immediately.

Done in the City of Manila, this 29th day of March, in the year
of Our Lord, nineteen hundred and seventy-six.