CSPY 
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E
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THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
1 
Introduced by Senators 
FRANKLIN M. DRILON, JUAN M. FLAVIER and FRANCIS N. 
PANGILINAN 
EXPLANATORY NOTE 
One of the challenges faced by the present administration is the 
urgent and daunting task of solving the country’s serious financial 
problems. To do this, government expenditures must be strictly 
monitored and controlled and revenues must be significantly increased. 
This may be easier said than done, but our fiscal authorities are still 
optimistic the government will be operating on a balanced budget by the 
year 2009, In fact, several measures that will result to significant 
expenditure savings have been identified by the administration. It is 
supported with a credible package of revenue measures that include 
measures to improve tax administration and control the leakages in 
revenue from income taxes and the value-added tax (VAT). 
To complement these fiscal measures, this bill proposes to increase 
the current value-added tax rate from ten percent (lo./) to twelve percent 
(12Yi). Since its inception in 1988, the value-added tax has proven to be 
a significant revenue source of government. It has been contributing 
more than 20% of the total national government revenues in the last five 
years. An upward adjustment therefore in the value-added tax rate is 
expected to bring in sizeable revenues that will supplement the financial 
needs of the government. 
In view of the foregoing, the approval of this bill is earnestly 
sought. 


THIRTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
’F4 
DEI: t 3 !’A 31 
First Regular Session 
1 
RECEIVED EIY 
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S E N A T E  
Introduced by Senators 
FRANKLIN M. DRILON, JUAN M. FLAVIER 
and FRANCIS N. PANGILINAN 
AN ACT 
FOR THE PURPOSE SECTION 1 0 6 , 1 0 7 , 1 0 8  AND 114 OF THE 
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND 
FOROTHERPURPOSES 
INCREASING THE RATE OF THE VALUE-ADDED TAX, AMENDING 
Be it enacted by the Senate and the House of Representatives of the 
Congress of the Philippines in session assembled: 
SECTION 1. Section 106 of the National Internal Revenue Code of 
1997, as amended, is hereby further amended to read as follows: 
“SEC. 
106 Value-Added Tax on Sale of Goods or Properties. - 
“(A) Rate and Base of Tax- There shall be levied, 
assessed and collected every sale, barter or exchange of goods 
(lOOh)] 
TWELVE PERCENT (12%) of the gross selling price or 
gross value in money of the goods or properties sold, bartered 
or exchanged, such tax to be paid by the seller or transferor. 
or properties, a value-added tax equivalent to [ten percent 
i 
X 
X 
X” 
“(B) Transactions Deemed Sale.- 
x
x
 X” 
“(C) Changes in or Cessation of Status of a VAT- registered 
Person - 
X 
X 
X” 
“(D) Determination of the Tax. - (1) The tax shall be 
.computed by [multiplying] DIVIDING the total amount indicated 
in the invoice by [one-eleventh (1 / 1 I)] NINE AND ONE THIRD (9 
1 /3).” 
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SEC. 2. Section 107of the National Internal Revenue Code of 1997, 
as amended, is hereby further amended to read as follows: 
“SEC. 107. Value- Added Tax on Importation of Goods - 
“(A) In General. - There shall be levied, assessed and 
collected on every importation of goods a value-added tax 
equivalent to [ ten percent (loo/,) ] TWELVE PERCENT (12%) 
based on the total value used by the Bureau of Customs in 
determining tariff and customs duties plus customs duties, 
excise taxes, if any, and other charges, such tax to be paid by 
the importer prior to the release of such goods from customs 
custody: Provided, That where the customs duties are 
determined on the basis of the quantity or volume of the goods, 
the value-added tax shall be based on the landed cost plus 
excise taxes, if any. 
(B) 
Transfer of Goods by Tax-Exempt Persons -x x 
x” 
SEC. 3. Section 108 of the National Internal Revenue Code of 
1997, as amended, is hereby further amended to read as follows: 
“SEC. 108. Value-added Tau 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%) ] TWELVE PERCENT (12%) of gross receipts derived from 
the sale or exchange of services, including the use or lease of 
properties. 
X 
X 
X 
“(B) Transactions Subject to Zero Percent (0%) Rate - 
X 
X 
X 
“(C) Determination ofthe tax. - The tax shall be computed 
by [multiplying] DIVIDING the total amount indicated in the 
official receipt by [one-eleventh (ljll)] NINE AND ONE THIRD 
(9 1/3). 
X 
X 
X” 
SEC. 4. Section 114 of the National Internal Revenue Code of 
1997, as amended, is hereby further amended to read as follows: 
“SEC. 114. Return and Payment of Value-Added Tau. - 
“(A) In General. - X  
. x  x 
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“(B) Where to File the Return and Pay the Tax. - x 
“(C) Withholding of Creditable Value-Added Tax - The 
government or any of its political subdivisions, instrumentalities or 
agencies, including government-owned-and-controlled corporations 
(GOCCs) shall, before making any payment on account of each 
purchase of 
goods from sellers and services rendered by 
contractors which are subject to the value-added- tax imposed in 
Sections 106 and 108 of this Code, deduct and withhold the value- 
added tax due at the rate of three percent (3%) of the gross 
payment for the purchase of goods and six percent (6%) on gross 
receipts for services rendered by contractors on every sale or 
installment payment. which shall be creditable against the value- 
added tax liability of the seller or contractor: Provided, however, 
That in case of government public works contractors, the 
withholding tax rate shall be [eight and one-half percent (8.5°/~)j 
TEN AND ONE-HALF PERCENT (10.5%): Pvouided, &??her, That the 
payment or lease or use of properties or property rights to 
nonresident owners shall be subject to [ ten percent (l0%0) ] 
TWELVE PERCENT (12%) withholding tax at the time of payment. 
For this purpose, the payor or person in control of the payment 
shall be considered as the withholding agent. 
x x 
“The value-added tax withheld under this Section shall be 
remitted with ten (10) days following the end of the month the 
withholding was made.” 
SEC. 5. 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. 6. SeparabiZity CIause. - If any provision of this Act shall be 
held to be unconstitutional or not valid, no other provision shall be 
affected thereby. 
SEC. 7. Repealing CZause. - All laws, decrees, executive orders, 
rules and regulations or parts thereof which are contrary to or 
inconsistent with this act are hereby repealed, amended or modified 
accordingly. 
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,
 
SEC. 8. Effectivity - This Act shall take effect fifteen (15) days 
after its publication in the Official Gazette or in any two newspapers of 
general circulation, whichever comes earlier. 
Approved, 
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