SIXTEENTH CONGRESS OF THE 
REPlIBLIC OF THE PHILIPPINES 
Second Regular Session 
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SENATE 
S.B.NO. 
2714 
Introduced by: SENATOR SERGIO OSMENA III 
AN ACT 
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MAR 18 P2:17 
CLASSIFYING THE SALE OF ELECTRICITY BY GENERATION, TRANSMISSION AND DISTRIBUTION 
COIIIIPANIES AND ELECTRIC COOPERATIVES, AND THE SERVICES OF FRANCHISE GRANTEES OF 
ELECTRIC UTILITIES, AND SALE OR IMPORTATION OF MACHINERY AND EQUIPMENT DIRECTLY 
dSED 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 
EXPLANATORY NOTE 
This bill seeks to amend the National Internal Revenue Code of 1997, as amended, by 
exempting from value-added tax (VAT) the sale of electricity by distribution, generation and 
transmission companies and electric cooperatives. 
VAT on electricity is another burden on the already over-taxed shoulders of our people, 
especially those whose incomes are barely enough to cover their basic needs. Thus, in light of 
the unabated price increases in fuel, food, and other commodities, Congress is duty bound to 
find ways of providing economic relief for the Filipino people. The removal of VAT on electricity 
is one of the reliefs that Congress should immediately act upon. 
Nowadays, the Philippines has one of the highest costs of electricity in Southeast Asia. For 
instance, the February 201S addition of 5.24 centavos generation charge per kilowatt-hour 
(kWh) plus the 12% VAT increased electricity charges by P, 0.52 per kWh. For a household 
consuming 200 kWh of electricity a month, the estimated VAT is M88.55. An amount 
substantial already to the average working Filipino as the price per kWh can hover from P, 5.49 
to as high as P, 12.10. What is worse, VAT is not only imposed on the generation of consumed 
power, it is also felt in transmission and system loss charges, among others. Thus, when it 
comes to electricity cost, Filipinos suffer most than those in Southeast Asia. 
As the bill promises to benefit the country's fiscal management, it is still imperative that 
Congress act with dispatch to approve it as the removal of VAT on electricity constitutes as an 
invaluable economic relief for all Filipino households and businesses. 
With regard to the foregone revenue that may be suffered by the government, they can 
be offset by the increased purchasing power of all households and businesses. The resulting 
cheaper production costs will then parlay to a more robust and equitable economy for the 
country. 
The immediate approval ofthis bill is therefore earnestly sought. 
~.~ I/V 
SERGIO OSMENA III 
Senator 


SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
Second Regular Session 
) 
) 
) 
SENATE 
2714 
S.B. NO. __ 
:..::...:-=.-=--
Introduced by: SENATOR SERGIO OSMENA III 
AN ACT 
"15 
MAR 18 P2:17 
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 the House of Representatives of the Philippines in Congress 
assembled: 
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SECTION 1. -
Section 108(A)(ii) of the National Internal Revenue Code, as amended by 
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Republic Act No. 9337, is hereby further amended to read as follows: 
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"SEC. 108.- Value-Added Tax on Sale of Services and Use or Lease of 
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Properties.-
S 
"(A) Rate and Base of Tax.- x x x 
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(i) x x x 
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(ii) x x x 
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"The phrase 'sale or exchange of services' means the performance of all 
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kinds of services in the Philippines for others for a fee, remuneration or 
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consideration, including those performed or rendered by construction and 
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service 
contractors; 
stock, 
real 
estate, 
commercial, 
customs 
and 
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immigration brokers; lessors of property, whether personal or real; 
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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 carriers 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 Sec. 119 of this Code and non-life insurance 
companies (except their crop insurances), including surety, fidelity, 
indemnity and bonding companies; and sirnilar 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: 
"x x x. 
SEC. 2.-
Section 109 (1) of the National Internal Revenue Code, as amended by 
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Republic Act No. 9337, is further amended to read as follows: 
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"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) xxx 
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"(U) xxx 
"(V) SALES OF ELECTRICITV BV GENERATION, TRANSMISSION, AND 
DISTRIBUTION COMPANIES AND ELECTRIC COOPERATIVES; 
"(W) SERVICES OF FRANCHISE GRANTEES OR ELECTRIC UTILITIES; 
"(X) SALE OR IMPORTATION OF MACHINERIES AND EQUIPMENT, INCLUDING 
SPARE PARTS, TO BE DIRECTLV USED BV THE BUVER OR IMPORTER HIMSELF IN 
THE GENERATION, TRANSMISSION, AND DISTRIBUTION OF ELECTRICITV." 
"(V) Export sales by persons who are not VAT-registered." 
SEC. 3.-
Repealing Clause.-
The following laws or provisions of laws are hereby 
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repealed: 
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(A) Section 24(A) and (B) of Republic Act No. 9337; and 
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(B) All other laws, acts, decrees, executive orders, issuances, and rules and regulations 
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or parts thereof which are contrary to and inconsistent with any provisions of this 
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Act are hereby repealed, amended or modified accordingly. 
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SEC. 4.-
Separability Clause. -If any provision of this Act is subsequently declared 
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unconstitutional, the validity of the remaining provisions hereof shall remain in full force and 
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effect. 
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SEC. 5.-
Effectivity Clause - This Act shall take effect immediately after its 
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complete publication either in the Official Gazette or in a newspaper of general circulation in 
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the Philippines. 
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Approved, 
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