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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

2554

House Bill No.

Introduced by Representative Sharon S. Garin

EXPLANATORY NOTE

The Tax Reform for Attracting Better and High Quality Opportunities (TRABAHO)
bill is a part of the Comprehensive Tax Reform Program (CTRP) of the President's
economic team with the end view of accelerating poverty reduction and sustainability
address inequality to attain the his promise of Tunay na Pagbabago. By making the tax
system simpler, fairer, and more efficient, additional and more sustainable stream of
revenues need to be generated to make meaningful investments on the people and
infrastructure to achieve the vision for the Philippines.

This measure will, among others, encourage investment by bringing down the
corporate income tax (CIT) rate from 30% to 20%, help bring in the greatest benefits
based on the indicated fiscal incentives, create an environment of fairness and
transparency in the grant of fiscal incentives, and enhance tax administration through a
clear taxpayers’ accountability.

Some of the salient features of the bill are as follows:

1. Reducing the current 30% corporate income tax (CIT) by 2% every after two (2)
years;

2. Exempting Home Development Mutual Fund from income taxation to have equal
footing with SSS, PHIC, and GSIS;

3. Removing the option for corporations, including resident foreign corporations, to
avail of the 15% gross income tax;

4, Subjecting corporate taxpayers who enjoy preferential rates to the 30% CIT;

5, Providing a schedule of amount of interest paid or incurred which may be allowed
as deduction from gross income;

6. Granting fiscal incentives only to registered activities of exporters and industries
listed in the Strategic Investments Priority Plan (SIPP).


7. Mandating the SIPP shall include those activities covered by the Philippine
Development Plan (PDP) taking into consideration the substantial amount of
investments, employment to be generated, business activities and value-added
production of MSME's, modern technology, environment protection, missing gaps in
the supply/value chain and market competitiveness;

8. Granting the President the power to grant incentives if the project has a
comprehensive sustainable development plan and will bring in at least US $200
Million;

9. Granting income incentives for a maximum of five years thus, removing perpetual
5% on gross income earned (GIE) and limiting income tax holiday (ITH);

10. Providing that in lieu of ITH or reduced CIT, incentive may be extended on a per
industry basis, upon Board of Investment (BO!) approval;

11. Reducing the 18% CIT by one percentage point every other year;

12, Adding two (2) years of incentives (inclusive of one-year ITH) for the projects
located in lagging areas, areas covering from armed conflict or major disasters,
agri-business outside major urban areas or those relocated from Metro Manila and
nearby urban areas;

43. Encouraging investors and locators to reapply after the five-year or seven-year
period, to qualify for another five years of incentives;

14. Specifying that VAT treatment shall be based on location and export sales;
15. Enhancing the tax administration through:

a. Empowering the Commissioner to issue subpoena duces tecum to compel
submission of documents, wherein taxpayers may face criminal action for
failure to obey subpoena;

b. Authorizing the service of subpoena, letters of authority, and assessments at
the taxpayer's registered business address or if not practicable, through
substituted service;

¢. Obliging the Bureau of Internal Revenue Commissioner, upon the request of
the Secretary of Finance (SOF), to furnish pertinent taxpayer information to
the Secretary and the concerned officers;

d. Defining tax avoidance as, either directly or indirectly, altering the incidence
of any income tax, or relieving a person from liability to pay income tax or
from a potential or prospective liability to future income tax or, avoiding,
postponing, or reducing any liability to income tax, or any potential or
prospective liability to future income tax;

e. Granting the Commissioner the authority to distribute, apportion, allocate and
impute income and deductions to disregard and counteract tax avoidance
arrangements in transfer pricing scheme by a taxpayer;

f. Stopping the issuance of tax credit certificates, instead, refund of creditable
input tax of a taxpayer shall now be through a refund;


g. Requiring digitization among taxpayers under the Large Taxpayer Service
(LTS), and exporters, i.e., e-receipts, or sales or commercial invoices, public
certification system, use of electronic transaction number; and

h. Increasing the fines and rationalizes imprisonment on violations of the Tax
Code following the adjustment of fines and penalties in the Revised Penal
Code

16. Providing for efficient administration of tax incentives by:

a. including the Department of the Trade and Industry (DTI) and the National
Economic and Development Authority (NEDA) as members in the Boards of
investment promotion agencies (IPAs), with the SOF as the co-chair of all IPA
boards;

b. expanding the powers of the Fiscal Incentives Review Board (FIRB);

c. requiring the registered enterprises to install an adequate accounting system
and an e-invoicing system and to file their tax returns electronically;

d. enhancing the VAT refund system for registered enterprises that did not meet
the 90% export sales threshold or are located outside the ecozones; and

e. expands the coverage of the Tax Expenditure Fund system to include all tax
and duty obligations of GOCCs

17. Incremental revenue collected from the measure will provide for subsidies in
school, housing vouchers, universal health care, funds for displaced workers,
infrastructure needs for IPAs.

TRABAHO bill has been approved on third reading last 17% Congress and it is high
time for the immediate passage of important piece of legislation.

IN S. GARIN
Pay st, AAMBIS-OWA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

2554

House Bill No.

Introduced by Representative Sharon S. Garin

AN ACT
AMENDING SECTIONS 4, 5, 20, 22, 27, 28, 34, 40, 50, 73, 112, 117, 204, 222, 237, 237-
A, 255, 256, 257, 258, 260, 261, 262, 263, 264, 265, 266, 275, 288, 290 AND ADDING
SECTIONS 6-A, 282-A, 291, 292, 293, 294, 295, 296, 297, 298, 299, 300, 301, 301-A,
301-B, 302, 303, 304, 305, 306, 307, 308, 309, 310, 311, 312, 313, AND 314 UNDER
THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR
OTHER PURPOSES

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

SECTION 1. Title. — This Act shall be known as the “Tax Reform for Attracting
Better and High-quality Opportunities,” or “TRABAHO.”
SEC. 2. Section 4 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:
“SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide
Tax Cases. — The power to interpret the provisions of the Code and other tax
laws shall be under the exclusive and original jurisdiction of the Commissioner,
subject to review by the Secretary of Finance: PROVIDED, THAT THE POWER
TO INTERPRET THE PROVISIONS OF TITLE Xill OF THIS CODE SHALL
BE UNDER THE EXCLUSIVE AND ORIGINAL JURISDICTION OF THE
SECRETARY OF FINANCE
“The power to decide disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or other
matters arising under this Code or other laws or portions thereof administered
by the Bureau of Internal Revenue is vested in the Commissioner, subject to the
exclusive appellate jurisdiction of the Court of Tax Appeals.”


23
24
25
26
27
28

SEC. 3. Section 5 of the National Internal Revenue Code of 1997, as amended, is

hereby further amended to read as follows:

“SEC. 5. Power of the Commissioner to Obtain Information and to

Summon, Examine, and Take Testimony of Persons. - In ascertaining the
correctness of any return, or in making a return when none has been made, or
in determining the liability of any person for any internal revenue tax, or
in collecting any such liability, or in evaluating tax compliance, the
Commissioner is authorized:

4A) xxx

4B) Xxx

“C) xxx

“D) xxx; [and]

“E) — xxx[J; AND

“(F)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 HIS 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: PROVIDED, THAT INFORMATION OR
RECORDS DULY RECEIVED OR ALREADY WITHIN THE CUSTODY OF
THE BUREAU SHALL NOT BE COVERED BY ANY SUBPOENA
DUCES TECUM.

“THE SERVICE OF A 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 SHALL BE INSTITUTED FOR FAILURE TO
OBEY THE SUBPOENA DUCES TECUM.

“BOOKS, RECORDS, AND DOCUMENTS SUBMITTED AS A RESULT
OF A SUBPOENA DUCES TECUM SHALL BE UNDER THE
CUSTODIANSHIP OF THE RECEIVING OFFICER WHO SHALL BE
RESPONSIBLE FOR ITS SAFEKEEPING AND PRESERVATION, SUBJECT
TO APPLICABLE RULES.”
SEC. 4. A new section shall be inserted as Section 6-A of the National Internal

Revenue Code of 1997, as amended, to read as follows:

“SEC. 6-A. SERVICE OF LETTER OF AUTHORITY, AND
ASSESSMENT NOTICES ISSUED BY THE BUREAU. — THE NOTICE TO
THE TAXPAYER HEREIN REQUIRED MAY BE SERVED BY THE
COMMISSIONER OR HIS DULY AUTHORIZED REPRESENTATIVE
THROUGH PERSONAL SERVICE AT HIS REGISTERED ADDRESS. IN
CASE PERSONAL SERVICE IS NOT PRACTICABLE, THE NOTICE SHALL
BE SERVED BY SUBSTITUTED SERVICE IN ACCORDANCE WITH THE
RULES OF THE COURT.”

SEC. 5. 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 PROVISIONS OF SECTION

71, NOTWITHSTANDING, THE COMMISSIONER SHALL, UPON THE
REQUEST OF THE SECRETARY OF FINANCE SPECIFICALLY
IDENTIFYING THE NEEDED INFORMATION AND JUSTIFICATION 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.

“[(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


1 Ways and Means of the Senate and House of Representatives, a report on the

2 exercise of his powers pursuant to the said Section, every six (6) months of
3 each calendar year.”
4 SEC. 6. Section 22 of the National Internal Revenue Code of 1997, as amended, is

5 hereby further amended to read as follows:

6 “SEC. 22 Definitions. — xxx
7 “(A) xxx

8 “(B) xxx

9 “(C) xxx

10 “(D) xxx

u “(E) The term ‘nonresident citizen’ means:

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

15 “(2) A citizen of the Philippines who leaves the Philippines during the
16 taxable year to reside abroad, either as an immigrant or for employment on a
” permanent basis.

8 “(3) A citizen of the Philippines who works and derives income from abroad
9 and whose employment thereat requires him to be physically present abroad
20 [most of the time] FOR ONE HUNDRED EIGHTY-THREE (183) DAYS OR
21 MORE during the taxable year.

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

28 *() The taxpayer shall submit proof to the Commissioner to show his
2 intention of leaving the Philippines to reside permanently abroad or to return to
30 and reside in the Philippines as the case may be for purpose of this Section

31 XK"

32 SEC. 7. Section 27 of the National Internal Revenue Code of 1997, as amended, is

33. hereby further amended to read as follows:
34 “SEC. 27. Rates of Income Tax on Domestic Corporations. —


*(A) In General. - Except as otherwise provided in this Code, [an income
tax of thirty-five percent (35%)] AN INCOME TAX RATE OF THIRTY
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 TWENTY-EIGHT PERCENT (28%) BEGINNING JANUARY 1,
2021; TWENTY-SIX PERCENT (26%) BEGINNING JANUARY 1, 2023;
TWENTY-FOUR PERCENT (24%) BEGINNING JANUARY 1, 2025; TWENTY-
TWO PERCENT (22%) BEGINNING JANUARY 1, 2027; AND TWENTY
PERCENT (20%) BEGINNING JANUARY 1, 2029: PROVIDED, FURTHER,
THAT THE PRESIDENT MAY ADVANCE THE SCHEDULED REDUCTION IN
THE CORPORATE INCOME TAX RATE WHEN ADEQUATE SAVINGS ARE
REALIZED FROM THE RATIONALIZATION OF FISCAL INCENTIVES
UNDER TITLE XIll OF THIS CODE, AS CERTIFIED BY THE SECRETARY OF
FINANCE.

“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 herein,
after 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
imrevocable 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 concem, ‘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 concern, ‘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. —

“KX.”

“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 Educationf, Culture and Sports (DECS)] (DEPED), 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) Government-owned or -Controlled Corporations, Agencies or
Instrumentalities. - 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), HOME DEVELOPMENT MUTUAL FUND, 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 a similar business, industry, or activity.

“(D) xxx

ME) 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) In 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-five percent (35%)] THIRTY PERCENT
(30%) 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 TWENTY-EIGHT PERCENT
(28%) BEGINNING JANUARY 1, 2021; TWENTY-SIX PERCENT
(26%) BEGINNING JANUARY 1, 2023; TWENTY-FOUR PERCENT (24%)
BEGINNING JANUARY 1, 2025; TWENTY-TWO PERCENT (22%)
BEGINNING JANUARY 1, 2027; AND TWENTY PERCENT (20%)


BEGINNING JANUARY 1, 2029: PROVIDED, FURTHER, THAT THE
PRESIDENT MAY ADVANCE THE SCHEDULED REDUCTION IN THE
CORPORATE INCOME TAX RATE WHEN ADEQUATE SAVINGS ARE
REALIZED FROM THE RATIONALIZATION OF FISCAL INCENTIVES
UNDER TITLE Xill OF THIS CODE, AS CERTIFIED BY THE SECRETARY OF
FINANCE.

“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 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, 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

“[(4) Offshore Banking Units. - The provisions of any law to the contrary
notwithstanding, income derived by offshore banking units authorized by the
Bangko Sentral 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 Bangko Sentral 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]

“{()] (4) Tax on Branch Profits Remittances. — Any profit remitted by a
branch to its head office shall be subject to a tax of fifteen percent (15%) which
shall be based on the total profits applied or earmarked for remittance without
any deduction for the tax component thereof [(except those activities which are
registered with the Philippine Economic Zone Authority)]. x x x

“{(6)] (5) 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.

“PROVIDED, THAT REGIONAL OPERATING HEADQUARTERS SHALL
BE SUBJECT TO THE REGULAR CORPORATE INCOME TAX TWO (2)
YEARS FROM THE EFFECTIVITY OF THIS ACT.

“[()] (6) 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 [seven and one-half percent (7'/2%)]
FIFTEEN PERCENT (15%) 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%)

“(d) Intercorporate Dividends. — x xx

“(B) Tax on Nonresident Foreign Corporation. -

“(1) In 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-five percent (35%)] THIRTY PERCENT (30%) of the gross
income received during each 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 TWENTY-EIGHT PERCENT (28%) BEGINNING JANUARY 1,
2021; TWENTY-SIX PERCENT (26%) BEGINNING JANUARY 1, 2023;
TWENTY-FOUR PERCENT (24%) BEGINNING JANUARY 1, 2025; TWENTY-
TWO PERCENT (22%) BEGINNING JANUARY 1, 2027; AND TWENTY
PERCENT (20%) BEGINNING JANUARY 1, 2029: PROVIDED, FURTHER,
THAT THE PRESIDENT MAY ADVANCE THE SCHEDULED REDUCTION IN
THE CORPORATE INCOME TAX RATE WHEN ADEQUATE SAVINGS ARE
REALIZED FROM THE RATIONALIZATION OF FISCAL INCENTIVES
UNDER TITLE XIll OF THIS CODE, AS CERTIFIED BY THE SECRETARY OF
FINANCE.

“(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

*(3) xxx

(4) xxx

“(6) Tax 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, 2009] EFFECTIVE JANUARY 1, 2019, 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 «........eee nese 5%

“On any amount in excess of 100,000... 10%]"

SEC. 9. Section 34 of the National Internal Revenue Code of 1997, as amended, is

hereby further amended to read as follows:

"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.


“(B) Interest. —

*(1) In General. - The amount of interest paid or incurred within a taxable
year on indebtedness in connection with the taxpayer's profession, trade or
business shall be allowed as deduction from gross income: Provided, however,
That the taxpayer's otherwise allowable deduction for interest expense shall be
reduced by [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 TWENTY-EIGHT PERCENT (28%), INTEREST EXPENSE
REDUCTION RATE IS TWENTY-NINE PERCENT (29%);

“IF RATE IS TWENTY-SIX PERCENT (26%), INTEREST EXPENSE
REDUCTION RATE IS TWENTY-THREE PERCENT (23%);

‘IF RATE IS TWENTY-FOUR PERCENT (24%), INTEREST EXPENSE
REDUCTION RATE IS SIXTEEN PERCENT (16%);

“IF RATE IS TWENTY-TWO PERCENT (22%), INTEREST EXPENSE
REDUCTION RATE IS NINE PERCENT (9%);

‘IF RATE IS TWENTY PERCENT (20%), INTEREST EXPENSE
REDUCTION RATE IS ZERO PERCENT (0%).

“PROVIDED, FINALLY, THAT IF THE INTEREST INCOME TAX IS
ADJUSTED IN THE FUTURE, THE INTEREST EXPENSE REDUCTION RATE
SHALL BE ADJUSTED ACCORDINGLY BASED ON THE PRESCRIBED
STANDARD FORMULA AS DEFINED IN THE RULES AND
REGULATIONS TO BE PROMULGATED BY THE SECRETARY OF
FINANCE, UPON THE RECOMMENDATION OF THE COMMISSIONER.

(2) xxx

“(C) Taxes. — xxx

“(D) Losses. ~ xxx

“(E) Bad Debts. — xxx

“(F) Depreciation. ~ xxx

“G) Depletion of Oil and Gas Wells and Mines. ~ x x x

“(H) Charitable and Other Contributions. — x x x


“(l) Research and Development. — x xx
“(J) Pension Trusts. — xxx
“(K) Additional Requirements for Deductibility of Certain Payments. — x x

“(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] AND A corporation CLASSIFIED
AS AMICRO, SMALL AND MEDIUM-SIZED ENTERPRISE AS DETERMINED
BY THE DEPARTMENT OF TRADE AND INDUSTRY AND subject to tax
under Sections 27(A) and 28(A)(1), [it] may elect a standard deduction in an
amount not exceeding 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 retum such financial statements otherwise
required under this Code: [Provided, further, That a general professional
partnership and the partners comprising such partnership may avail of the
optional standard deduction only once, either by the general professional
partnership or the partners comprising the partnership: Provided, [finally,]
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 provisions 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, 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) xxx

“(B) xxx

“(C) Exchange of Property. -

“() 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 THAT IS A PARTY TO THE REORGANIZATION. A
REORGANIZATION IS DEFINED AS:

“(a)A corporation, which is a party to a 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 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 another 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 a person 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] AND, IMMEDIATELY AFTER, SUCH PERSON OR PERSONS
ARE IN CONTROL: 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.

“SALE OR EXCHANGES OF PROPERTY USED FOR BUSINESS FOR
SHARES OF STOCK COVERED UNDER THIS SUBSECTION SHALL NOT
BE SUBJECT TO VALUE-ADDED TAX (VAT).


2s
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2
28
29
30
31
2
3

34

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 determines 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 (2) OR MORE ORGANIZATIONS, TRADES OR BUSINESSES,
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 ORGANIZATIONS, TRADES OR BUSINESSES, IF THE
COMMISSIONER DETERMINES THAT SUCH DISTRIBUTION,
APPORTIONMENT, ALLOCATION, OR IMPUTATION IS NECESSARY IN
ORDER TO PREVENT AVOIDANCE OF TAXES OR TO CLEARLY 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 PURPOSE OR EFFECT,
WHETHER OR NOT ANY OTHER PURPOSE OR EFFECT IS
ATTRIBUTABLE 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 TAX LAWS ON SUCH
TRANSACTION OR ARRANGEMENT WOULD NOT HAVE BEEN THE
INTENTION OF THE LAW.”

SEC. 12. Section 73 of the National Internal Revenue Code of 1997,

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
earnings or profits and payable to its shareholders, whether in money or in other
property.

“[Where a corporation distributes alll 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,

as


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26
27
28
29
30
31
32
33
34

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 ARE
DIVIDENDS REPRESENTING THE REMAINING GAINS REALIZED OR LOSS
SUSTAINED BY THE STOCKHOLDER IN A COMPLETE LIQUIDATION OR
DISSOLUTION BY A CORPORATION AND SHALL BE CONSIDERED AS
TAXABLE INCOME OR A DEDUCTIBLE LOSS, AS THE CASE MAY BE.

“{(C)] (D) Dividends Distributed are Deemed Made from Most Recently
Accumulated Profits. - Any distribution made to the shareholders or members
of a 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.

“{(0)] (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. Section 112(A) and 112(B) of the National Internal Revenue Code of

1997, as amended, is hereby further amended to read as follows:

“SEC. 112. Refunds [or Tax Credits] of Input Tax. -

“(A) Zero-Rated or Effectively Zero-Rated Sales. — Any VAT-registered
person, 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 Bangko Sentral ng Pilipinas (BSP): Provided, further, That
where the taxpayer is engaged in zero-rated or effectively zero-rated sale and


25

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 {the issuance of a tax
credit certificate for any unused input tax which may be used in payment of his
other internal revenue taxes] REFUND

SEC. 14. Section 117 of the National Internal Revenue Code of 1997, as

amended, is hereby amended to read as follows:
“SEC. 117. Percentage Tax on Domestic Carriers and Keepers of
Garages. - Cars for rent or hire driven by the lessee; transportation contractors,
including persons who transport passengers for hire, and other domestic
carriers by land for the transport of passengers (except
OWNERS/OPERATORS OF TRICYCLES OPERATING NOT MORE THAN
TWO (2) UNITS, owners of bancas, and owners of animal-drawn two-wheeled
vehicle), and keepers of garages shall pay a tax equivalent to three percent
(3%) of their quarterly gross receipts.

xx."

SEC. 15. Section 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

“Where the basic tax involved exceeds [One] TEN million pesos
{(P1,000.000)] (P10,000,000) 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.

KOK?

SEC. 16. Section 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] APPLICATION
made before the expiration of the period previously [agreed upon] APPLIED
FOR.

xx."

SEC. 17. Section 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
“Within five (6) 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 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 SERVICE 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 issuer, 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 [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. 18. Section 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, and 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 THROUGH THE
DESIGNATED ELECTRONIC CHANNELS OF THE BUREAU IN THE
STANDARD FORMAT REQUIRED [electronically report their sales data to the
Bureau 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 (1) TO YEAR FOUR (4) 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


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OR COMMERCIAL INVOICE TRANSMITTED THROUGH 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 TEN PERCENT
(10%) OF THE ETP MADE BY THE TAXPAYER. AN ANNUAL LIMIT ON THE
ALLOWED ETP DEDUCTIBLE EXPENSE PER TAXPAYER MAY BE SET BY
THE COMMISSIONER WITH THE APPROVAL OF THE SECRETARY OF
FINANCE.

“ELECTRONICALLY TRACEABLE PAYMENTS REFER TO CREDIT
CARD, DEBIT CARD, OR OTHER METHODS 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 THROUGH 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, trainings, and technologies to protect the cyber environment,
organization, and data in compliance with Republic Act No. 10175 or the
‘Cybercrime Prevention Act of 2012.'"

SEC. 19. Section 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


1 by rules and regulations promulgated thereunder to pay any tax, make a return,

2 keep any record, or supply correct and accurate information, who willfully fails to
3 pay such tax, make such return, keep such record, or supply correct and
4 accurate information, or withhold or remit taxes withheld, or refund excess taxes
5 withheld on compensation, at the time or times required by law or rules and
6 regulations shall, in addition to other penalties provided by law, upon conviction
7 thereof, be punished by a fine of not less than [Ten thousand pesos (P10,000)]
8 ONE HUNDRED THOUSAND PESOS (P100,000) BUT NOT MORE
9 THAN ONE MILLION TWO HUNDRED THOUSAND PESOS (P1,200,000) and
10 suffer imprisonment of not less than one (1) year but not more than ten (10)
u years.

R “Any person who attempts to make it appear for any reason that he or
b another has in fact filed a return or statement, or actually files a return or
“4 statement and subsequently withdraws the same return or statement after
1s securing the official receiving seal or stamp of receipt of internal revenue office
16 wherein the same was actually filed shall, upon conviction therefore, be
0 punished by a fine of not less than [Ten thousand pesos (P10,000) but not more
8 than Twenty thousand pesos (P20,000)] ONE HUNDRED THOUSAND PESOS
9 (P100,000) BUT NOT MORE THAN ONE MILLION TWO HUNDRED
20 THOUSAND PESOS (P1,200,000) and suffer imprisonment of not less than
21 one (1) year but not more than three (3) years.”

2 SEC. 20. Section 256 of the National Internal Revenue Code of 1997, as
23 amended, is hereby amended to read as follows:

24 “SEC. 256. Penal Liability of Corporations. -— Any corporation,
25 association or general co-partnership liable for any of the acts or omissions
2% penalized under this Code, in addition to the penalties imposed herein upon the
2 responsible corporate officers, partners, or employees shall, upon conviction for
28 each act or omission, be punished by a fine of not less than [Fifty thousand
2» pesos (P50,000) but not more than One hundred thousand pesos (P100,000)]
30 TWO HUNDRED THOUSAND PESOS (P200,000) BUT NOT MORE THAN
31 TWO MILLION FOUR HUNDRED THOUSAND PESOS (P2,400,000).”

2 SEC.21. Section 257 of the National Internal Revenue Code of 1997, as

33. 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:

“(4) 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

(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)] THREE
HUNDRED THOUSAND PESOS (P300,000) BUT NOT MORE THAN ONE
MILLION TWO HUNDRED THOUSAND PESOS (P1,200,000) and suffer
imprisonment of not less than two (2) years but not more than six (6) 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]
THEIR immediate deportation after serving sentence, without further
proceedings for deportation.”

SEC. 22. Section 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 (5,000) but not more
than Twenty thousand pesos (P20,000)] FIFTY THOUSAND PESOS (P50,000)
BUT NOT MORE THAN THREE HUNDRED THOUSAND PESOS (P300,000)
and suffer imprisonment of not less than six (6) months but 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 SEVEN HUNDRED THOUSAND
PESOS (P700,000) and suffer imprisonment of not less than two (2) years but
not more than four (4) years.”

SEC. 23. Section 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, Etc. - It shall be unlawful for any person to have in his possession
cigarette paper in bobbins or rolls, cigarette tipping paper or cigarette filter tips,


1 without the corresponding authority therefor issued by the Commissioner. Any

2 person, importer, manufacturer of cigar and cigarettes, who has been found
3 guilty under this Section, shall, upon conviction for each act or omission, be
4 punished by a fine of not less than [Twenty thousand pesos (P20,000) but not
5 more than One hundred thousand pesos (P100,000)] ONE MILLION FIVE
6 HUNDRED THOUSAND PESOS (P1,500,000) BUT NOT MORE THAN
7 FIFTEEN MILLION PESOS (P15,000,000) and suffer imprisonment for a term
8 of not less than six (6) years and one (1) day but not more than twelve (12)
9 years.”

10 SEC. 24. Section 261 of the National Internal Revenue Code of 1997, as
11 amended, is hereby amended to read as follows:

n “SEC. 261. Unlawful Use of Denatured Alcohol. - Any person who
b for the purpose of manufacturing any beverage, uses denatured alcohol or
4 alcohol specially denatured to be used for motive power or withdrawn under
1s bond for industrial uses or alcohol knowingly misrepresented to be denatured to
16 be unfit for oral intake or who knowingly sells or offers for sale any beverage
” made in whole or in part from such aleohol or who uses such alcohol for the
8 manufacture of liquid medicinal preparations taken internally, or knowingly sells
9 or offers for sale such preparations containing as an ingredient such alcohol,
20 shall upon conviction for each act or omission be punished by a fine of not less
a than [Twenty thousand pesos (P20,000) but not more than One hundred
2 thousand pesos (P100,000)] ONE MILLION FIVE HUNDRED THOUSAND
2 PESOS (P1,500,000) BUT NOT MORE THAN FIFTEEN MILLION PESOS
4 (P15,000,000) and suffer imprisonment for a term of not less than six (6) years
25 and one (1) day but not more than twelve (12) years.

2% “Any person who shall unlawfully recover or attempt to recover by
2 distillation or other process any denatured alcohol or who knowingly sells or
28 offers for sale, conceals or otherwise disposes of alcohol so recovered or
2» redistilled shall be subject to the same penalties imposed under this Section.”

30 SEC. 25. Section 262 of the National Internal Revenue Code of 1997, as
31 amended, is hereby amended to read as follows

2 “SEC. 262. Shipment or Removal of Liquor or Tobacco Products
3 under False Name or Brand or as an Imitation of any Existing or Otherwise

4 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)] ONE MILLION FIVE HUNDRED
THOUSAND PESOS (P1,500,000) BUT NOT MORE THAN FIFTEEN
MILLION PESOS (P15,000,000) and suffer imprisonment of not less than six
(6) years and one (1) day but not more than twelve (12) years.”

SEC. 26. Section 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 thousand
pesos (P2,000)] SEVENTY-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 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 (P1,000)] 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)] ONE HUNDRED FIFTY THOUSAND PESOS (P150,000)
and suffer imprisonment of not less than [two (2) years but not more than four
(4) years] SIX (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


28
26
27
28
29

31
32
3
34

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)] FIVE HUNDRED THOUSAND
PESOS (P500,000);

“(C)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); for]

“(4)A fine of not less than [Fifty thousand —_ pesos (P50,000)] 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) and suffer imprisonment of [not less than ten (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)] IS
MORE THAN ONE MILLION PESOS (P1,000,000) BUT NOT MORE THAN
FIVE MILLION PESOS (P5,000,000)f.};

“(E)A FINE OF NOT LESS THAN ONE MILLION FIVE HUNDRED
THOUSAND PESOS (P1,500,000) BUT NOT MORE THAN FIFTEEN
MILLION PESOS (15,000,000), AND SUFFER IMPRISONMENT OF NOT
LESS THAN SIX (6) YEARS AND ONE (1) DAY BUT NOT MORE THAN
TWELVE (12) YEARS, IF THE APPRAISED VALUE, TO BE DETERMINED IN
THE MANNER PRESCRIBED IN THE CUSTOMS MODERNIZATION AND


28
26
27
28
29
30
31
32
33

TARIFF ACT, INCLUDING DUTIES AND TAXES, OF THE ARTICLES IS
MORE THAN FIVE MILLION PESOS (P5,000,000) BUT NOT MORE THAN
FIFTY MILLION PESOS (P50,000,000);

“(F)A FINE OF NOT LESS THAN FIFTEEN MILLION PESOS
(P15,000,000) BUT NOT MORE THAN FIFTY MILLION PESOS
(P50,000,000), AND SUFFER IMPRISONMENT OF NOT LESS THAN
TWELVE (12) YEARS AND ONE (1) DAY BUT NOT MORE THAN TWENTY
(20) YEARS, IF THE APPRAISED VALUE, TO BE DETERMINED IN THE
MANNER PRESCRIBED IN THE CUSTOMS MODERNIZATION AND TARIFF
ACT, INCLUDING DUTIES AND TAXES, OF THE ARTICLES IS MORE THAN
FIFTY MILLION PESOS (P50,000,000) BUT NOT MORE THAN TWO
HUNDRED MILLION PESOS (P200,000,000); OR

“(G) IF THE APPRAISED VALUE OF THE GOODS UNLAWFULLY
IMPORTED TO BE DETERMINED IN THE MANNER
PRESCRIBED IN THE CUSTOMS MODERNIZATION AND TARIFF ACT,
INCLUDING DUTIES AND TAXES, EXCEEDS TWO HUNDRED MILLION
PESOS (P200,000,000) OR IF THE AGGREGATE AMOUNT OF THE
APPRAISED VALUE OF THE GOODS WHICH ARE THE SUBJECT OF
UNLAWFUL IMPORTATION COMMITTED IN MORE THAN ONE INSTANCE,
INCLUDING DUTIES AND TAXES, EXCEEDS TWO HUNDRED MILLION
PESOS (P200,000,000), THE SAME SHALL BE PUNISHABLE WITH A
PENALTY OF TWENTY (20) YEARS AND ONE (1) DAY BUT NOT MORE
THAN THIRTY (30) YEARS AND A FINE OF NOT LESS THAN FIFTY
MILLION PESOS (P50,000,000).

“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 ten (10) times the amount of
excise tax due on the articles found but not less than [Five hundred pesos
(P500)] TWENTY-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 PESOS (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. 27. Section 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 or 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)] ONE HUNDRED THOUSAND PESOS (P100,000)
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] 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. 28 Section 265 of the National Internal 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)]
SEVEN HUNDRED THOUSAND PESOS (P700,000) but not more than [Fifty
thousand pesos (P50,000)] ONE MILLION TWO HUNDRED THOUSAND
PESOS (P1,200,000) 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. 29. Section 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 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)] ONE HUNDRED THOUSAND PESOS
(P100,000) but not more than [Ten thousand pesos (P10,000)] THREE
HUNDRED THOUSAND PESOS (P300,000) and suffer imprisonment of not
less than one (1) year but not more than two (2) years.”

SEC. 30. Section 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. 31 A new section is hereby inserted after Section 282 of the National

Internal Revenue Code of 1997, as amended, to read as follows:

“SEC. 282-A. VIOLATION OF THE PROVISIONS OF THIS CODE
AMOUNTING TO ECONOMIC SABOTAGE. - ANY VIOLATION OF
SECTION 254 OF THIS CODE THAT UNDERMINES, WEAKENS OR
RENDERS INTO DISREPUTE THE ECONOMIC SYSTEM OR VIABILITY OF
THE COUNTRY OR TENDS TO BRING OUT SUCH EFFECTS, IN LIEU OF
THE PENALTY SET IN THE PRECEDING PROVISIONS, SHALL
CONSTITUTE ECONOMIC SABOTAGE, AND, UPON CONVICTION FOR
EACH ACT OR OMISSION, BE PUNISHED BY A FINE OF NOT LESS THAN
FIFTY MILLION PESOS (P50,000,000) AND IMPRISONMENT OF TWELVE
(12) YEARS AND ONE (1) DAY BUT NOT MORE THAN TWENTY (20)
YEARS.”

SEC. 32. Section 288 of the National Internal Revenue Code of 1997, as

amended, is hereby amended to read as follows:
“SEC. 288. Disposition of Incremental Revenue. —
“(A)XXX
“(B)XXX
“(C)XXX
“O)XXX
(E)XXX


1 “(F)XXX

2 “(G) STUDENT VOUCHERS. - INCREMENTAL REVENUE FROM
3 TAX PAYMENTS OF EDUCATIONAL INSTITUTIONS THAT FAIL TO MEET
4 THE ESTABLISHED PERFORMANCE CRITERIA SHALL FUND A STUDENT
5 VOUCHER PROGRAM TO BE IMPLEMENTED UNDER THE COMMISSION
6 ON HIGHER EDUCATION (CHED) OR THE DEPARTMENT OF EDUCATION
7 (DEPED).

8 “(H) ‘UNIVERSAL HEALTHCARE. - INCREMENTAL REVENUE
9 FROM TAX PAYMENTS OF HOSPITALS THAT FAIL TO MEET THE
10 ESTABLISHED PERFORMANCE CRITERIA SHALL FUND THE UNIVERSAL
" HEALTHCARE PROGRAM TO BE IMPLEMENTED UNDER THE
R DEPARTMENT OF HEALTH (DOH).

b “(l) HOUSING VOUCHERS. - INCREMENTAL REVENUES FROM TAX
“4 PAYMENTS OF REAL ESTATE DEVELOPERS SHALL FUND A HOUSING
1s VOUCHER PROGRAM TO BE IMPLEMENTED UNDER THE NATIONAL
16 HOUSING AUTHORITY.”

” SEC. 33. Section 290 of the National Internal Revenue Code of 1997, as
18 amended, is hereby further amended to read as follows:

9 “SEC. 290. Congressional Oversight Committee. ~

20 “XXX

2 “The Committee shall, among others, in aid of legislation:

2 “(1) xxx;

2 *(Q) xxx;

24 "(3) xx x; [and]

2 “(4) xx x[J; AND

2% “(5) REVIEW THE PERFORMANCE OF FUNCTIONS OF THE
2 INVESTMENT PROMOTION AGENCIES AND THE FISCAL INCENTIVES
28 REVIEW BOARD, PARTICULARLY __ IN THE GRANT OF INCENTIVES TO
2 REGISTERED ENTERPRISES AND IN THE REVIEW AND EVALUATION OF
30 GRANTED INCENTIVES, RESPECTIVELY, AS WELL AS IN THE
3M FORMULATION OF THE STRATEGIC INVESTMENT PRIORITY PLAN.

32 “KX

B SEC. 34. Anew title is hereby inserted beginning Section 291, Title XIII of the

34 National Internal Revenue Code of 1997, as amended, to read as follows:


“TITLE XII

“CHAPTER I
“GENERAL PROVISIONS ON TAX INCENTIVES
“SEC 291. 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.

“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.

“SEC. 292. GOVERNING PROVISION FOR IPAS. — ALL IPAS
VESTED WITH THE POWER TO CONFER AND ADMINISTER INCENTIVES
SHALL GRANT TAX INCENTIVES PROVIDED IN THIS TITLE TO
REGISTERED ENTERPRISES ONLY TO THE EXTENT OF THEIR
APPROVED REGISTERED PROJECTS OR ACTIVITIES UNDER THE
STRATEGIC INVESTMENT PRIORITY PLAN (SIPP). THE PERIOD OF
AVAILMENT OF INCENTIVES SHALL BE RECKONED FROM THE START
OF COMMERCIAL OPERATION.

“SALES RECEIPTS AND/OR OTHER INCOME DERIVED FROM NON-
REGISTERED ACTIVITY OR PROJECT SHALL BE SUBJECT TO
APPROPRIATE TAXES UNDER THIS CODE.

“UNLESS OTHERWISE PROVIDED IN THIS CODE, DIRECT EXPORTS
ARE SUBJECT TO VALUE-ADDED TAX (VAT) ZERO-RATING AND
DOMESTIC SALES ARE SUBJECT TO THE REGULAR VALUE-ADDED TAX
RATE.

“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.

“(B) 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 INCLUDING OURSOURCED SERVICES USED TO PRODUCE
FINAL EXPORT GOODS;

“(2) SALES TO DIPLOMATIC MISSIONS AND INSTITUTIONS
COVERED BY INTERNATIONAL TREATY;

“(3) 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.

“(C) 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 NON-RESIDENT FOREIGN CLIENTS
BY EXPORT ENTERPRISES;

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

“(3) SERVICES FOR THE OVERHAUL, REPAIR, AND MAINTENANCE
OF INTERNATIONAL SHIPPING, OR AIR TRANSPORT OPERATIONS.

“(D) 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), REGIONAL BOARD OF INVESTMENTS
AUTONOMOUS REGION IN MUSLIM MINDANAO (RBOI-ARMM),
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 EXISTING OR THAT
MAY BE CREATED BY LAW IN THE FUTURE.

“(E) 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.

“(F) THE TERM ‘SPECIAL ECONOMIC ZONE’ OR ‘ECOZONE’ SHALL
REFER TO A SELECTED AREA, WHICH SHALL BE OPERATED AND
MANAGED AS A SEPARATE CUSTOMS TERRITORY THAT IS HIGHLY
DEVELOPED OR HAS THE POTENTIAL TO BE DEVELOPED


INTO AN AGRO-INDUSTRIAL, INDUSTRIAL, —_ INFORMATION
TECHNOLOGY, OR TOURIST/RECREATIONAL, WHOSE METES AND
BOUNDS ARE FIXED OR DELIMITED BY PRESIDENTIAL
PROCLAMATIONS AND WITHIN A SPECIFIC GEOGRAPHICAL AREA:
PROVIDED, THAT FOR THE ECOZONE TO QUALIFY AS A SEPARATE
CUSTOMS TERRITORY, IT SHALL HAVE A PERMANENT CUSTOMS
CONTROL OR CUSTOMS OFFICE AT ITS PERIMETER. AN ECOZONE
MAY CONTAIN ANY OR ALL OF THE FOLLOWING: INDUSTRIAL
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 VERTICAL
ECONOMIC ZONES, SUCH AS, BUT NOT LIMITED TO, BUILDINGS,
SELECTED FLOORS WITHIN BUILDINGS, AND SELECTED AREAS ON A
FLOOR, SHOULD COMPLY WITH THE MINIMUM CONTIGUOUS LAND
AREA AS DETERMINED BY THE FISCAL INCENTIVES REVIEW BOARD
(FIRB).

“(G) 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
IMPORTED GOODS FROM THE FREE-TRADE AREA TO A NON-FREE
TRADE AREA IN THE COUNTRY SHALL BE SUBJECT TO ALL
APPLICABLE INTERNAL REVENUE TAXES AND DUTIES: PROVIDED,
THAT FOR THE FREEPORT ZONE TO QUALIFY AS A SEPARATE
CUSTOMS TERRITORY, IT SHALL HAVE A PERMANENT CUSTOMS
CONTROL OR CUSTOMS OFFICE AT ITS PERIMETER.

“CHAPTER It
“TAX AND DUTY INCENTIVES


“SEC. 294. INCENTIVES. - REGISTERED PROJECTS OR ACTIVITIES
UNDER THE STRATEGIC INVESTMENT PRIORITY PLAN SHALL BE
QUALIFIED TO ANY OF THE FOLLOWING INCENTIVES:

(A) INCOME TAX INCENTIVES

“(1)INCOME 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, EXCEPT THOSE
PROVIDED UNDER SECTIONS 294(7) and (9), 295, 296, AND 297.

“(2)REDUCED CORPORATE INCOME TAX. - A REDUCED TAX
RATE OF EIGHTEEN PERCENT (18%) OF THE TAXABLE INCOME AS
DEFINED UNDER SECTION 31 OF THIS CODE: PROVIDED, THAT THE
RATE OF CORPORATE INCOME TAX SHALL BE SEVENTEEN PERCENT
(17%) BEGINNING JANUARY 1, 2021; SIXTEEN PERCENT (16%)
BEGINNING JANUARY 1, 2023; FIFTEEN PERCENT (15%) BEGINNING
JANUARY 1, 2025; FOURTEEN PERCENT (14%) BEGINNING JANUARY 1,
2027; AND THIRTEEN PERCENT (13%) BEGINNING JANUARY 1, 2029:
PROVIDED, FURTHER, THAT IN THE CASE OF REGISTERED
ENTERPRISES WITHIN ECONOMIC ZONES AND FREEPORTS, THE TAX
SHALL BE DIRECTLY REMITTED AS FOLLOWS:

“FIFTEEN PERCENT (15%) TO THE NATIONAL GOVERNMENT IN
2019 AND 2020; FOURTEEN PERCENT (14%) TO THE NATIONAL
GOVERNMENT IN 2021 AND 2022; THIRTEEN PERCENT (13%) TO
THE NATIONAL GOVERNMENT IN 2023 AND 2024; TWELVE PERCENT
(12%) TO THE NATIONAL GOVERNMENT IN 2025 AND 2026; ELEVEN
PERCENT (11%) TO THE NATIONAL GOVERNMENT IN 2027 AND 2028;
AND TEN PERCENT (10%) TO THE NATIONAL GOVERNMENT IN 2029
AND THEREAFTER;

“ONE POINT FIVE PERCENT (1.5%) TO THE TREASURER’S OFFICE
OF THE PROVINCE WHERE THE ENTERPRISE IS LOCATED, IN LIEU OF
THE LOCAL BUSINESS TAX;


“ONE POINT FIVE PERCENT (1.5%) TO THE TREASURER'S OFFICE
OF THE MUNICIPALITY OR COMPONENT CITY WHERE THE ENTERPRISE
IS LOCATED, IN LIEU OF THE LOCAL BUSINESS TAX;

“PROVIDED, THAT IF THE ENTERPRISE IS UNDER THE
JURISDICTION OF A HIGHLY URBANIZED CITY (HUC) OR INDEPENDENT
COMPONENT CITY (ICC), THE THREE PERCENT (3%) SHARE OF THE
LGU SHALL BE DIRECTLY REMITTED TO THE TREASURER’S OFFICE OF
THE HUC OR ICC.

*(3) DEPRECIATION ALLOWANCE OF THE ASSETS ACQUIRED FOR
THE ENTITY'S PRODUCTION OF GOODS AND SERVICES (QUALIFIED
CAPITAL EXPENDITURE) - TEN PERCENT (10%) FOR BUILDINGS; AND
TWENTY PERCENT (20%) FOR MACHINERIES AND EQUIPMENT:
PROVIDED, THAT DEPRECIATION MAY BE COMPUTED USING
ACCELERATED DEPRECIATION METHOD ON A RATE NOT EXCEEDING
TWICE THE RATE WHICH ‘WOULD HAVE BEEN USED HAD THE
ANNUAL ALLOWANCE BEEN COMPUTED IN ACCORDANCE WITH THE
RULES AND REGULATIONS PRESCRIBED BY THE SECRETARY
OF FINANCE AND THE PROVISIONS OF THE NATIONAL INTERNAL
REVENUE CODE OF 1997, AS AMENDED: PROVIDED, FURTHER, THAT
THE ASSETS ARE ACQUIRED DIRECTLY FOR THE REGISTERED
ENTERPRISE’S PRODUCTION OF GOODS AND SERVICES OTHER THAN
ADMINISTRATIVE AND OTHER SUPPORT SERVICES.

“(4) UP TO FIFTY PERCENT (50%) ADDITIONAL DEDUCTION ON THE
LABOR EXPENSE IN THE TAXABLE YEAR AS A CONSEQUENCE OF AN
INCREASE IN DIRECT LOCAL EMPLOYMENT: PROVIDED,
THAT THIS DOES NOT INCLUDE INDIRECT LABOR, SALARIES AND
WAGES, AND OTHER PERSONNEL COSTS INCURRED FOR
ADMINISTRATIVE AND OTHER SUPPORT SERVICES.

“(5) UP. TO ONE HUNDRED PERCENT (100%) ADDITIONAL
DEDUCTION ON THE INCREMENT OF RESEARCH AND DEVELOPMENT
INCURRED IN THE TAXABLE YEAR: PROVIDED, THAT IT IS DIRECTLY
RELATED TO THE REGISTERED ACTIVITY/IES OF THE ENTITY.

“(6) UP TO ONE HUNDRED PERCENT (100%) ADDITIONAL
DEDUCTION ON TRAININGS INCURRED: PROVIDED, THAT IT IS GIVEN


TO THE EMPLOYEES ENGAGED DIRECTLY IN THE ENTITY'S
PRODUCTION OF GOODS AND SERVICES: PROVIDED, FURTHER,
THAT THE CONCERNED IPA HAS ISSUED A CORRESPONDING
CERTIFICATE OF ENTITLEMENT UPON APPLICATION, AND A
CERTIFICATE OF APPROVAL AFTER A REVIEW OF DOCUMENTATION
OF TRAININGS SUBMITTED BY THE ENTERPRISE AT THE END OF THE
TAXABLE YEAR, OTHERWISE, THIS INCENTIVE SHALL BE DEEMED
WAIVED.

“(7) UP TO ONE HUNDRED PERCENT (100%) DEDUCTION ON
INFRASTRUCTURE DEVELOPMENT. - REGISTERED ENTERPRISES
ESTABLISHING THEIR ACTIVITY IN AN AREA THAT THE STRATEGIC
INVESTMENT PRIORITY PLAN (SIPP) DESIGNATES AS
NECESSARY FOR COUNTRYWIDE 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 UP
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 INFRASTRUCTURE SHALL BE
OPEN FOR USE BY THE GENERAL PUBLIC: PROVIDED, FURTHER, THAT
THE TITLE TO ALL SUCH INFRASTRUCTURE WORKS SHALL UPON
COMPLETION, BE TRANSFERRED TO THE PHILIPPINE GOVERNMENT:
PROVIDED, FINALLY, 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 OPERATION.

“(8)DEDUCTION FOR REINVESTMENT ALLOWANCE TO
MANUFACTURING INDUSTRY. - WHEN A MANUFACTURING
REGISTERED ENTERPRISE REINVESTS ITS UNDISTRIBUTED PROFIT OR
SURPLUS IN ANY OF THE ACTIVITIES LISTED IN THE SIPP, THE
AMOUNT SO REINVESTED TO A MAXIMUM OF FIFTY PERCENT (50%)
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.

“(9) ENHANCED NET OPERATING LOSS CARRY-OVER
(NOLCO). - THE NET OPERATING LOSS OF THE REGISTERED ACTIVITY
DURING THE FIRST THREE (3) YEARS FROM THE START OF
COMMERCIAL OPERATION WHICH HAD NOT BEEN PREVIOUSLY
OFFSET AS DEDUCTION FROM GROSS INCOME MAY BE CARRIED
OVER AS DEDUCTION FROM GROSS INCOME WITHIN THE NEXT FIVE
(5) CONSECUTIVE TAXABLE YEARS IMMEDIATELY FOLLOWING THE
YEAR OF SUCH LOSS.

*(10) UP TO FIFTY PERCENT (50%) ADDITIONAL DEDUCTION ON
THE INCREMENT OF THE DOMESTIC INPUT EXPENSE INCURRED IN THE
TAXABLE YEAR: PROVIDED, THAT IT IS DIRECTLY RELATED TO AND
ACTUALLY USED IN THE REGISTERED EXPORT ACTIVITY OF THE
REGISTERED ENTITY.

“PROVIDED, THAT IN LIEU OF THE ITH UNDER SECTION 294(A)(1)
OR THE REDUCED TAX RATE OF EIGHTEEN PERCENT (18%) UNDER
SECTION 294(A)(2), THE TAX INCENTIVES UNDER SECTION 294(A)(3), (4),
(5), (6), (7), (8), (9), AND (10) MAY BE GRANTED ON AN INDUSTRY-
SPECIFIC BASIS AS DETERMINED BY THE BOI IN THE STRATEGIC
INVESTMENT PRIORITY PLAN. THE BO! SHALL PRESCRIBED THE
LEVEL OF ADDITIONAL DEDUCTION FOR SELECTED INDUSTRIES.

“PROVIDED, FURTHER, THAT IN NO SUCH CASE SHALL AN INCOME
TAX INCENTIVE BE EXTENDED BEYOND THE INITIAL GRANT OF FIVE (5)
YEARS, EXCEPT THOSE PROVIDED UNDER SECTION 294(A)(7) AND (9),
SECTIONS 295, 296, AND 297.

“(B) EXEMPTION FROM CUSTOMS DUTY ON IMPORTATION OF
CAPITAL EQUIPMENT AND RAW MATERIALS DIRECTLY AND
EXCLUSIVELY USED IN THE REGISTERED ACTIVITY BY REGISTERED
ENTERPRISES: PROVIDED, THAT THE FIVE (5) YEARS LIMIT IN THIS


19
20
21
2
B
24

SUBSECTION SHALL NOT APPLY TO FREEPORT ZONES AS DEFINED
UNDER THIS TITLE.

“PROVIDED, FURTHER, THAT EXPANSION OF REGISTERED
ACTIVITIES MAY BE GRANTED DUTY EXEMPTION ON CAPITAL
EQUIPMENT ONLY, SUBJECT TO THE FOLLOWING CONDITIONS:

“(1) THE ACTIVITY IS STILL COVERED BY THE STRATEGIC
INVESTMENT PRIORITY PLAN (SIPP) OR IS AN INNOVATION PROJECT
AS DEFINED IN THE STRATEGIC INVESTMENT PRIORITY PLAN;

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

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

“(C) VALUE-ADDED TAX (VAT)

“(1)REGISTERED ENTERPRISES WHOSE EXPORT SALES MEET
THE NINETY PERCENT (90%) THRESHOLD AND ARE LOCATED WITHIN
AN ECOZONE, FREEPORT, OR THOSE UTILIZING CUSTOMS BONDED
MANUFACTURING WAREHOUSE: VAT EXEMPTION ON IMPORTATION
AND VAT ZERO-RATING ON DOMESTIC PURCHASES OF CAPITAL
EQUIPMENT AND RAW MATERIALS USED IN THE MANUFACTURING
AND PROCESSING OF PRODUCTS AND IMPORTATION OF SOURCE
DOCUMENTS SHALL APPLY.

“(2)REGISTERED ENTERPRISES WHOSE EXPORT SALES ARE
BELOW THE NINETY PERCENT (90%) THRESHOLD AND ARE LOCATED
WITHIN AN ECOZONE, FREEPORT, OR THOSE UTILIZING CUSTOMS
BONDED MANUFACTURING WAREHOUSE: VAT EXEMPTION ON
IMPORTATION AND VAT ZERO-RATING ON DOMESTIC PURCHASES OF
CAPITAL EQUIPMENT AND RAW MATERIALS USED IN THE
MANUFACTURING AND PROCESSING OF PRODUCTS AND
IMPORTATION OF SOURCE DOCUMENTS: PROVIDED, THAT THEY
COMPLY WITH THE ELECTRONIC RECEIPTS OR INVOICING UNDER
SECTIONS 237 AND 237-A OF THIS CODE.

“(3)REGISTERED ENTERPRISES WHOSE EXPORT SALES ARE
BELOW NINETY PERCENT (90%) OR ARE LOCATED OUTSIDE AN
ECOZONE OR FREEPORT REGARDLESS OF EXPORT SALES


THRESHOLD: THE VALUE-ADDED TAX PROVISION IN TITLE IV OF THIS
CODE AND SECTION 307 OF THIS ACT SHALL APPLY.

“FOR THIS PURPOSE, ‘PROCESSING’ SHALL REFER TO THE
CONVERSION OF 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 DESICCATING, QUICK FREEZING,
THAT RESULTS IN A CHANGE IN THE NATURE OR STATE OF A
PRODUCT. MERE PACKING OR PACKAGING SHALL NOT CONSTITUTE
PROCESSING.

“‘SOURCE DOCUMENTS’ REFER TO INPUT MATERIALS AND
DOCUMENTS REASONABLY NEEDED BY I.T. AND 1.T.-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.

“SEC. 295. INCENTIVES FOR AGRIBUSINESS. -AGRIBUSINESS
PROJECTS OR ACTIVITIES OF REGISTERED ENTERPRISES LOCATED
OUTSIDE METRO MANILA AND OTHER URBAN AREAS AS IDENTIFIED IN
THE STRATEGIC INVESTMENT PRIORITY PLAN SHALL BE ENTITLED TO
ADDITIONAL TWO (2) YEARS OF INCENTIVE UNDER SECTION 294, OF
WHICH ONE (1) YEAR MAY BE AN ADDITIONAL YEAR OF INCOME TAX
HOLIDAY.

“SEC. 296. PROJECTS OR ACTIVITIES LOCATED IN LESS
DEVELOPED AREAS OR THOSE RECOVERING FROM ARMED CONFLICT
OR A MAJOR DISASTER. - PROJECTS OR ACTIVITIES OF REGISTERED
ENTERPRISES LOCATING IN LESS DEVELOPED AREAS AS
IDENTIFIED IN THE STRATEGIC INVESTMENT PRIORITY PLAN, OR
THOSE RECOVERING FROM ARMED CONFLICT AND/IOR A MAJOR
DISASTER AS DETERMINED BY THE OFFICE OF THE PRESIDENT SHALL
BE ENTITLED TO ADDITIONAL TWO (2) YEARS OF INCENTIVE UNDER
SECTION 294, OF WHICH ONE (1) YEAR MAY BE AN ADDITIONAL YEAR
OF INCOME TAX HOLIDAY.


“SEC. 297. RELOCATION PROJECTS OR ACTIVITIES. — PRIOR
TO THE EFFECTIVITY OF THIS ACT, REGISTERED PROJECTS OR
ACTIVITIES RELOCATING FROM METRO MANILA AND SELECTED
URBANIZED AREAS ADJACENT TO METRO MANILA TO OTHER
AREAS OF THE COUNTRY SHALL BE ENTITLED TO ADDITIONAL
TWO (2) YEARS OF INCENTIVE UNDER SECTION 294, OF WHICH ONE (1)
YEAR MAY BE AN ADDITIONAL YEAR OF INCOME TAX HOLIDAY.

“CHAPTER Ill
“THE FISCAL INCENTIVES REVIEW BOARD

“SEC. 298. EXPANDED FUNCTIONS OF THE FISCAL
INCENTIVES REVIEW BOARD. — THE FUNCTIONS AND POWERS
OF THE FISCAL INCENTIVES REVIEW BOARD OR FIRB CREATED
UNDER PRESIDENTIAL DECREE (PD) NO. 776, AS AMENDED BY PD NO.
1931 AND PD NO. 1955, OFFICE OF THE PRESIDENT MEMORANDUM
ORDER NO. 23, SERIES OF 1986 AND EXECUTIVE ORDER NO. 93,
SERIES OF 1986, SHALL BE EXPANDED AS FOLLOWS:

“(A) TO EXERCISE OVERSIGHT FUNCTIONS OVER IPAS.

“(B) TO REQUIRE THE IPAS TO SUBMIT THE FOLLOWING:

“(4) LIST OF REGISTERED ENTERPRISES ANNUALLY WITH
CORRESPONDING FIRM-LEVEL DATA AS MANDATED UNDER THE TAX
INCENTIVES MANAGEMENT AND TRANSPARENCY ACT OR TIMTA LAW;

“(2) APPROVED AMOUNT OF INVESTMENTS AND EMPLOYMENT
GENERATION AND OTHER BENEFITS ON A FIRM-LEVEL BASIS
ANNUALLY; AND

“(3) APPROVED AMOUNT OF TAX INCENTIVES, BOTH INCOME AND
NON-INCOME TAX BASED INCENTIVES, ON A FIRM-LEVEL BASIS
ANNUALLY.

“(C) FOR PROJECTS OR ACTIVITIES THAT POSE RISK TO THE
ENVIRONMENT, HEALTH, AND ECONOMIC STABILITY AND PROJECTS
OR ACTIVITIES THE APPROVAL OF WHICH ENCOUNTERS A DEADLOCK
IN THE IPAS BOARD, THE FIRB:

“(1) SHALL FORMULATE POLICIES ON TAX INCENTIVES IN
ACCORDANCE WITH THE PROVISIONS OF THIS CODE;


“(2) SHALL REVIEW IPAS’ COMPLIANCE WITH THE POLICIES SET
FORTH IN THIS CODE: PROVIDED, THAT THE FIRB MAY CANCEL OR
SUSPEND THE POWER OF IPAS TO GRANT INCENTIVES FOR
VIOLATIONS OF SUCH POLICIES;

“(3) SHALL APPROVE THE GRANT OF INCENTIVES ON THE ABOVE
INSTANCES; AND

“(4) ON THE ABOVE INSTANCES MAY SUSPEND OR CANCEL THE
TAX INCENTIVES GRANTED TO REGISTERED ENTERPRISES WHICH
ARE NOT COMPLIANT WITH THE CONDITIONS ON THE AVAILMENT OF
TAX INCENTIVES AS WELL AS THE POLICIES SET FORTH BY THE IPAS.

“(D) TO PUBLISH THE NAMES OF THE REGISTERED ENTERPRISES
OR BENEFICIARIES OF TAX INCENTIVES WITH APPROVED ESTIMATED
AMOUNT OF THE CORRESPONDING TAX INCENTIVES.

“(E) TOGRANT TAX SUBSIDIES TO GOVERNMENT -OWNED
AND/OR -CONTROLLED CORPORATIONS (GOCCS), GOVERNMENT
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 AS THE
CUSTODIAN OF FISCAL PRUDENCE AND RESPONSIBILITY,
THE SECRETARY OF FINANCE SHALL EXERCISE OVERSIGHT
FUNCTIONS AND SHALL HAVE VETO POWER OVER THE APPROVAL
AND CANCELLATION OF TAX INCENTIVES UNDER SECTION 298 (C).

“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 DEPARTMENT OF TRADE
AND INDUSTRY (DTI) SHALL BE MEMBERS OF ALL THE EXISTING AND
FUTURE IPAS.

“SEC. 299. COMPOSITION OF THE FIRB. - THE FIRB SHALL BE
RECONSTITUTED AS FOLLOWS:

“BOARD PROPER:

“CHAIRPERSON - SECRETARY OF FINANCE



“MEMBERS - SECRETARY OF TRADE AND INDUSTRY
- DIRECTOR GENERAL OF THE NATIONAL
ECONOMIC AND DEVELOPMENT AUTHORITY
(NEDA)
~ SECRETARY OF BUDGET AND MANAGEMENT
- EXECUTIVE SECRETARY OF THE OFFICE OF THE
PRESIDENT
“TECHNICAL COMMITTEE:
“CHAIRPERSON - UNDERSECRETARY OF FINANCE
“MEMBERS —- UNDERSECRETARY OF TRADE AND
INDUSTRY/BOARD OF INVESTMENTS MANAGING
HEAD
- UNDERSECRETARY OF BUDGET AND
MANAGEMENT
- DEPUTY DIRECTOR GENERAL OF THE NATIONAL
ECONOMIC ANDDEVELOPMENT AUTHORITY
COMMISSIONER OF INTERNAL REVENUE
— COMMISSIONER OF CUSTOMS
~ EXECUTIVE DIRECTOR OF THE NATIONAL TAX
RESEARCH CENTER (NTRC)
“SECRETARIAT: - NATIONAL TAX RESEARCH CENTER
“CHAPTER IV
“QUALIFIED ACTIVITIES FOR TAX INCENTIVES
“SEC. 300. | STRATEGIC INVESTMENT PRIORITY PLAN (SIPP). -
THE BOARD OF INVESTMENTS (BOl), IN COORDINATION WITH THE
OFFICE OF THE PRESIDENT, THE FISCAL INCENTIVES REVIEW BOARD,
THE CONCERNED IPAS, AND OTHER GOVERNMENT AGENCIES AND
THE PRIVATE SECTOR, SHALL FORMULATE THE SIPP TO BE
SUBMITTED TO THE PRESIDENT FOR HIS APPROVAL 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. ALL SECTORS OR
INDUSTRIES THAT MAY BE INCLUDED IN THE SIPP SHALL UNDERGO
AN EVALUATION PROCESS TO DETERMINE THE SUITABILITY AND


POTENTIAL OF THE INDUSTRY OR THE SECTOR IN PROMOTING LONG-
TERM GROWTH AND DEVELOPMENT, AND THE NATIONAL INTEREST.

“THE SIPP SHALL:

“(A) INCLUDE ACTIVITIES THAT COMPLY WITH THE FOLLOWING:

“(1) THE ACTIVITY SHALL BE COVERED BY THE PHILIPPINE
DEVELOPMENT PLAN OR ITS EQUIVALENT AND OTHER GOVERNMENT
PROGRAMS;

“(2) THE ACTIVITY SHALL TAKE INTO ACCOUNT ANY OF THE
FOLLOWING:

(i) SUBSTANTIAL AMOUNT OF INVESTMENTS;

“(ii) CONSIDERABLE GENERATION OF EMPLOYMENT;

“(iii) ADOPT INCLUSIVE BUSINESS ACTIVITIES AND VALUE-
ADDING PRODUCTION BY MSMES;

“(iv) USE OF MODERN OR NEW TECHNOLOGY;

“(v) ADOPTION OF ADEQUATE ENVIRONMENTAL PROTECTION
SYSTEMS;

*(vi) ADDRESS MISSING GAPS IN THE SUPPLY/VALUE CHAIN OR
MOVE UP THE VALUE CHAIN OR PRODUCT LADDER; OR

“(vil) PROMOTION OF MARKET COMPETITIVENESS.

“(B) IDENTIFY AGRIBUSINESS ACTIVITIES, THE LESS DEVELOPED
AREAS OR THOSE RECOVERING FROM ARMED CONFLICT OR A MAJOR
DISASTER.

“(C) DETERMINE SERVICES AND ACTIVITIES THAT CAN SPUR
REGIONAL OR GLOBAL OPERATIONS IN THE COUNTRY.

"(D) INCLUDE EXISTING REGISTERED PROJECTS OR ACTIVITIES
THAT SHALL RELOCATE FROM METRO MANILA TO OTHER AREAS OF
THE COUNTRY.

“THE ACTIVITIES MUST COMPLY WITH THE SPECIFIC
QUALIFICATION REQUIREMENTS OR CONDITIONS FOR A PARTICULAR
SECTOR OR INDUSTRY AND OTHER LIMITATIONS AS SET AND
DETERMINED BY THE BOI.

“THE THRESHOLD AMOUNT OF INVESTMENTS AND EMPLOYMENT
GENERATION REQUIRED FOR A SPECIFIC ACTIVITY SHALL BE
SUBJECT TO A PERIODIC REVIEW EVERY THREE (3) YEARS TAKING


INTO CONSIDERATION INTERNATIONAL STANDARDS AND OTHER
INDICATORS.

“SEC. 301. POWER OF THE PRESIDENT TO GRANT
INCENTIVES. — THE PRESIDENT MAY, IN THE INTEREST OF NATIONAL
ECONOMIC DEVELOPMENT AND UPON THE RECOMMENDATION OF THE
FISCAL INCENTIVES REVIEW BOARD, GRANT INCENTIVES IN ADDITION
TO THOSE THAT ARE PROVIDED UNDER THIS CODE, INCLUDING A
LONGER PERIOD, TO HIGHLY DESIRABLE PROJECTS: PROVIDED, THAT
THE BENEFITS THAT THE GOVERNMENT MAY DERIVE FROM SUCH
INVESTMENT THERETO IS CLEAR AND CONVINCING AND FAR
OUTWEIGH THE COST OF INCENTIVES THAT WILL BE GRANTED.”

“SEC. 301-A. CRITERIA FOR AVAILMENT. - THE BOARD OF
INVESTMENTS SHALL CONSIDER THE FOLLOWING CRITERIA IN
DETERMINING THE TYPES OF INCENTIVES AND THE DURATION
THEREOF THAT MAY BE GRANTED:

“(A) THE PROJECT HAS A COMPREHENSIVE SUSTAINABLE
DEVELOPMENT PLAN WITH CLEAR INCLUSIVE BUSINESS
APPROACHES AND INNOVATIONS; OR

“(B) MINIMUM INVESTMENT OF TWO HUNDRED MILLION US
DOLLARS (US$200,000,000) OR A MINIMUM DIRECT EMPLOYMENT
GENERATION OF AT LEAST ONE THOUSAND FIVE HUNDRED (1,500)
WITHIN THREE (3) YEARS FROM THE START OF COMMERCIAL
OPERATION.

“THE THRESHOLD SHALL BE SUBJECT TO A PERIODIC REVIEW
EVERY THREE (3) YEARS TAKING INTO CONSIDERATION
INTERNATIONAL STANDARDS AND OTHER INDICATORS.

“THE BOI MAY IMPOSE OTHER TERMS AND CONDITIONS TAKING
INTO CONSIDERATION THE AMOUNT OR KIND OF INCENTIVES THAT
WILL BE GRANTED TO SUCH INVESTMENTS.”

“SEC. 301-B. USE OF RESOURCES. - IN THE EXERCISE OF THE
POWER OF THE PRESIDENT TO GRANT INCENTIVES, THE
GOVERNMENT MAY UTILIZE ITS RESOURCES SUCH AS LAND USE,
WATER APPROPRIATION, POWER PROVISION, AMONG OTHERS, AS
MAY BE IDENTIFED BY THE BOI.”


“SEC. 302. AMENDMENTS. - SUBJECT TO
PUBLICATION REQUIREMENTS AND THE CRITERIA FOR INVESTMENT
PRIORITY DETERMINATION, THE BO! MAY, AT ANY TIME, INCLUDE
ADDITIONAL AREAS IN THE SIPP, ALTER ANY OF THE TERMS OF THE
DECLARATION OF AN INVESTMENT AREA, AND TEMPORARILY OR
PERMANENTLY SUSPEND ACTIVITIES ON THE SIPP IF IT CONSIDERS
THAT SUCH ACTIVITY IS NO LONGER A PRIORITY. IN NO CASE SHALL.
THE IPAS ACCEPT APPLICATIONS UNLESS THE ACTIVITY IS LISTED IN
THE SIPP.”

“SEC. 303. PUBLICATION. - UPON APPROVAL OF THE PLAN,
IN 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 AMENDMENT OR DELETION

THEREOF.”
“SEC. 304. QUALIFICATIONS OF A REGISTERED ENTERPRISE
FOR TAX INCENTIVES. - IN THE REVIEW AND GRANT OF TAX

INCENTIVES, A REGISTERED ENTERPRISE MUST:

“(A) BE ENGAGED IN AN ACTIVITY INCLUDED IN THE SIPP;

“(B) 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 THE WHOLE
ENTERPRISE; OR ESTABLISH A SEPARATE CORPORATION FOR EACH
REGISTERED PROJECT IF THE IPA SHOULD SO REQUIRE;

“(C) COMPLY WITH THE E-INVOICE AND E-SALES REQUIREMENT IN
ACCORDANCE WITH SECTION 237-A OF THIS CODE.”

“CHAPTER V
“AVAILMENT OF TAX INCENTIVES

“SEC. 305. INCOME TAX-BASED INCENTIVES. -

ALL REGISTERED ENTERPRISES ARE REQUIRED To


FILE ALL THEIR TAX RETURNS USING THE ELECTRONIC/ONLINE
FACILITIES OF THE BUREAU OF INTERNAL REVENUE (BIR). IN
AVAILING THE INCOME TAX-BASED INCENTIVES, THE REGISTERED
ENTERPRISE SHALL BE REQUIRED TO SECURE A CERTIFICATE OF
ENTITLEMENT ISSUED BY THE IPA 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 APPLICATION
SHALL CAUSE THE FORFEITURE OF THE INCENTIVE FOR THAT
TAXABLE PERIOD."

“SEC. 306. 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 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, THAT 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 THAT IT SHALL BE USED FOR
A
NON-REGISTERED ACTIVITY OF THE REGISTERED ENTERPRISE AT ANY


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TIME 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 THE SALE,
TRANSFER OR DISPOSITION OF THE CAPITAL EQUIPMENT AND/OR
SPARE PARTS WHICH WERE GRANTED TAX AND CUSTOMS DUTY
EXEMPTION HEREUNDER, AND SHALL BE ALLOWED ONLY UNDER THE
FOLLOWING CIRCUMSTANCES:

“(1)IF MADE TO ANOTHER ENTERPRISE ENJOYING CUSTOMS
DUTY EXEMPTION ON IMPORTED CAPITAL EQUIPMENT AND/OR SPARE
PARTS;

“(2) 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;

*(3) EXPORTATION OF CAPITAL EQUIPMENT, MACHINERY, SPARE
PARTS OR SOURCE DOCUMENTS, OR THOSE REQUIRED FOR
POLLUTION ABATEMENT AND CONTROL; OR

“(4) FOR REASONS OF PROVEN TECHNICAL OBSOLESCENCE.

“PROVIDED, THAT IF THE REGISTERED ENTERPRISE SELLS,
TRANSFERS OR DISPOSES THE AFOREMENTIONED IMPORTED ITEMS
WITHOUT PRIOR APPROVAL, THE REGISTERED ENTERPRISE AND THE
VENDEE, TRANSFEREE, OR ASSIGNEE 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
EQUIPMENT WAS MADE AFTER FIVE (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.”

“SEC. 307. VAT REFUND MECHANISM ON IMPORTATION OF
CAPITAL EQUIPMENT AND RAW MATERIALS. - THE VAT ON
IMPORTATION OF CAPITAL EQUIPMENT AND RAW MATERIALS PAID BY
EXPORT REGISTERED ENTERPRISES THAT DID NOT MEET THE NINETY
PERCENT (90%) EXPORT SALES THRESHOLD OR ARE LOCATED
OUTSIDE THE ECOZONE, FREEPORT, OR THOSE UTILIZING THE
CUSTOMS BONDED MANUFACTURING WAREHOUSE REGARDLESS OF
THE THRESHOLD SHALL BE REFUNDED PURSUANT TO THE ENHANCED
VAT REFUND SYSTEM UNDER SECTIONS 106 AND 108 OF THIS CODE.”

“CHAPTER VI
“FINAL PROVISIONS

“SEC. 308. NO DOUBLE REGISTRATION OF ENTERPRISES. -
REGISTERED ENTERPRISES SHALL NOT BE ALLOWED TO REGISTER
THEIR ACTIVITIES IN MORE THAN ONE (1) IPA.”

“SEC. 309. 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 FIVE (5) YEARS FROM
DATE OF REGISTRATION.”

“SEC. 310. INVESTMENTS PRIOR TO THE EFFECTIVITY OF THIS
ACT. - EXISTING REGISTERED ACTIVITIES GRANTED THE INCOME TAX
HOLIDAY SHALL BE ALLOWED TO CONTINUE WITH THE 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 OTHER TAX INCENTIVES GRANTED TO EXISTING
REGISTERED ACTIVITIES, SUCH AS THE FIVE PERCENT (5%) TAX ON
GROSS INCOME EARNED IN LIEU OF ALL TAXES, BOTH NATIONAL AND
LOCAL, SHALL BE ALLOWED TO CONTINUE FOLLOWING THE
SCHEDULE STATED HEREIN:

“(A) TWO (2) YEARS FOR ACTIVITIES ENJOYING THE TAX
INCENTIVE FOR MORE THAN TEN (10) YEARS;


“(B) THREE (3) YEARS FOR ACTIVITIES ENJOYING THE TAX
INCENTIVE BETWEEN FIVE (5) AND TEN (10) YEARS;

“(C) FIVE (5) YEARS FOR ACTIVITIES ENJOYING THE TAX
INCENTIVE BELOW FIVE (5) YEARS.

“PROVIDED, THAT THE FIVE PERCENT (5%) TAX ON GROSS
INCOME EARNED SHALL COMMENCE AFTER THE ITH PERIOD HAS
LAPSED ONLY FOR THE REMAINING YEARS WITHIN THE FIVE (5)-YEAR
PERIOD.”

“SEC. 311. SUSPENSION AND FORFEITURE OF TAX
INCENTIVES OF REGISTERED ENTERPRISES, REFUND AND PENALTIES;
WAIVER AND CONDONATION. - THE IPA MAY IMPOSE FINES AND
PENALTIES, SUSPEND AND/OR FORFEIT THE INCENTIVES GRANTED TO
THE REGISTERED ENTERPRISES WHENEVER THERE ARE VIOLATIONS
OF THE REGISTRATION TERMS AND CONDITIONS BY THE LATTER,
WITHOUT PREJUDICE TO THE CANCELLATION OF THE REGISTRATION
OF SAID ENTERPRISE.

“WHEN THERE IS PROBABLE CAUSE TO BELIEVE THAT THE
REGISTERED ENTERPRISE HAS VIOLATED ITS REGISTRATION TERMS
AND CONDITIONS, THE IPA SHALL SUSPEND THE AVAILMENT OF
INCENTIVES UNTIL PROVEN OTHERWISE: PROVIDED, THAT FOR
PROJECTS UNDER SECTION 298(C), THE CONCERNED IPA SHALL
RECOMMEND TO THE FIRB THE SUSPENSION OF ITS AVAILMENT OF
INCENTIVES.

‘IN CASE OF CANCELLATION OF THE CERTIFICATE OF
REGISTRATION, THE CONCERNED IPA MAY, IN APPROPRIATE CASES,
REQUIRE THE PAYMENT OF TAXES, CUSTOMS DUTIES AND ANY
APPLICABLE PENALTIES THEREON TO THE APPROPRIATE AGENCY,
AND IMPOSE ADDITIONAL FINES AND PENALTIES.

“FOR THIS PURPOSE, THE IPAS SHALL PREPARE A SCHEDULE OF
FEES, FINES AND PENALTIES TO BE IMPOSED ON ERRING
REGISTERED ENTERPRISES DEPENDING ON THE GRAVITY OF THE
VIOLATION INCURRED IN ADDITION TO THE FINES AND PENALTIES
IMPOSABLE UNDER THIS CODE.


“IN MERITORIOUS CASES, THE IPA MAY WAIVE, CONDONE OR
REDUCE FINES OR PENALTIES IMPOSED ON REGISTERED
ENTERPRISES BY THE IPAS: PROVIDED, THAT THE MINIMUM
COMPROMISE RATE, IN CASE OF REDUCTION, SHALL NOT BE LESS
THAN FORTY PERCENT (40%) OF THE BASIC ASSESSED FINES OR
PENALTIES.”

“SEC. 312. STRUCTURAL ADJUSTMENT FUND. - THE
FOLLOWING AMOUNTS SHALL BE APPROPRIATED TO COMPENSATE
WORKERS THAT MAY BE DISPLACED BY THE RATIONALIZATION OF
FISCAL INCENTIVES TO IMPROVE EMPLOYABILITY OF WORKERS:

“(1) THE AMOUNT OF FIVE HUNDRED MILLION PESOS
(P500,000,000) SHALL BE APPROPRIATED ANNUALLY, IN ADDITION TO
ANY ADJUSTMENT FUND APPROPRIATED UNDER THE BUDGET OF THE
DEPARTMENT OF LABOR AND EMPLOYMENT, TO PROVIDE TARGETED
CASH GRANTS OR OTHER SUPPORT PROGRAMS TO DISPLACED
WORKERS OF FIRMS THAT MAY BE AFFECTED BY THE
RATIONALIZATION OF FISCAL INCENTIVES;

“(2) THE AMOUNT OF FIVE HUNDRED MILLION PESOS
(P500,000,000) SHALL BE APPROPRIATED ANNUALLY TO PROVIDE
TARGETED TRAININGS TO DISPLACED WORKERS OF FIRMS THAT MAY
BE AFFECTED BY THE RATIONALIZATION OF FISCAL INCENTIVES;

(3) THE AMOUNT OF FIVE BILLION PESOS (P5,000,000,000) SHALL
BE ALLOCATED ANNUALLY FOR THE SKILLS UPGRADE PROGRAM OF
THE IT-BPO INDUSTRY. THE FUND SHALL BE SOLELY USED TO PAY
FOR FORMAL ACADEMIC OR TRAINING PROGRAMS OF ACCREDITED
PRIVATE OR PUBLIC SCHOOLS AND TRAINING CENTERS; AND

"(4) THE AMOUNT OF FIFTEEN BILLION PESOS (P15,000,000,000), IN
ADDITION TO ANY ADJUSTMENT FUND APPROPRIATED UNDER THE
BUDGET OF PERTINENT GOVERNMENT DEPARTMENTS/AGENCIES,
SHALL BE APPROPRIATED FOR THE DEVELOPMENT OF
INFRASTRUCTURE SURROUNDING AND WITHIN THE
AREASI/LOCALITIES OF SPECIAL ECONOMIC ZONES AND FREEPORTS
TO BE AFFECTED BY THIS ACT. THIS SUBSIDY SHALL LIKEWISE BE
UTILIZED TO SUPPORT RESEARCH AND DEVELOPMENT; COSTS OF


POWER, WATER AND OTHER UTILITIES; LEASE OF PROPERTIES; AND

OTHER ECONOMIC ACTIVITIES RELEVANT

TO DEVELOPING THE ABOVEMENTIONED AREAS/LOCALITIES.

“PROVIDED, THAT RELEASES TO THE INVESTMENT PROMOTION

AGENCIES SHALL BE GOVERNED BY IMPLEMENTING GUIDELINES TO

BE PROMULGATED BY THE DEPARTMENT OF FINANCE AND THE

DEPARTMENT OF BUDGET AND MANAGEMENT.

“PROVIDED, FURTHER, THAT EARMARKING FOR THESE FUNDS IN

THIS SECTION SHALL BE TERMINATED FIVE (5) YEARS AFTER THE

EFFECTIVITY OF THIS ACT.”

“SEC. 313. ENHANCED TAX EXPENDITURE FUND SYSTEM. -

ALL INTERNAL REVENUE TAX AND DUTY OBLIGATIONS OF

GOVERNMENT-OWNED AND/OR CONTROLLED CORPORATIONS SHALL

BE CHARGEABLE TO THE TAX EXPENDITURE FUND OF THE

GOVERNMENT UPON THE ESTABLISHMENT AND IMPLEMENTATION OF

AN ENHANCED TAX EXPENDITURE FUND SYSTEM THAT GRANTS TAX

SUBSIDY WITHIN THIRTY (30) DAYS FROM THE FILING OF APPLICATION

WITH THE FIRB."

“SEC. 314. | THE NAME OF RECIPIENTS OF INCENTIVES AND

THE AMOUNT OF INCENTIVES AVAILED SHALL BE REPORTED BY THE

INVESTMENT PROMOTION AGENCIES ANNUALLY TO CONGRESS. THE

REPORT SHALL BE MADE AVAILABLE TO THE PUBLIC."

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

SEC. 36. Title XIV of the National Internal Revenue Code of 1997, as amended,
is hereby retitled as Title XV.

SEC. 37. Amendatory Clause. —

(a) 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 299 of this Act, the following provisions, among others, are
amended accordingly:

(1) Atticle 4 of Executive Order No. 226, as amended, entitled “The Omnibus
Investments Code of 1987";


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(2) 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”;

(8) 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’;

(4) 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";

(5) 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”;

(©) 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 this Purpose the Authority of the Freeport
Area of Bataan (AFAB), Appropriating Funds Therefor and for Other Purposes”;

(7) 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 and
Efficiently Implement that Policy, and Appropriating Funds Therefor";

(8) 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;

(9) 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


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in the Municipality of Aparri, Province of Cagayan, Providing Funds Therefor, and for
Other Purposes”,

(10) 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; and

(11) 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”

(b) 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)
pursuant to Section 313 of this Act:

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

(2) 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”;

(8) 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’ ";

(4) 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";

(6) 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’;

(6) 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”,


(1) Section 14 of Republic Act No. 7364, 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";

(8) Sections 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 Republic
Act No, 6038, and for Other Purposes";

(8) Sections 2 and 19 of Republic Act No. 9679, entitled “An Act Amending the
Home Development Mutual Fund, Otherwise Known as the Pag-IBIG Fund”;

(10) Section 17(c) under Section 8 of Republic Act No. 9576, entitled “An Act
Increasing the Maximum Deposit Insurance Coverage, and in Connection Therewith, to
Strengthen the Regulatory and Administrative Authority, and Financial Capability of the
Philippine Deposit Insurance Corporation (PDIC), Amending for this Purpose Republic Act
Numbered Three Thousand Five Hundred Ninety-One, as Amended, Otherwise Known as
the PDIC Charter and for Other Purposes";

(11) 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”;

(12) Section 5(j) of Republic Act No. 9510, entitled “An Act Establishing the Credit
Information System and for Other Purposes”;

(13) Section 13(e) of Presidential Decree No. 857, entitled “Providing for the
Reorganization of Port Administrative and Operation Functions in the Philippines, Revising
Presidential Decree No. 505 dated July 11, 1974, Creating the Philippine Port Authority, by
Substitution, and for Other Purposes”;

(14) 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”;

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


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(16) 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 Repealing Clauses. —

(a) The tax treatment provisions of entities covered by the following franchise laws
are hereby amended or repealed effective two (2) years from the implementation of this
Act: Provided, That the tax treatment provisions of entities covered by franchise laws
pertaining to energy and telecommunications shall be deferred for an additional two (2)
years:

(1) Section 9 of Republic Act No. 7953, entitled “An Act Amending Republic Act
Numbered Sixty-Six Hundred Thirty-Two, 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 the Said Franchise by Twenty-five (25) Years From the
Expiration of the Term Thereof '";

(2) Section 12 of Republic Act No. 8407, entitled "An Act Amending Republic Act
Numbered Sixty-Six Hundred Thirty-One, 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 Twenty-five (25) Years From the Expiration of the Term Thereof’ ";

(3) Section 9 of Republic Act No. 8298, —enfitled “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

(4) 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"

(b) The provisions of the following laws, including the tax incentives, that are
inconsistent with this Act are hereby amended or repealed effective two (2) years from the
implementation of this Act: Provided, That the tax treatment provisions of
entities covered by special laws pertaining to energy, agriculture, and telecommunications
shall be deferred for an additional two (2) years:


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(1) Section 37 of Republic Act No. 6848, entitled “An Act Providing for the 1989
Charter of the Al-Amanah Islamic Investment Bank of the Philippines, 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";

(2) 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”;

(8) Section 1 of Republic Act No. 7353, entitled “An Act Providing for the Creation,
Organization and Operation of Rural Banks, and for Other Purposes”;

(4) Book |, Title III, Article 39(A), (B), (C), (D), (E), (G), (I) and (J); Title IV, Article 40;
Book Ill, Articles 59, 60, 61; Book IV Article 69; Book VI, Articles 77 and 78 of Executive
Order No. 226, series of 1987, entitled ‘The Omnibus Investments Code of 1987";

(6) Section 1 of Republic Act No. 7918, entitled “An Act Amending Article 39, Title III
of Executive Order No. 226, Otherwise Known as the Omnibus 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";

(7) Executive Order No. 22, series of 2017, amending Executive Order No. 70,
series of 2012 and Executive Order No. 528, series of 2006 and Executive Order No. 313,
series of 2004, entitled “Reducing the Rates of Duty on Capital Equipment, Spare Parts
and Accessories Imported by Board of Investments - Registered New and Expanding
Enterprises”;

(8) 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”;

(9) Section 17(1) to (8) insofar as tax exemption and/or VAT zero-rating on 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";


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(10)Section 4(e) and (f), insofar 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”,

(11)Section 4(b)(c),_—sinsofar. = as_-—stax_~— exemption = and/or_~—s« 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”,

(12) 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";

(13) 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”;

(14) Section 1 of Republic Act No. 9400, amending Section 12(b) of Republic
Act No. 7227, insofar as tax exemption and VAT zero-rating of domestic merchandise and
capital equipment are concerned, Section 12(c), Section 2 amending Section 15, second,
third and last paragraph of Republic Act No. 7227, Section 3, first and second paragraph;
Sections 4 and 5 entitled “An Act Amending Republic Act No. 7227, as Amended,
Otherwise Known as the Bases Conversion and Development Act of 1982, and for Other
Purposes”,

(15) Section 1 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”,

(16) 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”,

(17)Sections 3(e)(f)(h) and 4 of Republic Act No. 10083, entitled “An Act Amending
Republic Act No. 9490";


(18) Section 4(f), insofar 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”;

(19) Section 36(e) and (f) of Presidential Decree No. 705, entitled “Revising PD No.
389, Otherwise Known as the Forestry Reform Code of the Philippines”;

(20)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”;

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

(22)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";

(23)Seetion 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”,

(24)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;

(25) Section 20(d)(1) to (5) of Republic Act No. 10884, entitled “An Act Strengthening
the Balanced Housing Development Program, Amending for the Purpose Republic Act No.
7279, as Amended, Otherwise Known as the Urban Development and Housing Act of
1992",

(26) Republic Act No. 7718, entitled “An Act Amending Certain Sections of Republic
‘Act No, 6957, Entitled ‘An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes’ ",


(27) 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’;

(28) Section 3(a) to (d) and (h) of Republic Act No. 8502, entitled “An Act to Promote
the Development of the Jewelry Manufacturing Industry, Providing Incentives Therefor and
for Other Purposes”,

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

(30) Sections 9(h)(10) of Republic Act No. 9501, entitled “Promoting Entrepreneurship
by Strengthening Development and Assistance Programs to Micro, Small and Medium
Scale Enterprises Amending Republic Act No. 6977, Otherwise Known as the Magna
Carta For Small Enterprises”;

(31)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”,

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

(33)Chapter Il, 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”;

(34) Section 6 of Republic Act No. 7471, as amended, entitled “An Act to Promote the
Development of Philippine Overseas Shipping”,

(35)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 Department of Tourism and its
Attached Agencies to Effectively and Efficiently Implement That Policy, and Appropriating
Funds Therefor";

(36) Section 8, insofar 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”,


(37)Section 8 of Presidential Decree No. 1491, Amending Section 8 of Presidential
Decree No. 538 (Philippine Veterans Investment Development Corporation);

(38)Section 8, insofar 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”;

(39)Section 1(1.1) of Executive Order No. 97-A, series of 1993, entitled “Further
Clarifying the Tax and Duty-Free Privilege Within the Subic Special Economic and Free
Port Zone”;

(40) Sections 4(f) and 5(c)(k), insofar as tax exemption and/or VAT zero-rating on
domestic merchandise is concerned, and Section 12(b) of Republic Act No.
40083, entitled “An Act Amending Republic Act No. 9490, Otherwise Known as the Aurora
Special Economic Zone Act of 2007";

(41)Section 5(5.1) and (5.2) of Executive Order No. 290, series of 2004, entitled
“Implementing the Natural Gas Vehicle Program for Public Transport”;

(42)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”;

(43) Section 22 of Republic Act No. 9337, entitled "An Act Amending 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”,

(44) 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”,

(45) Section 2 of Presidential Decree No. 1931, series of 1984, entitled "Directing the
Rationalization of Duty and Tax Exemption Privileges Granted to Government-Owned or -
Controlled Corporations and All Other Units of Government’;

(46) Section 1(c) and (d) of 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”, and


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(47) Section 1(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’.

(c) Memorandum Order No. 23, series of 1986, entitled “Expanding the Membership
of the Fiscal Incentives Review Board’, is hereby repealed.

(@) In General. - 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. 39. Implementing Rules and Regulations. — Within ninety (90) days from
the effectivity of this Act, the Secretaries of Finance and Trade and Industry shall, upon
consultations with the Commissioner of Internal Revenue and the Board of Investments
and other Investment Promotion Agencies, promulgate the necessary rules and
regulations for its effective implementation.

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 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.