FIFTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
SENATE 
S.B. No. 2159 
.Inwe fIN :+t:;....· -'-. 
Introduced by Senator Juan Ponce Emile 
EXPLANATORY NOTE 
This bill proposes to exempt the sale of electricity to residential consumers 
with consumption not exceeding two hundred fifty kilowatt hour (250 kwh) from the 
payment of value-added tax (VAT). 
Prior to the enactment of Republic Act No. 9337, also known as the Expanded 
Value Added Tax Law, the cost of electricity in the Philippines was already one of the 
highest in Asia and the imposition of VAT on power further increased the cost .... 
According to the Department of Energy (DOE), residential consumers or households 
would have to shell out additional 0.592 centavos per kwh due to the imposition of 
VAT. If a household consumes an average of 250 kwh per month, household members 
would be able to save P148.00 in electricity payment if VAT is removed, a rather 
substantial amount especially to those who belong to the lower middle income 
bracket and below. 
The bill is limited to exempting residential users or households only because 
households cannot avail of output VAT to mitigate their VAT liability unlike 
industries, business and commercial establishments which could pass on the cost of 
electricity to the users of their services. Moreover, commercial users are in a better 
position to carry out the burden of VAT on electricity compared to households. 
Lastly, households are also the last point in the VAT chain so the exemption will not 
adversely affect VAT collection efficiency in terms of establishing paper trail of 
VATable transactions. 
In view of these, the immediate passage ofthis bill is earnestly sought. 
Senator 


, 
FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
) 
) 
) 
• S.B. No. 2159 
" 
I"~. 
Introduced by Senator Juan Ponce Enrile 
AN ACT 
•.. ~ 
OF'~~ ~CRErAR'i 
EXEMPTING THE SALE OF ELECTRICITY TO RESIDENTIAL CONSUMERS WITH 
CONSUMPTION NOT EXCEEDING 250 KILOWATI HOUR FROM THE VALUE-
ADDED TAX. AMENDING FOR THE PURPOSE SECTION 109 (1) OF REPUBLIC 
ACT NO. 8424 OR THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS 
AMENDED, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Phl1ippines In 
Congress assembled: 
SECTION 1. Section 109 (1) of Republic Act No. 8424, as amended, otherwise known 
as the National Internal Revenue Code of 1997, is hereby 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: 
xxx 
"(U) 
Deductions Allowed to the Estate of Citizen or a Resident. - In the 
case of a citizen or resident of the Philippines, by deducting from the value of 
the gross estate -
Services of banks, non-bank financial intermediaries 
performing 
quasi-banking 
functions, 
and 
other 
non-bank 
financial 
intermediaries; [and] 
"(V) 
SALE OF ELECTRICITY BY DISTRIBUTION UTILITIES TO 
RESIDENTIAL CONSUMERS WHOSE MONTHLY CONSUMPTION DOES 
NOT EXCEED TWO HUNDRED FIFTY KILOWATI HOUR (250 KWH); 
AND, 
• 
"[ (V)] 
(W) Sale or lease of goods or properties or the performance of 
services other than the transactions mentioned in the preceding paragraphs, 
the gross annual sales and/or receipts do not exceed the amount of One million 
five hundred thousand pesos (Pl,SOO,OOO): Provided, That not later than 
January 31,2009 and every three (3) years thereafrer, the amount herein stated 
shall be adjusted to its present value using the Consumer Price Index" as 
published by the National Statistics Office (NSO);" 


Sec. 2. Implementing Rules and Regulations. - The Secretary of Finance shall, upon 
the recommendation of the Commissioner of Internal Revenue, promulgate the 
necessary rules and regulations for the effective implementation of this Act. 
Sec. 3. Repealing Clause. - All laws, decrees, orders, rules and regulations or other 
issuances or parts thereof inconsistent with the provisions of this Act are hereby 
repealed and modified accordingly. 
Sec. 4. Effectivity. - This Act shall take effect fifteen (15) days following the 
completion of its publication either in the Official Gazette or in a newspaper of 
general circulation in the Philippines. 
Approved,