FIFTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
FIRST REGULAR SESSION )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House Bill No._3513
EXPLANATORY NOTE

Congress enacted the Electric Power Industry Reform Act (EPIRA) in
2001 with the end goal of establishing a more competitive and responsible
electricity industry which would lead to lower electric rates.

However, almost ten years after the passage of EPIRA, the contrary is
being experienced by the general public. There has been a constant rise in the
cost of electricity that is more burdensome on the part of the consumers.

In addition, taxes paid by industry players in the power sector became
unreasonable that it encouraged an unabated transfer of the burden of what are
properly costs of doing business to the consumers.

Prior to the enactment of Republic Act 9337, which further amended the
National Internal Revenue Code (NIRC), electric, gas and water utilities were
subject to a franchise tax at the rate of two percent (2%) on gross receipts under
Section 119 of the NIRC, as amended. The amendments embodied in RA 9337
removed electric utilities from the franchise tax regime and subjected the same to
the twelve percent (12%) value added tax.

This bill therefore seeks to revert to the previous system where a franchise
tax is imposed on electric utilities instead of the VAT because the franchise tax
is directly absorbed by the franchisee and it will free the consumers from
shouldering additional pass on charges.

In view of the foregoing, the immediate passage of the bill is earnestly
sought.

MAXIMO®. RODRIGUEZ, JR.


FIFTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
FIRST REGULAR SESSION

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House Bill No.__3013

AN ACT
FURTHER AMENDING THE NATIONAL INTERNAL REVENUE CODE OF
1997, AS AMENDED BY REPUBLIC ACT 9337.

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

SECTION 1. Section 108 of the National Internal Revenue Code of 1997 as
amended by Republic Act 9337 is hereby further amended to read as follows:

"SEC. 108. Value-added Tax on Sale of Services and Use or Lease
of Properties. -
(A) Rate and Base of Tax. - There shall be levied, assessed and
collected, a value-added tax equivalent to ten percent (10%) of
gross receipts derived from the sale or exchange of services,
including the use or lease of properties: Provided, That the
President, upon the recommendation of the Secretary of Finance,
shall, effective January 1, 2006, raise the rate of value-added tax to
twelve percent (12%), after any of the following conditions has been
satisfied:
(i) Value-added tax collection as a percentage of
Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of
GDP of the previous year exceeds one and one-half
percent (1 1/2%).

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 construction and service contractors; stock, real
estate, commercial, customs and immigration brokers; lessors of


property, whether personal or real; 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 Section 119 of this
Code and non-life insurance companies (except their crop
insurances), including surety, fidelity, indemnity and bonding
companies; and similar 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:
(1) The lease or the use of or the right or privilege to
use any copyright, patent, design or model plan,
secret formula or process, goodwill, trademark, trade
brand or other like property or right;
(2) The lease or the use of, or the right to use of any
industrial, commercial or, scientific equipment;
(3) The supply of scientific, technical, industrial or
commercial knowledge or information;
(4) The supply of any assistance that is ancillary and
subsidiary to and is furnished as a means of enabling
the application or enjoyment of any such property, or
right as is mentioned in subparagraph (2) or any such
knowledge or information as is mentioned in
subparagraph (3);
(5) The supply of services by a nonresident person or
his employee in connection with the use of property or
tights belonging to, or the installation or operation of
any brand, machinery or other apparatus purchased
from such nonresident person;
(6) The supply of technical advice, assistance or
services rendered in connection with technical
management or administration of any scientific,


industrial or commercial undertaking, venture, project
or scheme;

(7) The lease of motion picture films, films, tapes and
discs; and

(8) The lease or the use of or the right to use radio,
television, satellite transmission and cable television
time.

Lease of properties shall be subject to the tax herein
imposed irrespective of the place where the contract of lease or
licensing agreement was executed if the property is leased or used
in the Philippines.

The term ‘gross receipts’ means the total amount of money
or its equivalent representing the contract price, compensation,
service fee, rental or royalty, including the amount charged for
materials supplied with the services and deposits and advanced
payments actually or constructively received during the taxable
quarter for the services performed or to be performed for another
person, excluding value-added tax.

SEC. 2. Section 119 of the National Internal Revenue Code of 1997 as amended
by Republic Act 9337 is hereby reverted back to its original wording prior to the
amendments introduced by Republic Act 9337, 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 does not exceed Ten million pesos (P10,000.00),
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: Provided, however, That radio and television
broadcasting companies referred to in this Section shall have an
option to be registered as a value-added taxpayer and pay the tax
due thereon: Provided, further, That once the option is exercised, it
shall not be revoked.

The grantee shall file the return with, and pay the tax due
thereon to the Commissioner or his duly authorized representative,
in accordance with the provisions of Section 128 of this Code, and
the return shall be subject to audit by the Bureau of Internal
Revenue, any provision of any existing law to the contrary
notwithstanding


SEC. 3. Separability Clause. — \f any provision or part hereof, is held invalid or
unconstitutional, the remainder of the law or the provisions not otherwise affected
shall remain valid and subsisting.

SEC. 4. Repealing Clause. — Any law, presidential decree or issuance, executive
order, letter of instruction, administrative order, rule or regulation contrary to or

inconsistent with the provisions of the Act is hereby repealed, modified, or
amended accordingly.

SEC. 5. Effectivity Clause. — This Act shall take effect fifteen (15) days after its
publication in at least two (2) newspapers of general circulation

Approved,