RR No. 2-2021 — Amends certain provisions of RR No. 2-98, as amended, to implement the amendments introduced by RA No. 11534 (Corporate Recovery and Tax Incentives for Enterprises Act or CREATE Act) to the NIRC of 1997, as amended, relative to the Final Tax on certain passive income (Published in Malaya Business Insight on April 9, 2021)

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE Quezon City 0 8 APR 2021

REVENUE REGULATIONS NO.2 - 20 2

SUBJECT : Amending Certain Provisions of Revenue Regulations No. 2-98, as Amended, to Implement the Amendments Introduced by Republic Act No. 11534, or the National Internal Revenue Code of 1997, as Amended, Relative to the Final Tax "Corporate Recovery and Tax Incentives for Enterprises Act" (CREATE), to the on Certain Passive Income

TO : All Internal Revenue Officers and Others Concerned

tax rates on certain passive incomes of individuals and corporations as prescribed under the relation to Section 21 of Republic Act No. 11534, or CREATE, certain provisions of Revenue Regulations (RR) No. 2- 98, as amended, are hereby further amended to implement the new final aforesaid Act. Pursuant to the provisions of Section 244 of the National Internal Revenue Code, in

further amended to read as follows: SECTION 1. Section 2.57.1(B), (E) and (F) of RR No. 2-98, as amended, is hereby

The following forms of income shall be subject to final withholding tax at the rates herein specified: "SECTION 2.57.1. Income Payments Subject to Final Withholding Tax.

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(B) Income Payments to Non-resident Aliens Engaged in Trade or Business in the Philippines. -- The following forms of income derived from sources within the Philippines shall be subject to final withholding tax in the hands of a non- resident alien individual engaged in trade or business within the Philippines, based on the gross amount thereof and at the tax rates prescribed therefor:

Philippines. imposed on certain (1) On Certain Passive Income -- A tax of twenty percent (20%) is hereby passive income received from all sources within the

(a) Cash and property dividend from a domestic corporation or from a or from a regional operating headquarter of a multinational company: joint stock company, or from an insurance or r mutual fund company

(b) Share in distributable net income after tax of a partnership (except general professional partnership) of which he is a partner, or share in the net income after tax of an association, a joint account, or a joint venture of which he is a member or a co-venturer;

(c) Interests from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements;

BUREAU OF INTERNAL REVENUE NTTYT

APR. 08 2021 Iis p A 1 OrDS MGT.DIVISION

(d) Royalties (except royalties on books, as well as other literary works and musical compositions which shall be subject to 10% final withholding tax);

(e) Prizes (except prizes amounting to Ten thousand pesos [P10,000] or less which shall be subject to tax under Subsection [B] [1] of Section winnings_from Philippine Charity Sweepstakes Office [PCSO] 24 of the Tax Code, as amended) and other winnings_(except games_amounting to P10,000 or less which shall be exempt from

income tax)

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(E) Income payments to a Resident Foreign Corporation. -- The following forms corporation, based on the gross amount thereof and at the rate of tax prescribed of income shall be subject to a final withholding tax in the hands of a foreign

therefor:

(1) Tax on Branch Remittances -- On any profit remitted by the Philippine branch of a foreign corporation to its head office abroad based on the (15%) the Philippine Economic Zone Authority (PEZA)- total profits applied or earmarked for remittance without any deduction for the tax component thereof except those registered with Fifteen percent

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(2) Interest on any currency bank deposit and yield or any other monetary arrangements and royalties derived from sources within the (20% benefit from deposit substitutes and from trust funds and similar Philippines Twenty percent

(3) Interest income derived from a Depository Bank under the Expanded Foreign Currency Deposit System Fifteen percent (15%)

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JREAU OF INTER (6) Capital Gains from Sale of Shares of Stock Not Traded in the Stock in a domestic corporation Exchange. - On the net capital gains realized during the taxable year from the sale, barter, exchange or other disposition of shares of stock Fifteen Percent (15%)

T j8 21 APR S F (F) Income Derived From all Sources Within the Philippines by Non-Resident prescribed therefor: Foreign Corporation (NRFC) - The Following shall be subject to final withholding tax based on the gross amount of income and at the rate of tax

T C (1) In general -- on gross income derived from all sources within the Philippines of shares of stock in any domestic corporation which is subject to capital gains tax under item 7 hereof) - such as interests, dividends, rents, royalties, salaries, premiums (except determinable annual, periodic or casual gains, profits and income and capital gains (except capital gains realized from sale, exchange, disposition reinsurance premiums), annuities, emoluments, or other fixed or

2

January 1, 2021 onwards - Twenty-five percent (25%

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(6) Dividends received from a domestic corporation -- In general, it is subject to of Fifteen percent (15%) shall be applied, subject to the condition that the Twenty-five percent (25%) final withholding tax. However, a reduced rate

country in which the non-resident foreign corporation is domiciled (a) shall corporation which are equivalent to taxes deemed to have been paid in the Philippines equal to ten percent (10%) effective January 1, 2021, which resident foreign corporation under Section 28(B)(1) of the NIRC of 1997, allow a credit against the tax due from the said non-resident foreigr represents the difference between the regular income tax rate for non-

as amended, and the fifteen percent (15%) tax on dividends as herein provided; or, (b) does not impose any income tax on dividends received from a domestic corporation.

(7)Capital Gains from sale of Shares of Stock Not Traded in the Stock Exchange. -- On net capital gains realized during the taxable year from the

sale, barter, exchange or other disposition of shares of stock in a domestic corporation Fifteen percent (15%)

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percentage tax pursuant to Section 116 of the Tax Code, as amended, shall be subject to One percent (1%) withholding tax for the period July 1, 2020 until June 30, 2023. Governments, and other government instrumentalities, from persons/entities subject to Government-Owned and Controlled Corporations, National Government Agencies, Local SECTION2. GOVERNMENT MONEY PAYMENTS. Purchases made by

where the withhoiding agents used the rate higher than what are imposed in these Regulations remitted, provided that, in case the withholding agents or other persons/entities shall file the may be claimed as tax refund by the withholding agents if the withheld taxes have already been claim for refund for and on behalf of the payees, they must be duly authorized by said payees. having jurisdiction over the withholding agents. The claim for refund shall be filed with the Revenue District Office/Large Taxpayer Service SECTION 3. TRANSITORY PROVISIONS. Any taxes withheld from persons/entities

thereof which are inconsistent with the provisions of these regulations are hereby amended o SECTION 4. REPEALING CLAUSE. All existing rules and regulations or parts

revoked accordingly.

publication in the Official Gazette or in any two newspapers af general circulation, whichever SECTION 5. EFFECTIVITY. These regulations shall take effect immediately upon

comes earlier.

Recommending Approval: CARLOS G. DOMING! Secretary of Finance APR 0 7 2027

1a BUKEAU OF INTERNAL REVENUE

Commissioner of Internal Revenue CAESAR R. DULAY 04229.2 APR. 0 8.2021 8is0M Yet Y5

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