Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

326
HOUSE BILLNo. _ 183 9

‘Introduced by Reps. TEODORO A. CASINO and NERI JAVIER COLMENARES

EXPLANATORY NOTE

‘This bill seeks to amend the National Internal Revenue Code of 1997, as amended by
Republic Act No. 9377, by exempting electricity as a commodity from value-added tax
(VAT). VAT is imposed on the sales of electricity by generation companies, transmission
and distribution companies and the services of franchise grantees of electric utilities.

VAT on electricity is another burden on the already over-taxed shoulders of out people,
especially those whose incomes are barely enough to cover their basic needs. In time of
unabated price increases of fuel, food, and other commodities, itis the duty of Congress to
provide economic relief to the Filipino people. The removal of VAT on electricity is one of
the most viable options for Congress to immediately act on.

The Philippines has already one of the highest cost of electricity in Southeast Asia, The

recent addition of 5.8 centavos per kilowatt-hour (kWh) on generation charges plus the 12%
VAT imposed considerably raised the price of electricity at P9.55 per kWh. For a household
consuming 200kWh of electricity a month, the VAT is estimated at P191, an amount quite
substantial to an average working Filipino. What is worse, VAT is not only imposed on the
generation of consumed power but also on system loss charges, this is clearly making the
Filipino people suffer twice over.

Since the imposition of VAT on electricity in 2005, the government has already collected
over P40 billion. In 2008, the VAT on power reached P16 billion. This amount is 13% of
the total revenue from all VAT collections.

Despite the obvious benefit to the country’s fiscal management, itis imperative that
Congress act on the removal of VAT on electricity as it is the fastest and most direct form of
‘economic relief for all Filipino households. Whatever revenue losses to be suffered by
government will be offset by the increased purchasing power of all households as well as
cheaper production costs, redounding to a more robust and equitable economy.

In view of the foregoing, approval of this bill is earnestly sought.
Approve,

eS A. Ces
P. TEODORO A. CASINO

Bayan Muna Party-list,



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSE BILL No. __ 1639

Introduced by Reps. TEODORO A. CASINO and NERI JAVIER COLMENARES

AN ACT
CLASSIFYING THE SALE OF ELECTRICITY BY GENERATION,
TRANSMISSION, AND DISTRIBUTION COMPANIES AND ELECTRIC
COOPERATIVES, AND THE SERVICES OF FRANCHISE GRANTEES OF
ELECTRIC UTILITIES, AND SALE OR IMPORTATION OF MACHINERY
AND EQUIPMENT DIRECTLY USED IN GENERATION, TRANSMISSION,
AND DISTRIBUTION OF ELECTRICITY AS VALUE-ADDED TAX EXEMPT
‘TRANSACTIONS, AMENDING FOR THE PURPOSE SECTIONS 108 (A)(ii) and
109 (1) OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED BY
REPUBLIC ACT NO. 9337, AND FOR OTHER PURPOSES.

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

SECTION 1. Section 108 (A)(i) of the National Internal Revenue Code, as amended by
Republic Act No. 9337, is hereby further amended to read as follows:

“SEC. 108, Value-added Tax on Sale of Services and Use ot Lease of
Properties. —

“(A) Rate and Base of Tax. ~ xxx
“@) xxx
“Gi xxx

“The phrase 'sale or exchange of services’ means the performance of all kinds of
services in the Philippines for others for a fee, remuneration ot consideration,
including those performed or rendered by construction and service contractors;
stock, real estate, commercial, customs and immigration brokers; lessors of property,
whether personal or real; warehousing services; lessors or distributors of
cinematographic films; persons engaged in milling, processing, manufacturing or
repacking goods for others; proprietors, operators or keepers of hotels, motels, rest-
houses, pension houses, inns, resorts; proprietors or operators of restaurants,
refreshment parlors, cafes and other eating places, including clubs and caterers;
dealers in securities; lending investors; transportation contractors on their transport
of goods or cargoes, including persons who transport goods or cargoes for hire and
other domestic common catriers by land relative to their transport of goods or
cargoes; common carriers by air and sea relative to their transport of passengers,
goods or cargoes from one place in the Philippines to another place in the


Philippines; [sales of electricity by generation companies, transmission, and
distribution companies:] services of franchise grantees of [electric utilities,] telephone
and telegraph, radio and television broadcasting and all other franchise grantees
except those under Section 119 of this Code and non-life insurance companies
(except their crop insurances), including surety, fidelity, indemnity and bonding
companies; and similar services regardless of whether or not the performance
thereof calls for the exercise or use of the physical or mental faculties. The phrase
‘sale or exchange of services' shall likewise include:

xxx,

SECTION. 2. Section 109 (1) of the National Internal Revenue Code, as amended by
Republic Act No. 9337, is hereby further amended to read as follows:

“SEC. 109, Exempt Transactions. - (1) Subject to the provisions of subsection (2)
hereof, the following transactions shall be exempt from the value-added tax:

(A) xxx

“(B) so

“(U) xxx

“(V) SALES OF ELECTRICITY BY GENERATION, TRANSMISSION,
AND DISTRIBUTION COMPANIES AND ELECTRIC COOPERATIVES;
“(W) SERVICES OF FRANCHISE GRANTEES OF ELECTRIC
UTILITIES;

“(X) SALE OR IMPORTATION OF MACHINERIES AND EQUIPMENT,
INCLUDING SPARE PARTS, TO BE DIRECTLY USED BY THE BUYER
OR IMPORTER HIMSELF IN THE GENERATION, TRANSMISSION,
AND DISTRIBUTION OF ELECTRICITY.

“(Y) Export sales by persons who are not VAT-tegistered.

SECTION. 3. Repealing Clause. ~ The following laws ot provisions of laws are hereby
repealed:

(A) Section 24 (A) and (B) of Republic Act No. 9337; and

®) All other laws, acts, decrees, executive orders, issuances, and rules and
regulations or parts thereof which are contrary to and inconsistent with any
provisions of this Act are hereby repealed, amended, or modified accordingly.

SECTION. 4. Separability Clause. — If any provision of this Act is subsequently declared

unconstitutional, the validity of the remaining provisions hereof shall remain in full force
and effect.


SECTION 5. Effectiviey Clause. — This Act shall take effect immediately after its
complete publication either in the Official Gazette or in a newspaper of general circulation
in the Philippines.

Approved,