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THIRTEENTH CONGRESS OF 
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THE REPUBLIC OF THE PHILIPPINES 
9 
Second Regular Session 
S E N A T E  
S. No. 
INTRODUCED BY SENATORS MAR ROXAS, RODOLFO G. BIAZOC 
MIRIAM DEFENSOR SANTIAGO, FRANKLIN M. DRILON, JINGGOY 
EJERCITO ESTRADA, LUISA “LOI” P. EJERCITO ESTRADA, JUAN PONCE 
ENRILE, RICHARD J. GORDON, MANUEL M. LAPID, RAMON E. 
MAGSAYSAY. JR.. AND RAMON “BONG” REVILLA. JR. 
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EXPLANATORY NOTE 
This bill seeks to amend Republic Act No. 9337, by exempting the generation, 
transmission, distribution and supply of power from the coverage of the new VAT law 
and deleting the limit on creditable input VAT. 
R.A. No. 9337 was passed for the purpose of raising the necessary revenues to 
remedy the ailing fiscal position of our country. One of the significant measures of the 
law was to impose VAT on power by removing its zero-rating under Section 6, fifth 
paragraph of R.A. 9 136 (the EPIRA Law), and lifting the VAT exemption of the National 
Power Corporation under Section 13 of R.A. 6395 as well as that of the electric 
cooperatives under Section 109(S) of the National Internal Revenue Code of 1997. To 
cushion the effect on power, the franchise tax on electric utilities was abolished. 
VAT on power is expected to raise the government’s annual revenue by P8.85 
billion starting 2006, comprising of P7.62 billion from VAT on power and P1.23 billion 
from lifting of exemption of electric cooperatives. This is 7% of the total additional 
expected revenue of $2123.62 billion a year from the new VAT law. 
As it stands, the Philippines already has one of the highest cost of power among 
the countries in the South East Asian region. With the additional 10% VAT, however, 
MERALCO reports that end-consumers will have to pay an additional 80.56 centavos per 
kilowatt-hour (kWh), even after the 2% national franchise tax was already removed. 
Thus, for households consuming 200 kwh of electricity a month, the VAT is estimated at 
g167.49, a quite substantial amount for working class Filipinos. 
Industries will likewise bear the heavy burden of this measure. 
For the 
businessman, increased cost of power means higher cost of doing business, which, in 
turn, would be detrimental to government efforts of attracting investments and creating 
additional jobs. This might even lead to existing businesses having to close shop, thus 
fiirther aggravating the country’s unemployment problem. There is therefore an urgent 
need to lift VAT on power. 


Another provision of R.A. 9337 that unduly prejudices businesses, and hence 
must be removed, is the 70% cap on creditable input VAT. The provision imposes an 
effective 3% VAT liability on businesses, regardless of their margin of profit. It does not 
only curtail a benefit which is supposed to be inherent under the VAT system, it restricts 
further the viability of doing business in the Philippines and, in the process, penalizes 
legitimate enterprises. 
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In view of the foregoing, approval of this bill is earnestly requested. 


r.-. 
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THIRTEENTH CONGRESS OF 
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THE REPUBLIC OF THE PHILIPPINES 
1 
J 
pi :’ ’ : . ‘ I  
Second Regular Session 
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I 
S. No. 
20130 
INTRODUCED BY SENATORS MAR ROXAS, RODOLFO G. BIAZON, 
MIRIAM DEFENSOR SANTIAGO, FRANKLIN M. DRILON, JINGGOY 
EJERCITO ESTRADA, LUISA “LOI” P. EJERCITO ESTRADA, JUAN PONCE 
ENRILE, RICHARD J. GORDON, MANUEL M. LAPID. RAMON B. 
MAGSAYSAY, JK., 
AND RAR~ON “BONG” m v i i L A ,  JR. 
AN ACT 
AMENDING SECTIONS 6, 7, 8, 15 AND 24 OF REPUBLIC ACT NO. 9337, 
ENTITLED “AN ACT AMENDING SECTIONS 27,28,34,106,107,108,109,110, 
111,112, 113,116,117,119,121,148,151,236,237 AND 288 OF THE NATIONAL 
INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER 
PURPOSES.” 
Be it enacted by the Senate and House of Representatives ofthe Philippines in Congress 
assembled: 
SECTION 1. 
amended by Section 6 of Republic Act No. 9337, is hereby amended to read as follows: 
Section 108(A) of the National Internal Revenue Code of 1997, as 
“SEC. 108. Value-added Tax on Sale of Services and Use or Lease 
of Properties. - 
(A) Rate and Base of Tax. - x x x 
x x x  
The phrase ‘sale or exchange of services’ means the performance of 
all kinds of services in the Philippines for others for a fee, remuneration or 
consideration, including those performed or rendered by x x x 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 of grantees of [electric 
utilities,] telephone and telegraph, radio and television broadcasting and 
all other franchise grantees x x x.” 
SECTION2. 
amended by Section 7 of R.A. No. 9337, is hereby amended to read as follows: 
Section 109(1) of the National Internal Revenue Code of 1997, as 
“SEC. 109. 
Exempt Transactions. - (1) Subject to the the 
provisions of Subsection (2) hereof, the following transactions shall be 
exempt from the value-added tax: 
“(A) 
x x x 
x x x  
“(B) 
x x x 
x x x  


“(C) 
SALES OF ELECTRICITY BY GENERATION, 
TRANSMISSION, 
DISTRIBUTION 
AND 
SUPPLY 
COMPANIES; 
“[(C)l D* 
x x x  
x x x  
x x x  
x x x  
x x x  
“[(L)] M. 
Sales by agricultural representatives duly registered 
with the Cooperative Development Authority x x x 
“N. 
SALES BY ELECTRIC COOPERATIVES DULY 
REGISTERED WITH THE COOPERATIVE DEVELOPMENT 
AUTHORITY 
OR 
NATIONAL 
ELECTRIFICATION 
ADMINISTRATION, RELATIVE TO THE GENERATION AND 
DISTRIBUTION OF ELECTRICITY AS WELL AS THEIR 
IMPORTATION 
OF 
MACHINERIES 
AND 
EQUIPMENT, 
INCLUDING SPARE PARTS, WHICH SHALL BE DIRECTLY 
USED IN THE GENERATION AND DISTRIBUTION OF 
ELECTRICITY: 
“[(M)] 0. Gross receipts from lending activities by credit or multi- 
purpose cooperatives duly registered with the Cooperative Development 
Authority; 
x x x  
x x x  
x x x. 
SECTION3. Section llO(B) of the National Internal Revenue Code of 1997, as 
amended by Section 8 of R.A. No. 9337, is hereby amended to read as follows: 
“(B) Excess Output or Input Tax. - If at the end of any taxable 
quarter the output tax exceeds the input tax, the excess shall be paid by the 
VAT-registered person. If the input tax exceeds the output tax, the excess 
shall be carried over to the succeeding quarter or quarters: Provided, 
[That the input tax inclusive of input VAT carried over from the previous 
quarter that may be credited in every quarter shall not exceed seventy 
percent (70%) of the output VAT; Provided, however,] That any input tax 
attributable to zero-rated sales by a VAT-registered person may at his 
option be refunded or credited against other internal revenue taxes, subject 
to the provisions of Section 112.” 
SECTION 4. Section 119 of the National Internal Revenue Code of 1997, as amended 
by Section 15 of R.A. No. 9337, is hereby amended to read as follows: 
“SEC. 119. Tax on Franchises. - Any provision of general or 
special law to the contrary notwithstanding, there shall be levied, assessed 
and collected in respect to all franchises on radio and/or television 
broadcasting companies whose annual gross receipts of the preceding year 
do not exceed Ten million pesos (PlO,OOO,OOO), subject to Section 236 of 
this Code, a tax of three percent (3%) and on ELECTRIC, gas and water 
utilities, a tax of two percent (2%) on the gross receipts derived from the 
business covered by the law granting the franchise: x x x.” 


. 
SECTION 5. Section 24 of R.A. No. 9337 is hereby amended to read as follows 
“SEC. 24. Repealing Clause. -The following laws or provisions of 
laws ‘are hereby repealed and the persons and/or transactions affected 
herein are made subject to the value-added tax subject to the provisions of 
Title IV of the National Internal Revenue Code of 1997, as amended: 
[(A) Section 13 of R.A. No. 6395 on the exemption from value- 
added tax of the National Power Corporation (NPC);] 
“[(B)] A. Section 6, fifth paragraph of R.A. No. 9136 on the zero 
VAT rate imposed on the sales of generated power by generation 
companies; and 
“[(C)] B. 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 6. Repealing Clause. - All laws, decrees and orders or parts thereof 
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inconsistent herewith, are deemed repealed or modified accordingly. 
SECTION 7. Separabdliby Clause. - The provisions of this Act are hereby declared to be 
separable and, in the event any of such provisions is declared unconstitutional, the other 
provisions which are not affected thereby shall remain in full force and effect. 
SECTION 8. Efectiviby. - This Act shall take effect fifteen (15) days following its 
publication in a newspaper of general circulation in the Philippines. 
Approved.