Presidential Decree
No. 1354
IMPOSING
FINAL INCOME TAX ON SUBCONTRACTORS AND ALIEN EMPLOYEES OF SERVICE CONTRACTORS
AND SUBCONTRACTORS ENGAGED IN PETROLEUM OPERATIONS IN THE
WHEREAS,
foreign subcontractors involved in petroleum operations in the
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
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
WHEREAS,
it is therefore necessary to simplify the method of taxing the said foreign
subcontractors and the aliens involved in petroleum operations in the
WHEREAS,
in order to place local or domestic subcontractors on equal footing and to make
them competitive with foreign subcontractors, they should similarly be taxed as
foreign subcontractors;
NOW,
THEREFORE, I, FERDINAND E. MARCOS, President of the
SECTION
1. Tax on subcontractors.
– Every
subcontractor, 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 equivalent to eight percent (8%) of its gross
income derived from such contract, such tax to be in lieu of any and all taxes,
whether national or local: Provided, however, That any income
received from all other sources within and without the Philippines in the case
of domestic subcontractors and within the Philippines in the case of foreign
subcontractors shall be subject to the regular income tax under the National
Internal Revenue Code. The term “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
SEC.
2. Taxation of aliens employed by petroleum service contractors
and subcontractors.
– Aliens who are permanent residents of
a foreign country but who are employed and assigned in the Philippines by
service contractors or by subcontractors engaged in petroleum operations in the
Philippines, shall be liable to a final income tax equal to fifteen percent
(15%) of the salaries, wages, annuities, compensations, remunerations and
emoluments received from such contractors or subcontractors. Any income earned from all other sources within
the
SEC.
3. Manner of collecting the tax.
–
(a) Every service contractor shall deduct, withhold, and pay the tax imposed in Section 1 of this Decree from the amounts paid by the service contractor to the subcontractor under the contract entered into by and between them in the same manner and subject to the same conditions as provided in Section 54 of the National Internal Revenue Code.
(b) Every service contractor shall also deduct, withhold and pay the tax imposed in Section 2 of this Decree from the salaries, wages, annuities, compensations, remunerations and emoluments paid to (1) its alien employees and (2) the aliens employed by its foreign subcontractors in the same manner and under the same conditions as provided in Section 54 of the National Internal Revenue Code.
(c) Every domestic subcontractor shall deduct, withhold and pay the tax imposed in Section 2 of this Decree from the salaries, wages, annuities, compensations, remunerations and emoluments paid to its alien employees in the same manner and under the same conditions as provided in Section 54 of the National Internal Revenue Code.
SEC.
4. Registration of service contracts.
– All
contracts relating to oil operations entered into between the service
contractor and a subcontractor engaged in petroleum operations in the
SEC.
5. Additional conditions for reimbursement of operating
expense.
– The cost of subcontractors shall be
considered as part of reimbursable operating expenses of the service contractor
under
Presidential Decree No. 87 only if it is shown
that the contract has been properly registered with the Bureau of Energy
Development and the taxes due under this Decree have been withheld and paid in
accordance with the provisions of Section 53 and 54 of the National Internal
Revenue Code.
SEC.
6. Repealing Clause.
– Any provision of existing general and
special laws inconsistent with the provisions of this Decree is hereby
modified, amended or repealed accordingly.
SEC.
7. Effectivity.
– This Decree shall take effect upon
approval.
Done
in the City of
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