He ve?
‘5? RECEIVED

EIGHTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES ) |= pare. SEP_4 129i
First Regular Session ) TIME.
BY:
A Ss
HOUSE OF REPRESENTATIVES

<1 S
Dex ®
H.B,No,__4931

Introduced by Rep. Vilma Santos-Recto
6th District of Batangas

AN ACT
EXEMPTING BOOKS, NEWSPAPERS, MAGAZINES, JOURNALS, REVIEWS,
BULLETINS AND OTHER EDUCATIONAL OR LEARNING MATERIALS MADE
OR PUBLISHED IN DIGITAL OR ELECTRONIC FORMAT FROM VALUE-
ADDED TAX, AMENDING FOR THE PURPOSE SECTION 109 (1) OF THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED

EXPLANATORY NOTE

Northrop Frye, a famous Canadian literary critic and theorist once said, “The most
technologically efficient machine that man has ever invented is the book.”

Frye’s quote still holds true to this day. Books and other useful reading materials

contribute to a person’s intellectual development and imagination.

However, not much has been introduced to the print books since it was first officially
printed more than 500 years ago using Johannes Gutenberg’s movable type printing press,
until 40 years ago, when Michael Hart, founder of Project Gutenberg, started “digitizing”
cultural works including books which later became known as e-books. E-books are basically
books composed in or converted to digital format for display on a computer screen or
handheld device.!

Recently, there have been dramatic changes in the world of consumer electronics with
the introduction of the latest generation gadgets such as digital books, e-readers, smart
phones and tablets. Thus, it would only be a matter of time before learning institutions in the

* Merriam-Webster


country start to require their students to bring the latest electronic technology to class. Not
only are they handy, eco-friendly and space-saving but also, these gadgets will make it easier
for students to take down notes and at the same time download books and other useful
reading materials from the Internet. Unfortunately, students might find it more expensive to
download e-books than buying its printed format since the former is not VAT-exempt.

At present, our Tax Code under Section 109 (1) includes the sale, importation,
printing or publication of books and any newspaper, magazine, review or bulletin as exempt
from the coverage of the value-added tax (VAT). Exemption from VAT makes books more
affordable and more accessible to the public most especially to the students and researchers.
However, at the time the VAT Reform Act of 2005 was enacted, e-books and other digitally
formatted reading and learning materials were not yet used prevalently and only a handful of
electronic devices were capable of reading or displaying e-books. Hence, they were not
included in the list of VAT-exempt items. Moreover, the Bureau of Internal Revenue issued
BIR Ruling No. 244-2012 and Revenue Memorandum Circular No. 75-2012 stating that the
sale of e-books and other electronically formatted versions of books are subject to VAT since
it is not one of those listed under Section 109 (1) of the Tax Code.

Guided by the principle that laws must reflect the changing times and encouraged by
the countless benefits that e-books will provide the students and researchers in this country,
the proposed Bill seeks to exempt books, newspapers, magazines, journals, reviews, bulletins
and other educational or learning materials made or published in digital or electronic format
from value-added tax.



Cawnuewne

1
12
13
14
15
16
17

EIGHTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES
H.B.No,__4531

Introduced by Rep. Vilma Santos-Recto
6th District of Batangas

AN ACT

EXEMPTING BOOKS, NEWSPAPERS, MAGAZINES, JOURNALS, REVIEWS,
BULLETINS AND OTHER EDUCATIONAL OR LEARNING MATERIALS MADE
OR PUBLISHED IN DIGITAL OR ELECTRONIC FORMAT FROM VALUE-
ADDED TAX, AMENDING FOR THE PURPOSE SECTION 109 (1) OF THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED

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

Section 1. A new subparagraph is hereby inserted after subparagraph (AA) of
Section 109 (1) of the National Internal Revenue Code of 1997, as 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:

MA) xx
“0x
“(BB) SALE OF BOOKS, NEWSPAPERS,
MAGAZINES, JOURNALS, REVIEWS, BULLETINS
AND OTHER EDUCATIONAL OR LEARNING
MATERIALS MADE OR PUBLISHED IN DIGITAL
OR ELECTRONIC FORMAT; AND

Sec. 2. Subparagraph (BB) of Section 109 (1) of the same Code is amended to read as
‘subparagraph (CC).


wCavwauneaone

10

Sec. 3. Implementing Rules and Regulations. — ‘The Secretary of Finance, shall, upon
the recommendation of the Commissioner of Internal Revenue, promulgate not later than
thirty (30) days upon the effectivity of this Act the necessary rules and regulations for its
effective implementation.

Sec. 4. Repealing Clause. — All laws, acts, presidential decrees, executive orders,
issuances, presidential proclamations, rules and regulations or parts thereof which are
contrary to and inconsistent with any provision of this Act are hereby repealed, amended or
modified accordingly.

Sec. 5. Effectivity. This Act shall take effect fifteen (15) days after its
complete publication either in the Official Gazette, or in at least two (2) newspapers of
general circulation.

Approved,