Presidential Decree No. 1354
FINAL INCOME TAX ON SUBCONTRACTORS AND ALIEN EMPLOYEES OF SERVICE CONTRACTORS
AND SUBCONTRACTORS ENGAGED IN PETROLEUM OPERATIONS IN THE
foreign subcontractors involved in petroleum operations in the
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;
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
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;
THEREFORE, I, FERDINAND E. MARCOS, President of the
1. Tax on subcontractors.
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
2. Taxation of aliens employed by petroleum service contractors
– 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
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.
4. Registration of service contracts.
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.
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