Republic of the Philippines
House of Representatives
Quezon City

Seventeenth Congress
Regular Session

7458

HOUSE BILL NO,

Introduced by Congressmen Dakila Carlo E. Cua,
Raneo E. Abu, and Aurelio D. Gonzales, Jr.

AN ACT AMENDING SECTIONS, 20, 22, 27, 28, 34, 40, 50, 73, 112, 119,
203, 204, 220, 222, 228, 237, 237-A, 248, 254, 255, 256, 257, 258, 259, 260, 261,
262, 263, 264, 265, 266, 275, 290, 291, 292 AND ADDING SECTIONS 293,
294, 295, 296, 297, 298, 298-A, 299, 300, 301, 302, 303, 304, 305, AND 306
UNDER CHAPTERS 1, I, Il, IV, V AND VI, ALL UNDER THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND
FOR OTHER PURPOSES

Explanatory Note

This Bill covers the second package of the Duterte Administration's comprehensive tax
reform program. It complements the recently-passed Tax Reform for Acceleration and Inclusion
Act. [R.A. No. 10963] by further addressing the inequitability in our taxation system.

Specifically, this Bill proposes the lowering of corporate income tax rate, reforming the
corporate income tax system, broadening the tax base by modernizing investment tax incentives,
removing excessive tax exemptions and privileges given to certain industries, and limiting the
grant of tax incentives to strategic industries and lagging regions.

By doing this, we will be able to enhance fairness, improve competitiveness, plug tax
leakages, and achieve fiscal sustainability. Thus, the of this bill is earnestly
sought.

D. OE, CUA

Al D. LES, JR.


SEVENTEENTH CONGRESS OF THE
REPUBLIC OF THE PHILIPPINES
Second Regular Session

HOUSE OF REPRESENTATIVES

7458

House Bill No.

Introduced by Representatives Dakila Carlo E. Cua, Raneo E. Abu,
urelio D. Gonzales, Jr.

AN ACT AMENDING SECTIONS, 20, 22, 27, 28, 34, 40, 50, 73, 112, 119,
203, 204, 220, 222, 228, 237, 237-A, 248, 254, 255, 256, 257, 258, 259, 260, 261,
262, 263, 264, 265, 266, 275, 290, 291, 292 AND ADDING SECTIONS 293,
294, 295, 296, 297, 298, 298-A, 299, 300, 301, 302, 303, 304, 305, AND 306
UNDER CHAPTERS |, I, Il, IV, V AND VI, ALL UNDER THE
NATIONAL INTERNAL REVE! CODE OF 1997, AS AMENDED, AND
FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Represematives of the Philippines in
Congress assembled.

SECTION 1. Title. This Act shall be known as the “Corporate Income Tax and
Incentives Reform Act.”

SEC. 2. A new section shall be inserted as Section 6-A of the National Internal Revenue
Code of 1997, as amended, to read as follows:

“SECTION 6-A — POWER OF THE COMMISSIONER TO ISSUE
SUBPOENA DUCES TECUM; HOW SERVICE OF SUBPOENA DUCES
TECUM 1S MADE. - PURSUANT TO SECTION 5 OF THIS CODE, IN
CASE THE INFORMATION OR RECORDS REQUESTED ARE NOT
FURNISHED WITHIN THE PERIOD PRESCRIBED IN THE WRITTEN
NOTICE, OR WHEN THE INFORMATION OR RECORDS SUBMITTED
ARE INCOMPLETE, THE COMMISSIONER OR HUIS DULY
AUTHORIZED REPRESENTATIVE, SHALL ISSUE A SUBPOENA
DUCES TECUM STATING THEREIN THE RELEVANT FACTS,
SPECIFYING THE PARTICULAR DOCUMENTS OR RECORDS NOT
MADE AVAILABLE AND THE TAXPAYER LIABLE OR THE THIRD
PARTY/OFFICE CONCERNED.


THE SERVICE OF SUBPOENA DUCES TECUM SHALL BE
EFFECTED BY THE REVENUE OFFICERS ASSIGNED TO
INVESTIGATE THE CASE. HOWEVER, SUCH SERVICE MAY BE
MADE BY ANY OTHER INTERNAL REVENUE OFFICER
AUTHORIZED FOR THE PURPOSE.

THE SUBPOENA DUCES TECUM SHALL BE SERVED
THROUGH PERSONAL SERVICE, BUT IF NOT PRACTICABLE, IT
SHALL. BE SERVED BY SUBSTITUTED SERVICE IN ACCORDANCE
WITH THE RULES OF THE COURT.

A CRIMINAL ACTION MAY BE INSTITUTED FOR FAILURE TO
OBEY THE SUBPOENA DUCES TECUM.

SEC. 3. A new section shall be inserted as Section 6-B of the National Internal Revenue
Code of 1997, as amended, to read as follows:

“SECTION 6-B—- SERVICE OF LETTER OF AUTHORITY, AND
ASSESSMENT NOTICES ISSUED BY THE BUREA THE NOTICE TO
THE TAXPAYER HEREIN REQUIRED MAY BE SERVED BY THE
COMMISSIONER OR HIS DULY AUTHORIZED REPRESENTATIVE
THROUGH PERSONAL SERVICE BY DELIVERING PERSONALLY A
COPY THEREOF TO THE PARTY AT HIS REGISTERED OR KNOWN
ADDRESS OR WHEREVER HE MAY BE FOUND. A KNOWN ADDRESS
SHALL MEAN A PLACE OTHER THAN THE REGISTERED ADDRESS
WHERE BUSINESS ACTIVITIES OF THE PARTY ARE CONDUCTED
OR HIS PLACE OF RESIDENCE, IN CASE PERSONAL SERVICE IS
NOT PRACTICABLE, THE NOTICE SHALL BE SERVED BY
SUBSTITUTED SERVICE IN ACCORDANCE WITH THE RULES OF
THE COURT.

SEC. 4, Section 20 of the National Internal Revenue Code of 1997, as amended, is hereby
further amended to read as follows:

“SEC. 20, Submission of Report and Pertinent Information by the Commissioner.
(A) xxx

(B) SUBMISSION OF TAX-RELATED INFORMATION TO THE
DEPARTMENT OF FINANCE. — THE COMMISSIONER SHALL, UPON
THE REQUEST OF THE SECRETARY OF FINANCE SPECIFICAL
IDENTIFYING THE NEEDED INFORMATION AND JUSTIFICATI
FOR SUCH REQUEST, FURNISH THE SECRETARY PERTINENT
TAXPAYER INFORMATION: PROVIDED, HOWEVER, THAT THE
SECRETARY AND THE RELEVANT OFFICERS HANDLING SUCH
SPECIFIC INFORMATION SHALL BE COVERED BY THE



PROVISIONS OF SECTION 270, UNLESS TAXPAYER CONSENTS IN
WRITING TO SUCH DISCLOSURE.

| (B) [(C) Report to Oversight Committee. - The Commissioner shall,
with reference to Section 204 of this Code, submit to the Oversight Committee
referred to in Section 290 hereof, through the Chairmen of the Committee on
Ways and Means of the Senate and House of Representatives, a report on the
exercise of his powers pursuant to the said Section, every six (6) months of each
calendar year.”

SEC. 5, Section 22 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

(A) xxx

(B) xxx

(C) xxx

(D) xxx

(E) The term ‘nonresident citizen’ means;

(1) A citizen of the Philippines who establishes to the satisfaction of the
Commissioner the fact of his physical presence abroad with a definite intention to
reside therein.

{ (2) A citizen of the Philippines who leaves the Philippines during the
taxable year to reside abroad, cither as an immigrant or for employment on a
permanent basis. |

[ (3) 1) A citizen of the Philippines who works and derives income
from abroad and whose employment thereat requires him to be physically present
| abroad most of the time ]FOR 183 DAYS OR MORE during the taxable year.

[ (4) 1 @) A citizen who has been previously considered as nonresident
citizen and who arrives in the Philippines at any time during the taxable year to
reside permanently in the Philippines shall likewise be treated as a nonresident
citizen for the taxable year in which he arrives in the Philippines with respect to
his income derived from sources abroad until the date of his arrival in the
Philippines.

{ (5) ] (4) The taxpayer shall submit proof to the Commissioner to show
his intention of leaving the Philippines to reside permanently abroad or to return
to and reside in the Philippines as the case may be for purpose of this Section.”


SEC. 6. Section 25 of the National Internal Revenue Code of 1997, as amended, is hereby
further amended to read as follows:

“SEC, 25. Tax on Nonresident Alien Individual. —

(A) Nonresident Alien Engaged in Trade or Business Within the
Philippines. —

XXXXXX XXX

(B) Nonresident Alien Not Engaged in Trade or Business Within the
Philippines.

XXXXAX XXX

{ (C) Alien Individual Employed by Regional or Area Headquarters and
Regional Operating Headquarters of Multinational Companies. There shall be
levied, collected and paid for each taxable year upon the gross income received by
every alien individual employed by regional or area headquarters and regional
operating headquarters established in the Philippines by multinational companies
as salaries, wages, annuities, compensation, remuneration and other emoluments,
such as honoraria and allowances, from such regional or area headquarters and
regional operating headquarters, a tax equal to fifteen percent (15%) of such gross
income: Provided, however, That the same tax treatment shall apply to Filipinos
employed and occupying the same position as those of aliens employed by these
multinational companies. For purposes of this Chapter, the term ‘multinational
company’ means a foreign firm or entity engaged in international trade with
affiliates or subsidiaries or branch offices in the Asia-Pacific Region and other
foreign markets |

[ (D) Alien Individual Employed by Offshore Banking Units. - There shall
be levied, collected and paid for each taxable year upon the gross income received
by every alien individual employed by offshore banking units established in the
Philippines as salaries, wages, annuities, compensation, remuneration and other
emoluments, such as honoraria and allowances, from such offshore banking units,
‘a tax equal to fifteen percent (15%) of such gross income: Provided, however,
‘That the same tax treatment shall apply to Filipinos employed and occupying the
same positions as those of aliens employed by these offshore banking units. |

{ (B) Alien Individual Employed by Petroleum Service Contractor and
Subcontractor. - An Alien individual who is a permanent resident of a foreign
country but who is employed and assigned in the Philippines by a foreign service
contractor or by a foreign service subcontractor engaged in petroleum operations
in the Philippines shall be liable to # tax of fifteen percent (15%) of the salaries,
wages, annuities, compensation, remuneration and other emoluments, such as
honoraria and allowances, received from such contractor or subcontractor:


Provided, however, That the same tax treatment shall apply to a Filipino
employed and occupying the same position as an alien employed by petroleum
service contractor and subcontractor. |

{| Any income eared from all other sources within the Philippines by the
alien employees referred to under Subsections (C), (D) and (E) hereof shall be
subject to the pertinent income tax, as the case may be, imposed under this Code.
r

SEC. 7, Section 27 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

“SEC. 27. Rates of Income tax on Domestic Corporations.

(A) In General. - Except as otherwise provided in this Code, AN
INCOME TAX RATE OF PERCENT (30%), is hereby imposed upon the
taxable income derived during each taxable year from all sources within and
without the Philippines by every corporation, as defined in Section 22(B) of this
Code and taxable under this Title as a corporation, organized in, or existing under
the laws of the Philippines: | Provided, that effective January 1, 2009, the rate of
income tax shall be thirty percent (30%), |PROVIDED, THAT THE RATE OF
CORPORATE INCOME TAX SHALL BE REDUCED BY ONE
PERCENTAGE POINT EVERY YEAR BEGINNING JANUARY 1, 2019:
PROVIDED, FURTHER, THAT THE CORPORATE INCOME TAX RATE
SHALL NOT BE LOWER THAN TWENTY PERCENT (20%),

In the case of corporations adopting the fiscal-year accounting period, the
taxable income shall be computed without regard to the specific date when
specific sales, purchases and other transactions occur. Their income and expenses
for the fiscal year shall be deemed to have been earned and spent equally for each
month of the period

‘The corporate income tax rate shall be applied on the amount computed by
multiplying the number of months covered by the new rate within the fiscal year
by the taxable income of the corporation for the period, divided by twelve

| Provided, further, That the President, upon the recommendation of the
Secretary of Finance, may effective January 1, 2000, allow corporations the
option to be taxed at fifteen percent (15%) of gross income as defined hereinafter
the following conditions have been satisfied:

(1) A tax effort ratio of twenty percent (20%) of Gross National
Product (GNP);

(2) A ratio of forty percent (40%) of income tax collection to total
tax revenues;


(3) A VAT tax effort of four percent (4%) of GNP; and

(4) A 0.9 percent (0.9%) ratio of the Consolidated Public Sector
Financial Position (CPSFP) to GNP.

‘The option to be taxed based on gross income shall be available only to
firms whose ratio of cost of sales to gross sales or receipts from all sources does
not exceed fifty-five percent (55%).

The election of the gross income tax option by the corporation shall be
irrevocable for three (3) consecutive taxable years during which the corporation is
qualified under the scheme.

For purposes of this Section, the term ‘gross income’ derived from
business shall be equivalent to gross sales less sales returns, discounts and
allowances and cost of goods sold. ‘Cost of goods sold’ shall include all business
expenses directly incurred to produce the merchandise to bring them to their
present location and use.

For a trading or merchandising concer, ‘cost of goods sold" shall include
the invoice cost of the goods sold, plus import duties, freight in transporting the
goods to the place where the goods are actually sold, including insurance while
the goods are in transit. |

| For a manufacturing concem, ‘cost of goods manufactured and sold’
shall include all costs of production of finished goods, such as raw materials used,
direct labor and manufacturing overhead, freight cost, insurance premiums and
other costs incurred to bring the raw materials to the factory or warehouse.

In the case of taxpayers engaged in the sale of service, ‘gross income’
means gross receipts less sales returns, allowances and discounts. |

| (B) Proprietary Educational Institutions and Hospitals.

Proprietary educational institutions and hospitals which are nonprofit shall
pay a tax of ten percent (10%) on their taxable income except those covered by
Subsection (D) hereof: Provided, that if the gross income from ‘unrelated trade,
business or other activity’ exceeds fifty percent (50%) of the total gross income
derived by such educational institutions or hospitals from all sources, the tax
prescribed in Subsection (A) hereof shall be imposed on the entire taxable
income, For purposes of this Subsection, the term ‘unrelated trade, business or
other activity’ means any trade, business or other activity, the conduct of which is
not substantially related to the exercise or performance by such educational
institution or hospital of its primary purpose or function. A ‘proprietary
educational institution’ is any private school maintained and administered by


private individuals or groups with an issued permit to operate from the
Department of Education, Culture and Sports (DECS), or the Commission on
Higher Education (CHED), or the Technical Education and Skills Development
Authority (TESDA), as the case may be, in accordance with existing laws and
regulations, |

{.(C) | (B)Government-owned or —Controlled Corporations, Agencies or
Instrumemtalities. - The provisions of existing special or general laws to the
contrary notwithstanding, all corporations, agencies, or instrumentalities owned or
controlled by the Government, except the Government Service Insurance System
(GSIS), the Social Security System (SSS), AND the Philippine Health Insurance
Corporation (PHIC), | and the local water districts (LWDs) | shall pay such rate
of tax upon their taxable income as are imposed by this Section upon corporations
or associations engaged in similar business, industry, or activity

[(D)] © xxx
[(E) ] (D) xxx"

SEC. 8. Section 28 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

“SEC. 28. Rates of Income Tax on Foreign Corporations. ~
(A) Tax on Resident Foreign Corporations. -

(1) Jn General, - Except as otherwise provided in this Code, a corporation
organized, authorized, or existing under the laws of any foreign country, engaged
in trade or business within the Philippines, shall be subject to an income tax
equivalent to THIRTY PERCENT (30%) | thirty-five percent (35%) | of the
taxable income derived in the preceding taxable year from all sources within the
Philippines: | Provided, That effective January 1, 2009, the rate of income tax
shall be thirty percent (30%) |PROVIDED, THAT THE RATE OF
CORPORATE INCOME TAX SHALL BE REDUCED BY ONE
PERCENTAGE POINT EVERY YEAR BEGINNING JANUARY 1, 2019:
PROVIDED, FURTHER, THAT THE CORPORATE INCOME TAX RATE
SHALL NOT BE LOWER THAN TWENTY PERCENT (20%).

In the case of corporations adopting the fiscal-year accounting period, the
taxable income shall be computed without regard to the specific date when sales,
purchases and other transactions occur. Their income and expenses for the fiscal
year shall be deemed to have been eared and spent equally for each month of the

period.


The corporate income tax rate shall be applied on the amount computed by
multiplying the number of months covered by the new rate within the fiscal year
by the taxable income of the corporation for the period, divided by twelve.

| Provided, however, That a resident foreign corporation shall be granted
the option to be taxed at fifteen percent (15%) on gross income under the same
conditions, as provided in Section 27(A). |

(2) xxx
(3) xxx

1 (4) Offshore Banking Units. - The provisions of any law to the contrary
notwithstanding, income derived by offshore banking units authorized by the
BangkoSentral ng Pilipinas (BSP), from foreign currency transactions with
nonresidents, other offshore banking units, local commercial banks, including
branches of foreign banks that may be authorized by the BangkoSentral ng
Pilipinas (BSP) to transact business with offshore banking units shall be exempt
from all taxes except net income from such transactions as may be specified by
the Secretary of Finance, upon recommendation of the Monetary Board which
shall be subject to the regular income tax payable by banks; Provided, however,
‘That any interest income derived from foreign currency loans granted to residents
other than offshore banking units or local commercial banks, including local,
branches of foreign banks that may be authorized by the BSP to transact business
with offshore banking units, shall be subject only to a final tax at the rate of ten
percent (10%),

Any income of nonresidents, whether individuals or corporations, from
transactions with said offshore banking units shall be exempt from income tax. |

1 (S) 14) xxx

166) Regional or Area Headquarters and Regional Operating
Headquarters of Multinational Companies. -

(a) Regional or area headquarters as defined in Section 22(DD) shall not
be subject to income tax.

(b) Regional operating headquarters as defined in Section 22(EE) shall pay
a tax of ten percent (10%) of their taxable income. |

1 (7) 1 &) Tax on Certain Incomes Received by a Resident Foreign
Corporation.

(a) Interest from Deposits and Yield or any other Monetary Benefit from
Deposit Substitutes, Trust Funds and Similar Arrangements and Royalties. —


Interest from any currency bank deposit and yield or any other monetary benefit
from deposit substitutes and from trust funds and similar arrangements and
royalties derived from sources within the Philippines shall be subject to a final
income tax at the rate of twenty percent (20%) of such interest: Provided,
however, That interest income derived by a resident foreign corporation from a
depository bank under the expanded foreign currency deposit system shall be
subject to a final income tax at the rate of FIFTEEN PERCENT (15%) | seven
and one-half percent (7 '/2%) | of such interest income.

(b) Income Derived under the Expanded Foreign Currency Deposit System
XXX

(c) Capital Gains from Sale of Shares of Stock Not Traded in the Stock
Exchange. — A final tax at the rate | s prescribed below |OF FIFTEEN
PERCENT (15%) is hereby imposed upon the net capital gains realized during
the taxable year from the sale, barter, exchange or other disposition of shares of
stock in a domestic corporation except shares sold or disposed of through the
stock exchange:,

| Not over P100,000 5%
On any amount in excess of P100,000 10% J

(d) Intercorporate Dividends.- xxx

(B) Tax on Nonresident Foreign Corporation. -

Jn General. - Except as otherwise provided in this Code, a foreign
corporation not engaged in trade or business in the Philippines shall pay a tax
equal to THIRTY PERCENT (30%) [ thirty-five percent (35%) | of the gross
income received during cach taxable year from all sources within the Philippines,
such as interests, dividends, rents, royalties, salaries, premiums (except
reinsurance premiums), annuities, emoluments or other fixed or determinable
annual, periodic or casual gains, profits and income, and capital gains, except
capital gains subject to tax under subparagraph 5 (c):  [Provided, That effective
January 1, 2009, the rate of income tax shall be thirty percent (30%),
|PROVIDED, THAT THE RATE OF CORPORATE INCOME TAX SHALL
BE REDUCED BY ONE PERCENTAGE POINT EVERY YEAR
BEGINNING JANUARY 1, 2019: PROVIDED, FURTHER, THAT THE
CORPORATE INCOME TAX RATE SHALL NOT BE LOWER THAN
TWENTY PERCENT (20%).

L (2) Nonresident Cinematographic Film Owner, Lessor or Distributor, -
A cinematographic film owner, lessor, or distributor shall pay a tax of twenty-five
percent (25%) of its gross income from all sources within the Philippines. }


1 (3) Nonresident Owner or Lessor of Vessels Chartered by Philippine
‘Nationals. A nonresident owner or lessor of vessels shall be subject to a tax of
four and one-half percent (4 1/2%) of gross rentals, lease or charter fees from
leases or charters to Filipino citizens or corporations, as approved by the Maritime
Industry Authority.

1 (4) Nonresident Owner or Lessor of Aircraft, Machineries and Other
Equipment. ~ Rentals, charters and other fees derived by a nonresident lessor of
aircraft, machineries and other equipment shall be subject to a tax of seven and
one-half percent (7 1/2%) of gross rentals or fees. |

[ (5) ] @)Fax on Certain Incomes Received by a Nonresident Foreign
Corporation.

(a) Interest on Foreign Loans. ~ xxx

(b) Intercorporate Dividends. ~ A final withholding tax at the rate
of fifteen percent (15%) is hereby imposed on the amount of cash and/or
property dividends received from a domestic corporation, which shall be
collected and paid as provided in Section 57 (A) of this Code, subject to
the condition that the country in which the nonresident foreign corporation
is domiciled, shall allow a credit against the tax due from the nonresident
foreign corporation taxes deemed to have been paid in the Philippines
equivalent to | twenty percent (20%) |FIFTEEN PERCENT (15%)
which represents the difference between the regular income tax [ of thirty-
five percent (35%) | and the fifteen percent (15%) tax on dividends as
provided in this subparagraph: Provided, that EFFECTIVE JANUARY
1, 2019, | effective January 1, 2009 |, the credit against the tax due shall
be equivalent to | fifteen percent (15%), which represents | the difference
between the regular income tax RATE | of thirty percent (30%) ] and the
fifteen percent (15%) tax on dividends.

(c) Capital Gains from Sale of Shares of Stock not Traded in the
Stock Exchange. — A final tax at the rate| s prescribed below OF
FIFTEEN PERCENT (15%) is hereby imposed upon the net capital
gains realized during the taxable year from the sale, barter, exchange or
other disposition of shares of stock in a domestic corporation, except
shares sold, or disposed of through the stock exchange. |

Not over P100,000 5%
On any amount in excess of P100,000 10% |”

SEC. 9. Section 34 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

10


“SEC, 34. Deductions from Gross Income. - Except for taxpayers earning
compensation income arising from personal services rendered under an employer-
employee relationship where no deductions shall be allowed under this Section, in
‘computing taxable income subject to income tax under Sections 24 (A); 25 (A);
26; 27 (A), (B) and (C), and 28 (A) (1), there shall be allowed the following
deductions from gross income,

(A) Expenses. -
(1) Ordinary and Necessary Trade, Business or Professional Expenses.-
XxX

[ (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) Jn 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 | forty-two percent (42%) |THIRTY
THREE PERCENT(33%) of the interest income subjected to final tax [

Provided, That effective January 1, 2009, the percentage shall be thirty-
three percent (33%). | PROVIDED FURTHER, THAT THE
FOLLOWING PERCENTAGES SHALL APPLY IF THE
CORPORATE INCOME TAX RATE AS PROVIDED IN
SECTIONS 27 (A) AND 28(A)(1) IS ADJUSTED AS FOLLOWS:

IF RATE IS 29%, INTEREST EXPENSE REDUCTION RATE IS 31%;
IF RATE IS 28%, INTEREST EXPENSE REDUCTION RATE IS 29%
IF RATE IS 27%, INTEREST EXPENSE REDUCTION RATE IS 27%
IF RATE IS 26%, INTEREST EXPENSE REDUCTION RATE IS 26%
IF RATE IS 25%, INTEREST EXPENSE REDUCTION RATE IS 25%
IF RATE IS 24%, INTEREST EXPENSE REDUCTION RATE IS 24 %
IF RATE IS 23%, INTEREST EXPENSE REDUCTION RATE IS 23%
IF RATE IS 22%, INTEREST EXPENSE REDUCTION RATE IS 22%
IF RATE IS 21%, INTEREST EXPENSE REDUCTION RATE IS 21%
IF RATE IS 20%, INTEREST EXPENSE REDUCTION RATE IS 20%


(2) xxx
(C) Taxes. -xxx
(D) Losses. - xxx
(E) Bad Debts. - xxx
(F) Depreciation. - xex
(G) Depletion of Oil and Gas Wells and Mines. - xxx
(H) Charitable and Other Contributions. ~220x
(1) Research and Development.- xxx
(8) Pension Trusts. ~ xxx
(K) Additional Requirements for Deductibility of Certain Payments. - xxx

(L) Optional Standard Deduction (OSD). - In lieu of the deductions
allowed under the preceding Subsections, an individual subject to tax
under Section 24, other than a nonresident alien, | may elect a standard
deduction in an amount not exceeding forty percent (40%) of his gross
sales or gross receipts, as the case maybe. In the case of a] ANDA
corporation subject to tax under Sections 27(A) and 28 (A)(1), | it | may
elect a standard deduction in an amount not exceeding TWENTY
PERCENT (20%) | forty percent (40%) | of its gross income as defined
in Section 32 of this Code. Unless the taxpayer signifies in his return his
intention to elect the optional standard deduction, he shall be considered as
having availed himself of the deductions allowed in the preceding
Subsections. Such election when made in the return shall be irrevocable
for the taxable year for which the return is made: Provided, That an
individual who is entitled to and claimed for the optional standard
deduction shall not be required to submit with his tax return such financial
statements otherwise required under this Code: Provided, further, That
except when the Commissioner otherwise permits, the said individual shall
keep such records pertaining to his gross sales or gross receipts, or the said
corporation shall keep such records pertaining to his gross income as
defined in Section 32 of this Code during the taxable year, as may be
required by the rules and regulations promulgated by the Secretary of
Finance, upon, recommendation of the Commissioner.

Notwithstanding the provision of the preceding Subsections, the Secretary

of Finance, upon recommendation of the Commissioner, after a public hearing
shall have been held for this purpose, may prescribe by rules and regulations,

12


limitations or ceilings for any of the itemized deductions under Subsections (A) to
(J) of this Section: Provided, That for purposes of determining such ceilings or
limitations, the Secretary of Finance shall consider the following factors: (1)
adequacy of the prescribed limits on the actual expenditure requirements of each
particular industry; and (2)effects of inflation on expenditure levels; Provided,
further, That no ceilings shall further be imposed on items of expense already
subject to ceilings under present law.”

SEC. 10, Section 40(C\2) of the National Internal Revenue Code of 1997, as amended,
is hereby further amended to read as follows:

“SEC. 40. Determination of Amount and Recognition of Gain or Loss, ~
{A)x xx
(B)x xx
(C) Exchange of Property. -
(1) xxx

(2) Exception. - No gain or loss shall be recognized TO A
CORPORATION OR ON ITS STOCK OR SECURITIES IF SUCH
CORPORATION IS A PARTY TO A REORGANIZATION AND
EXCHANGES PROPERTY, | if | in pursuance of a plan of | merger
or consolidation REORGANIZATION SOLELY FOR STOCK OR
SECURITIES IN ANOTHER CORPORATION A PARTY TO THE
REORGANIZATION. A REORGANIZATION IS DEFINED AS:

(a) A corporation, which is a party to a A
STATUTORY merger or consolidation, exchanges
property solely for stock in a corporation, which is a party
to the merger or consolidation; or

(b) [A shareholder exchanges stock in a
corporation, which is a party to the merger or
consolidation, solely for the stock of another corporation
also a party to the merger or consolidation; or |THE
ACQUISITION BY ONE CORPORATION, IN
EXCHANGE SOLELY FOR ALL OR A PART OF ITS
VOTING STOCK (OR IN EXCHANGE SOLELY FOR
ALL OR A PART OF THE VOTING STOCK OF A
CORPORATION WHICH IS IN CONTROL OF THE
ACQUIRING CORPORATION), OF STOCK OF
ANOTHER CORPORATION IF, IMMEDIATELY
AFTER THE ACQUISITION, THE ACQUIRING

13


CORPORATION HAS CONTROL OF SUCH OTHER
CORPORATION WHETHER OR NOT SUCH
ACQUIRING CORPORATION HAD CONTROL
IMMEDIATELY BEFORE THE ACQUISITION);

(c) | A security holder of a corporation, which is a
party to the merger or consolidation, exchanges his
securities in such corporation, solely for stock or securities
in such corporation, a party to the merger or consolidation.
| THE ACQUISITION BY ONE CORPORATION, IN
EXCHANGE SOLELY FOR ALL OR A PART OF ITS
VOTING STOCK (OR IN EXCHANGE SOLELY FOR
ALL OR A PART OF THE VOTING STOCK OF A
CORPORATION WHICH IS IN CONTROL OF THE
ACQUIRING CORPORATION), OR
SUBSTANTIALLY ALL OF THE PROPERTIES OF
ANOTHER CORPORATION, BUT IN
DETERMINING WHETHER THE EXCHANGE IS
SOLELY FOR STOCK THE ASSUMPTION BY THE
ACQUIRING CORPORATION OF A LIABILITY OF
THE OTHER SHALL BE DISREGARDED;

(D) A RECAPITALIZATION; OR
(E) A REINCORPORATION

No gain or loss shall also be recognized if property is transferred to a
corporation by | aJONE OF MOREpersonS in exchange for stock | or unit of
participation in such a corporation of which as a result of such exchange said
person, alone or together with others, not exceeding four (4) persons, gains
control of said corporation | : Provided, that stocks issued for services shall not
be considered as issued in return for property.

IN ALL OF THE ABOVE INSTANCES, THE TRANSACTION OR
ARRANGEMENT MUST BE UNDERTAKEN FOR A LEGITIMATE OR
BONA FIDE BUSINESS PURPOSE AND NOT SOLELY FOR THE
PURPOSE OF AVOIDING OR ESCAPING THE BURDEN OF
TAXATION,

THE PROVISION OF SECTION 50 OF THIS CODE SHALL BE
APPLIED AND ENFORCED, IN CASES WHERE THE TRANSACTION
OR ARRANGEMENT ENTERED INTO IS FOUND TO BE NOT FOR
LEGITIMATE OR BONA FIDE BUSINESS PURPOSE.

PROVIDED, HOWEVER, SALE OR EXCHANGES OF PROPERTY
USED FOR BUSINESS FOR SHARES OF STOCK COVERED UNDER

14


THIS SUBSECTION SHALL NOT BE SUBJECT TO VALUE ADDED
TAX (VAT).

XxX”

SEC. 11. Section 50 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

“SEC. 50,[Allocation of Income and Deductions. In the case of two or
more organizations, trades or businesses (whether or not incorporated and
whether or not organized in the Philippines) owned or controlled directly or
indirectly by the same interests, the Commissioner is authorized to distribute,
apportion or allocate gross income or deductions between or among such
organization, trade or business, if he determined that such distribution,
apportionment or allocation is necessary in order to prevent evasion of taxes or
clearly to reflect the income of any such organization, trade or business.
|AUTHORITY OF THE COMMISSIONER TO DISTRIBUTE, APPORTION,
ALLOCATE, AND IMPUTE INCOME AND DEDUCTIONS TO
DISREGARD AND COUNTERACT TAX AVOIDANCE ARRANGEMENTS. ~
IN CASE OF TWO OR MORE ORGANIZATIONS, TRADES OR
(NESSES, WHETHER OR NOT ORGANIZED IN THE
PHILIPPINES, OWNED OR CONTROLLED DIRECTLY OR
INDIRECTLY BY THE SAME INTERESTS, THE COMMISSIONER IS
AUTHORIZED TO DISTRIBUTE, APPORTION, ALLOCATE, OR
IMPUTE INCOME OR DEDUCTIONS BETWEEN OR AMONG SUCH
ORGANIZATION, TRADE OR BUSINESS, IF THE COMMISSIONER
DETERMINES THAT SUCH DISTRIBUTION, APPORTIONMENT,
ALLOCATION, OR IMPUTATION IS NECESSARY IN ORDER TO
PREVENT AVOIDANCE OF TAXES OR TO CLEARLY TO REFLECT
THE INCOME OF ANY SUCH ORGANIZATION, TRADE, OR
BUSINESS,

IN CASES WHEN A TRANSACTION OR ARRANGEMENT,
WHETHER ENTERED INTO BY THE PERSON AFFECTED BY THE
TRANSACTION OR ARRANGEMENT OR BY ANOTHER PERSON,
THAT DIRECTLY OR INDIRECTLY HAS TAX AVOIDANCE AS ITS
PURPOSES OR EFFECTS, WHETHER OR NOT ANY OTHER PURPOSE
OR EFFECT IS ATTRIBUTABLE AS TO ORDINARY BUSINESS OR
FAMILY DEALINGS, IF THE TAX AVOIDANCE PURPOSE OR
EFFECT IS NOT MERELY INCIDENTAL, THE COMMISSIONER IS
AUTHORIZED TO DISREGARD AND CONSIDER SUCH
TRANSACTION OR ARRANGEMENT AS VOID FOR INCOME TAX
PURPOSES, AND MAY ADJUST THE TAXABLE INCOME OF A
PERSON AFFECTED BY THE ARRANGEMENT IN A WAY THE
COMMISSIONER THINKS APPROPRIATE, IN ORDER TO



COUNTERACT A TAX ADVANTAGE OBTAINED BY THE PERSON
FROM OR UNDER THE ARRANGEMENT.

FOR PURPOSES OF THIS SECTION, THE TERM “TAX
AVOIDANCE” INCLUDES: (A) DIRECTLY OR INDIRECTLY
ALTERING THE INCIDENCE OF ANY INCOME TAX; (B) DIRECTLY
OR INDIRECTLY RELIEVING A PERSON FROM LIABILITY TO PAY
INCOME TAX OR FROM A POTENTIAL OR PROSPECTIVE
LIABILITY TO FUTURE INCOME TAX; OR (C) DIRECTLY OR
INDIRECTLY AVOIDING, POSTPONING, OR REDUCING ANY
LIABILITY TO INCOME TAX, OR ANY POTENTIAL OR
PROSPECTIVE LIABILITY TO FUTURE INCOME TAX. THERE IS
“TAX AVOIDANCE’ IN THE AFOREMENTIONED INSTANCES,
WHERE THE TRANSACTION OR ARRANGEMENT IS MOTIVATED
BY OBTAINING TAX BENEFIT OR ADVANTAGE WITH NO
COMMERCIAL REALITY OR ECONOMIC EFFECT AND THE USE OF
THE PROVISIONS OF THE TAXATION LAW ON SUCH
TRANSACTION OR ARRANGEMENT WOULD NOT HAVE BEEN THE
INTENTION OF THE LAW.”

SEC. 12. Sec, 73 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 73. Distribution of Dividends or Assets by Corporations, -

(A) Definition of Dividends. - The term ‘dividends’ when used in this Title
means any distribution made by a corporation to its shareholders out of its
carnings of profits and payable to its shareholders, whether in money or in other
Property

[ Where a corporation distributes all of its assets in complete liquidation
or dissolution, the gain realized or loss sustained by the stockholder, whether
individual or corporate, is a taxable income or a deductible loss, as the case may
be |

(B) Stock Dividend. - A stock dividend representing the transfer of surplus
to capital account shall not be subject to tax. However, if a corporation cancels or
redeems stock issued as a dividend at such time and in such manner as to make
the distribution and cancellation or redemption, in whole or in part, essentially
equivalent to the distribution of a taxable dividend, the amount so distributed in
redemption or cancellation of the stock shall be considered as taxable income to
the extent that it represents a distribution of earnings or profits.

(C) LIQUIDATING DIVIDENDS. — LIQUIDATING DIVIDENDS
REPRESENTING THE REMAINING GAINS REALIZED OR LOSS


SUSTAINED BY THE STOCKHOLDER IN A COMPLETE
LIQUIDATION OR DISSOLUTION BY A CORPORATION.

1 (C) | ()Dividends Distributed are Deemed Made from Most Recently
Accumulated Profits. - Any distribution made to the shareholders or members of
corporation shall be deemed to have been made from the most recently
accumulated profits or surplus, and shall constitute a part of the annual income of
the distribute for the year in which received.

[ @) \E)Net Income of a Partnership Deemed Constructively Received
by Partners, - The taxable income declared by a partnership for a taxable year
which is subject to tax under Section 27 (A) of this Code, after deducting the
corporate income tax imposed therein, shall be deemed to have been actually or
constructively received by the partners in the same taxable year and shall be taxed
to them in their individual capacity, whether actually distributed or not.”

SEC. 13. Sec. 112 (A) (B) of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

“SECTION 112. Refunds | or Tax Credits | of Input Tax.

"(A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered

whose sales are zero-rated or effectively zero-rated may, within two (2)
years after the close of the taxable quarter when the sales were made, apply for |
the issuance of a tax credit certificate or | refund of creditable input tax due or
paid attributable to such sales, except transitional input tax, to the extent that such
input tax has not been applied against output tax: Provided, however, That in the
case of zero-rated sales under Section 106(A\(2)(a(1) ,(2) and | (b) | and Section
108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof
had been duly accounted for in accordance with the rules and regulations of the
BangkoSentral ng Pilipinas (BSP); PROVIDED, THAT SECTION
106(A)(2aX2) AND SECTION 108 (B\1) SHALL NO LONGER BE
SUBJECT TO ZERO PERCENT VAT RATE UPON THE SUCCESSFUL
ESTABLISHMENT AND IMPLEMENTATION OF AN ENHANCED VAT
REFUND SYSTEM IN ACCORDANCE WITH THE VAT REFUND
PROVISIONS UNDER SECTION  106(A) AND SECTION 108(B),
RESPECTIVELY. Provided, further, That where the taxpayer is engaged in
zero-rated or effectively zero-rated sale and also in taxable or exempt sale of
goods or properties or services, and the amount of creditable input tax due or paid
cannot be directly and entirely attributed to any one of the transactions, it shall be
allocated proportionately on the basis of the volume of sales. Provided, finally,
that for a person making sales that are zero-rated under Section 108(B)(6), the
input taxes shall be allocated ratably between his zero-rated and non-zero-rated
sales.


"(B) Cancellation of VAT Registration. - A person whose registration has
been cancelled due to retirement from or cessation of business, or due to changes
in or cessation of status under Section 106(C) of this Code may, within two (2)
years from the date of cancellation, apply for REFUND. [ the issuance of a tax
credit certificate for any unused input tax. which may be used in payment of his
other internal revenue taxes |

SEC. 14. Sec. 119 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“Section 119. Tax on Franchises. - Any provision of general or special
Jaw to the contrary notwithstanding, there shall be levied, assessed and collected
in respect to all EXISTING franchise agreement or law pertaining TO franchises
on radio and/or television broadcasting AND TELECOMMUNICATION
companies \whose annual gross receipts of the preceding year do not exceed Ten
million pesos (P10,000,000.00) | , subject to Section 236 of this Code, a
FRANCHISE tax of three percent (3%) and on gas and water utilities, a
FRANCHISE tax of two percent (2%) on the gross receipts derived from the
business covered by the law granting the franchise: Provided, however, That
radio and/OR television broadcasting AND TELECOMMUNICATION
companies referred to in this Section shall | have an option to) be registered as a
value-added taxpayer and pay the tax due thereon.| : Provided, further, That
‘once the option is exercised, said option shall not be irrevocable |

SEC. 15. Sec. 204 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund
or Credit Taxes. — The Commissioner may —

(A) Compromise the payment of any internal revenue tax, when:

(1) A reasonable doubt as to the validity of the claim against the taxpayer
exists; or

(2) The financial position of the taxpayer demonstrates a clear inability to
pay the assessed tax.

‘The compromise settlement of any tax liability shall be subject to the following
minimum amounts:

For cases of financial incapacity, a minimum compromise rate equivalent to ten
percent (10%)of the basic assessed tax; and

For other cases, a minimum compromise rate equivalent to forty percent (40%)of
the basic assessed tax.

18


Where the basic tax involved exceeds | One | TEN million pesos | (P1,000.000)
| (10,000,000) or where the settlement offered is less than the prescribed
minimum rates, the compromise shall be subject to the approval of the Evaluation
Board which shall be composed of the Commissioner and the four (4) Deputy
Commissioners.

xxx!

SEC. 16, Sec. 220 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 220. Form and Mode of Proceeding in Actions Arising under this Code.
— {Civil and criminal actions and proceedings instituted in behalf of the
Government under the authority of this Code or other law enforced by the Bureau
of Internal Revenue shall be brought in the name of the Government of the
Philippines and shall be conducted by legal officers of the Bureau of Internal
Revenue but no civil or criminal action for the recovery of taxes or the
enforcement of any fine, penalty or forfeiture under this Code shall be filed in
court without the approval of the Commissioner. |CIVIL ACTIONS
INVOLVING DISPUTED ASSESSMENTS AND COLLECTIONS OR
REFUNDS OF INTERNAL REVENUE TAXES, FEES OR OTHER
CHARGES OR PENALTIES IN RELATION THERETO, OR OTHER
MATTERS ARISING UNDER THIS CODE OR OTHER LAW
ENFORCED BY THE BUREAU OF INTERNAL REVENUE SHALL BE
HANDLED EXCLUSIVELY BY LEGAL OFFICERS OF THE BUREAU
OF INTERNAL REVENUE IN ALL STAGES OF THE PROCEEDINGS,
INCLUDING APPEALS BEFORE THE PROPER COURTS.

CRIMINAL ACTIONS INVOLVING VIOLATIONS OF THIS CODE OR
OTHER LAW ENFORCED BY THE BUREAU OF INTERNAL REVENUE
SHALL BE INVESTIGATED, PROSECUTED, AND HANDLED
EXCLUSIVELY BY THE LEGAL OFFICERS OF THE BUREAU OF
INTERNAL REVENUE IN ALL STAGES OF THE PROCEEDINGS,
INCLUDING APPEALS BEFORE THE PROPER COURTS. FOR
PURPOSES OF DETERMINING WHETHER THERE IS SUFFICIENT
GROUND TO ENGENDER A WELL-FOUNDED BELIEF THAT A
CRIMINAL VIOLATION OF THIS CODE OR OTHER LAW ENFORCED
BY THE BUREAU OF INTERNAL REVENUE HAS BEEN COMMITTED
AND THAT THE RESPONDENT IS PROBABLY GUILTY THEREOF
AND SHOULD BE HELD FOR TRIAL, THE LEGAL OFFICERS OF THE
BUREAU OF INTERNAL REVENUE ARE HEREBY AUTHORIZED TO
CONDUCT THE REQUISITE PRELIMINARY INVESTIGATION.
SHOULD THERE EXISTS PROBABLE CAUSE TO HOLD THE
RESPONDENT FOR TRIAL, THE INVESTIGATING LEGAL OFFICER

19


SHALL PREPARE THE INFORMATION TO BE FILED DIRECTLY
WITH THE APPROPRIATE COURTS.

ALL CIVIL AND CRIMINAL ACTIONS SHALL BE BROUGHT IN THE
NAME OF THE GOVERNMENT OF THE PHILIPPINES AND SHALL BE
FILED IN COURT WITH THE APPROVAL OF THE COMMISSIONER
OF INTERNAL REVENUE OR HIS/HER DULY AUTHORIZED
REPRESENTATIVE. NO REFERRAL BY THE BUREAU OF INTERNAL
REVENUE TO THE OFFICE OF THE SOLICITOR GENERAL,
DEPARTMENT OF JUSTICE, OR ANY GOVERNMENT AGENCY
SHALL BE ‘DED IN CONNECTION WITH A CIVIL OR CRIMINAL.
ACTION HANDLED BY THE LEGAL OFFICERS OF THE BUREAU OF
INTERNAL REVENUE.

FOR THIS PURPOSE, THE SECRETARY OF FINANCE, UPON
RECOMMENDATION OF THE COMMISSIONER, SHALL
PROMULGATE THE NECESSARY RULES AND REGULATIONS FOR
‘THE IMPLEMENTATION OF THIS PROVISION.”

SEC. 17, Sec. 222 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection
of Taxes.-

(a) xxx

(b) If before the expiration of the time prescribed in Section 203 for the
assessment of the tax, | both the Commissioner and | the taxpayer | have
agreed | APPLIES WITH THE COMMISSIONER in writing to its
assessment after such time, the tax may be assessed within the period |
agreed upon | SPECIFIED IN THE APPLICATION WHICH SHALL
NOT EXCEED SIX (6) MONTHS AT ANY ONE TIME. The
FOREGOING period | so agreed upon | may be extended by subsequent
written | agreement JAPPLICATION made before the expiration of the
period previously [ agreed upon |JAPPLIED FOR

Xxx’

SEC. 18, Sec, 237 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. —

(A) Issuance. — xxx

20


“Within five (5) years from the effectivity of this Act and upon the establishment
of a system capable of storing and processing the required date, the Bureau shall
require taxpayers engaged in the export of goods and service, taxpayers engaged
in e-commerce, and taxpayers under the jurisdiction of the Large Taxpayers
Service to issue AND TRANSMIT electronic receipts or sales or commercial
invoices [in lieu of manual receipts or sales or commercial invoices. [THRU
DESIGNATED ELECTRONIC CHANNELS WITH A_ PUBLIC
CERTIFICATION SYSTEM ACCREDITED BY THE BUREAU, subject to
the rules and regulations to be issued by the Secretary of Finance upon
recommendation of the Commissioner | and after a | following a public hearing [
shall have been | held for this purpose: Provided, That taxpayers not covered by
the mandate of this provision may issue electronic receipts of sales or commercial
invoices in lieu of manual receipts or sales or commercial invoices. PROVIDED
FURTHER, SUBJECT TO THE RULES AND REGULATIONS TO BE
ISSUED BY THE SECRETARY OF FINANCE, THE COMMISSIONER
MAY REQUIRE ANY TAXPAYER TO COMPLY WITH THE
PROVISIONS OF THIS SECTION.

A PUBLIC CERTIFICATION SYSTEM SHALL REFER TO A DIGITAL
PERSONAL AUTHENTICATION PROGRAM WITH ABILITY TO
VERIFY THE IDENTITY OF ISSUING TAXPAYER AND ATTEST TO
THE AUTHENTICITY OF THE INFORMATION IN THE ELECTRONIC
RECEIPTS OR SALES OR COMMERCIAL INVOICES. THIS MAY
INCLUDE THE USE OF DIGITAL SIGNATURE ISSUED BY
CERTIFICATION AUTHORITY AS ACCREDITED BY THE BUREAU
OF INTERNAL REVENUE.

A DESIGNATED ELECTRONIC CHANNEL SHALL REFER TO ANY
MEDIUM OR PORTAL IDENTIFIED BY THE BUREAU WITH AN
ABILITY TO RECEIVE THE TRANSACTION DATA OF THE
ELECTRONIC RECEIPTS OF SALES OR COMMERCIAL INVOICES
FOR ASSIGNMENT OF AN APPROVED ELECTRONIC TAX
TRANSACTION NUMBER.

AN APPROVED TAX TRANSACTION NUMBER SHALL REFER TO
THE UNIQUE ASSIGNED SERVIES OF NUMBERS AND/OR LETTERS
LINKED TO A VALIDATED SALES TRANSACTION REPORTED
THROUGH THE DESIGNATED ELECTRONIC CHANNEL.

‘The original of each receipt or invoice shall be issued to the purchaser, customer,
or client at the time the transaction is effected, who, if engaged in the business or
in the exercise of profession, shall keep and preserve the same in his place of
business for a period of three (3) years from the close of the taxable year in which
such invoice or receipt was issued, while the duplicate shall be kept and preserved
by the issue, also in his place of business, for a like period: Provided, that in case
of electronic receipts or sales or commercial invoices, digital record of the same |

21


shall be kept by the purchaser, customer or client and the issuer for the same
period above stated |BEARING THE APPROVED ELECTRONIC TAX
TRANSACTION NUMBER SHALL BE SUFFICIENT COMPLIANCE

The Commissioner may, in meritorious cases, exempt any person subject to
internal revenue tax from compliance with the provision of this Section.”

SEC. 19. Sec, 237-A of the National Internal Revenue Code of 1997, as amended, is
hereby amended to read as follows:

“SEC. 237-A. Electronic Sales Reporting System. — Within five (5) years from
the effectivity of this Act and upon the establishment of a system capable of
storing and processing the required data, the Bureau shall require taxpayers
engaged in the export of goods and services, taxpayers engaged in e-commerce,
and taxpayers under the jurisdiction of the Large Taxpayers Service to USE A
SYSTEM CAPABLE OF ISSUING ELECTRONIC RECEIPTS OR SALES
OR COMMERCIAL INVOICES, COLLECT TRANSACTION RECORDS,
AND TRANSMIT THE SAME THRU THE DESIGNATED ELECTRONIC
CHANNELS OF THE BUREAU IN THE STANDARD FORMAT
REQUIRED| electronically report their sales data to the Bureau of through the
use of electronic point of sales systems, ] subject to the rules and regulations to
be issued by the Secretary of Finance upon recommendation of the Commissioner
of Internal Revenue: Provided, That the POINT OF SALE (POS) machines,
VALUE ADDED NETWORK (VAN) TERMINALS, fiscal devices, and fiscal
memory devices WITH CAPACITY TO MAKE SUCH TRANSMISSION
shall be at the expense of the taxpayers) PROVIDED FURTHER, SUBJECT
TO THE RULES AND REGULATIONS TO BE ISSUED BY THE
SECRETARY OF FINANCE, THE COMMISSIONER MAY REQUIRE
ANY TAXPAYER TO COMPLY WITH THE PROVISIONS OF THIS
SECTION.

IN YEAR ONE TO YEAR FOUR OF THE IMPLEMENTATION PERIOD,
A TAXPAYER WHO ADOPTS THE REQUIRED SYSTEM SHALL BE
GRANTED A TAX CREDIT OF 0.1% OF THE PURCHASE VALUE, NET
OF VALUE ADDED TAX, FOR EVERY ELECTRONIC RECEIPT OR
SALE OR COMMERCIAL INVOICE TRANSMITTED THRU THE
DESIGNATED ELECTRONIC CHANNELS OF THE BUREAU AND
ISSUED AN ELECTRONIC TAX TRANSACTION NUMBER.

IN SUPPORT OF THE ELECTRONIC SALES REPORTING SYSTEM,
THE BUREAU OF INTERNAL REVENUE MAY GRANT TAX
INCENTIVES FOR ELECTRONICALLY TRACEABLE PAYMENTS
(ETP) IN THE FORM OF ALLOWABLE DEDUCTIBLE EXPENSE OF
UP TO 10% OF THE ETP MADE BY THE TAXPAYER. AN ANNUAL
LIMIT ON THE ALLOWED ETP DEDUCTIBLE EXPENSE PER

22


TAXPAYER MAYBE SET BY THE COMMISSIONER WITH THE
APPROVAL OF THE SECRETARY OF FINANCE.

ELECTRONICALLY TRACEABLE PAYMENTS REFER TO CREDIT
CARD, DEBIT CARD, OR OTHER METHOD OF PAYMENT WITH A
SYSTEM TO VERIFY OR LINK THE PAYMENT TO THE IDENTITY
OF PAYOR.

THE BUREAU MAY LIKEWISE ESTABLISH A RECEIPT AND
INVOICE LOTTERY PROGRAM FOR ELECTRONIC RECEIPTS OR
SALES OR COMMERCIAL INVOICES TRANSMITTED THRU THE
DESIGNATED ELECTRONIC CHANNELS OF THE BUREAU AND
ISSUED AN ELECTRONIC TAX TRANSACTION NUMBER.

‘The data processing of sales and purchase data shall comply with the provisions
of Republic Act No. 10173, otherwise known as the "Data Privacy Act” and
Section 270 of the NIRC, as amended, on unlawful divulgence of taxpayer
information and such other laws relating to the confidentiality of information

‘The Bureau shall also establish policies, risk management approaches, actions,
training, and technologies to protect the cyber environment, organization, and
data in compliance with Republic Act No. 10175 or the "Cybererime Prevention
Act of 2012."

SEC. 20. Sec. 254 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 254, Attempt to Evade or Defeat Tax. - Any person who willfully attempts
in any manner to evade or defeat any tax imposed under this Code or the payment
thereof shall, in addition to other penalties provided by law, upon conviction
thereof, be punished by a fine of not less than THREE HUNDRED
THOUSAND (P300,000) [ Thirty thousand pesos (P30,000) | but not more than
ONE MILLION PESOS (P1,000,000) | One hundred thousand pesos
(P100,000) | and suffer imprisonment of not less than | two (2) years but not
more than four (4) years |SIX (6) YEARS BUT NOT MORE THAN
TWELVE (12) YEARS: Provided, That the conviction or acquittal obtained
under this Section shall not be a bar to the filing of a civil suit for the collection of
taxes.”

SEC. 21. Sec. 255 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 255. Failure to File Return, Supply Correct and Accurate Information,
Pay Tax Withhold and Remit Tax and Refund Excess Taxes Withheld on
Compensation. - Any person required under this Code or by rules and regulations
promulgated thereunder to pay any tax make a return, keep any record, or supply

23


correct the accurate information, who willfully fails to pay such tax, make such
return, keep such record, or supply correct and accurate information, or withhold
or remit taxes withheld, or refund excess taxes withheld on compensation, at the
time of times required by law or rules and regulations shall, in addition to other
penalties provided by law, upon conviction thereof, be punished by a fine of not
less than [ Ten thousand pesos (P10,000) JONE HUNDRED THOUSAND
(P100,000) and suffer imprisonment of not less than one (1) year but not more
than ten (10) years.

Any person who attempts to make it appear for any reason that he or another has
in fact filed a return or statement, or actually files a return or statement and
subsequently withdraws the same return or statement after securing the official
receiving seal or stamp of receipt of internal revenue office wherein the same was
actually filed shall, upon conviction therefore, be punished by a fine of not less
than [ Ten thousand pesos (P10,000) but not more than Twenty thousand pesos
(P20,000) JONE HUNDRED THOUSAND PESOS (P100,000) BUT NOT
MORE THAN TWO HUNDRED THOUSAND (P200,000) and suffer
imprisonment of not less than one (1) year but not more than three (3) years.”

SEC. 22. Sec. 256 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 256. Penal Liability of Corporations. - Any corporation, association or
general co-partnership liable for any of the acts or omissions penalized under this
Code, in addition to the penalties imposed herein upon the responsible corporate
officers, partners, or employees shall, upon conviction for each act or omission,
be punished by a fine of not less than [Fifty thousand pesos (PS0,000) but not
more than One hundred thousand pesos (P100,000) JONE HUNDRED
THOUSAND PESOS (P100,000) BUT NOT MORE THAN THREE
HUNDRED THOUSAND PESOS (P300,000).”

SEC, 23. Sec. 257 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 257. Penal Liability for Making False Entries, Records or Reports, or
Using Falsified or Fake Accountable Forms,

(A) Any financial officer or independent Certified Public Accountant engaged to
examine and audit books of accounts of taxpayers under Section 232 (A) and any
person under his direction who:

(1) Willfully falsifies any report or statement bearing on any examination
or audit, or renders a report, including exhibits, statements, schedules or
other forms of accountancy work which has not been verified by him
personally or under his supervision or by a member of his firm or by a
member of his staff in accordance with sound auditing practices; or

24


(2) Certifies financial statements of a business enterprise containing an
essential misstatement of facts or omission in respect of the transactions,
taxable income, deduction and exemption of his client; or

(B) Any person who:

(1) Not being an independent Certified Public Accountant according to
Section 232(B) or a financial officer, examines and audits books of
accounts of taxpayers; or

(2) Offers to sign and certify financial statements without audit; or

(3) Offers any taxpayer the use of accounting bookkeeping records for
internal revenue purposes not in conformity with the requirements
prescribed in this Code or rules and regulations promulgated thereunder;
or

(4) Knowingly makes any false entry or enters any false or fictitious name
in the books of accounts or record mentioned in the preceding paragraphs;
or

(5) Keeps two (2) or more sets of such records or books of accounts; or

(6) In any way commits an act or omission, in violation of the provisions
of this Section; or

(7) Fails to keep the books of accounts or records mentioned in Section
232 in a native language, English or Spanish, or to make a true and
complete translation as required in Section 234 of this Code, or whose
books of accounts or records kept in a native language, English or
Spanish, and found to be at material variance with books or records kept
by him in another language; or

(8) Willfully attempts in any manner to evade or defeat any tax imposed
under this Code, or knowingly uses fake or falsified revenue official
receipts, Letters of Authority, certificates authorizing registration, Tax
Credit Certificates, Tax Debit Memoranda and other accountable forms
shall, upon conviction for each act or omission, be punished by a fine not
less than | Fifty thousand pesos (P50,000) but not more than One hundred
thousand pesos (P100,000) JONE HUNDRED THOUSAND PESOS
(P100,000) BUT NOT MORE THAN THREE HUNDRED
THOUSAND PESOS (P300,000) and suffer imprisonment of not less
than | two (2) years but not more than six (6) years | SIX (6) years but
not more than TWELVE (12) years.


If the offender is a Certified Public Accountant, his certificate as a Certified
Public Accountant shall be automatically revoked or cancelled upon conviction.

In the case of foreigners, conviction under this Code shall result in his immediate
deportation after serving sentence, without further proceedings for deportation.”

SEC. 24, Sec. 258 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 258. Unlawful Pursuit of Business. - Any person who carries on any
business for which an annual registration fee is imposed without paying the tax as
required by law shall, upon conviction for each act or omission, be punished by a
fine of not less than —_[ Five thousand pesos (P5,000) but not more than Twenty
thousand pesos (P20,000) [FIFTY THOUSAND PESOS (P50,000) BUT NOT
MORE THAN TWO HUNDRED THOUSAND PESOS (P200,000) and suffer
imprisonment of not lessthan six (6) monthsbut not more than two (2) years:
Provided, That in the case of a person engaged in the business of distilling,
rectifying, repacking, compounding or manufacturing any article subject to excise
tax, he shall, upon conviction for each act or omission, be punished by a fine of
not less than | Thirty thousand pesos (P30,000) but not more than Fifty thousand
pesos (P50,000) [THREE HUNDRED THOUSAND PESOS (P300,000) BUT
NOT MORE THAN FIVE HUNDRED THOUSAND PESOS (P500,000) and
suffer imprisonment of not less than two (2) years but not more than four (4)
years.”

SEC. 25. Sec. 260 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

SEC. 260. Unlawful Possession of Cigarette Paper in Bobbins or Rolls, Ete. - \t
shall be unlawful for any person to have in his possession cigarette paper in
bobbins or rolls, cigarette tipping paper or cigarette filter tips, without the
corresponding authority therefor issued by the Commissioner. Any person,
importer, manufacturer of cigar and cigarettes, who has been found guilty under
this Section, shall, upon conviction for each act or omission, be punished by a fine
of not less than than[ Twenty thousand pesos (P20,000) but not more than One
hundred thousand pesos (P100,000) J]ONE HUNDRED THOUSAND PESOS
(P100,000) BUT NOT MORE THAN FIVE HUNDRED THOUSAND
PESOS (P500,000) and suffer imprisonment for a term of not less than six (6)
years and one (1) day but not more than twelve (12) years.”

SEC. 26. Sec. 261 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 261. Unlawful Use of Denatured Alcohol. - Any person who for the

purpose of manufacturing any beverage, uses denatured alcohol or alcohol
specially denatured to be used for motive power or withdrawn under bond for

26


industrial uses or alcohol knowingly misrepresented to be denatured to be unfit
for oral intake or who knowingly sells or offers for sale any beverage made in
whole or in part from such alcohol or who uses such alcohol for the manufacture
of liquid medicinal preparations taken internally, or knowingly sells or offers for
sale such preparations containing as an ingredient such alcohol, shall upon
conviction for each act or omission be punished by a fine of not less than
than[Twenty thousand pesos (P20,000) but not more than One hundred thousand
pesos (P100,000) |ONE HUNDRED THOUSAND PESOS (P100,000) BUT
NOT MORE THAN FIVE HUNDRED THOUSAND PESOS (PS00,000) and
suffer imprisonment for a term of not less than six (6) years and one (1) day but
not more than twelve (12) years.

‘Any person who shall unlawfully recover or attempt to recover by distillation or
other process any denatured alcohol or who knowingly sells or offers for sale,
conceals or otherwise disposes of alcohol so recovered or redistilled shall be
subject to the same penalties imposed under this Section.”

SEC. 27. Sec. 262 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 262. Shipment or Removal of Liquor or Tobacco Products under False
Name or Brand or as an Imitation of any Existing or Otherwise Known Product
Name or Brand. - Any person who ships, transports or removes spirituous,
compounded or fermented liquors, wines or any manufactured products of
tobacco under any other than the proper name or brand known to the trade as
designating the kind and quality of the contents of the cask, bottle or package
containing the same or as an imitation of any existing or otherwise known product
name or brand or causes such act to be done, shall, upon conviction for each act or
‘omission, be punished by a fine of not less than | Twenty thousand pesos
(P20,000) but not more than One hundred thousand pesos (P100,000) |TWO
HUNDRED THOUSAND PESOS (P200,000) BUT NOT MORE THAN
FIVE HUNDRED THOUSAND PESOS (P500,000) and suffer imprisonment of
not less than six (6) years and one (1) day but not more than twelve (12) years.”

SEC. 28. Sec. 263 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 263. Unlawful Possession or Removal of Articles Subject to Excise Tax
without Payment of the Tax.- Any person who owns and/or is found in
possession of imported articles subject to excise tax, the tax on which has not
been paid in accordance with law, or any person who owns and/or is found in
possession of imported tax-exempt articles other than those to whom they are
legally issued shall be punished by:

(a) A fine of not less than [| One thousand pesos (P1,000) [TWENTY
FIVE THOUSAND PESOS (P25,000) | nor | BUT NOT more than | Two

27


thousand pesos (P2,000) JSEVENTY FIVE THOUSAND PESOS (P75,000)
and suffer imprisonment of not less than | sixty (60) days but not more than one
hundred (100) days | THIRTY (30) DAYS AND ONE (1) DAY BUT NOT
MORE THAN SIX (6) MONTHS if the appraised value, to be determined in the
manner prescribed in the | Tariff and Customs Code [CUSTOMS
MODERNIZATION AND TARIFF ACT, including duties and taxes, of the
articles does not exceed | One thousand pesos (1,000), [TWO HUNDRED
FIFTY THOUSAND PESOS (P250,000),

(b) A fine of not less than | Ten thousand pesos (P10,000) | SEVENTY
FIVE THOUSAND PESOS (P75,000) but not more than [ Twenty thousand
pesos (P20,000) JONE HUNDRED FIFTY THOUSAND PESOS (P150,000)
and suffer imprisonment of not less than | two (2) years but not more than four
(4) years |SEX (6) MONTHS AND ONE (1) DAY BUT NOT MORE THAN
ONE (1) YEAR if the appraised value, to be determined in the manner prescribed
in the | Tariff and Customs Code }|CUSTOMS MODERNIZATION AND
TARIFF ACT, including duties and taxes, of the articles exceeds | One thousand
pesos (P1,000) | TWO HUNDRED FIFTY THOUSAND PESOS (P250,000)
but does not exceed | Fifty thousand pesos (P50,000) JFIVE HUNDRED
THOUSAND PESOS (P500,000),

(©) A fine of not less than [| Thirty thousand pesos (P30,000) | ONE
HUNDRED FIFTY THOUSAND PESOS (P150,000) but not more than [ Sixty
thousand pesos (P60,000) |THREE HUNDRED THOUSAND PESOS
(P300,000) and suffer imprisonment of not less than | four (4) years but not
more than six (6) years | ONE (1) YEAR AND ONE (1) DAY BUT NOT
MORE THAN THREE (3) YEARS, if the appraised value, to be determined in
the manner prescribed in the | Tariff and Customs Code |CUSTOMS
MODERNIZATION AND TARIFF ACT, including duties and taxes of the
articles is more than [Fifty thousand pesos (P50,000) but does not exceed
One hundred fifty thousand pesos (P150,000) [FIVE HUNDRED THOUSAND
PESOS (P500,000) BUT DOES NOT EXCEED ONE MILLION PESOS
(P1,000,000), or

(d) A fine of not less than [ Fifty thousand pesos (PS0,000) THREE
HUNDRED THOUSAND PESOS (P300,000) but not more than | One hundred
thousand pesos (P100, 000) | ONE MILLION FIVE HUNDRED THOUSAND
PESOS (P1,500, 000) andsuffer imprisonment of not less thanten (10) years but
not more than twelve (12) years THREE (3) YEARS AND ONE (1) DAY BUT
NOT MORE THAN SIX (6) years, if the appraised value, to be determined in
the manner prescribed in the [ Tariff and Customs Code CUSTOMS
MODERNIZATION AND TARIFF ACT, including duties and taxes, of the
articles exceeds | One hundred fifty thousand pesos (P150,000). JONE
MILLION PESOS (P1,000,000).

28


Any person who is found in possession of locally manufactured articles
subject to excise tax, the tax on which has not been paid in accordance with law,
or any person who is found in possession of such articles which are exempt from
excise tax other than those to whom the same is lawfully issued shall be punished
with a fine of not less than (10) times the amount of excise tax due on the articles
found but not less than { Five hundred pesos (PS00) JTWENTY FIVE
THOUSAND PESOS (P25,000) and suffer imprisonment of not less than two (2)
years but not more than four (4) years.

‘Any manufacturer, owner or person in charge of any article subject to
excise tax who removes or allows or causes the unlawful removal of any such
articles from the place of production or bonded warehouse, upon which the excise
tax has not been paid at the time and in the manner required, and any person who
knowingly aids or abets in the removal of such articles as aforesaid, or conceals
the same after illegal removal shall, for the first offense, be punished with a fine
of not less than ten (10) times the amount of excise tax due on the articles but not
less than | One thousand pesos (P1,000) [TWENTY FIVE THOUSAND
(P25,000) and suffer imprisonment of not less than | one (1) year but not more
than two (2) years | TWO (2) YEARS BUT NOT MORE THAN FOUR (4)
YEARS.

The mere unexplained possession of articles subject to excise tax, the tax
on which has not been paid in accordance with law, shall be punishable under this
Section.”

SEC. 29. Sec. 264 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 264. Failure or refusal to Issue Receipts or Sales or Commercial
Invoices, Violations related to the Printing of such Receipts or Invoices and
Other Violations. -

(a) Any person who, being required under Section 237 to issue
receipts or sales or commercial invoices, fails or refuses to issue
such receipts of invoices, issues receipts or invoices that do not
truly reflect and/or contain all the information required to be
shown therein, or uses multiple or double receipts or invoices,
shall, upon conviction for each act or omission, be punished by a
fine of not less than | One thousand pesos (P1,000) but not more
than Fifty thousand pesos (P50,000) JONE HUNDRED
THOUSAND PESOS (P100,000) BUT NOT MORE THAN
FIVE HUNDRED THOUSAND PESOS (PS00,000) and suffer
imprisonment of not less than | two (2) years but not more than
four (4) years |] FOUR (4) YEARS BUT NOT MORE THAN
EIGHT (8) YEARS.


(b) Any person who commits any of the acts enumerated hereunder
shall be penalized in the same manner and to the same extent as
provided for in this Section:

(1) Printing of receipts or sales or commercial invoices without
authority from the Bureau of Internal Revenue; or

(2) Printing of double or multiple sets of invoices or receipts; or

(3) Printing of unnumbered receipts or sales or commercial
invoices, not bearing the name, business style, Taxpayer
Identification Number, and business address of the person or
entity.”

SEC. 30. Sec. 265 of the National Inteal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC. 265. Offenses Relating to Stamps. - Any person who commits any of the
acts enumerated hereunder shall, upon conviction thereof, be punished by a fine
of not less than | Twenty thousand pesos (P20,000) |TWO HUNDRED
THOUSAND PESOS (P200,000) but not more than | Fifty thousand pesos
(PS0,000) | FIVE HUNDRED THOUSAND PESOS (PS00,000) and suffer
imprisonment of not less than four (4) years but not more than eight (8) years:

(a) Making, importing, selling, using or possessing without express authority from
the Commissioner, any die for printing or making stamps, labels, tags or playing
cards;

(b) Erasing the cancellation marks of any stamp previously used, or altering the
written figures or letters or cancellation marks on internal revenue stamps,

(c) Possessing false, counterfeit, restored or altered stamps, labels or tags or
causing the commission of any such offense by another,

(d) Selling or offering for sale any box or package containing articles subject to
excise tax with false, spurious or counterfeit stamps or labels or selling from any
such fraudulent box, package or container as aforementioned, or

(e) Giving away or accepting from another, or selling, buying or using containers
on which the stamps are not completely destroyed.”

SEC. 31. Sec. 266 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“Sec. 266. Failure to Obey Summons. - Any person who, being duly summoned
to appear to testify, or to appear UNDER SECTION 6-A OF THIS CODE |

30


and produce books of accounts, records, memoranda or other papers, | or to
furnish information as required under the pertinent provisions of this Code,
neglects to appear or to produce such books of accounts, records, memoranda or
other papers, or to furnish such information, shall, upon conviction, be punished
by a fine of not less than | Five thousand pesos (P5,000) [FIFTY THOUSAND
PESOS (PS0,000) but not more than | ten thousand pesos (P10,000) JONE
HUNDRED THOUSAND PESOS (P100,000) and suffer imprisonment of not
less than | one (1) year but not more than two (2) years | TWO (2) YEARS
BUT NOT MORE THAN FOUR (4) YEARS.”

SEC. 32. Sec. 275 of the National Internal Revenue Code of 1997, as amended, is hereby
amended to read as follows:

“SEC, 275. Violation of Other Provisions of this Code or Rules and
Regulations in General. Any person who violates any provision of this Code or
any rule or regulation promulgated by the Department of Finance, for which no
specific penalty is provided by law, shall, upon conviction for each act or
omission, be punished by a fine of not more than [ One thousand pesos (P1,000)
| TEN THOUSAND PESOS (P10,000) or suffer imprisonment of not more than
| six (6) months | TWO (2) YEARS, or both.”

SEC. 33. A new title is hereby inserted beginning Section 291, Title XIII of the National
Internal Revenue Code of 1997, as amended, to read as follows:

“TITLE XI
CHAPTER I
GENERAL PROVISIONS ON TAX INCENTIVES

“SEC 291. GENERAL PROVISION. - ALL EXPORT ACTIVITIES
AND STRATEGIC INVESTMENTS, INCLUDING THOSE INTENDED
FOR THE DOMESTIC MARKET UNDER THE STRATEGIC
INVESTMENTS PRIORITY PLAN (SIPP) AS DEFINED UNDER
CHAPTER Il OF THIS TITLE, WHETHER LOCATED INSIDE OR
OUTSIDE ECOZONES AND FREEPORT, ELIGIBLE FOR
REGISTRATION IN THE RESPECTIVE INVESTMENT PROMOTION
AGENCIES (IPAS) EFFECTIVE JANUARY 1, 2019, AND WHICH WILL
QUALIFY FOR INCENTIVES UPON EVALUATION AND REVIEW BY
THE FISCAL INCENTIVES REVIEW BOARD (FIRB), MAY ONLY BE
GRANTED INCOME TAX AND CUSTOMS DUTY INCENTIVES UNDER
THIS TITLE, AND IN NO SUCH CASE SHALL THE VALUE-ADDED
TAX AND LOCAL TAXES BE USED AS INVESTMENT TAX
INCENTIVES. PROVIDED, THAT THE TAX INCENTIVES AVAILABLE
UNDER THIS TITLE TO THE AFOREMENTIONED ENTERPRISES
SHALL BE APPLICABLE TO THE REGISTERED ACTIVITY OR

nu


PROJECT ONLY. INCOME DERIVED FROM NON-REGISTERED
ACTIVITY OR PROJECT SHALL, THUS, BE SUBJECT TO
APPROPRIATE TAXES UNDER THIS CODE. THE PERIOD OF
AVAILMENT OF INCENTIVES SHALL BE RECKONED FROM THE
START OF COMMERCIAL OPERATION.

SEC. 292. INVESTMENT PROMOTION AGENCIES.

(A) SCOPE AND COVERAGE, — THIS TITLE SHALL COVER ALL
EXISTING INVESTMENT PROMOTION AGENCIES (IPAS) AS
DEFINED IN THIS CODE OR RELATED LAWS, AND ALL OTHER
IPAS AND OTHER SIMILAR AUTHORITIES THAT MAY BE CREATED
BY LAW. THESE IPAS E THE BOARD O1 VESTMENTS:
(BOD, PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA), BASES
CONVERSION AND DEVELOPMENT AUTHORITY (BCDA), SUBIC
BAY MI OPOLITAN AUTHORITY (SBMA), CLARK
DEVELOPMENT CORPORATION (CDC), JOHN HAY MANAGEMENT
CORPORATION (JHMC), PORO POINT MANAGEMENT
CORPORATION (PPMC), CAGAYAN ECONOMIC ZONE AUTHORITY
(CEZA), ZAMBOANGA CITY SPECIAL ECONOMIC ZONE
AUTHORITY (ZCSEZA), PHIVIDEC INDUSTRIAL AUTHORITY (PIA),
AURORA PACIFIC ECONOMIC ZONE AND FREEPORT AUTHORITY
(APECO), AUTHORITY OF THE FREEPORT AREA OF BATAAN
(AFAB), TOURISM INFRASTRUCTURE AND ENTERPRISE ZONE
AUTHORITY (TIEZA), AND ALL OTHER SIMILAR AUTHORITIES
THAT MAY BE CREATED BY LAW IN THE FUTURE,

(B) GOVERNING PROVISION FOR IPAS, ~ ALL EXISTING AND
FUTURE IPAS SHALL UNIFORMLY RECOMMEND THE GRANT OF
TAX INCENTIVES PROVIDED IN THIS TITLE TO THE FIRB FOR ITS
APPROVAL

(C) EXISTING CHARTERS OF IPAS. — THE IPAS SHALL
MAINTAIN THEIR FUNCTIONS AND POWERS AS PROVIDED UNDER
THE SPECIAL LAWS GOVERNING THEM EXCEPT ON THE EXTENT
MODIFIED BY THE PROVISIONS OF THIS CODE, SUCH AS THOSE
PERTAINING TO THE REVIEW AND GRANT OF TAX INCENTIVES,

SEC, 293, DEFINITIONS - WHEN USED IN THIS TITLE:

(A) THE TERM ‘CAPITAL EQUIPMENT’ REFERS TO
MACHINERY, EQUIPMENT, MAJOR COMPONENTS THEREOF,
FITTINGS AND ACCOMPANIMENTS WHICH ARE DIRECTLY AND
REASONABLY NEEDED IN THE REGISTERED ACTIVITY OF THE
REGISTERED ENTERPRISE.

32


(B) THE TERM ‘EXPORT ENTERPRISE’ SHALL MEAN A
REGISTERED ENTERPRISE WHICH IS A MANUFACTURER,
PROCESSOR, OR SERVICE PROVIDER AND WHOSE EXPORT SALE
OF ITS PRODUCTS OR SERVICES IS AT LEAST NINETY PERCENT
(90%) OF ITS TOTAL ANNUAL PRODUCTION OF THE PRECEDING
‘TAXABLE YEAR.

(C) THE TERM ‘DOMESTIC ENTERPRISE’ SHALL MEAN A
REGISTERED ENTERPRISE WHICH PRODUCES GOODS FOR SALE
OR RENDERS SERVICES EXCLUSIVELY TO THE DOMESTIC
MARKET OR DOES NOT MEET THE MINIMUM EXPORT
REQUIREMENT OF AN EXPORT ENTERPRISE.

(D) THE TERM *EXPORT SALES OF GOODS’ SHALL MEAN
THE SALES OF AN EXPORT ENTERPRISE PAID FOR IN FREELY
CONVERTIBLE FOREIGN CURRENCY INWARDLY REMITTED TO
THE PHILIPPINES, FROM THE FOLLOWING:

(1) THE SALE AND ACTUAL SHIPMENT OF GOODS FROM
THE PHILIPPINES TO A FOREIGN COUNTRY BY AN EXPORT
ENTERPRISE;

(2) SALES TO DIPLOMATIC MISSIONS AND INSTITUTIO!
COVERED BY INTERNATIONAL TREATY;

8) SALES OF AN EXPORT ENTERPRISE TO AN
INTERNATIONAL SEA OR AIR TRANSPORT OPERATIONS OF
GOODS, EQUIPMENT, SPARE PARTS, AND SUPPLIES, EXCEPT
FUEL, FORMING PART OF DIRECT COSTS AND TO BE USED
IN THE AIRCRAFT OR SEACRAFT, AND CAPITAL
EQUIPMENT NEEDED FOR THE SHIPPING OR AIR
TRANSPORT OPERATIONS;

(E) THE TERM ‘EXPORT SALES OF SERVICES’ SHALL MEAN
THE SALES OF AN EXPORT ENTERPRISE, PAID FOR IN FREELY
CONVERTIBLE FOREIGN CURRENCY INWARDLY REMITTED TO
THE PHILIPPINES, FOR THE FOLLOWING:

(1) SERVICES RENDERED TO N
CLIENTS BY EXPORT ENTERPRISES;

RESIDENT FOREIGN

(2) SERVICES RENDERED TO DIPLOMATIC MISSIONS AND
INSTITUTIONS COVERED BY INTERNATIONAL TREATY;


@ SERVICES FOR THE OVERHAUL, REPAIR, AND
MAINTENANCE OF INTERNATIONAL SHIPPING, OR AIR
TRANSPORT OPERATIONS.

(F) THE TERM ‘INVESTMENT PROMOTION AGENCIES’ (IPAS)
SHALL REFER TO GOVERNMENT ENTITIES CREATED BY LAW,
EXECUTIVE ORDER, DECREE OR OTHER ISSUANCE, IN CHARGE
OF PROMOTING INVESTMENTS, ADMINISTERING TAX AND NON-
TAX INCENTIVES, AND/OR OVERSEEING THE OPERATIONS FOR
THE DIFFERENT ECONOMIC ZONES AND FREEPORTS IN
ACCORDANCE WITH THEIR RESPECTIVE CHARTERS. THESE
INCLUDE THE BOARD OF INVESTMENTS (BOI), PHILIPPINE
ECONOMIC ZONE AUTHORITY (PEZA), BASES CONVERSION AND
DEVELOPMENT AUTHORITY (BCDA), SUBIC BAY METROPOLITAN
AUTHORITY (SBMA), CLARK DEVELOPMENT CORPORATION
(CDC), JOHN HAY MANAGEMENT CORPORATION (JHMC), PORO
POINT MANAGEMENT CORPORATION (PPMC), CAGAYAN
ECONOMIC ZONE AUTHORITY (CEZA), ZAMBOANGA CITY
SPECIAL ECONOMIC ZONE AUTHORITY (ZCSEZA), PHIVIDEC
INDUSTRIAL AUTHORITY (PIA), AURORA PACIFIC ECONOMIC
ZONE AND FREEPORT AUTHORITY (APECO), AUTHORITY OF THE
FREEPORT AREA OF BATAAN (AFAB), TOURISM
INFRASTRUCTURE AND ENTERPRISE ZONE AUTHORITY (TIEZA),
AND ALL OTHER SIMILAR AUTHORITIES THAT MAY BE CREATED
BY LAW IN THE FUTURE.

(G) THE TERM ‘REGISTERED ENTERPRISE’ SHALL. MEAN
ANY INDIVIDUAL, PARTNERSHIP, CORPORATION, PHILIPPINE
BRANCH OF A FOREIGN CORPORATION, OR OTHER ENTITY
ORGANIZED AND EXISTING UNDER PHILIPPINE LAWS AND
REGISTERED WITH AN INVESTMENT PROMOTION AGENCY (IPA)
AS DEFINED UNDER REPUBLIC ACT NO. 10708, OR THE TIMTA
LAW, PROVIDED, HOWEVER, THAT THE TERM “REGISTERED
ENTERPRISE” SHALL NOT INCLUDE ANY OF THE FOLLOWING
SERVICE ENTERPRISES SUCH AS, BUT NOT LIMITED TO, THOSE
ENGAGED IN CUSTOMS BROKERAGE, TRUCKING OR
FORWARDING SERVICES, JANITORIAL SERVICES, SECURITY
SERVICES, INSURANCE, BANKING, AND OTHER FINANCIAL
SERVICES, CONSUMERS’ COOPERATIVES, CREDIT UNIONS,
CONSULTANCY SERVICES, RETAIL BUSINESS, RESTAURANTS, OR
SUCH OTHER SIMILAR SERVICES, AS MAY BE DETERMINED BY
THE IPA BOARD, IRRESPECTIVE OF LOCATION, WHETHER
INSIDE OR OUTSIDE THE ZONES, DULY ACCREDITED AND/OR
LICENSED BY ANY OF THE IPAS AND WHOSE INCOME DELIVERED
WITHIN THE ECONOMIC ZONES SHALL BE SUBJECT TO TAXES



UNDER THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS
AMENDED.

(H) THE TERM ‘SPECIAL ECONOMIC ZONE’ OR ‘ECOZONE’
SHALL REFER TO A SELECTED AREA WITH WHICH IS HIGHLY
DEVELOPED, OR WHICH HAS THE POTENTIAL TO BE DEVELOPED
INTO, AGRO-INDUSTRIAL, INDUSTRIAL, INFORMATION
TECHNOLOGY, TOURIST/RECREATIONAL, WHOSE METES AND
BOUNDS ARE FIXED OR DELIMITED BY PRESIDENTIAL
PROCLAMATIONS AND WITHIN A SPECIFIC GEOGRAPHICAL
AREA. AN ECOZONE MAY CONTAIN ANY OR ALL OF THE
FOLLOWING: USTRIAL ESTATES (IES), EXPORT PROCESSING
ZONES (EPZS), ICT PARKS AND CENTERS, AND FREE TRADE
ZONES, PROVIDED, HOWEVER, THAT AREAS WHERE MINING
EXTRACTIONS ARE UNDERTAKEN SHALL NOT BE DECLARED AS
ECOZONES. PROVIDED FURTHER, THAT THE ECOZONES SHOULD
US LAND AREA TO BE
IVES REVIEW BOARD

DETERMINED BY TI
(FIRB).

(1) THE TERM ‘FREEPORT ZONES’ REFERS TO AN ISOLATED
AND POLICED AREA ADJACENT TO A PORT OF ENTRY, WHICH
SHALL BE OPERATED AND MANAGED AS A SEPARATE CUSTOMS
TERRITORY TO ENSURE FREE FLOW OR MOVEMENT OF GOODS,
EXCEPT THOSE EXPRESSLY PROHIBITED BY LAW, WITHIN, INTO,
AND EXPORTED OUT OF THE FREEPORT ZONE WHERE
IMPORTED GOODS MAY BE UNLOADED FOR IMMEDIATE
TRANSSHIPMENT OR STORED, REPACKED, SORTED, MIXED, OR
OTHERWISE MANIPULATED WITHOUT BEING SUBJECT TO
IMPORT DUTIES. HOWEVER, MOVEMENT OF THESE
GOODS FROM THE FREE-TRADE AREA TO A NON-FRE!
AREA IN THE COUNTRY SHALL BE SUBJECT TO ALL APPLICABLE
INTERNAL REVENUE TAXES AND DUTIES.

(J) THE TERM ‘TAX EXPENDITURES’ REFER TO PROVISIONS
OF LAW THAT GIVE RELIEF IN THE FORM OF TAX SUBSIDIES OR
TAX INCENTIVES THAT REDUCE TAX REVENUES. FOR PURPOSES
OF LOWERING THE CORPORATE INCOME TAX RATE, IE
ESTIMATES OF TAX EXPENDITURES SHALL INCLUDE ALL TAX
SUBSIDIES OR TAX INCENTIVES AVAILED OF BY BUSINESS
TAXPAYERS IN A PARTICULAR YEAR AS REPORTED BY THE DOF,
PROVIDED, THAT IN THE VAT SHOULD BE ACCOUNTED NET OF
REFUND.

35


CHAPTER IL

TAX AND DUTY

\CENTIVES:

SEC. 294. - THE FOLLOWING TAX AND CUSTOMS DUTY
INCENTIVES MAY BE GRANTED FOR QUALIFIED REGISTERED
ENTERPRISES, AS DETERMINED BY THE BOARD OF THE
RESPECTIVE INVESTMENT PROMOTION AGENCY (IPA), SUBJECT
TO THE REVIEW AND APPROVAL OF THE FIRB,

(A)

SOME TAX INCENTIVES

(a) YCOME TAX HOLIDAY (ITH). ~ THE ITH SHALL BE
GRANTED FOR A PERIOD NOT EXCEEDING THREE (3)
YEARS: PROVIDED, THAT AFTER THE EXPIRATION OF THE
ITH, THE FOLLOWING INCENTIVES MAY BE APPLIED FOR A
PERIOD NOT EXCEEDING FIVE (5) YEARS, WHICH INCLUDES
THE PERIOD OF ITH AVAILMENT.

(b) REDUCED CORPORATE INCOME TAX. - A REDUCED TAX
RATE OF FIFTEEN PERCENT (15%) OF THE TAXABLE
INCOME AS DEFINED UNDER SECTION 31 OF THIS CODE.

(c) TAX ALLOWANCE FOR INVESTMENTS. - AN ALLOWANCE
OF UP TO FIFTY PERCENT (50%) OF THE ACTUAL
QUALIFIED CAPITAL PENDITURE INCURRED WITHIN
THREE (3) YEARS SHALL BE ALLOWED AS A DEDUCTION
FROM THE TAXABLE INCOME,

(d) DOUBLE DEDUCTION FOR RESEARCH AND
DEVELOPMENT, -_ EXP! IES INCURRED FOR RESEARCH
AND DEVELOPMENT RELATED TO THE REGISTERED
ACTIVITY, IDENTIFIED AND APPROVED AS SUCH BY THE
APPROPRIATE GOVERNMENT AGENCY/IES SHALL BE
DEDUCTIBLE FROM THE GROSS INCOME FOR INCOME TAX
PURPOSES TO THE EXTENT OF TWO HUNDRED PERCENT
(200%) ON THE YEAR THE SAID RESEARCH AND
DEVELOPMENT EXPENSES WERE INCURRED.

(e) DOUBLE DEDUCTION FOR TRAINING. - EXPENSES
INCURRED FOR TRAINING GIVEN TO EMPLOYEES BY THE
REGISTERED ENTERPRISE FOR THE DEVELOPMENT OF
SKILLS, IDENTIFIED AND APPROVED AS NECESSARY BY
THE APPROPRIATE GOVERNMENT AGENCY/IES SHALL BE
DEDUCTIBLE FROM THE GROSS INCOME FOR INCOME TAX
PURPOSES TO THE EXTENT OF TWO HUNDRED PERCENT

36


(200%) ON THE YEAR THE SAID TRAINING EXPENSE WAS
INCURRED.

() ADDITIONAL DEDUCTION FOR LABOR EXPENSE, — A
REGISTERED ENTERPRISE MAY BE ALLOWED AN
ADDITIONAL DEDUCTION FROM TAXABLE INCOME OF
FIFTY PERCENT (50%) OF THE WAGES CORRESPONDING TO
THE INCREMENT IN THE NUMBER OF DIRECT LABOR.

(g) ONE HUNDRED PERCENT (100%) DEDUCTION ON
INFRASTRUCTURE DEVELOPMENT. = REGISTERED
ENTERPRISES ESTABLISHING THEIR ACTIVITY IN AN AREA
THAT THE STRATEGIC INVESTMENTS PRIORITY PLAN
(SIPP) DESIGNATES AS NECESSARY FOR COUNTRY-WIDE
DEVELOPMENT OR IN AN AREA FOUND TO BE DEFICIENT IN
INFRASTRUCTURE, PUBLIC UTILITIES, AND OTHER
FACILITIES, SUCH AS IRRIGATION, DRAINAGE, OR OTHER
SIMILAR WATERWORKS INFRASTRUCTURE MAY DEDUCT
FROM THE GROSS INCOME AN AMOUNT EQUIVALENT TO
ONE HUNDRED PERCENT (100%) OF NECESSARY AND
MAJOR INFRASTRUCTURE WORKS IT MAY HAVE
UNDERTAKEN WITH THE PRIOR APPROVAL AND
RECOMMENDATION OF THE IPA CONCERNED; PROVIDED,
THAT THE TITLE TO ALL SUCH INFRASTRUCTURE WORKS
SHALL UPON COMPLETION, BE TRANSFERRED TO THE
PHILIPPINE GOVERNMENT; PROVIDED FURTHER, THAT
ANY AMOUNT NOT DEDUCTED FOR A PARTICULAR YEAR
MAY BE CARRIED OVER FOR DEDUCTION FOR
SUBSEQUENT YEARS NOT EXCEEDING FIVE (5) YEARS
FROM COMMERCIAL OPERATIO!

(h) DEDUCTION FOR REINVESTMENT ALLOWANCE TO
MANUFACTURING INDUSTRY. — WHEN A MANUFACTUR!
REGISTERED ENTERPRISE REINVESTS ITS UNDISTRIBUTED
PROFIT OR SURPLUS IN ANY OF THE ACTIVITIES LISTED IN
THE SIPP, THE AMOUNT SO REINVESTED SHALL BE
ALLOWED AS A DEDUCTION FROM ITS TAXABLE INCOME
WITHIN A PERIOD OF FIVE (5) YEARS FROM THE TIME OF
SUCH REINVESTMENT: PROVIDED, THAT PRIOR APPROVAL
AND RECOMMENDATION BY THE IPA CONCERNED OF SUCH
REINVESTMENT WAS OBTAINED BY THE REGISTERED
ENTERPRISE PLANNING SUCH REINVESTMENT.

PROVIDED, THAT IN LIEU OF THE ITH UNDER (a), THE TAX
INCENTIVES UNDER (b), (c), (d), (e) (f), (2) AND (h) MAY BE
ED.

7


PROVIDED FURTHER, THAT IN NO SUCH CASE SHALL AN INCOME
TAX INCENTIVE BE EXTENDED BEYOND THE INITIAL GRANT OF
FIVE (5) YEARS.

PROVIDED FURTHER, THAT SUPERIOR NON-FISCAL INCENTIVES,
AS MAY BE DEFINED IN THE SIPP, MAY BE GRANTED IN LAGGING
AREAS, AND AREAS RECOVERING FROM ARMED CONFLICT OR A
MAJOR DISASTER.

PROVIDED FINALLY, THAT REGISTERED ACTIVITIES PRIOR TO
THE EFFECTIVITY OF THIS ACT RELOCATING FROM METRO
MANILA AND SELECTED AREAS OF REGIONS Ill AND IV-A TO
OTHER AREAS OF THE COUNTRY MAY BE ALLOWED A ONE-YEAR
INCOME TAX INCENTIVE AS RELOCATION INCENTIVE.

(B) CUSTOMS DUTY INCENTIVES. - REGISTERED ENTERPRISES
QUALIFIED FOR INCENTIVES MAY BE ALLOWED A MAXIMUM OF
FIVE (5) YEARS EXEMPTION ON CUSTOMS DUTY ON IMPORTED
CAPITAL EQUIPMENT, MACHINERY, AND SPARE PARTS
EXCLUSIVELY USED FOR CAPITAL EQUIPMENT AND MACHINERY,
ALL INCLUDING CONSIGNMENT THEREOF, RAW MATERIALS
USED IN THE MANUFACTURE, PROCESSING, AS DEFINED HEREIN,
OF PRODUCTS, AND IMPORTATION OF SOURCE DOCUMENTS BY
THE REGISTERED ENTERPRISE. PROVIDED, THAT THE DUTY-
FREE IMPORTATION SHALL BE USED EXCLUSIVELY FOR THE
REGISTERED EXPORT ACTIVITY, PROVIDED FURTHER, THAT
EXPANSION OF REGISTERED ACTIVITIES MAY BE GRANTED
DUTY EXEMPTION ON CAPITAL EQUIPMENT ONLY, SUBJECT TO
THE FOLLOWING CONDITIONS:

() THE ACTIVITY IS STILL. COVERED BY THE STRATEGIC
INVESTMENTS PRIORITY PLAN (SIPP);

(i) CUSTOMS DUTY EXEMPTION WILL ONLY APPLY ON
THE INCREMENTAL PORTION OF THE ACTIVITY; AND

(111) THE CUSTOMS DUTY EXEMPTION EXTENSION SHALL
NOT EXCEED FIVE (5) YEARS.

FOR THIS PURPOSE, ‘PROCESSING’ SHALL REFER TO
CONVERTING RAW MATERIALS INTO MARKETABLE FORM
THROUGH PHYSICAL, MECHANICAL, CHEMICAL, ELECTRICAL,
BIOCHEMICAL, BIOLOGICAL, OR OTHER MEANS, OR BY A
SPECIAL TREATMENT OR A SERIES OF ACTIONS, SUCH AS
SLAUGHTERING, MILLING, PASTEURIZING, DRYING, OR

38


DESICCATING, QUICK FREEZING, THAT RESULTS IN A CHANGE IN
THE NATURE OR STATE OF THE PRODUCTS. MERE PACKING OR
PACKAGING SHALL NOT CONSTITUTE PROCESSING.

‘SOURCE DOCUMENTS’ REFER TO INPUT MATERIALS AND
DOCUMENTS REASONABLY NEEDED BY LT. AND LT.-ENABLED
INDUSTRIES SUCH AS, BUT NOT LIMITED TO, BOOKS,
DIRECTORIES, MAGAZINES, NEWSPAPERS, BROCHURES,
PAMPHLETS, MEDICAL RECORDS/FILES, LEGAL RECORDS/FILES,
INSTRUCTION MATERIALS, AND
DRAWINGS/BLUEPRINTS/OUTLINES.

CHAPTER Il
ADMINISTRATION OF TAX INCENTIVES

SEC. 295, EXPANDED FUNCTIONS OF THE FISCAL INCENTIVES
REVIEW BOARD. - THE INCENTIVES PROVIDED IN SECTION 290
MAY BE GRANTED BY THE FISCAL INCENTIVES REVIEW BOARD
(FIRB) TO THE REGISTERED ENTERPRISE TO THE EXTENT OF
THEIR REGISTERED ACTIVITY UPON RECOMMENDATION OF THE
ADMINISTERING INVESTMENT PROMOTION AGENCY (IPA). THE
PERIOD OF AVAILMENT OF INCENTIVES SHALL BE RECKONED
FROM THE START OF COMMERCIAL OPERATION, IN THIS
REGARD, THE FIRB CREATED UNDER PRESIDENTIAL DECREE (PD)
NO. 776, AS AMENDED BY PD 1931 AND PD 1955, OFFICE OF THE
PRESIDENT MEMORANDUM ORDER NO. 23, SERIES OF 1986 AND
EXECUTIVE ORDER 93, SERIES OF 1986, SHALL BE EXPANDED TO
INCLUDE THE FOLLOWING FUNCTIONS AND POWERS:

a) TO SERVE AS THE OVER-ALL ADMINISTRATOR OF ALL
INVESTMENT INCENTIVES;

b) TO REVIEW ALL IPA POLICY DECISIONS RELATED TO THE
ENDORSEMENT AND AVAILMENT OF TAX INCENTIVES;

c) TO REVIEW AND APPROVE THE GRANT OF INVESTMENT TAX
INCENTIVES AS RECOMMENDED BY THE IPAS;

d) TO PUBLISH THE NAMES OF THE REGISTERED ENTERPRISES
OR BENEFICIARIES OF TAX INCENTIVES WITH APPROVED
ESTIMATED AMOUNT OF THE CORRESPONDING INCENTIVES;
AND

e) TO GRANT TAX SUBSIDIES TO GOVERNMENT-OWNED AND/OR -
CONTROLLED CORPORATIONS (GOCCS), GOVERNMENT

39


INSTRUMENTALITIES (GIS), GOVERNMENT COMMISSARIES, AND
STATE UNIVERSITIES AND COLLEGES (SUCS) AS MAY BE
PROVIDED UNDER THE ANNUAL GENERAL APPROPRIATIONS
ACT,

PROVIDED THAT, AS CHAIR OF THE FIRB AND APPROVING
HEAD, THE SECRETARY OF FINANCE SHALL HAVE VETO POWER
AS THE CUSTODIAN OF FISCAL PRUDENCE AND RESPONSIBILITY,
AND AS SUCH, MAY CANCEL OR SUSPEND THE GRANT OF
INCENTIVES UPON THE REVIEW AND RECOMMENDATION OF THE
FIRB.

PROVIDED FURTHER, THAT THE SECRETARY OF FINANCE
SHALL AUTOMATICALLY BE THE CO-CHAIR OF ALL THE
EXISTING AND FUTURE IPAS,

PROVIDED FINALLY, THAT THE NATIONAL ECONOMIC AND
DEVELOPMENT AUTHORITY (NEDA) AND THE DTI SHALL BE A
MEMBER OF ALL IPAS, BOTH EXISTING AND FUTURE,

SEC, 296. COMPOSITION OF THE FIRB - THE FIRB SHALL BE
RECONSTITUTED AS FOLLOWS:

BOARD PROPER:
CHAIRPERSON — SECRETARY OF FINANCE

MEMBERS - SECRETARY TRADE AND INDUSTRY
~ DIRECTOR GENERAL OF THE NATIONAL
ECONOMICANDDEVELOPMENT AUTHORITY
(NEDA)
(CRETARY OF BUDGET
ECUTIVE SECRETARY OF THE PHILIPPINES

TECHNICAL COMMITTEE — UNDERSECRETARY OF FINANCE
— UNDERSECRETARY OF TRADE AND
INDUSTRY
~ UNDERSECRETARY OF BUDGET
— DEPUTY DIRECTOR GENERAL OF NEDA
~ COMMISSIONER OF INTERNAL,

REVENUE
— COMMISSIONER OF CUSTOMS
EXECUTIVE DIRECTOR OF

THENATIONAL TAX AND RESEARCH
CENTER(NTRC)

40


SECRETARIAT —NTRC

CHAPTER IV
QUALIFIED ACTIVITIES FOR TAX INCENTIVES

SEC, 297. ‘STRATEGIC INVESTMENTS PRIORITY PLAN’ (SIPP). —
THE BOARD OF INVESTMENT (BOI), IN COORDINATION WITH THE
OFFICE OF THE PRESIDENT, THE CONCERNED IPAS, AND OTHER
GOVERNMENT AGENCIES AND THE PRIVATE SECTOR, SHALL
FORMULATE THE PLAN TO BE SUBMITTED TO THE PRESIDENT
FOR HIS APPROVAL THROUGH THE ISSUANCE OF AN EXECUTIVE
ORDER NOT LATER THAN DECEMBER OF THE THIRD YEAR SET
FOR PERIODIC REVIEW. THE PLAN SHALL BE VALID FOR A
PERIOD OF THREE (3) YEARS SUBJECT TO REVIEW AND
AMENDMENT AS THE NEED ARISES.

THE FOLLOWING CRITERIA SHALL BE COMPLIED WITH IN
THE LIST OF ECONOMIC ACTIVITIES IN THE PLAN:

a. THE ACTIVITY SHALL BE COVERED BY THE PHILIPPINE
DEVELOPMENT PLAN OR ITS EQUIVALENT AND OTHER
GOVERNMENT PROGRAMS, AND SHALL REFLECT THE
HIGH-LEVEL PRIORITIES OF THE COUNTRY;

b. THE ACTIVITY SHALL ENDEAVOR TO BE NEUTRAL IN
TERMS OF NATIONALITY AND MARKET, PROVIDED THAT
THOSE INTENDED FOR THE DOMESTIC MARKET BE

IMPORT-SUBSTITUTING OR IMPORT-COMPETING
PRODUCTS OR ACTIVITIES;
& THE ACTIVITY’S PERFORMANCE SHALL BE

MEASURABLE IN TERMS OF EXPORT SALES, ACTUAL
INVESTMENTS, ACTUAL JOB CREATION, INVESTMENTS IN
LAGGING REGIONS AS DEFINED IN THE SIPP, INVESTMENT
AND EMPLOYMENT IN RESEARCH AND DEVELOPMENT,
LINKAGES CREATION, AND SPILL-OVER EFFECTS, AMONG
OTHERS;

d. THE ACTIVITY SHALL NOT INCLUDE THOSE THAT ARE
PART OF CROSS-SUBSIDY SCHEMES;

e. THE ACTIVITY IN LAGGING REGIONS SHALL BE GIVEN
PREFERENCE;

41


f THE ACTIVITY SHALL TAKE INTO ACCOUNT THE
FOLLOWING:

a
Q)

SUBSTANTIAL AMOUNT OF ACTUAL INVESTMENTS;

CONSIDERABLE GENERATION OF ACTUAL FULL TIME
EMPLOYMENT;

(3) ADOPT INCLUSIVE BUSINESS ACTIVITIES AND VALUE-ADDED
PRODUCTION BY MICRO, SMALL, AND, MEDIUM-SIZE
ENTERPRISES (MSMES);

@

USE OF MODERN OR NEW TECHNOLOGY;

(5) ADOPTION OF ADEQUATE ENVIRONMENTAL PROTECTION
SYSTEMS;

(6)

ADDRESS MISSING GAPS IN THE SUPPLY/VALUE CHAIN AND/OR
MOVE UP THE VALUE CHAIN OR PRODUCT LADDER;

(7) PROMOTION OF MARKET COMPETITIVENESS; AND

(8) COMMERCIALIZATION OF IDEAS AND INTRODUCTION OF
INNOVATION ACTIVITIES WHETHER PRODUCT, PROCESS,
MARKETING, OR NEW BUSINESS MODEL.

THE THRESHOLD AMOUNT OF INVESTMENTS AND
EMPLOYMENT GENERATION REQUIRED FOR A_ SPECIFIC
ACTIVITY TO BE GRANTED TAX INCENTIVES AND RETAIN THE
TAX INC! TIVE SHALL BE SUBJECT TO A PERIODIC REVIEW
EVERY THREE (3) YEARS TAKING INTO CONSIDERATION
INTERNATIONAL STANDARDS AND OTHER INDICATORS.

THE ACTIV! MUST COMPLY WITH THE SPECIFIC
QUALIFICATION REQUIREMENTS AND/OR CONDITIONS FOR A
PARTICULAR SECTOR OR INDUSTRY AND OTHER LIMITATIONS
AS SET AND DETERMINED BY THE BOL.

PROVIDED, THAT THE PRESIDENT MAY, IN THE INTEREST
OF NATIONAL ECONOMIC DEVELOPMENT AND UPON THE
RECOMMENDATION OF THE BOARD OF INVESTMENTS AND THE
ECONOMIC MANAGERS, GRANT INCENTIVES TO HIGHLY
DESIRABLE PROJECTS THAT MAY INCLUDE THOSE THAT ARE
NOT PROVIDED IN THE SIPP: PROVIDED, THAT THE BENEFITS
THAT THE GOVERNMENT COULD DERIVE FROM oH
INVESTMENT THERETO IS CLEAR AND CONVINCING AND FAR

42


OUTWEIGHS THE COST OF INCENTIVES THAT WILL BE GRANTED.
PROVIDED FURTHER, THAT THE FOLLOWING CRITERIA, AMONG
OTHERS, ARE CONSIDERED: (A) MINIMUM INVESTMENT OF FIVE
HUNDRED MILLION US DOLLARS (USS500,000,000); (B) MINIMUM
DIRECT EMPLOYMENT GENERATION OF AT LEAST ONE
THOUSAND FIVE HUNDRED (1,500) WITHIN THE FIRST YEAR OF
ITS OPERATION. PROVIDED FINALLY, THAT THE GOVERNMENT
MAY UTILIZE ITS RESOURCES FOR THE GRANT OF INCENTIVES
SUCH AS LAND USE, WATER APPROPRIATION, POWER
PROVISION, AND THE LIKE,

AMENDMENTS. — SUBJECT TO PUBLICATION
REQUIREMENTS AND THE CRITERIA FOR INVESTMENT PRIORITY
DETERMINATION, THE BOI MAY, AT ANY TIME, INCLUDE
ADDITIONAL AREAS IN THE PLAN, ALTER ANY OF THE TERMS OF
THE DECLARATION OF AN INVESTMENT AREA, AND
TEMPORARILY OR PERMANENTLY SUSPEND ACTIVITIES
PLAN IF IT CONSIDERS THAT SUCH ACTIVITY IS NO LO!
PRIORITY. THE IPAS SHALL NOT ACCEPT APPLICATIO!
AREA OF INVESTMENT PRIOR TO THE APPROVAL OF THE SAME
AS A PREFERRED AREA OR AFTER APPROVAL OF ITS DELETION
AS A PREFERRED AREA OF INVESTMENT IN THE PLAN,

SEC. 299, PUBLICATION. — UPON APPROVAL OF THE PLAN,
WHOLE OR IN PART, OR UPON APPROVAL OF AN AMENDMENT
THEREOF, THE PLAN OR THE AMENDMENT, SPECIFYING AND
DECLARING THE AREAS OF INVESTMENTS SHALL BE PUBLISHED
IN AT LEAST ONE (1) NEWSPAPER OF GENERAL CIRCULATION OR
THE OFFICIAL GAZETTE AND ALL SUCH AREAS SHALL BE OPEN
FOR APPLICATION UNTIL PUBLICATION OF AN AME! ENT OR
DELETION THEREOF.

SEC. 300. QUALIFICATIONS OF A REGISTERED ENTERPRISE
FOR TAX INCENTIVES. — A REGISTERED ENTERPRISE MUST
SATISFY THE FOLLOWING CONDITIONS FOR CONSIDERATION IN
‘THE REVIEW AND GRANT OF TAX INCENTIVE!

A. TT WILL ENGAGE IN AN ACTIVITY INCLUDED

THE PLAN;

B. IF THE APPLICANT IS ENGAGED OR PROPOSES TO ENGAGE IN
ACTIVITIES OTHER THAN THE REGISTERED PROJECTS, IT SHALL
INSTALL AN ADEQUATE ACCOUNTING SYSTEM THAT SHALL
IDENTIFY THE INVESTMENTS, REVENUES, COSTS AND PROFITS
OR LOSSES OF EACH REGISTERED PROJECT UNDERTAKEN BY
THE ENTERPRISE SEPARATELY FROM THE AGGREGATE
INVESTMENTS, REVENUES, COSTS AND PROFITS OR LOSSES OF

43


THE WHOLE ENTERPRISE, OR ESTABLISH A SEPARATE
CORPORATION FOR EACH REGISTERED PROJECT IF THE IPAS
SHOULD SO REQUIRE;

C. IT SHALL SATISFY THE PERFORMANCE TARGETS SET FORTH
IN THE SIPP, WHICH SHALL INCLUDE, BUT NOT LIMITED TO,
EXPORT SALES, ACTUAL INVESTMENTS, ACTUAL JOB CREATIO!
INVESTMENTS IN LAGGING REGIONS AS DEFINED IN THE SIPP,
INVESTMENT AND EMPLOYMENT IN RESEARCH AND
DEVELOPMENT, AND INVESTMENT AND EMPLOYMENT IN
INTERMEDIATE PARTS AND COMPONENTS, SUPPLIES, AND RAW
MATERIALS, AMONG OTHERS; AND

D. IT SHALL REGULARLY REPORT AND COMPLY WITH THE
REPORTORIAL REQUIREMENTS UNDER REPUBLIC ACT NO. 10708
OR THE TIMTA LAW.

PROVIDED, THAT NON-COMPLIANCE OF THE ABOVE-MENTIONED
CONDITIONS SHALL CAUSE THE REVOCATION OF THE TAX
INCENTIVES GRANTED AND THE REGISTERED ENTERPRISE
SHALL BE LIABLE TO THE PENALTIES UNDER SECTION 301 OF
THIS CODE. PROVIDED FURTHER, THAT REGISTERED EXPORT
ENTERPRISES INSIDE ECONOMIC ZONES AND FREEPORTS MAY
AVAIL OF THE TAX AND DUTY FREE IMPORTATION OF CAPITAL
EQUIPMENT AND RAW MATERIALS DIRECTLY AND
EXCLUSIVELY USED IN THE REGISTERED ACTIVITY INSIDE THE
ZONES.

CHAPTER V
AVAILMENT OF TAX INCENTIVES

INCOME TAX-BASED INCENTIVES. — ALL
REGISTERED ERPRISES ARE REQUIRED TO FILE ALL THEIR
TAX RETURNS USING THE ELECTRONIC/ONLINE FACILITIES OF
THE BUREAU OF INTERNAL REVENUE (BIR). ON AVAILING THE
INCOME TAX-BASED INCENTIVES, THE REGISTERED ENTERPRISE
SHALL BE REQUIRED TO SECURE A CERTIFICATE OF
ENTITLEMENT ISSUED BY THE FIRB AND ATTACH THE SAME TO
ITS INCOME TAX RETURN (ITR) OR ANNUAL INFORMATION
RETURN (AIR), WHICHEVER IS APPLICABLE. THEREAFTER, THE
REGISTERED ENTERPRISE SHALL FILE ITS CLAIM WITH THE BIR
FOR VALIDATION.

FAILURE TO SECURE AND ATTACH THE CERTIFICATION TO
THE ITR OR AIR, AND/OR FILE THE INCENTIVE AVAILMENT

44


APPLICATION SHALL CAUSE THE FORFEITURE OF THE
INCENTIVE FOR THAT TAXABLE PERIOD.

SEC. 302, CUSTOMS DUTY EXEMPTION ON CAPITAL
EQUIPMENT. IMPORTATION OF CAPITAL EQUIPMENT,
MACHINERY AND SPARE PARTS EXCLUSIVELY USED FOR
CAPITAL EQUIPMENT AND MACHINERY INCLUDING
CONSIGNMENT THEREOF BY REGISTERED ENTERPRISES MAY BE
EXEMPTED TO THE EXTENT OF ONE HUNDRED PERCENT (100%)
OF THE CUSTOMS DUTY, PROVIDED THAT THE FOLLOWING
CONDITIONS ARE COMPLIED WITH:

(A) THE CAPITAL EQUIPMENT AND/OR SPARE PARTS IS ARE
DIRECTLY AND REASONABLY NEEDED AND WILL BE USED
EXCLUSIVELY IN AND AS PART OF THE DIRECT COST OF
THE REGISTERED ACTIVITY OF THE REGISTERED
ENTERPRISE, AND ARE NOT MANUFACTURED
DOMESTICALLY IN SUFFICIENT QUANTITY, OF
COMPARABLE QUALITY AND AT REASONABLE PRICES.
PRIOR APPROVAL OF THE IPA MAY BE SECURED FOR THE
PART TIME UTILIZATION OF SAID EQUIPMENT IN A NON-
REGISTERED ACTIVITY TO MAXIMIZE USAGE THEREOF,
PROVIDED THE PROPORTIONATE TAXES AND DUTIES ARE
PAID ON A SPECIFIC EQUIPMENT AND MACHINERY IN
PROPORTION TO ITS UTILIZATION FOR NON-REGISTERED
ACTIVITIES. IN THE EVENT, IT SHALL BE USED FOR NON-
REGISTERED ACTIVITY OF THE REGISTERED ENTERPRISE
AT ANYTIME WITHIN THE FIRST FIVE (5) YEARS FROM
DATE OF IMPORTATION, THE REGISTERED ENTERPRISE
SHALL FIRST SEEK PRIOR APPROVAL OF THE AUTHORITY,
AND PAY THE TAXES AND CUSTOMS DUTIES THAT WERE
NOT PAID UPON ITS IMPORTATION; AND

(B) THE APPROVAL OF THE IPA WAS OBTAINED BY THE
REGISTERED ENTERPRISE PRIOR TO THE IMPORTATION
OF SUCH CAPITAL EQUIPMENT AND/OR SPARE PARTS.

APPROVAL OF THE IPA MUST BE SECURED BEFORE ANY
SALE, TRANSFER OR DISPOSITION OF THE CAPITAL EQUIPMENT
AND/OR SPARE PARTS WHICH WAS GRANTED TAX AND CUSTOMS
DUTY EXEMPTION HEREUNDER IS MADE, AND IT SHALL BE
ALLOWED ONLY UNDER THE FOLLOWING CIRCUMSTANCES:

(A) ITF MADE TO ANOTHER ENTERPRISE ENJOYING

CUSTOMS DUTY EXEMPTION ON IMPORTED CAPITAL
EQUIPMENT AND/OR SPARE PARTS;

45


(B) IF MADE TO ANOTHER ENTERPRISE NOT DUTY
EXEMPTION ON IMPORTED CAPITAL EQUIPMENT AND/OR
SPARE PARTS, UPON PAYMENT OF ANY TAXES AND DUTIES
DUE ON THE NET BOOK VALUE OF THE CAPITAL
EQUIPMENT AND/OR SPARE PARTS TO BE SOLD;

(C) EXPORTATION OF CAPITAL EQUIPMENT, MACHINERY,
SPARE PARTS OR SOURCE DOCUMENTS, OR THOSE
REQUIRED FOR POLLUTION ABATE! T AND CONTROL;
oR

(D) FOR REASONS OF PROVEN TECHNICAL OBSOLESCENCE.

PROVIDED, THAT IF THE REGISTERED ENTERPRISE SELLS,
Late! OR DISPOSES THE AFOREMENTIONED IMPORTED

ENTERPRISE AND THE VENDEE, TRANSFEREE, OR ASSIGN
SHALL BE SOLIDARILY LIABLE TO PAY TWICE THE AMOUNT OF
THE DUTY EXEMPTION THAT SHOULD HAVE BEEN PAID DURING
ITS IMPORTATION. PROVIDED, FURTHER, THAT EVEN IF THE
SALE, TRANSFER OR DISPOSITION OF THE CAPITAL EQUIPME!
WAS MADE AFTER F! (5) YEARS FROM DATE OF IMPORTATION
WITH THE APPROVAL OF THE IPA, THE REGISTERED
ENTERPRISE IS STILL LIABLE TO PAY THE DUTIES BASED ON THE
NET BOOK VALUE OF THE CAPITAL EQUIPMENT IF IT HAS
VIOLATED ANY OF ITS REGISTRATION TERMS AND CONDITIONS.

CHAPTER VI
FINAL PROVISIONS:

SEC. 303, NO DOUBLE REGISTRATION OF ENTERPRISES. —
REGISTERED ENTERPRISES SHALL NOT BE ALLOWED TO
REGISTER THEIR ACTIVITIES IN MORE THAN ONE (1) IPA.

SEC, 304, GOVERNANCE RULES. — THE DIFFERENT IPAS MAY
REQUIRE DOMESTIC REGISTERED ENTERPRISES TO LIST THEIR
SHARES OF STOCK IN ANY ACCREDITED STOCK EXCHANGE OR
DIRECTLY OFFER A PORTION OF THEIR CAPITAL STOCK TO THE
PUBLIC AND/OR THEIR EMPLOYEES WITHIN FIFTEEN (15) YEARS
FROM DATE OF REGISTRATION,

SEC, 305, INVESTMENTS PRIOR TO THE EFFECTIVITY OF THIS

ACT. EXISTING REGISTERED ACTIVITIES GRANTED THE INCOME
TAX HOLIDAY SHALL BE ALLOWED TO CONTINUE WITH THE

46


AVAILMENT OF THE SAID INCENTIVE FOR THE REMAINING
PERIOD OF THE ITH OR FOR A PERIOD OF FIVE (5) YEARS ONLY,
WHICHEVER COMES FIRST; PROVIDED THAT THE TAX
INCENTIVE GRANTED TO EXISTING REGISTERED ACTIVITIES
SHALL BE ALLOWED TO CONTINUE FOLLOWING THE SCHEDULE
STATED HEREIN:

(A) TWO (2) YEARS FOR ACTIVITIES THAT HAVE RECEIVED
THE SPECIAL TAX RATE OF 5% OF GROSS INCOME EARNED
FOR MORE THAN TEN (10) YEARS;

(B) THREE (3) YEARS FOR ACTIVITIES THAT HAVE
RECEIVED THE SPECIAL TAX RATE OF 5% OF GROSS
INCOME EARNED BETWEEN FIVE (5) AND TEN (10) YEARS;

(C) FIVE (5) YEARS FOR ACTIVITIES THAT HAVE RECEIVED
THE INCOME TAX HOLIDAY (ITH) OR THE SPECIAL TAX
RATE OF 5% OF GROSS INCOME EARNED BELOW FIVE (5)
YEARS. PROVIDED THAT THE 5% TAX ON GROSS INCOME
EARNED SHALL COMMENCE AFTER THE ITH PERIOD HAS
LAPSED ONLY FOR THE REMAINING YEARS WITHIN THE
FIVE-YEAR PERIOD.

SEC. 306, SUSPENSION AND FORFEITURE OF TAX
INCENTIVES OF REGISTERED ENTERPRISES, REFUND AND
PENALTIES; WAIVER AND CONDONATION. WHEN THERE IS
PROBABLE CAUSE TO BELIEVE THAT THE REGISTERED
ENTERPRISE HAS VIOLATED ITS REGISTRATION TERMS AND
CONDITIONS, THE IPA SHALL RECOMMEND TO THE FIRB THE
SUSPENSION OF ITS AVAILMENT OF INCENTIVES, UNTIL PROVEN
OTHERWISE.

IN CASE OF CANCELLATION OF THE CERTIFICATE OF
REGISTRATION GRANTED UNDER THIS ACT, THE BIR, IN
COORDINATION WITH THE FIRB, WILL REQUIRE THE PAYMENT
OF INCENTIVES ASSESSED TO HAVE BEEN GRANTED TO THE SAID
ENTERPRISE FOR ITS REGISTERED ACTIVITY AND IMPOSE
CORRESPONDING FINES AND PENALTIES.

THE FOREGOING IS WITHOUT PREJUDICE TO THE
AUTHORITY OF THE BIR TO CONDUCT AUDIT AND IMPOSE
PENALTIES UNDER THIS CODE.

SEC. 307. ALL TAX INCENTIVES OF QUALIFIED REGISTERED

ACTIVITIES, INCLUDING INTERNAL REVENUE TAX AND DUTY
OBLIGATIONS OF GOVERNMENT CORPORATIONS, SHALL BE

47


CHARGEABLE TO THE TAX EXPENDITURE FUND, AS DEFINED IN
SECTION 293 OF THIS CODE.”

SEC. 34. Title XIII of the National Internal Revenue Code of 1997, as amended, is hereby
retitled as Title XIV.

SEC. 35. Title XIV of the National Internal Revenue Code of 1997, as amended, is hereby
retitled as Title XV.

SEC. 36. Amending Clause. - to ensure that the DOF, NEDA and DTI are represented in the
Governing Boards of all IPAS, where the DOF shall automatically serve as co-chair, and DTI
and NEDA as members, pursuant to section 295 of this act, the following provisions, among
others, are amended accordingly:

i, Article 4 of Executive Order No, 226, as amended, entitled “The Omnibus
Investments Code of 1987,”

ii, Sections 9 and 13 (c) of Republic Act No. 7227, entitled “An Act
Accelerating the Conversion of Military Reservations into Other
Productive Uses, Creating the Bases Conversion and Development
Authority for this Purpose, Providing Funds therefor and for Other
Purposes,”

Section 3 of Executive Order No. 80, series of 1993, entitled “Authorizing
the Establishment of the Clark Development Corporation as the
Implementing Arm of the Bases Conversion and Development Authority
for the Clark Special Economic Zone, and Directing All Heads of
Departments, Bureaus, Offices, Agencies and Instrumentalities of
Government to Support the Program,”

iv. Section 6 of Executive Order No. 132, series of 2002, entitled
“Authorizing the Creation of the Poro Point Management Corporation as
the Implementing Arm of the Bases Conversion Development Authority
over the Poro Point Special Economic and Freeport Zone and Renaming
the John Hay Poro Point Development Corporation as the John Hay
Management Corporation;”

v. Section 9 of Republic Act No. 7903, entitled “An Act Creating a Special
Economic Zone and Freeport in the City of Zamboanga Creating for this
Purpose the Zamboanga City Special Economic Zone Authority,
Appropriating Funds therefor, and for other Purposes,”

vi, Section 14 of Republic Act No. 9728, entitled “An Act Converting the

Bataan Economic Zone Located in the Municipality of Mariveles,
Province Of Bataan, into the Freeport Area of Bataan (Fab), Creating for

48


this Purpose the Authority of the Freeport Area of Bataan (AFAB),
Appropriating Funds therefor and for other Purposes,”

vii. Section 65 of Republic Act No. 9593, entitled “An Act Declaring a
National Policy for Tourism as an Engine of Investment, Employment,
Growth and National Development, and Strengthening the Department of
Tourism and its Attached Agencies to Effectively Efficiently implement
that Policy, and Appropriating Funds therefor,”

viii. Section 15 of Republic Act No, 9490, entitled “An Act Establishing the
Aurora Special Economic Zone in the Province of Aurora, Creating for
the Purpose the Aurora Special Economic Zone Authority, Appropriating
Funds Therefor and for other Purposes,” as amended by Republic Act No.
10083;

ix. Section 7 of Republic Act No. 7922, entitled “An Act Establishing a
Special Economic Zone and Freeport in the Municipality of Santa Ana and
the Neighboring Islands in the Municipality of Aparri, Province of
Cagayan Providing Funds Therefor, and for other Purposes,”

x Section 6 of Presidential Decree No. 538, entitled “Creating and
Establishing the Phividec Industrial Authority and Making It a Subsidiary
Agency of the Philippine Veterans Investment Development Corporation
Defining its Powers, Functions and Responsibilities, and for Other
Purposes,” as amended by Executive Order No, 1031, series of 1985;

xi

Section 11 of Republic Act No. 7916, entitled “An Act Providing for the
Legal Framework and Mechanisms for the Creation, Operation,
Administration, and Coordination of Special Economic Zones in the
Philippines, Creating For This Purpose, The Philippine Economic Zone
Authority (PEZA), and for Other Purposes.”

Sec, 37, The following Laws are hereby amended to mandate all internal revenue tax and duty
obligations of the relevant entities be chargeable to the Tax Expenditure Fund (TEF):

i. Section 18 of Republic Act No. 7884, entitled “An Act Creating the
National Daity Authority to Accelerate the Development of the Dairy
Industry in the Philippines, Providing for a Dairy Development Fund, and
for Other Purposes;”

ii, Section 8 of Republic Act No. 7903, entitled “An Act Creating Special
Economic Zone and Freeport in the City of Zamboanga for this Purpose
the Zamboanga City Special Economic Zone Authority, Appropriating
Funds Therefor, and for Other Purpose;”

49


iii

vi

vii

viii

Section 12-a of Republic Act No. 10083, entitled “An Act Amending
Republic Act No, 9490, otherwise known as the Aurora Special Economic
Zone Act of 2007;”

Sections 29, 57, 74, 95 (c) of Republic Act No. 9593, entitled “An Act
Declaring Tourism as Engine of Investment, Employment, Growth and
National Development and Strengthening the Department of Tourism or
Tourism Act of 2009,”

Section 10 of Presidential Decree No. 538, entitled “Creating and
Establishing the Phividec Industrial Authority and Making it a Subsidiary
Agency of the Philippine Veterans Investment Development Corporation
Defining its Powers, Functions and Responsibilities, and for Other
Purposes,”

Section 16 (a) (b) of Republic Act No. 9497, entitled “An Act Creating the
Civil Aviation Authority of the Philippines, Authorizing the Appropriation
of Funds Therefor, and for Other Purposes,”

Section 8 of Republic Act No. 7278, entitled “An Act Amending
Commonwealth Act 111, As Amended by PD 460, Entitled “An Act To
Create a Public Corporation Known as the Boys Scouts of the Philippines
and to Define its Powers and Purposes,” By Strengthening The Volunteer
And Democratic Character Of the Boys Scouts of the Philippines and for

Other Purposes,”

Section 11 (a), (b), (c), (d) of Republic Act No, 10073, entitled “An Act
Instituting the New Girl Scouts of the Philippines Charter, Penalizing
Violations therefor and for Other Purposes,”

Section 14 of Republic Act No. 7354, entitled “An Act Creating the
Philippine Postal Corporation, Defining its Powers, Functions and
Responsibilities, Providing For Regulation of the Industry and for Other
Purposes Connected Therewith;”

Section 8 and 14 of Presidential Decree No. 269, entitled “Creating the
National Electrification Administration as a Corporation, Prescribing its
Powers and Activities, Appropriating the Necessary Funds Therefore and
Declaring a National Policy Objective for the Total Electrification of the
Philippines on an Area Coverage Service Basis, the Organization,
Promotion and Development of Electric Cooperatives to Attain the Said
Objective, Prescribing Terms and Conditions for their Operations, the
Repeal OF RA 6038, and for Other Purposes,”


xi

xii

xiii

xiy,

xv,

xvii,

xviii,

xix.

Section 2 and 19 of Republic Act No, 9679, entitled “An Act Amending
The Home Development Mutual Fund Otherwise Known as the Pag-Ibig
Fund;

Section 17 (c) under section 8 of Republic Act No. 9576, entitled
“Increasing the Maximum Deposit Insurance Coverage, and Strengthening
the Regulatory and Administrative Authority and Financial Capability of
PDIC;”

Section 13 of Republic Act No. 7820, entitled “An Act Creating the
Partido Development Administration, Defining its Powers and Functions,
Providing Funds Therefor, and for Other Purposes,”

Section S (j) of Republic Act No, 9510, entitled “An Act Establishing the
Credit Information System and for Other Purposes;

Section 13 (e) of Presidential Decree No, 857, entitled “An Act Providing
for the Reorganization of Port Administration and Operation Functions in
the Philippines, Revising PD 50S Dated July 11, 1974, Creating the
Philippine Port Authority, by substitution, and for Other Purposes;”

. Section 19 of Republic Act No, 6847, entitled “An Act Creating and

Establishing the Philippine Sports Commission, Defining its Powers,
Functions, and Responsibilities, Appropriating Funds Therefor, and for
Other Purposes;

Section 8 (a) (b) and section 13 of Republic Act No. 6395, entitled “An
Act Revising the Charter of the National Power Corporation;"

Section | of Republic Act No, 7291, entitled “An Act Restoring the Tax
and Duty Incentives Previously Enjoyed by the Veterans Federation of
The Philippines Under Republic Act Numbered Twenty-Six Hundred And
Forty,” and

Section 21 of Republic Act No. 7306, entitled “An Act Providing for the
Establishment of the People’s Television Network, Inc,, Defining its
Powers and Functions, Providing for its Sources of Funding and for Other
Purposes.”

Sec. 38. The tax treatment provisions of entities covered by the following franchise laws are
hereby amended or repealed to adhere to the provisions of this Act

Section 14 of Republic Act No, 7783, entitled “An Act Granting the Major
Telecoms, Inc., a Franchise to Establish, Install, Maintain, Lease and
Operate Wire and/or Wireless Telecommunications Systems, Lines,

51


vi

vii

viii.

Circuits and Stations Throughout the Philippines For Public Domestic and
International Communications, and for Other Purposes,”

. Section 10 of Republic Act No. 7939, entitled “An Act Granting the Island

Country Telecommunications, Inc., a Franchise to Establish, Install,
Maintain, Lease and Operate were and/or Wireless Telecommunication
System and Services, Lines, Circuits and Stations Within and Without the
Philippines, and for Other Purposes,”

Section 9 of Republic Act No. 7961, entitled “An Act Granting to Cruz
‘Telephone Company, Inc., (CRUZTELCO), a Franchise to Install, Operate
And Maintain A  Telecommunications System Throughout — the
Philippines,”

Section 8 of Republic Act No, 7962, entitled “An Act Granting the
Philippine Broadcasting Corporation a Franchise to Construct, Install,
Operate and Maintain Radio and Television Broadcasting Stations Within
the Philippines, and for Other Purposes,”

Section 8 of Republic Act No, 7963, entitled “An Act Granting the Cebu
Broadcasting Company a Franchise to Construct, Install, Operate and
Maintain Radio and Television Broadcasting Stations Within The
Philippines and for Other Purposes,”

Section 8 of Republic Act No, 7966, entitled “An Act Granting the ABS-
CBN Broadcasting Corporation a Franchise to Construct, Install, Operate
and Maintain Television and Radio Broadcasting Stations in the
Philippines and for Other Purposes;

Section 8 of Republic Act No, 7967, entitled “An Act Granting the Pacific
Broadcasting System, Inc. a Franchise to Construct, Install, Operate and
Maintain Radio and Television Broadcasting Stations Within the
Philippines and for Other Purposes;”

Section 8 of Republic Act No, 7969, entitled “An Act Granting the Central
Catv, Inc, a Franchise to Establish, Maintain and Operate for Commercial
Purposes Cable/Community Antenae Television Systems in the
Philippines,”

ix. Section 13 of Republic Act No. 8004, entitled “An Act Granting to

Millennia Telecommunications Corporation a Franchise to Install, Operate
and Maintain Telecommunication Services Within the Philippines and
International Points, and for Other Purposes,”

. Section 9 of Republic Act No. 10900, entitled “An Act Extending for

Another Twenty-Five (25) Years the Franchise Granted to Bell

52


xii.

xiii,

xviii

‘Telecommunication Philippines, Inc., Amending for the Purpose Republ
Act No. 7692, entitled "An Act Granting Bell Telecommunication
Philippines, Inc, a Franchise to Install, Operate, and Maintain
Telecommunications Systems Throughout the Philippines and for Other
Purposes,”

Section 3 of Republic Act No. 7859, entitled “An Act Amending Section
One of the Franchise of Worldwide Communications, Inc., Granted Under
Republic Act No. Five Thousand Three Hundred Twenty-One and
Extending it for Another Twenty-Five (25) Years, and for Other
Purposes,”

Section 9 of Republic Act No, 7908, entitled “An Act Granting the Multi-
Media Telephony Incorporated, a Franchise to Construct, Establish,
Operate and Maintain Radio Paging System In the Philippines, and for
Other Purposes,”

Section 8 of Republic Act No. 8060, entitled “An Act Granting Palawan
Broadcasting Corporation a Franchise to Install, Construct, Operate and
Maintain Commercial Radio and Television Broadcasting Stations
‘Throughout the Philippines,”

Section 8 of Republic Act No. 8063, entitled “An Act Granting the Beacon
Communications Systems, Ine., Franchise to Construct, Install,
Establish, Operate and Maintain Commercial Radio Stations in the
Philippines,”

Section 9 of Republic Act No. 8065, entitled “An Act Granting the Isla
Cellular Communications, Inc., a Franchise to Construct, Maintain,
Establish, Operate Commercial Mobile and Fixed Wireless
‘Telecommunications System in the Philippines;”

Section 9 Republic Act No. 8066, entitled “An Act Granting the Isla
Paging Company, A Franchise to Construct, Maintain, Establish, and
Operate Commercial Radio Paging Services in the Philippines,”

Section 8 of Republic Act No. 8067, entitled “An Act Granting the Radio
Gubat Network, Inc., a Franchise to Construct, Install, Operate and
Maintain Radio Broadcasting Stations in the Bicol Region;”

Section 8 of Republic Act No. 8068, entitled “An Act Granting a
Franchise to Agusan Communications Foundation, Inc., to Construct,
Operate and Maintain Stations for Radio and Television in the Province of
Agusan Del Sur and for Other Purposes,”


xxiii,

Xxi¥,

aoxvii,

Section 8 of Republic Act No. 8071, entitled “An Act Granting Vismin
Radio and Television Broadcasting Network, Incorporated a Franchise To
Construct, Install, Operate and Maintain for Commercial Purposes Radio
and Television Broadcasting Stations in the Visayas and Mindanao, and
for Other Purposes,”

Section 8 of Republic Act No, 8080, entitled “An Act Granting the Asian-
Pacific Broadcasting Company, Inc., a Franchise to Construct, Install,
Operate and Maintain Broadcasting Stations in the Philippines;”

Section 8 of Republic Act No. 8094, entitled “An Act Granting the Ipil
Broadcasting News Network, Inc. a Franchise to Construct, Install,
Operate and Maintain Radio and Television Broadcasting Stations in
Zamboanga Del Sur and for Other Purposes,”

Section 10 of Republic Act No. 8095, entitled “An Act Granting the Islatel
Corporation a Franchise to Construct, Maintain, Establish and Operate
Commercial Nationwide and Regional Transmission Network and Other
‘Telephone Services in the Philippines;”

Section 8 of Republic Act No. 8096, entitled “An Act Granting the Allied
Broadcasting Center, Incorporated a Franchise to Construct, Operate and
Maintain Stations for Radio in Cebu City and Other Areas in the
Philippines Where Frequencies Are Still Available For Radio
Broadcasting For Educational And Cultural, As Well As For Commercial
Purposes,”

Section 8 of Republic Act No. 8097, entitled “An Act Granting the Partido
Broadcasting Corporation a Franchise to Construct, Install, Establish,
Operate and Maintain Broadcast and Cable Radio and Television Stations
In the Bicol Region;”

Section 8 of Republic Act No. 8098, entitled “An Act Granting Broadcast
Enterprises and Affiliated Media (BEAM), Inc., a Franchise to Establish,
Construct, Operate and Maintain Commercial Radio and Television
Broadcast Stations Including Cable Television Systems in the
Philippines,”

Section 8 of Republic Act No. 8099, entitled “An Act Granting A
Franchise to Sagay Broadcasting Corporation (SBC) to Construct, Operate
and Maintain Stations For Radio and Television In the Philippines and for
Other Purposes;”

Section 7 of Republic Act No. 8102, entitled “An Act Granting the

Ultimate Entertainment, Inc., a Franchise to Construct, Install, Maintain
And Operate Radio Broadcasting Stations Within the Philippines;”

54


xxviii,

xxxii

XXxxvi.

Section 8 of Republic Act No. 8116, entitled “An Act Granting the
Vimcontu Broadcasting Corporation A Franchise to Construct, Install,
Operate and Maintain Radio and Television Broadcasting Stations, Within
the Philippines and for Other Purposes.”

= Saag i cesar 8119, entitled “An Act Granting the Good
News Sorsogon Foundation, Inc., A Franchise to Construct, Install,
Operate and Maintain for Religious, Educational and Commercial
Purposes, Radio and Television Broadcasting Stations Within The
Philippines and for Other Purposes;”

Section 5 of Republic Act No. 8120, entitled “An Act Granting The
Andres Bonifacio College Broadcasting System, Inc,. a Franchise to
Construct, Maintain and Operate Radio Broadcasting Stations and Stations
for Television in The Island Of Mindanao for Educational, Cultural, and
‘Commercial Purposes,”

Section 8 of Republic Act No. 8121, entitled “An Act Granting the M.S.
Network Management, Inc. a Franchise to Construct, Install, Operate and
Maintain for Commercial Purposes, Radio Broadcasting Stations in the
Philippines and for Other Purposes;

Section 7 of Republic Act No. 8123, entitled “An Act Granting the Royal
Broadcasting Corporation. a Franchise to Construct, Operate and Maintain
for Commercial Purposes, Radio and Television Broadcasting Stations in
the Philippines and for Other Purposes,”

|. Section 8 of Republic Act No. 8128, entitled “An Act Granting a

Franchise to the Oriental Mindoro Management Resources Corporation
(OMARCO) to Construct, Install, Establish, Operate, Manage and
Maintain a Network Of Radio and Television Stations Anywhere in the
Philippines, and for Other Purposes,”

. Section 8 of Republic Act No. 8132, entitled “An Act Granting Jose M.

Luison And Sons, Inc., a Franchise to Construct, Install, Operate and
Maintain for Commercial Purposes Radio and Television Broadcasting
Stations in the Philippines,”

. Section 7 of Republic Act No. 8144, entitled “An Act Granting the

Azimuth Broadcasting Corporation a Franchise to Construct, Operate and
Maintain for Commercial Purposes Radio and Television Broadcasting
Stations in the Philippines,”

Section 8 of Republic Act No. 8145, entitled “An Act Granting the Radyo
Pilipino Corporation A Franchise To Construct, Install, Operate And

55


xxxviii,

xii

xiii

lili.

Maintain Commercial Radio And Television Broadcasting Stations,
Satellite And Cable Stations In the Philippines;”

I. en 14 of Republic Act No. 8147, entitled “An Act Granting the

Southern Broadcasting Network a Franchise to Construct, Maintain,
Establish and Operate Commercial Radio/Television Broadcasting
Stations, in the Philippines,”

Section 8 of Republic Act No. 8149, entitled “An Act Granting
theTagbilaran Broadcasting System a Franchise to Construct, Install,
Operate and Maintain Radio and Television Broadcasting Stations, in
the Visayas Region, and for Other Purposes;”

Section 8 of Republic Act No. 8154, entitled “An Act Granting Prime
Broadcasting Network, Incorporated, a Franchise to Construct, Operate
and Maintain Stations for Radio and Television in thePhilippines,”

Section 4 of Republic Act No 8158, entitled “An Act Extending the
Franchise Granted to Jorge D. Bayona Under Republic Act Numbered
Fifty-Seven Hundred Eighty-Nine, Assigning it in Favor of Pbn
Broadcasting Network Inc., and Renewing the Term thereof for another
‘Twenty-Five (25) Years from the Date of the Effectivity of this Act;””

Section 8 of Republic Act No, 8169, entitled “An Act Granting Gv
Broadcasting System, Inc., a Franchise to Construct, Install, Maintain and
Operate for Commercial Purposes Radio Broadcasting Stations in the
Island of Luzon and for Other Purposes;”

Section 5 of Republic Act No, 10926, entitled “An Act Extendingfor
‘Twenty-Five (25) Years the Franchise Granted to Smart Communications,
Inc., (Formerly Smart Information Technologies, Inc.) Amending for the
Purpose Republic Act No. 7294, entitled “An Act Granting Smart
Information Technologies Inc. (SMART) a Franchise to Establish,
Maintain, Lease And Operate Integrated
Telecommunications/Computer/Electronic Services, and —_ Stations
throughout the Philippines for Public Domestic and International
Telecommunications, and for Other Purposes,”

Section 9 of Republic Act No. 9511, entitled “An Act Granting the
National Grid Corporation of the Philippines a Franchise to Engage in the
Business of Conveying or Transmitting Electricity Through High Voltage
Backbone Systems of Interconnected Transmission Lines, Substations and
Related Facilities;”

. Section 9 of Republic Act No. 7953, entitled “An Act Amending Ra 6632,

Entitled “An Act Granting the Philippine Racing Act, Inc., a Franchise to


Operate And Maintain a Race Track for Horse Racing in the Province of
Rizal, and Extending thesaid Franchise by 25 Years from the Expiration of
the Term thereof.”

xlv. Section 12 of Republic Act No. 8407, entitled “an act amending ra 6631,
entitled “An Act Granting Manila Jockey Club, Inc., a Franchise to
Construct, Operate and Maintain a Race Track for Horse Racing in the
City of Manila or any Place within the Provinces Of Bulacan, Cavite or
Rizal and Extending the Said Franchise by 25 Years from the Expiration
of the Term Thereof.”

xlvi._ Section 9 of Republic Act No, 8298, entitled “An Act Amending Republic
‘Act Numbered Seventy-Nine Hundred Seventy-Eight, Entitled “An Act
Granting the Metro Manila Turf Club, Inc., a Franchise to Construct,
Operate and Maintain a Racetrack for Horse Racing in the City of
Kalookan;” and

xlvii. Section 12 of Republic Act No. 8446, entitled “An Act Granting the Fil-
Asia Racing Club a Franchise to Construct, Operate And Maintain a
Racetrack for Horse Racing in Rizal or Tarlac, or Pampanga or Batangas
or Quezon City.”

Sec. 39. Repealing Clauses. — A. The provisions of the following Laws that are inconsistent
with this Act are hereby repealed:

i. Section 5 of Republic Act No. 9379, entitled “An Act Defining Handline
Fishing, Providing Effective Regulations therefor and for Other
Purposes,”

ii, Section 16 of Republic Act No. 10601, entitled “An Act Promoting
Agricultural and Fisheries Mechanization Development in the Country
Which Grants Incentives to Local Manufacturers and Assemblers of Agri-
Fisheries Machinery Pursuant to EO 226”,

iii, Section 32 of Republic Act No. 10654, entitled “An Act to Prevent, Deter
and Eliminate legal, Unreported and Unregulated Fishing, Amending
Republic Act No, 8550, otherwise known as thePhilippine Fisheries Code
of 1998, and for other purposes;”

iv. Section 14 (b) of Republic Act No. 7308, entitled “An Act to Promote and
Develop the Seed Industry in the Philippines and Create a National Sced
Industry Council and for Other Purposes,”

vy. Section 18 of Republic Act No. 7884, entitled “An Act Creating the
National Dairy Authority to Accelerate the Development of The Dairy

57


xii

xiii.

xiv.

Industry in the Philippines, Providing for a Dairy Development Fund, and

for Other Purposes,”

Sexton 9 (0). (0) @) 0) Republic Act No 7900, entitled “An Act to
the Production, Marketing, and Distribution of High

ei vanpetand ey au Ek hae ‘and for Other Purposes;”

i. Chapter Il, article Il, sec. 35 (b), (c) and (d) of Republic Act No. 8550,

entitled “An Act Providing for the Development, Management and
Conservation of the Fisheries and Aquatic Resources, Integrating all Laws
Pertinent Thereto, and for Other Purposes;”

Section 24 (a) (f) of Republic Act No. 10068, entitled “An Act Providing
for the Development and Promotion of Organic Agriculture in the
Philippines and for Other Purposes,”

Section 37 of Republic Act No. 6848, entitled “An Act Providing For the
1989 Chaner Of the Al-Amanah Islamic Investment Bank of
thePhilippines, Authorizing its Conduct of Islamic Banking Business, and
Repealing for this Purpose Presidential Decree Numbered Two Hundred
And Sixty-Four as Amended by Presidential Decree Numbered Five
Hundred and Forty-Two;"

Section 17 of Republic Act No. 7906, entitled “An Act Providing for the
Regulation of the Organization and Operations of Thrift Banks, and for
Other Purposes,”

Section 15 of Republic Act No. 7353, entitled “An Act Providing for the
Creation, Organization and Operation of Rural Banks, and for Other
Purposes,”

Executive Order No. 226, series of 1987, entitled “the Omnibus
Investments Code of 1987;"

Section 1 of Republic Act No. 7918, entitled “An Act Amending Article
39, Title [of Executive Order No. 226, Otherwise Known as theOmnibus
Investments Code Of 1987, As Amended, and for Other Purposes;”

Articles 62, 63, 64, 65, 66, 67 and 69 of Republic Act No. 8756, entitled
“An Act Providing for the Terms, Conditions and Licensing Requirements
of Regional or Area Headquarters, Regional Operating Headquarters,
Regional Warehouses of Multinational Companies Amending for the
Purpose Certain Provisions of Executive Order No. 226, Otherwise
Known as the Omnibus Investment Code Of 1987,”


xvii

xviii

. Executive Order No. 22 series of 2017 amending EO 70 series of 2012

528, series of 2006 and 313, series of 2004, entitled “Reducing the Rates
of Duty on Capital Equipment, Spare Parts and Accessories Imported by
Boi-Registered New and Expanding Enterprises,”

Section 12 of Republic Act No. 8047, entitled “An Act Providing For the
Development of the Book Publishing Industry through the Formulation
and Implementation of a National Book Policy and a National Book
Development Plan,”

Section Section 17 (1) to (8) ins fr as tx exemption andlor VAT ze rating 00

domestic merchandise is concerned, and Section 18 (a), (b), (c) and (f) of
Presidential Decree No. 66, entitled “Creating the Export Processing Zone
Authority and Revising Republic Act No. 5490,"

Section 4 (e) and (f), in so far as tax exemption and/or VAT zero rating on
domestic merchandise is concerned, of Republic Act No. 7903, entitled
“An Act Creating Special Economic Zone and Freeport in the City Of
Zamboanga and Establishing for this Purpose the Zamboanga City Special
Economic Zone Authority, Appropriating Funds Therefor, and for Other
Purposes,”

Section 4 (b) (c), in so far as tax exemption and/or VAT zero rating on
domestic merchandise is concerned, of Republic Act No. 7922, entitled
“An Act Establishing a Special Economic Zone and Freeport in the
Municipality of Santa Ana and the Neighboring Islands in the
Municipality of Aparri, Province of Cagayan Providing Funds Therefor,
and for other Purposes.”

Section 4 of Republic Act No. 8748, entitled “An Act Amending Republic
Act No. 7916, otherwise Known as the Special Economic Zone Act of
1995,"

Sections 23 and 24 of Republic Act No. 7916, entitled “An Act Providing
for the Legal Framework and Mechanisms for the Creation, Operation,
Administration, and Coordination of Special Economic Zones in the
Philippines, Creating for the Purpose the Philippine Economic Zone
Authority (PEZA), and for Other Purposes;”

‘Section 12 (b), in so far as tax exemption and VAT zero rating of domestic
merchandise and capital equipment are concemed, and Section 15, in so
far as tax and duty incentives are concemed, of Republic Act No, 7227,
entitled “The Bases Conversion and Development Act of 1982, and for
other Purposes,” as amended by Republic Act No. 9400;


xxiv.

xxviii.

Section | of Executive Order No. 619, entitled “Creating and Designating
Special Economic Zones Pursuant to Republic Act No. 7916, as amended
by Republic Act No. 8784, in relation to Republic Act No. 7227, as
amended by Republic Act No. 9400, inside the Clark Freeport Zone;”

Sections 5, 6, 7, 8 and 9 of Republic Act No. 9490, entitled “An Act
Establishing the Aurora Special Economic Zone in the Province of
Aurora, Creating for the Purpose the Aurora Special Economic Zone
Authority, Appropriating Funds Therefor and for Other Purposes; Sections
3 (e) (f) (h) and 4 of RA. No. 10083, entitled “An Act Amending
Republic Act No. 9490,"

Section 4 (f), in so far as tax exemption and/or Value Added Tax or VAT
zero rating on domestic merchandise and capital equipment are concerned,
and Sections 5, 6 and 10 of Republic Act No. 9728, entitled “An Act
Converting the Bataan Economic Zone Located in the Municipality of
Mariveles, Province of Bataan, into the Freeport Area of Bataan (Fab),
Creating for this Purpose the Authority of the Freeport Area of Bataan
(AFAB), Appropriating Funds Therefor and for Other Purposes,”

i. Sections 12, 21 and 22 of Presidential Decree No. 87 restored by FIRB

Resolution 19-87 Amending Presidential Decree 8 issued on October 2,
1972, and Promulgating an Amended Act to promote the Discovery and
Production of Indigenous Petroleum and Appropriate Funds Therefor,

Presidential Decree No. 529 (restored by FIRB Resolution 19-87), entitled
“Granting to Petroleum Exploration Concessionaires under the Petroleum
Act of 1949 Exemption from Customs Duty and Compensating Tax on
Importations of Machinery and Equipment, Spare Parts and Materials
Required for their Exploration Operations;

Section 16 (a), (b) and (c) and section 17 (a) to (e) of Presidential Decree
No. 972, entitled “Promulgating An Act To Promote An Accelerated
Exploration, Development, Exploitation, Production and Utilization Of
Coal;”

. Section 4 (a) of Presidential Decree No. 1442 restored by FIRB resolution

19-87, entitled “An Act to Promote the Exploration and Development of
Geothermal Resources,”

Section 10 (1) to (6) of Republic Act No. 7156, entitled “An Act Granting
Incentives to Mini-Hydro Electric Power Developers and For Other
Purposes,”

Section 9 of Republic Act No, 8479, entitled “An Act Deregulating the
Downstream Oil Industry, and for Other Purposes,”

60


xxxii,

xxiii.

XXXVI.

XXXViiL

xxviii

XXxiX,

xl.

xii,

Section 6, in so far as value added tax zero-rated sale of generated power
is concerned, of Republic Act No. 9136, entitled “An Act Ordaining
Reform in the Electric Power Industry, Amending for the Purpose Certain
Laws and for other Purposes,”

Chapter VII, Section 15 except (h), Sections 19, 21 (a) to (d), and 23 of
Republic Act No, 9513, entitled “An Act Promoting the Development,
Utilization and Commercialization of Renewable Energy Resources and

for other Purposes,”

Section 6 (a) (b) of Republic Act No, 9367, entitled “An Act to Direct the
Use of Biofuels, Establishing for this Purpose the Biofuel Program,
Appropriating Funds Therefore, and for Other Purposes,”

Sections 36 (¢) and (f) of Presidential Decree No. 705, entitled “Revising
PD No, 389, otherwise known as the Forestry Reform Code of the
Philippines,”

Section (b) (1) (c) of Republic Act No, 9003, entitled “An Act Providing
for an Ecological Solid Waste Management Program, Creating the
Necessary Institutional Mechanisms and Incentives, Declaring Certain
Acts Prohibited and Providing Penalties, Appropriating Funds Therefor
and for Other Purposes;”

Section 26 a (1) (3) of Republic Act No, 9275, entitled “An Act Providing
for Comprehensive Water Quality Management and for Other Purposes;

Sections 16 and 17 of Republic Act No, 7844, entitled “An Act to Develop
Exports as a Key Towards the Achievement of the National Goals
Towards the Year 2000;"

Section 13 of Republic Act No. 10817, entitled “An Act Instituting the
Philippine Halal Export Development and Promotion Program, Creating
for the Purpose the Philippine Halal Export Development and Promotion
Board, and for Other Purposes,”

Section 14 of Republic Act No. 8423, entitled “An Act Creating the
Philippine Institute of Traditional and Alternative Health Care (PITAHC)
To Accelerate the Development of Traditional and Alternative Health
Care in the Philippines, Providing for a Traditional and Alternative Health
Care Development Fund and for other Purposes,”

Section 20 (d) (1) to (5) of Republic Act No, 10884, entitled “An Act
Strengthening the Balanced Housing Development Program, Amending

61


xiii.

lili

xliv.

xiv,

xlvi

xlvii.

xlviii

xlix.

For the Purpose Republic Act No. 7279, as amended, Otherwise Known as
the Urban Development and Housing Act of 1992;”

Republic Act No. 7718, entitled “An Act Amending Certain Sections of
RA 6957, Entitled “An Act Authorizing the Financing, Construction,
Operation and Maintenance of Infrastructure Projects by the Private
‘Sector, and for Other Purposes;”

Section 6 (c) (d) (f) and Sections 7 and 8 of Republic Act No. 7103,
entitled “An Act to Strengthen the Iron and Steel Industry and Promote
Philippine Industrialization and for Other Purposes,”

Section 3 in) ed (bh) of Republic Act No. 8502, entitled “An Act to
Promote the

Development of the Jewelry Manufacturing Industry,
Providing Incentives Therefor and for Other Purposes:”

Section 5 (a) (b) of Republic Act No. 10771, entitled “An Act Promoting
the Creation of Green Jobs, Granting Incentives and Appropriating Funds
Therefor,”

Section 9 (h) (10) of Republic Act No. 9501, entitled “Promoting

itreprencurship by Strengthening Development And Assistance
Programs to Micro, Small and Medium Scale Enterprises Amending RA
6977, otherwise known as the Magna Carta For Small Enterprises;”

Section 7 of Republic Act No. 9178, entitled “An Act to Promote the
Establishment of Barangay Micro Business Enterprises (BMBES),
Providing Incentives and Benefits Therefor, and for Other Purposes,”

Chapter XV, Section 83; Chapter XVI, Sections 90, 91, 92, 93 of Republic
Act No. 7942, entitled “An Act Instituting A New System of Mineral
Resources Exploration, Development, Utilization and Conservation;”

Chapter II, Section 4 and Chapter VIII, Section 19 of Republic Act No.
9295, entitled “An Act Promoting the Development of Philippine
Domestic Shipping, Shipbuilding, Ship Repair and Ship Breaking,
Ordaining Reforms In Government Policies Towards Shipping in the
Philippines and for other Purposes,”

|. Section 6 of Republic Act No. 7471, as amended, entitled “An Act to

Promote the Development of Philippine Overseas Shipping;”

Sections 86, 88 and 95 (a) and (b) of Republic Act No, 9593, entitled “An
Act Declaring a National Policy for Tourism as an Engine of Investment,
Employment, Growth and National Development, and Strengthening the


liv.

Wii.

Iii.

lix.

Department of Tourism and its Attached Agencies to Effectively and
Efficiently Implement that Policy, and Appropriating Funds Therefor.”

Section 8, in so far as investment incentives are concerned, of Republic
Act No. 10816, entitled “An Act Providing for the Development and
Promotion of Farm Tourism in the Philippines,”

Section 8 of Presidential Decree 1491- Amending Section 8 of Presidential
Decree no. 538 (Philippine Veterans Investment Development
Corporation);”

Section 8, in so far as tax exemption and VAT zero rating of domestic
merchandise are concerned, and Section 9 of Presidential Decree No. 538,
entitled “Creating and Establishing the Phividec Industrial Authority and
Making It a Subsidiary Agency of the Philippine Veterans Development
Corporation, Defining its Powers, Functions and Responsibilities, and for
Other Purposes,”

Section | (1.1) of Executive Order No, 97-A s. 1993, entitled “Further
Clarifying the Tax and Duty-Free Privilege within the Subic Special
Economic and Free Port Zone;”

Section 12(c) of Republic Act No. 7227, entitled “An Act Accelerating the
Conversion of Military Reservations into Other Productive Uses, Creating
the Bases Conversion and Development Authority for this Purpose,
Providing Funds Therefor and for Other Purposes,”

Sections 4(f) and 5(c)(k), in so far as tax exemption and/or VAT zero
rating on domestic merchandise is concerned, and Section 12-b of
Republic Act No. 10083, entitled “An Act Amending Republic Act No.
9490, otherwise known as the Aurora Special Economic Zone Act Of
2007,"

Section 5 (5.1) and (5.2) of Executive Order No. 290, entitled
“Implementing the Natural Gas Vehicle Program for Public Transport,”

Sections 18 and 20 of Republic Act No. 6847, entitled “An Act Creating
and Establishing the Philippine Sports Commission, Defining Its Powers,
Functions, And Responsibilities, Appropriating Funds therefor, And For
Other Purposes;”

. Section 10 of Presidential Decree No. 972 or the “Coal Development Act

Of 1976,” as Amended by Presidential Decree No. 1174;


Ixi

Ixii.

Iii,

Ixiv.

Section 23 of Republic Act No. 7925, entitled “An Act to Promote and
Govern the Development of Philippine Telecommunications and Delivery
of Public Telecommunications Services,”

Section 42 (c) of Republic Act No. 7277, entitled “An Act Providing For
the Rehabilitation, Self-Development and Self-Reliance of Disabled
Persons and their Integration into the Mainstream of Society and for Other
Purposes.”

Section 22 of Republic Act No. 9337, entitled “An Act i
Sections 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117,
119, 121, 148, 151, 236, 237 and 288 of the National Internal Revenue
Code of 1997, as Amended, and for Other Purposes,”

Sections 1 (6) and 2 of Presidential Decree No. 776, entitled “Repealing
All Laws, Acts, Decrees, Orders and Ordinances Granting Exemptions
from Taxes, Duties, Fees, Imposts and Other Charges under Certain
Exceptions and Creating a Fiscal Incentives Board”

Section 2 of Presidential Decree No. 1931, s. 1984, entitled “Directing the
Rationalization of Duty and Tax Exemption Privileges Granted to
Government-Owned or Controlled Corporations and All other Units of
Government”

j. Section | (c), (d) Executive Order No. 93, series of 1986, entitled

“Withdrawing All Tax and Duty Incentives, Subject to Certain
Exceptions, Expanding the Powers of the Fiscal Incentives Review Board
and for other Purposes”

. Section | (a) and (b) of Presidential Decree No. 1955, entitled

“Withdrawing, Subject to Certain Conditions, the Duty And Tax
Privileges Granted To Private Business Enterprises and/or Persons
Engaged In Any Economic Activity And For Other Purposes”

B. Memorandum Order No. 23, s. 1986, entitled “Expanding the Membership of the Fiscal
Incentives Review Board”,

C. Ingeneral. — All other laws, decrees, Executive Orders, rules and regulations, or parts
thereof which are contrary to or inconsistent with this Code are hereby repealed, amended or
modified accordingly.

SEC. 40. Separability Clause. — If any clause, sentence, paragraph, or part of this Code
shall be adjudged by any Court of competent jurisdiction to be invalid, such judgment shall not
affect, impair, or invalidate the remainder of said Code, but shall be confined in its operation to
the clause, sentence, paragraph, or part thereof directly involved in the controversy.


SEC. 41. Implementing Rules and Regulations. ~ Within thirty (30) days from the
effectivity of this Act, the Secretary of Finance shall, upon the recommendation of the
Commissioner of Internal Revenue and consultations with the Department of Trade and Industry,
promulgate the necessary rules and regulations for its effective implementation.

SEC. 42. Effectivity. This Act shall take effect on January 1, 2019 following its
complete publication in the Official Gazette or in a newspaper of general circulation.

Approved,