EIGHTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHIUPPINES ) 
First Regular Session 
)
of tiif r . ' '
SENATE
S.B. No. 
4 0 G
'19 Jllll P4 33
Introduced by SENATOR IMEE R. Ma K 66S
AN ACT AMENDING SECTIONS 34, 110, 113, 237-A, 255, 256, AND 257 OF 
THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED,
AND FOR OTHER PURPOSES.
EXPLANATORY NOTE
Taxation is the lifeblood of the government, and improving tax collection and 
revenue generation, while eliminating corruption and inefficiency, provide impetus for a 
more perfect state capable of fulfilling the social contract and upholding the welfare of 
the Filipino public.
To ensure that businesses pay their fair share, this measure seeks to implement 
Value Added Tax Electronic Billing (VAT e-Billing) which shall provide proof that (1) a 
legitimate transaction has taken place; and (2) the business has complied with the tax 
requirements. This compels businesses to pay the VAT in advance, and has the 
advantage of allowing the deduction of implicit VAT payments on purchases from 
overall tax liability, thus avoiding payment of VAT multiple times as an input to other 
goods or services. Adopted from China's fapiao system, VAT e-Billing will ensure 
compliance among businesses in paying VAT and enable real-time monitoring of 
business transactions among enterprises, plugging more than P5 Billion in tax leakages 
at the source.
VAT e-billing will streamline the Bureau of Internal Revenue (BIR) and allow it to 
re-organize and re-allocate its resources. Further, this system shall increase the 
competitiveness of firms engaged in the production of intermediary goods and services. 
Further, the use of VAT e-Billing makes the payment of revenue all year round, thus 
eliminating the traditional peak period, and ultimately allowing for sustainable revenue 
generation to fund vital programs aimed at poverty alleviation and economic 
development.
To ensure the success of VAT e-Billing, the use of blockchain technology is 
sought in order to safeguard the process and protect it from counterfeiting. The use of 
distributed electronic ledgers based on blocks, each of which record a transaction, is 
tamper-proof and transparent. Using an invoicing system on the blockchain will allow 
for seamless payments made automatically between the BIR and the businesses using 
VAT e-Billing.
sought.
In view of the foregoing, the immediate passage of this measure is urgently
A.
I EE R. MARCOS
Senator


EIGHTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
SENATE
S.B. No. 
406
v ;^.:c;©rntrcCth<‘fi '
•19 JUL 11 P 4 ;33
RECEIV
Introduced by SENATOR IMEE R. MARCOS
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AN ACT AMENDING SECTIONS 34, 110, 113, 237-A, 255, 256, AND 257 OF 
THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED,
AND FOR OTHER PURPOSES.
Be it enacted by the Senate and the House o f Representatives o f the Philippines in 
Congress assembled.
SECTION 1. Short Title. -  This Act shall be known as the "VAT e-Billing Act". 
SECTION 2. Declaration o f Policy. -
1) To establish an electronic single billing system for value added tax (VAT) 
purposes and to streamline the requirements for the issuance of invoices 
whether for income tax or VAT purposes.
2) To provide for a more uniform billing system for VAT that effectively 
address substantiation requirements and help avoid fraudulent business 
transactions by facilitating audit by the tax collectors.
3) To lay the foundation for a more sophisticated system of tax compliance 
and monitoring of business transactions at the point-of-sale leading to the 
deterrence of tax evasion and development of an institutional framework 
for incentives to taxpayers who will utilize the electronic system and front 
load their tax liabilities.
SECTION 3. Section 34 (A) (1) (b) is hereby amended to read as follows:
"SEC. 34. xxx:
(A) Expenses. - xxx
(1) Ordinary and Necessary Trade, Business or Professional Expenses. -
(a) In General. - xxx
(b) Substantiation Requirements. - No deduction from gross income shall be allowed 
under Subsection (A) hereof unless the taxpayer shall substantiate with [sufficient 
evidence such as official receipts and other adequate records] A VAT /  NONVAT 
OFFICIAL BILL AS PROVIDED FOR IN SECTION 113 OF THIS CODE, 
(i) the 
amount of the expense being deducted, and (ii) the direct connection or relation of the 
expense being deducted to the development, management, operation and/or conduct 
of the trade, business or profession of the taxpayer."
SECTION 4. Section 110 is hereby amended to read as follows:
"SEC. 110. Tax Credits. - 
A. Creditable Input Tax. -
(1) Any input tax evidenced by a [VAT invoice or official receipt] VAT OFFICIAL BILL 
issued in accordance with with Section 113 hereof on the following transactions shall be 
creditable against the output tax:
(a) Purchase or importation of goods:
(i) For sale; or
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(ii) For conversion into or intended to form part of a finished product for sale including
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packaging materials; or
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(iii) For use as supplies in the course of business; or
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(iv) For use as materials supplied in the sale of service; or
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(v) For use in trade or business for which deduction for depreciation or amortization is
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allowed under this Code.
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(b) Purchase of services on which a value-added tax has been actually paid.
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(2) The input tax on domestic purchase or importation of goods or properties by a VAT-
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registered person shall be creditable:
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(a) To the purchaser upon consummation of sale and on importation of goods or
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properties; and
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(b) To the importer upon payment of the value-added tax prior to the release of the
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goods from the custody of the Bureau of Customs.
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XXX
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(3) A VAT-registered person who is also engaged in transactions not subject to the
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value-added tax shall be allowed tax credit as follows:
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(a) Total input tax which can be directly attributed to transactions subject to value-
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added tax; and
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(b) A ratable portion of any input tax which cannot be directly attributed to either
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activity.
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The term "input tax" means the value-added tax due from or paid by a VAT-registered
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person in the course of his trade or business on importation of goods or local purchase
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of goods or services, including lease or use of property, from a VAT-registered person,
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SUBJECT TO THE PROVISIONS OF SECTION 113.
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The term "output tax" means the value-added tax due on the sale or lease of taxable
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goods or properties or services by any person registered or required to register under
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Section 236 of this Code.
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(B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax
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exceeds the input tax, the excess shall be paid by the VAT-registered person. If the
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input tax exceeds the output tax, the excess shall be carried over to the succeeding
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quarter or quarters. Provided, however. That any input tax attributable to zero-rated
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sales by a VAT-registered person may at his option be refunded or credited against
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other internal revenue taxes, subject to the provisions of Section 112.
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(C) Determination of Creditable Input Tax. - xxx"
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SECTION 5. Sections 113 (A) and (B) of the Tax Code is hereby amended to read
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as follows:
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"SEC. 113. Billing and Accounting Requirements for VAT-Registered Persons. -
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(A) 
Billing Requirements. -  A VAT-registered person shall issue
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[1) A VAT bill for every sale, barter or exchange of goods or properties; and
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(2) A VAT official receipt for every lease of goods or properties, and for every sale,
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barter or exchange of services]
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1. 
AN OFFICIAL VAT BILL FOR EVERY SALE, BARTER OR EXCHANGE OF
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GOODS OR PROPERTIES, EVERY LEASE OF GOODS OR PROPERTIES, AND FOR
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EVERY SALE, BARTER OR EXCHANGE OF SERVICES.
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2. 
SAID 
OFFICIAL 
BILL 
SHALL 
BE 
PURCHASED 
OR 
SOURCED
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ELECTRONICALLY FROM THE BUREAU OF INTERNAL REVENUE AND NO
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OTHER DOCUMENT OTHER THAN SAID OFFICIAL BILL SHALL BE ALLOWED
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AS CLAIM OF INPUT TAX CREDIT. PROVIDED THAT, THOSE UNDER THE
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COMPUTERIZED ACCOUNTING SYSTEM OR E-BILLING SHALL BE REQUIRED
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TO CONNECT ELECTRONICALLY TO THE SYSTEM OF THE BUREAU OF
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INTERNAL REVENUE IN ORDER TO ISSUE THE OFFICIAL VAT BILL.
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(B) Information Contained in the Official VAT bill. - The following information shall be
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indicated in the [VAT invoice or VAT official receipt] OFFICIAL VAT BILL:


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(1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's
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Identification Number (TIN); and
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(2) The total amount which the purchaser pays or is obligated to pay to the seller with
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the indication that such amount includes the value-added tax. Provided, That:
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(a) The amount of the tax shall be known as a separate item in the bill [or receipt];
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(b) If the sale is exempt from value-added tax, the term "VAT-exempt sale: shall be
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written or printed prominently on the bill [ or receipt];
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(c) If the sale is subject to zero percent (0%) value-added tax, the term "zero-rated
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sale" shall be written or printed prominently on the bill [or receipt].
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(d) If the sale involved goods, properties or services some of which are subject to and
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some of which are VAT zero-rated or VAT exempt, the bill [or receipt] shall clearly
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indicate the break-down of the sale price between its taxable, exempt and zero-rated
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components, and the calculation of the value-added tax on each portion of the sale
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shall be known on the invoice [or receipt]: Provided, That the seller may issue separate
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bills [or receipts] for the taxable, exempt, and zero-rated components of the sale.
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(3) The date of transaction, quantity, unit cost and description of the goods or
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properties or nature of the service; and
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(4) The name, business style, if any, address and Taxpayer Identification Number (TIN)
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of the purchaser, customer or client.
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(C) Accounting Requirements. -  xxx
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[(D) Consequence of Issuing Erroneous VAT Bill or VAT Official Receipt.-
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(1) If a person who is not a VAT-registered person issues an invoice or receipt showing
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his Taxpayer Identification Number (TIN), followed by the word "VAT";
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(a) The issuer shall, in addition to any liability to other percentage taxes, be liable to:
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(i) The tax imposed in Section 106 or 108 without the benefit of any input tax credit;
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and
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(ii) A 50% surcharge under Section 248(B) of this Code;
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(b) The VAT shall, if the other requisite information required under Subsection (B)
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hereof is shown on the invoice or receipt, be recognized as an input tax credit to the
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purchaser under Section 110 of this Code.
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(2) If a VAT-registered person issues a VAT bill or VAT official receipt for a VAT-exempt
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transaction, but fails to display prominently on the bill or receipt the term 'VAT exempt
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sale,' the issuer shall be liable to account for the tax imposed in section 106 or 108 as if
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Section 109 did not apply.]
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[(E)] (D) Transitional Period. -  Notwithstanding Subsection (B) hereof, taxpayers may
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continue to issue VAT bills and VAT official receipt for the period [July 1, 2005 to
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December 31, 2005] JANUARY 1, 2020 TO DECEMBER 31, 2021 in accordance
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with Bureau of Internal Revenue administrative practices that existed as of ^December
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31, 2004] DECEMBER 31, 2019.
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SECTION 6. Section 237 (A) of the National Internal Revenue Code of 1997, as
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amended, is hereby amended to read as follows:
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"SEC. 237-A. Electronic Sales Reporting System. -  Within five (5) years from the
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effectivity of this Act and upon the establishment of a system capable of storing and
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processing the required data, the Bureau shall require taxpayers engaged in the export
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of goods and services, and taxpayers engaged in e-commerce and taxpayers under the
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jurisdiction of the Large Taxpayers 
Sen/ice to USE A SYSTEM CAPABLE OF
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ISSUING ELECTRONIC RECEIPTS OR SALES OR COMMERCIAL INVOICES,
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COLLECT TRANSACTION RECORDS, AND TRANSMIT THE SAME THROUGH
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THE 
DESIGNATED 
ELECTRONIC CHANNELS OF THE 
BUREAU IN THE
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STANDARD FORMAT REQUIRED [electronically report their sales data to the Bureau
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through the use of electronic point of sales systems,] subject to the rules and
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regulations to be issued by the Secretary of Finance upon recommendation of the
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Commissioner of Internal Revenue: Provided, That the POINT OF SALE (POS) machines.


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VALUE-ADDED NETWORK (VAN) TERMINALS, fiscal devices, and fiscal memory
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devices WITH CAPACITY TO MAKE SUCH TRANSMISSION shall be at the expense
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of the taxpayers: 
PROVIDED, FURTHER, SUBJECT TO THE RULES AND
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REGULATIONS TO BE ISSUED BY 
THE SECRETARY OF FINANCE, THE
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COMMISSIONER 
MAY REQUIRE ANY TAXPAYER TO COMPLY WITH THE
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PROVISIONS OF THIS SECTION.
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IN SUPPORT OF THE ELECTRONIC SALES REPORTING SYSTEM, THE BUREAU
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OF INTERNAL REVENUE MAY GRANT TAX INCENTIVES FOR ELECTRONICALLY
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TRACEABLE PAYMENTS (ETP) IN THE FORM OF ALLOWABLE DEDUCTIBLE
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EXPENSE OF UP TO FIFTEEN PERCENT (1 5 % ) OF THE ETP MADE BY THE
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TAXPAYER. AN ANNUAL LIM IT ON THE ALLOWED ETP DEDUCTIBLE EXPENSE
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PER TAXPAYER MAY BE SET BY THE COMMISSIONER WITH THE APPROVAL
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OF THE SECRETARY OF FINANCE.
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ELECTRONICALLY TRACEABLE PAYMENTS REFER TO CREDIT CARD, DEBIT
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CARD, OR OTHER METHODS OF PAYMENT WITH A SYSTEM TO VERIFY OR
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LINK THE PAYMENT TO THE IDENTITY OF PAYOR.
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"The data processing of sales and purchase data shall comply with the provisions of
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Republic Act No. 10173, otherwise known as the 'Data Privacy Act' and Section 270 of
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the NIRC, as amended, on unlawful divulgence of taxpayer information and such other
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laws relating to the confidentiality of information.
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"The Bureau shall also establish policies, risk management approaches, actions,
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trainings, and technologies to protect the cyber environment, organization, and data in
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compliance with Republic Act No. 10175 or the 'Cybercrime Prevention Act of 2012."
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SECTION. 7. Section 255 of the National Internal Revenue Code of 1997, as
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amended, is hereby amended to read as follows:
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"SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax
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Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation. -  Any
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person required under this Code or by rules and regulations promulgated thereunder to
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pay any tax, make a return, keep any record, or supply correct and accurate
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information, who willfully fails to pay such tax, make such return, keep such record, or
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supply correct and accurate information, or withhold or remit taxes withheld, or refund
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excess taxes withheld on compensation, at the time or times required by law or rules
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and regulations shall, in addition to other penalties provided by law, upon conviction
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thereof, be punished by a fine of not less than [Ten thousand pesos (P10,000)] ONE
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HUNDRED THOUSAND PESOS (P100,000) BUT NOT MORE THAN TWO
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MILLION 
TWO 
HUNDRED THOUSAND 
PESOS 
(P2,200,000) 
and 
suffer
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imprisonment of not less than one (1) year but not more than ten (10) years.
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"Any person who attempts to make it appear for any reason that he or another has in
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fact filed a return or statement, or actually files a return or statement and subsequently
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withdraws the same return or statement after securing the official receiving seal or
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stamp of receipt of internal revenue office wherein the same was actually filed shall,
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upon conviction therefore, be punished by a fine of not less than [Ten thousand pesos
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(P10,000) but not more than Twenty thousand pesos (P20,000)] ONE HUNDRED
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THOUSAND PESOS (P100,000) BUT NOT MORE THAN TWO MILLION TWO
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HUNDRED THOUSAND PESOS (P2,200,000) and suffer imprisonment of not less
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than one (1) year but not more than three (3) years."
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SECTION. 8. Section 256 of the National 
Internal Revenue Code of 1997, as
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amended, is hereby amended to read as follows:
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"SEC. 256. Penal Liability of Corporations. -  Any corporation, association or general co-
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partnership liable for any of the acts or omissions penalized under this 
Code, in
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addition to the penalties imposed herein upon 
the responsible corporate officers,
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partners, or employees shall, upon conviction for each act or omission, be punished by


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a fine of not less than [Fifty thousand pesos (P50,000) but not more than One hundred
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thousand pesos (P100,000)] TWO HUNDRED THOUSAND PESOS (P200,000) BUT
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NOT MORE THAN 
TWO MILLION FOUR HUNDRED THOUSAND PESOS
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(P2/400,000)."
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SECTION. 9. Section 257 of the National Internal Revenue Code of 1997, as
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amended, is hereby amended to read as follows:
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"SEC. 257. Penal Liability for Making False Entries, Records or Reports, or Using
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Falsified or Fake Accountable Forms. -
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"(A) Any financial officer or independent Certified Public Accountant engaged to
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examine and audit books of accounts of taxpayers under Section 232 (A) and any
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person under his direction who:
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"(1) Willfully falsifies any report or statement bearing on any examination or audit, or
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renders a report, including exhibits, statements, schedules or other forms of
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accountancy work which has not been verified by him personally or under his
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supervision or by a member of his firm or by a member of his staff in accordance with
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sound auditing practices; or
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"(2) Certifies financial statements of a business enterprise containing an essential
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misstatement of facts or omission in respect of the transactions, taxable income,
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deduction and exemption of his client; or
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"(B) Any person who:
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"(1) Not being an independent Certified Public Accountant according to Section 232(B)
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or a financial officer, examines and audits books of accounts of taxpayers; or
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"(2) Offers to sign and certify financial statements without audit; or
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"(3) Offers any taxpayer the use of accounting bookkeeping records for internal
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revenue purposes not in conformity with the requirements prescribed in this Code or
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rules and regulations promulgated thereunder; or
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"(4) Knowingly makes any false entry or enters any false or fictitious name in the books
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of accounts or record mentioned in the preceding paragraphs; or
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"(5) Keeps two (2) or more sets of such records or books of accounts; or
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"(6) In any way commits an act or omission, in violation of the provisions of this
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Section; or
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"(7) Fails to keep the books of accounts or records mentioned in Section 232 in a
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native language, English [or Spanish], or to make a true and complete translation
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as required in Section 234 of this Code, or whose books of accounts or records kept in
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a native language, English [or Spanish], and found to be at material variance with
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books or records kept by him in another language; or
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"(8) Willfully attempts in any manner to evade or defeat any tax imposed under this
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Code, or knowingly uses fake or falsified revenue official BILLS, receipts. Letters of
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Authority, certificates authorizing registration. Tax 
Credit Certificates, Tax Debit
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Memoranda and other accountable forms shall, upon conviction for each act or
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omission, be punished by a fine not less than [Fifty thousand pesos (P50,000) but not
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more than One hundred thousand pesos (P100,000)] THREE HUNDRED THOUSAND
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PESOS (P300,000) BUT NOT MORE THAN ONE MILLION TWO HUNDRED
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THOUSAND PESOS (P I,200,000) and suffer imprisonment of not less than two (2)
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years but not more than six (6) years.
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" If the offender is a Certified Public Accountant, his certificate as a Certified Public
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Accountant shall be automatically revoked or cancelled upon conviction.
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"In the case of foreigners, conviction under this Code shall result in [his] THEIR
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immediate deportation after serving sentence, without further proceedings for
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deportation."
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SECTION 10. Integration o f Block Chain Technology in the Electronic Sates
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Reporting System- A "blockchain" is a mathematically secured, chronological, and


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decentralized ledger or database. The Bureau shall appoint a Technical Working Group 
(TWG) to evaluate and formulate a plan to integrate Block Chain Technology into the 
Electronic Sales Reporting System. The TWG shall include participants from all of the 
following: Three resource persons from the technology industry; three resource persons 
from private sector accounting firms who are lawyers; two resource persons from Civil 
Society Organizations representing consumer rights and/or privacy concerns; a resource 
person from the Department on Information Communications Technology; and a 
resource person from the National Privacy Commission.
SECTION 11. Separability Clause. - If any provision or part hereof, is held invalid 
or unconstitutional, the remainder of the Act or the provision not otherwise affected 
shall remain subsisting.
SECTION 12. Repeating Clause. - Any law, presidential decree or issuance, 
executive order, letter of instruction, administrative order, rule or regulation contrary to, 
or inconsistent with the provisions of this Act is hereby repealed, modified, or amended 
accordingly.
SECTION 13. Effectivity. -  This Act shall take effect on January 1, 2020 following 
its complete publication in the Official Gazette or in 2 newspaper of general circulation.
Approved,