FOURTEENTH CONGRESS OF THE 
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First Regular Session 
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REPUBLIC OF THE PHILIPPINES 
7 JUN 30 Q4 .’~; 
SENATE 
., 
S.B.No. 219 
Introduced by SENATOR EDGARDO J. ANGARA 
EXPLANATORY NOTE 
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. 
Though 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 cc 


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 
Senator 


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FOURTEENTH CONGRESS OF THE 
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REPUBLIC OF THE PHILIPPINES 
1 
First Regular Session 
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”7 
JUN 30 P4 i i ’  
SENATE 
~~~~I~~~ 
BY .. +- 
S. B. No. 219 
Introduced bv 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 
Be it enacted by the Senate and the House of Representatiues of the 
Philippines in Congress assembled: 
SECTION 1. Definition of Terms. As used in this Act, 
(a)“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). 
(b) “Goods” shall mean any movable, tangible objects which are 
appreciable or transferable. 
(c) “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, bulkhandling 
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 AFMA. 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 
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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 this 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 miniloaders, 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 AGRICULTTJRAL INPUTS, AS DEFINED IN 
THE AFMA, AND ALL FURTHER REVISIONS TO SAID LAW 
REGARDING THE SAME, ARE VAT-EXEMPTED. All agricultural inputs 
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VAT. 
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Approved, 
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 
SECTION 4. Effectivity. This law shall take effect fifteen (15) days 
after publication in two (2) newspapers of general circulation. 
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