PRE TERMINATION OF LONG-TERM

DEPOSITS OR INVESTMENT OF INDIVIDUALS

If the deposit or investment placement of individual
taxpayers is pre- terminated before 5 years, any
previously untaxed or exempted interest income will
be subjected to the following final taxes upon pre-
termination:
Holding period Pre-termination tax
Less than 3 years 20%
3 years to less than 4 12%
years
4 years to less than 5 5%
years
5 years or more 0%
PRE-TERMINATION, TRANSFER OR
NEGOTIATION OF INVESTMENT
CERTIFICATES
 For purposes of applying that pre- termination
rates for individual taxpayers on long- term
investment certificates, the remaining maturity
of the instrument must still satisfy the 5- year
requirement.

FOREIGN CURRENCY DEPOSIT WITH

FOREIGN CURRENCY DEPOSITORY BANKS
  The interest income from foreign currency
deposits under the foreign currency deposit
system or expanded foreign currency deposit
system by residents is subject to a final tax of
15%
TAXPAYER Individuals Corporations
Residents 15% 15%
Non-residents Exempt Exempt
Note:
1.Resident taxpayers include resident citizens,
resident aliens, domestic corporations and
resident foreign corporations.
2.Non- resident taxpayers include non-resident
citizens non-resident aliens and non-resident
foreign corporations.
3.It should be emphasized that non-resident aliens
not engage in trade or business and non-resident
foreign corporations are also exempt.
4.There is no long- term or short- term
pacification of foreign currency deposits.

 The reduce final tax rates on interest income on

foreign currency deposits and the exemption of
non- resident depositors are intended to
encourage the deposit of foreign currencies in
 our banks which will be used in the financing of
our international trades
 Our Philippine peso is not a globally accepted
currency.
 Our foreign trade will be limited without
adequate foreign currency reserves in our
banking sector.

JOINT ACCOUNT ON FOREX DEPOSITS

 If the bank account is jointly in the same of a
non-resident and a resident taxpayer, 50% of the
interest shall be exempt while the other 50%
shall be subject to the 15% final tax.

DIVIDENDS
Any distribution made by a corporation to its
shareholders out of its earnings or profits and
payable to its shareholders, whether in money or in
property

TYPES OF DIVIDENDS
1.Cash dividends
a. Paid in cash

2.Property dividends
 a. Pain in non-cash properties including stocks
or securities
3.Scrip dividends
a. Those paid in notes or evidence of
indebtedness of the corporation
4.Stock dividends
a. Pain in the stocks of the corporation
5.Liquidating dividends
a. Distribution of corporate net assets

As a rule, dividends are income subject to tax.

However, the following are not income for taxation
purposes:

STOCK DIVIDENDS
 Representing transfer of surplus to capital
account shall not be subject to tax.
 Stock dividends in the form of increase in
corporate value like capital gain which should be
properly taxable when realized through disposal
or sale of the stocks investment.
 The distribution of stocks of another corporation
as dividends is a taxable property dividend and
not a stock dividend.
LIQUIDATING DIVIDENDS
 Under the NIRC, the receipt of liquidating
dividends is not viewed as income but as
exchange of properties. When the liquidating
dividends exceed the cost of the investments, the
excess is a taxable capital gain, subject to
regular income tax period any loss is deductible
only to the extent of capital gain.

TAXABILITY OF STOCK DIVIDENDS

Normally, stock dividends are exempt from income
tax. Exceptionally stock dividends are subject to tax
at the fair value of stocks received under the
following conditions: