Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezoa City

Fifteenth Congress
Second Regular Session

COMMITTEE REPORT NO._201 6

Subsnited by the Committee on Ways und Means on 19 MAR 2012_

RE Hook Bitte 3-22
Recommending its approval in substitution of House Bul Nos, 3928, 4444
and House Resolution No 1949

Sponsors Representatives tsidro T. Ungab, Hermilando I. Mandanas, Jesry P. Trefias
and Giorgids B. Augabao

Mr. Speaker

The Committee on Ways and Means 10 which were referred louse Bill No. 3928,
introduced by Rep. Hermilando I. Mandanas, entitled:

“AN ACT RECOGNIZING THE TAX EXEMPTIONS UNDER
TAX TREATIES AND INTERNATIONAL AGREEMENTS
RELATED TO INTERNATIONAL CARRIERS TO WHICH THE
PHILIPPINES IS A SIGNATORY, AND FOR OTHER
PURPOSES”;

HOUSE BILL NO. 4444, ingoduced by Rep. Jetry P. Trofias, entitled
“AN ACT RATIONALIZING THE TAXES IMPOSED ON
INTERNATIONAL AIR CARRIERS OPERATING IN THE
PHILIPPINES, AMENDING FOR THE PURPOSE SECTIONS 28
AND 118 OF THE NATIONAL INTERNAL REVENUE CODE OF
1997, AS AMENDED”; and

HOUSE RESOLUTION NO. 1949 introduced by Rep. Giorgidi B.
Aggabao entitled “A RESOLUTION DIRECTING THE
COMMITTEE ON WAYS AND MEANS TO CONDUCT AN
INQUIRY, IN AID OF LEGISLATION, ON THE. CLOSING
DOWN OF OPERATIONS OF INTERNATIONAL CARRIERS
HERE IN THE PHILIPPINES DUE TO THE ALLEGED


ALLEGED DISCRIMINATORY TAXATION IMPOSED ON THEM BY THE
PHILIPPINE GOVERNMENT”

has considered the samc and recommends that the attached House Bill No.

ANG - 5222 entitled:

AN ACT RATIONALIZING THE TAXES ON INTERNATIONAL AIR
CARRIERS OPERATING IN THE PHILIPPINES, AMENDING FOR THE
PURPOSE SECTIONS 28(A}3)(a), 108 (BY(6) AND 118, ALL UNDER THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED

be approved in substitution of House Bill Nos. 3928, 4444 and House Resolution No.
1949 with Representatives Hermilando 1. Mandanas, Jerry P, Trefias, Giorgidi B.
Aggaban, Isidro T. Ungab, Rufus B. Rodriguez, Tomas V. Apacible, Fernando V.
Gonzales, Luis R. Villafuerte, Roger G. Mercado, Florencio T, Miraflores, Elmer E.
Panotes and Rodolfo B, Albano as authors thereof.

Respectfully submitted,

REP. ISEDR¢ UNGAB

Chairman
Committee on Ways and Means

‘The HONORABLE SPEAKER
HOUSE OF REPRESENTATIVES
QUEZON CITY


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City. Metro Manila

FIFTEENTH CONGRESS
Second Regular Session

HOUSE BILL NO. 9 2
{in substitution of House Bill Nos. 3928 and 4444, and House Resolution No. 1949)

introduced by the Honorable Representatives Hermilando |. Mandanas,
deny P. Trefias, Giorgidi 8. Aggabao, Isidro T. Ungab, Rufus 8. Rodriguez,
Tomas V, Apacibie, Femando V. Gonzalez, Roger Gaviola Mercado, Luis R.
Vikafuerte, Florencio T. Miraflores, Eimer E. Panotes and Rodolfo B. Albano

AN ACT
RATIONALIZING THE TAXES ON INTERNATIONAL AIR CARRIERS
OPERATING IN THE PHILIPPINES, AMENDING FOR THE PURPOSE
SECTIONS 28 (A) (3) (a), 108 (B) (6) AND 118, ALL UNDER THE NATIONAL,
INTERNAL REVENUE CODE OF 1997, AS AMENDED

Be it enacted by the Senate and the House of Representatives of the
Philippines in Congress assembied:

SECTION. 1. Section 28 (A) (3) (a) 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) Tex on Resident Foreign Corporations. —

‘ “(1) 00x

i
2
3
4
5
6
7
8
9
19
it

“(2) mx


*(3) Intemational Carrer. — An intemetional carrier doing business in the
Philippines shall pay a tax of two and one-half percent (21/2%) on its
*Gross Philippine Billings” as defined hereunder:

Bune

waa

{a) International Air Carrier. - “Gross Philippine Billings” refers

to the amount of grass revenue derived from carriage of persons,
excess baggage, cargo and mail originating from the Philippines in
@ continuous and uninterrupted flight, irrespective of the place of
sale or issue and the place of payment of the ticket or passage
document: Provided, That tickets revalidated, exchanged and/or
indorsed to anather international airline form part of the Gross
Philippine Billings if the passenger boards a plane in a port or point
in the Phitippines: Provided, further, That for a flight which
originates from the Philippines, but transshipment of passenger
takes place at any port outside the Philippines on another airine,
only the aliquot portion of the cost of the ticket coresponding to the
leg flown from the Philippines {o the point of transshipment shall
form part of Gross Philippine Billings.

PROVIDED, THAT INTERNATIONAL AIR CARRIERS DOING BUSINESS
iN THE PHILIPPINES SHALL NOT BE LIABLE TO PAY THE GROSS
PHILIPPINE BILLINGS HEREIN PROVIDED PURSUANT TO THE
PRINCIPLE OF RECIPROCITY: PROVIDED, FURTHER, THAT THE
GRANT OF RECIPROCAL EXEMPTIONS TO INTERNATIONAL AIR
CARRIERS SHALL ENTER INTO FORCE THIRTY (30) DAYS FROM
THE EXCHANGE OF DIPLOMATIC NOTES BETWEEN THE
PHILIPPINES AND THE FOREIGN JURISDICTION CONCERNED:
PROVIDED, FINALLY, THAT SAID DIPLOMATIC NOTES SHALL
CONSTITUTE THE AGREEMENT BETWEEN THE TWO COUNTRIES.”

(b) 00K

SEC. 2, Section 108 (B) (6) of the National Intemat Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

"SEC. 108. Value-added Tax on Sate of Services and Use or Lease of
Properties. —

(A)


‘(B) Transactions Subject to Zero Percent (0%} Rate. — The following
services performed in the Philippines by VAT-registered persons shall be subject
10 zero percent (0%) rate:

*(1) 200K
*(2) x00
*(8) 300
“{4) 00K

*(8) x00
**(6) Transport of passengers and cargo by DOMESTIC AND
INTERNATIONAL air or sea [vessels] CARRIERS from the Philippines to a
foreign country; and

*(7) 100%."

SEC. 3. Section 118 of the Nationa! Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 118. Percentage Tax on International SHIPPING Carriers. -

{(A) International air carriers doing business in the Philippines shalt pay a
tax of three percent (3%) of their quarterly gross receipts ]

[(B)]_ International shipping carriers doing business in the Philippines
shail pay a tax equivalent to three percent (3%) of their quarterly gross
receipts.”

SEC. 4, Implementing Ruies and Regulations. - The Secretary of Finance shall,
upon the recammendation of the Commissioner of Internal Reveaue, promuigate
not later than 30 days upon the effectivity of this Act the necessary Rules and
Regulations for its effective implementation. The Department of Finance (DOF),
in coordination with the Department of Foreign Affairs (DFA), shall oversee the
exchange of notes between the Philippines and concerned countries for
purposes of facilitating the availment of reciprocal exemptions intended under
this Act.


COIAW RWI

SEC. 5. Separability Clause. - Hf any provision of this Act is subsequently
declared invalid or unconstitutional, other provisions hereof which are not
affected thereby shali remain in full force and effect.

SEC. 6. Repealing Clause. - Ail laws. acts, presidential decrees, executive
orders, issuances, presidential proclamations, rules and regulations or parts
thereof which are contrary to and inconsistent with any provision of this Act are
hereby repealed, amended or modified accordingly.

SEG. 7. Effectivity Clause. - This Act shall take effect fifteen (15) days after its
complete pubiication either in the Official Gazette, or in at least two (2)
newspapers of general circulation.

Approved,


FACT SHEET

aap eee)
HOUSE BILLNO. 902
(in substitution of House Bill Nos. 3928 and 4444, and House Resolution No. 1949)

AN ACT RATIONALIZING THE TAXES ON INTERNATIONAL AIR CARRIERS
OPERATING IN THE PHILIPPINES, REPEALING FOR THE PURPOSE SECTION
SECTIONS 28(A)(3)(a), 108(B)(6) AND 118 ALL UNDER THE NATIONAL
INTERNAL REVENUE CODE OF 1997, AS AMENDED

introduced by: REPS. HERMILANDO 1. MANDANAS, JERRY P. TRENAS,
GIORGIDI B. AGGABAO, ISIDRO T. UNGAB, RUFUS B. RODRIGUEZ, TOMAS
V. APACIBLE, FERNANDO V. GONZALEZ, ROGER GAVIOLA MERCADO, LUIS
R. VILLAFUERTE, FLORENCIO T. MIRAFLORES, ELMER E. PANOTES AND
RODOLFO B. ALBANO

Committee Referral: WAYS AND MEANS
Committee Chairperson: REP. ISIDRO T. UNGAB

OBJECTIVES:

* To recognize, honor and respect the principle of reciprocity with regard to
other countries in relation to tax treaties and international agreements
embodied in diplomatic notes involving international air carriers:

* To enhance the country’s competitiveness through tax incentives thus
facititating the movement of goods and services and people, and improving
the country's tourism climate as welt as attracting more foreign investments;
and

* To encourage international air carriers which had left the Philippines to
festore flight operations and more importantly, direct flights to and from the
country


KEY PROVISIONS:

* Provides exemption from the payment of the two and one-half percent (2 ¥%)
tax on Gross Philippine Billings imposed on international air carriers operating
in the Philippines whose respective countries of domicile/registry have
exchanged diptomatic notes with the Philippines for purposes of availing said
exemption pursuant to the principle of reciprocity by amending Section 28 of
the National Internal Revenue Code of 1997, as amended

« Exempts international air carriers from the three percent (3%) Common
Carriers Tax by amending Section 118 of the NIRC of 1997, as amended,
and classifying transactions of said international air carriers as subject to zero
percent (0%) Vatue-Added Tax (VAT) rate, amending for this latter purpose
Section 708 of the same Code

RELATED LAWIS:

* Sections 28, 108 and 118 of the National Internal Revenue Code (NIRC) of
1997, as amended

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