Title II — TAX ON INCOME
for any payment made, directly or indirectly, to an official
or employee of the national government, or to an official or
employee of any local government unit, or to an official or
employee of a government-owned or -controlled corporation,
or to an official or employee or representative of a foreign
government, or to a private corporation, general professional
partnership, or a similar entity, if the payment constitutes a
bribe or kickback.
(2) Expenses Allowable to Private Educational Institutions. — In addition
to the expenses allowable as deductions under this Chapter, a private
educational institution, referred to under Section 27(B) of this Code,
may at its option elect either: (a) to deduct expenditures otherwise
considered as capital outlays of depreciable assets incurred during
the taxable year for the expansion of school facilities, or (b) to
deduct allowance for depreciation thereof under Subsection (F)
hereof.
(B)
Interest. —
(1) In General. — The amount of interest paid or incurred within a
taxable year on indebtedness in connection with the taxpayer’s
profession, trade or business shall be allowed as deduction from
gross income: Provided, however, That the taxpayer’s otherwise
allowable deduction for interest expense shall be reduced by fortytwo percent (42%) of the interest income subjected to final tax:
Provided, That effective January 1, 2009, the percentage shall be
thirty-three percent (33%).
(2) Exceptions. — No deduction shall be allowed in respect of interest
under the succeeding subparagraphs:
(a) If within the taxable year an individual taxpayer reporting
income on the cash basis incurs an indebtedness on which
an interest is paid in advance through discount or otherwise:
Provided, That such interest shall be allowed as a deduction in
the year the indebtedness is paid: Provided, further, That if the
indebtedness is payable in periodic amortizations, the amount
of interest which corresponds to the amount of the principal
amortized or paid during the year shall be allowed as deduction
in such taxable year;
(b) If both the taxpayer and the person to whom the payment has
been made or is to be made are persons specified under Section
36(B); or
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Isla Lipana & Co., the Philippine member firm of the PwC network
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