, 
'sClHltl' 
SIXTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES) 
First Regular Session 
) 
, (Off,;t (If tilE ,»fruh1r~ 
·14 
FEB 13 P 7 :06 
SENATE 
S.B. No. 2123 
Introduced by Senator Sergio Osmefia III 
AN ACT FURTHER AMENDING THE NATIONAL INTERNAL REVENUE CODE 
(NIRC) OF 1997, AS AMENDED, BY INCLUDING THE TRANSPORT OF CARGOES 
BY INTERNATIONAL CARRIERS UNDER THE LAST PARAGRAPH OF SECTION 
28(A)(3), PARAGRAPH (S) OF SECTION 109 AND DELETING SECTION 118 OF 
TITLE V THEREOF FOR THE PURPOSE OF EXPANDING TRADE AND 
ATTRACTING INVESTMENTS IN THE COUNTRY, AND FOR OTHER PURPOSES 
EXPLANATORY NOTE 
Establishing our country's connectivity becomes more imperative as the year 
2015 draws near, which is the target year for the Association of Southeast Asian 
Nations (ASEAN) Economic Integration. International connectivity does not merely 
refer to tourism but also to the export development thrust of the government. The 
benefits of increasing Philippine connectivity for the purpose of enhancing trade should 
not be compromised. 
• 
Republic Act No. 10378 or "An Act Recognizing the Principle of Reciprocity as· 
Basis for the Grant of Income Tax Exemptions to International Carriers and 
Rationalizing Other Taxes Imposed Thereon by Amending Sections 28(A)(3)(A), 109, 
118 and 236 of the National Internal Revenue Code (NIRC), as Amended, and For 
Other Purposes" granted international air and sea carriers exemption from the payment 
of the Gross Philippine Billings Tax (GPBT) on the basis of reciprocity, and from the 
payment of the Common Carriers Tax. (CCT) insofar, as their trallsport of passengers is i 
concerned. Unfortunately, the transport of cargoes by these international carriers wasl 
not considered by the said measure. 
This bill seeks to remedy this peculiar situation by granting the same tax 
exemption to international carriers in the transport of cargo. The goal is to elevate not 
only our tourism industry but also dur export of goods and services into a more globally 
competitive level. Moreover, studies have shown that international companies generally 
shy away from countries with poor connectivity and instead opt to put their investments 
elsewhere. 
oj 
As pointed out by the Board of Airline Representatives (BAR), there is no 
distinction between CCT for passenger and for cargo on any passenger carriers' 
financial bottom-line. Removing CCT for cargo also goes towards the goal of increasing 
connectivity for the Philippines for the betterment of tourism. Further, the Joint Foreign 
Chambers of the Philippines (JFC) supports the inclusion of the transport of cargoes 
within the exemption from GPBT and OCT given our international commitments with 
1 
, 


the World Trade Organization (WTO) and the International Civil Aviation Organization 
(ICAO). To include cargoes within the exemption will provide the necessary impetus to 
promote trade and investment in the Philippines. Sea and air carriers provide the vital 
transport nexus that keep the supply chain flowing and uninterrupted. Thus, the 
removal of these tax barriers will induce foreign vessels and airlines to expand their 
services in all ports and airports of the country thereby increasing supply chain 
networks nationwide. 
In view of the foregoing, early passage of this bill is earnestly sought. 
;!MU[·~ 
SERGIO OSMEiilA III 
Senator 
• 
• 


..senntl' 
<OH,;, "f I~'c~",.t"f~ 
SIXTEENTH CONGRESS OF J"HE ) 
REPUBLIC OF THE PHILIPPINES) 
First Regular Session 
) 
'14 fEB 13 P 7 :06 
• 
, 
SENATE 
S.B. No. 212J 
HECEIV ~:u lit; -.. f-. 
Introduced by Senator Sergio Osmena III 
AN ACT FURTHER AMENDING THE NATIONAL INTERNAL REVENUE CODE 
(NIRC) OF 1997, AS AMENDED, BY INCLUDING THE TRANSPORT OF CARGOES 
BY INTERNATIONAL CARRIERS UNDER THE LAST PARAGRAPH OF SECTION 28 
(A)(3), PARAGRAPH (5) OF SECTION 109 AND DELETING SECTION 118 OF TITLE 
V THEREOF FOR THE PURPOSE OF EXPANDING TRADE AND ATTRACTING 
INVESTMENTS IN THE COUNTRY, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in. 
Congress assembled: 
1 
SECTION 1. The last paragraph of Section 28 (A)(3) of the National Internal 
2 
Revenue Code of 1997, as amended, is hereby further amended to read as follows: 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
"Sec. 28 Rates of Income Tax on Foreign Corporations.-
"(A) Tax on Resident Foreign Corporations.-
"(1)xxxxx 
"(2) xx x x x 
"(3) International Carrier. -
An International carrier doing 
business in the Philippines shal; pay a tax of two and one-half 
percent (2 1/2 %) on its Gross Philippine Billings as defined 
hereunder: 
"(a)xxxxx 
"(b)xxxxx 
1 
• 
, 


1 
2 
3 
4 
5 
6 
7 
8 
9 
"Provided, That international carriers doing business in the 
Philippines may avail of a preferential rate or exemption from the 
tax herein imposed on their gross revenue derived from the 
carriage of persons and their excess baggage, AND CARGOES on 
the basis of an applicable tax treaty for international agreement to 
which the Philippines is a signatory or on the basis of reciprocity 
such that an international carrier, whose home country grants 
income tax exemption to Philippine carriers, shall likewise be 
exempt from the tax imposed under this provision." 
10 
"(4)xxxxx 
11 
SECTION 2. Paragraph (S) of Section 109 of the National Internal Revenue • 
12 
Code of 1997, as amended, is hereby further amended to read as follows: 
13 
14 
15 
16 
17 
18 
"Sec. 109. Exempt Transactions. - The following shall be exempt 
from the value-added tax: 
"(A) xx x x x 
"xxxxx 
"(S) 
Transport 
of passengers 
AND 
CARGOES 
by 
19 
international carriers; 
w 
~xxxx 
21 
"(W) X X X X X 
II 
"xxxxx 
23 
SECTION 3. Section 118, Title V of the National Internal Revenue Code of 1997, 
24 
as amended, is hereby deleted. 
25 
SECTION 4. Implementing Rules and Regulations. -
The Secretary of 
26 
Finance shall, upon the recommendation of the Commissioner of Internal Revenue, 
27 
promulgate not later than thirty (30) days upon the effectivity of this Act the necessary 
28 
rules and regulations for its effective implementation. 
The Department of Finance 
29 
(DOF), in coordination with Department of Foreign Affairs (DFA), shall oversee the 
30 
exchange of notes between the Philippines and concerned countries for purposes of 
31 
facilitating the availment of reciprocal exemptions intended under this Act. 
2 
• 
, 
, 


, 
, . 
1 
SECTION 5. Separability Clause.- If any provision of this Act is subsequently 
2 
declared invalid or unconstitutional, other provisions thereof which are not affected 
3 
thereby shall remain in full force and effect. . 
4 
SECTION 6. Repealing Clause.- All laws, acts, presidential decrees, executive 
5 
orders, issuances, presidential proclamations, rules and regulations, or parts thereof 
6 
which are contrary to and inconsistent with any provisions of this Act are hereby 
7 
repealed, amended or modified accordingly. 
8 
SECTION 7. Effectivity. - This Act shall take effect fifteen (15) days after its 
9 
complete publication either in the Official Gazette or in at least two (2) newspapers of 
10 
general circulation. 
11 
Approved, 
3 
• 
•