THIRTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
Second Regular Session 
) 
INTRODUCED BY THE HONORABLE MAR R O U S  
. . -~~ 
- 
EXPLANATORY NOTE 
This bill seeks to promote environment-friendly sources of fuel and modes of 
transportation by encouraging the development and use of alternative fuel and alternatively- 
fueled vehicles and by widening consumer acceptance of such forms of alternative fuels and 
vehicles by addressing the major barriers: the increased costs of alternative fuels and 
alternatively-fueled vehicles and the lack of adequate infrastructure to refuel the alternative- 
fueled vehicles. 
The Philippines is a large and diverse geographic area that includes densely populated 
urban areas along with sparsely populated rural areas separated by long distances, and, as a 
result, Filipinos require reliable, efficient, and diversified modes of transportation. 
Oil currently provides the largest share of world energy consumption than any other 
energy source and most of the growth in oil consumption is projected for the transportation 
sector, where few alternatives are currently economical. 
The Philippines depends on oil as the primary fuel source for the transportation of 
people and goods and services. Since 1994, the Philippines has imported an annual average 
of 120 million barrels of crude oil and petroleum products. In 2004 alone, we imported at 
least 126 million barrels of crude oil & petroleum products valued at $5 billion. This amount 
translates to about P280 billion yearly that could otherwise be spent to spur economic 
growth. 
Moreover, the Philippines has a commitment to environmental reform and thus to 
better control over the emission of greenhouse gases, notably carbon dioxide, and of other air 
pollutants. Damage to the environment is caused by the emission of air pollutants by 
internal combustion engines using conventional fuels. 
This heavy reliance on imported oil and the damage caused to the environment by 
conventional fuels demonstrate the need to accelerate development of advanced fuel cell 
technology, hybrid technology, and alternative fuels technology for new motor vehicles in 
the transportation of people, goods and services as an important means of helping to reverse 
the trends of increasing dependence on oil imports and non-attainment of air quality 
standards. Hence the current legislative efforts to develop and use alternative fuels such as 
bio-ethanol through the filing of Senate Bill Nos. 1677, 1907 and 2007, and House Bill No. 
4629. 


However, despite the increasing recognition of the need to develop and use cleaner 
alternative fuels and alternatively-fueled vehicles, consumer acceptance of such vehicles and 
fuels has been restrained by major barriers - high vehicle and alternative fuels costs and low 
availability of refueling infrastructure. 
This bill seeks to lessen, if not remove, these barriers by providing financial incentives 
to manufacturers and purchasers of alternatively-fueled vehicles and to retailers of 
alternative fuels for a five-year period. 
In view of the foregoing, passage of this bill is earnestly 
Senator 


THIRTEENTH CONGRESS OF THE 
1 
REPUBLIC OF THE PHILIPPINES 
) 
Second Regular Session 
) 
S E N A T E  
INTRODUCED BY THE HONORABLE MAR R O U S  
AN ACT 
TO PROMOTE THE PRODUCTION, DISTRIBUTION, AND USE OF ALTERNATIVE 
FUELS AND MOTOR VEHICLES POWERED BY FUEL CELL TECHNOLOGY, HYBRID 
TECHNOLOGY, ELECTRIC POWER TECHNOLOGY, OR OTHER ALTERNATIVE FUEL 
MOTOR VEHICLE TECHNOLOGIES, AND FOR OTHER PURPOSES. 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
Section 1. Short Erie This Act may be cited as the “Alternative Fuel Incentives Act 
of 2005.” 
Section 2. Declaration ofpolicy - The purposes of this Act are to: 
(a) enable the accelerated introduction into the marketplace of new motor vehicle 
technologies without adverse emission impact, while retaining a policy of fuel 
neutrality in order to foster private innovation and commercialization and allow 
market forces to decide the technologies and fuels that are consumer-friendly, 
safe, environmentally sound, and economic; 
(b) provide, for a limited time period, financial incentives to encourage consumers 
nationwide to purchase or lease new fuel cell, hybrid, and alternative fuel motor 
vehicles; 
(c) increase demand of such vehicles so as to make the annual production by 
manufacturers and retail sale of such vehicles economically and commercially 
viable for the consumer: 
(d) promote and expand the use of such vehicles nationwide: and 
(e) promote a nationwide diversity of motor vehicle fuels for advanced and hybrid 
technology and alternatively fueled motor vehicles. 
Section 3. Definition of Terms. For purpose of this Act, the following terms shall 
mean: 
a) “Alternative fuel” means compressed natural gas, liquefied natural gas, liquefied 
petroleum gas, hydrogen, electricity, and any liquid at least 85 percent of the 
volume of which consists of methanol, ethanol, or methyl ester. 


b) “Alternative-fuel vehicle refueling property” means any property (not including a 
building and its structural components) if: 
i) 
ii) 
such property is of a character subject to the allowance for depreciation; 
(A) such property is for the storage or dispensing of alternative fuel into of 
a motor vehicle propelled by such fuel, but only if the storage or 
dispensing of the fuel is at the point where such fuel is delivered into the 
fuel tank of the motor vehicle; or (B) for the recharging of electric motor 
vehicles, but only if the property is located at the point where the motor 
vehicles are recharged. 
the original use of such property begins with the taxpayer. 
iii) 
c) ‘Compressed Natural Gas vehicle” means any motor vehicle that operates solely 
on Compressed Natural Gas (CNG). 
d) “Electric vehicle” means any motor vehicle that operates solely on electric power. 
e) “Fuel cell vehicle” means any motor vehicle that operates on power derived from 
one or more cells which convert chemical energy directly into electricity by 
combining oxygen with hydrogen fuel stored on board the vehicle; 
f) “Gasoline liter equivalent” means, with respect to any alternative fuel, the amount 
of such fuel having a BTU (British Thermal Unit) content of 430,000. 
g) “Hybrid Vehicle” means any motor vehicle that operates on a combination of an 
internal-combustion engine and electric motor powered by gasoline/diesel and 
electric batteries. 
h) “Mixed-fuel vehicle” means any motor vehicle that operates on a combination of 
Bio-ethanol vehicle designed to run on gasoline and a minimum ethahol 
contenthlend of at least 20% 
Bio-diesel vehicle designed to run on diesel and a maximum biodiesel 
blenucontent of at least 10% 
an alternative fuel and a petroleum-based fuel. This includes a: 
i) 
ii) 
i) “Other alternative fuel vehicle” means any motor vehicle that operates solely on 
an alternative fuel and which vehicle is not specifically defined herein. 
j) “Retail alternative-fuel vehicle refueling property” means qualified alternative- 
fuel vehicle refueling property that is installed on property used in a trade or 
business of the taxpayer. 
k) “Sold at retail” means the sale, for a purpose other than resale, after manufacture, 
production, or importation. 
Section 4. Alternative Motor Vehicle Incentive. (a) There shall be allowed as a 
deduction against the tax imposed on the purchase of any of the vehicles enumerated below 
an amount equal to the applicable percentage of the excess of the manufacturer’s suggested 
retail price for such vehicle over such price for a gasoline or diesel fuel motor vehicle of the 
same model: 
2 


Tpe of Vehicle 
1. Hybrid vehicle 
2. Mixed Fuel vehicle 
1, Compressed Natural Gas vehicle 
2. Electric vehicle 
3. Fuel Cell vehicle 
3. Other alternative fuel vehicle 
Section 6. Incentive for Manufacture of Alternatively-Fueled & Hybrid Vehicles. - 
The excise tax levied, assessed and collected on automobiles in Section 149 of National 
Internal Revenue Code (NIRC), as amended by Rep. Act 9224, shall be limited to two 
percent (2%) if such automobiles are classified as any of the vehicles enumerated in Section 
3, subsections (c), (d), (e), (g), (h), and (i) and has a maximum engine displacement of3 liters. 
Deduction 
2% of the excess price 
5% of the excess price 
Section 7. Incentive for Installation of Alternative Fueling Stations. - There shall be 
allowed as a deduction against the tax imposed for the purchase of any alternative-fuel 
vehicle refueling property an amount equal to 5% of the excess over the price of a similar 
refueling property used for regular fuel; Provided, That, such deduction shall not exceed 25% 
of the total tax due on the purchase of such alternative-fuel vehicle refueling property. 
Year of Effictivity This Act 
First year 
Second and third year 
Section 8. Incentive for Retail Sale of Alternative Fuels as Motor Vehicle Fuel. - (a) 
The alternative fuel retail sales deduction for any taxable year is the applicable amount for 
each gasoline liter equivalent of alternative fuel that is sold at retail by the taxpayer during 
the following years: 
Applicable amount 
PO. 15 per gasoline liter equivalent 
gO.10 per gasoline liter equivalent 
Section 9. Maximum Period of Deduction. The incentives provided for in this Act 
shall be applicable only for the first five years after the effectivity of this Act. 
Section IO. Implementing Rules and Regulations. The Department of Finance (DOF), 
in consultation with the Department of Energy (DOE) shall promulgate the regulations 
necessary to carry out the provisions of this Act. 
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Section 11, Study ofEfXectiveness of Certain Provisions. (a) The DOF, in coordination 
(i) 
the effectiveness of the alternative motor vehicles and fuel incentives 
provisions under this Act, and 
(ii) 
the recipients of the tax benefits contained in such provisions, including an 
identification of such recipients by income and other appropriate 
measurements. 
with the DOE, shall undertake an ongoing analysis of: 
Such analysis shall quantify the effectiveness of such provisions by examining and 
comparing the Government's forgone revenue to the aggregate amount of energy actually 
conserved and tangible environmental benefits gained as a result of such provisions. 
(b) The DOF Secretary shall report the analysis required under subsection (a) to 
Congress not later than one year from the effectivity of this Act and annually thereafter. 
Such analysis shall include a recommendation on whether the term of any incentive 
provided in this Act. should be shortened or extended beyond the applicable periods provided 
herein. 
Section 12. Separability Clause. - If any provision of this Act is held invalid, the other 
provisions of this Act not affected shall remain in force and effect. 
Section 13. Repealing Clause. - All laws, decrees, rules and regulations, executive or 
administrative orders and such other presidential issuances as are inconsistent with any of 
the provisions of this Act are hereby repealed, amended or otherwise modified accordingly. 
Section 14. Xffectivity Clause. - This Act shall take effect fifteen (15) days following 
its complete publication in two (2) newspapers of general circulation or in the Official 
Gazette, whichever comes earlier. 
Approved. 
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