THIRTEENTH CONGRESS OF THE REPUBLIC 
1 
OF THE PHILIPPINES 
} 
‘Q4 Jl,1;1 30 36 :I 8 
First Regular Session 
1 
Introduced by Senator Edgardo J. Angara 
EXPLANATORY N 
Under the Agricultural and Fisheries Modernization Act or AFMA, 
(‘the goals of the national economy are a more equitable distribution of 
opportunities, income and wealth; a sustainable increase in the amount of 
goods and services produced by the nation for the benefit of the people; 
and an expanding productivity as the key to raising the quality of life for 
all, especially the underprivileged.” With these in mind, it is highly 
realistic that agricultural inputs - which form the very backbone of the 
sustainable growth envisioned for the country - be exempted from the 
Value-Added tax effective once this law is passed. 
The Value-Added Tax or VAT is a business tax levied on certain 
goods, properties and service. 
It is a universal taxation system 
developed by the Frenchman Maurice Laure in 1954. The term “value- 
added” refers to the value created in a product in the course of 
processing or manufacturing. 
In the Philippines, the VAT system was introduced in 1988 
through Executive Order 273 covering a limited number of goods and 
services. Under this set-up, the seller or producer has two options. One, 
he can absorb the VAT and not pass it on to the buyers since it allows 
him to claim tax credit within a 10% ceiling. Or two, he can choose to 
pass it on to his buyers. Both are allowed by the law. 
RA 7716, which was signed in May 5, 1994, expanded the coverage 
of the 1988 VAT law. The law was intended to stabilize and sustain the 
country’s economic growth. 
But the exemption on basic goods and 
services common to the general population was maintained. 
No 
additional exemptions were granted. 
Through the VAT system is highly commendable because it 
establishes a wider tax base, makes taxation more fair and equitable 
while promoting efficiency and a simplified tax administration, there is 
still a need to further revise it. The best way to do this is to insert 
revisions in Republic Act 8435, otherwise known as the Agriculture and 
Fisheries Modernization Act (AFMA) . 
Noticeably, the VAT system needs to be more particular in terms of 
agricultural inputs utilized in the country. Currently, only certain 
agricultural inputs are exempted from the VAT. Most are not. This leads 
the seller or importer to pass on or shift to the consumers, specifically 
the farmers, livestock growers and the like, to absorb the tax. This shall 


further lead to higher overhead costs that shall ultimately be burdened 
by the average Filipino family. 
The need to exempt from VAT coverage all agricultural inputs 
cannot be overemphasized. Agricultural inputs are the key ingredients or 
elements that contribute or make up agricultural products used, traded 
and consumed by the Philippine economy. The continuous non- 
exemption of these vital inputs fosters a circuitous drain on the average 
farmer and consumer which sadly does not help our plight one bit. More 
taxes imposed on the factors of production in the agricultural sector 
imply costs for everyone. As stated in Section 108 of the AFMA, “Taxation 
policies must not deter the growth of value-adding activities in the rural 
areas.” It is thereby incumbent upon the Legislature to come up with 
laws or revisions to existing laws that shall be beneficial to the farmers in 
particular and the nation in general. 
Early passage of this bill is most earnestly sought. 
EDGARDO J. ANGARA 


THIRTEENTH CONGRESS OF THE REPUBLIC 
1 
OF THE PHILIPPINES 
) 
,:., ,! 50 73 3 
First Regular Session 
1 
Introduced by Senator Edgardo J. Angara 
AN ACT 
AMENDING THE AGRICULTURAL AND FISHERIES MODERNIZATION 
ACT (AFMA) OTHERWISE KNOKWN AS REPUBLIC ACT 8435 BY 
PROVIDING 
FOR 
THE 
GRANT OF VAT 
EXEMPTION 
TO 
ALL 
ENUMERATED AGRICULTURAL INPUTS 
Section 1. Definition of Terms. As used in this Act, 
“Persons Liable for Vat” shall mean any person who, in the 
course of trade or business, sells, barters, exchanges, leases, 
goods or properties, renders services, and any person who 
imports goods shall be subject to the value-added tax (VAT) ...” 
(Section 105, NIRC). 
Woods” shall mean any movable, tangible objects which are 
appreciable or transferable. 
“Agricultural Inputs” shall mean “all types of agriculture inputs, 
equipment and machinery such as, but not limited to, fertilizer, 
insecticide, pesticide, tractor, trailers, trucks, farm implements 
and machinery, harvesters, threshers, hybrid seeds, genetic 
materials, sprayers, packaging machinery and materials, bulk- 
handling facilities such as conveyors and mini-loaders, 
weighing scales, harvesting equipment, spare parts of all 
agricultural equipment, fishing equipment and parts thereof, 
refrigeration equipment, and renewable energy systems such as 
solar panels” (Section 104, AFMA) 
Section 2. Amendment of the A 
. Section 109 of the AFMA is 
hereby amended to read as follows: 
“All enterprises engaged in agriculture and fisheries as 
duly certified by the Department in consultation with the 
Department of Finance and the Board of Investment, 
shall, for five (5) years after the effectivity of this Act, be 
exempted from the payment of tariff and duties for the 
importation of all types of agriculture and fisheries inputs, 
equipment and machinery such as, but not limited to, 
fertilizer, insecticide, pesticide, tractor, trailers, trucks, 
farm implements and machinery, harvesters, threshers, 
hybrid seeds, genetic materials, sprayers, packaging 
machinery and materials, bulk-handling facilities such as 
conveyors and mini-loaders, weighing scales, harvesting 
equipment, spare parts of all agricultural equipment, 


fishing equipment and parts thereof, 
refrigeration 
equipment, 
and 
renewable 
energy systems 
such 
as 
solar 
panels, 
Provided, 
however, 
that 
the imported agricultural and fishery inputs, equipment 
and machinery shall be for the exclusive use of the 
importing enterprise.” 
“The Department, in consultation with the Department of 
Finance and the Board of Investments shall, within ninety 
(90) days from the effectivity of his Act, formulate the 
implementing rules and regulations governing the 
importation of agriculture and fishery inputs, equipment 
and machinery.” 
“As an additional incentive for the agricultural sector, all 
types of agricultural inputs, equipment and machinery 
such as, but not limited to, fertilizer, insecticide, 
pesticide, tractor, trailers, trucks, farm implements and 
machinery, harvesters, threshers, hybrid seeds, genetic 
materials, sprayers, packaging machinery and materials, 
bulk-handling facilities, such as conveyors and mini- 
loaders, weighing scales, harvesting equipment, spare 
parts of all agricultural equipment, fishing equipment and 
parts thereof, refrigeration equipment, and renewable 
energy systems such as solar panels shall be exempted 
from the payment and coverage of the expanded Value- 
Added tax upon the effectivity of this Act. This shall not 
preclude however, the Legislature from instituting future 
laws that shall re-implement VAT coverage to said 
agricultural inputs if the need arises or when the market 
forces allow.” 
Section. 3. ALL AGRICULTURAL INPUTS, AS DEFINED IN 
THE AFMA, AND ALL FURTHER REVISIONS TO SAID LAW 
REGARDING THE SAME, ARE VAT-EXEMPTED. All agricultural 
inputs as defined in the current AFMA are VAT-exempted. All 
further revisions to this law involving the expansion of the 
definition of agricultural inputs shall mean that all of these 
newly-defined inputs are similarly exempted from VAT. 
Section 4. Effectivity. This law shall take effect fifteen 
(15) days after publication in two (2) newspapers of general 
circulation. 
Approved,