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Republic of the Philippines
House of Representatives
Quezon City

Seventeenth Congress
First Regular Session

HOUSE BILL NO. __

ee
Introduced by Representative Dakila Carlo E. Cua

“Tunay na pagbabago” or real positive change is the promise and
commitment of President Rodrigo Duterte to the Filipino people. This
includes, among others, more inclusive growth manifested by a comfortable
life for all, improved public services, more and better jobs, and more money
in the people’s pockets; and safe, healthy, and peaceful communities.

All these can significantly reduce poverty incidence from 21.6 to 14 percent
by 2022, or lifting some six million Filipinos out of poverty, and achieving
upper middle income country status by 2022. Sustaining real positive
change for one generation can eradicate extreme poverty and allow our
country to join the ranks of advanced nations by 2040. This is a dream that
all Filipinos share and aspire for.

To realize these aspirations, the Duterte Administration recognizes the need
to sustain high growth of at least seven percent every year for one
generation, shift the source of growth from consumption to investment, and
heavily invest in our people through improved social services, such as public
health and education systems, and in better infrastructure to improve
connectivity and raise productivity. These necessary investments require an
additional one trillion pesos annually over the long-term, of which some 400
billion pesos (2% of GDP) is targeted by 2019. To sustainably finance these
investments, a Tax Reform for Acceleration and Inclusion is proposed.

The Tax Reform for Acceleration and Inclusion envisions to create a tax
system that is simpler, fairer, and more efficient, characterized by low rates
and a broad base that promotes investment, job creation and poverty
reduction. This will be complemented by major tax administration reforms
in both the Bureau of Internal Revenue and Bureau of Customs. In addition


to tax policy and administration reforms, budget reforms are being pursued
to promote spending transparency and efficiency.

‘The tax reform program consists of several packages, with each package
balancing trade-offs (e.g., lowering of some tax rates while broadening the
base of other taxes) and helping to ensure timely enactment. The first
package, which is the subject of this bill, seeks to lower personal income
taxes, broadening the VAT base, adjusting excise taxes on petroleum and
automobiles, and reducing the estate and donor's tax. In addition, the
following tax administration measures are being pursued under this
package: i) mandatory use of fuel marking; ii) mandatory issuance of e-
receipts; iii) mandatory interconnection of large and medium firms point of
sale machines and accounting system with BIR; iv) mandatory use of GPS
locks when transporting cargo from ports to economic zones and free ports;
and v) relaxation of bank secrecy for fraud cases.

‘The key features of this bill are the following: adjustment of the personal
income tax brackets to correct for “income bracket creeping”, reduction of
the maximum rate to 25% over time, except for the highest income earners
to maintain progressivity, and shift to a modified gross system to simplify
the PIT system. Revenue losses from the PIT reform will be compensated by
i) expanding the VAT base by limiting exemptions to raw food and other
necessities (e.g., education and health), ii) increasing excise tax rates on all
petroleum products to address negative externalities brought about by
congestion and pollution, iii) restructuring and increasing the excise tax on
automobiles, and iv) reducing the estate and donors tax to six percent.

To properly determine the correct taxes to be paid on the part of the
taxpayer and the correct taxes to be collected on the part of the BIR, it has
been mandated that all establishments shall issue an electronic receipt or
invoice, as the case maybe, which shall be directly generated and
transmitted to the BIR upon sale.

As regards putting up a fuel marking and monitoring system, the intended
results are increased revenue from fuel taxes and high-quality petroleum
sold in the market. This step will certainly plug the leakage of duties and
taxes due on this commodity and protect both the consumers and the
environment.

To mitigate the impact of the tax increases on the poor and vulnerable
households, earmarking for social protection programs is proposed.

Effective partnership between Congress and the Executive has always been
crucial in moving the country’s development agenda forward. Today, a

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window of opportunity exists to take the country to the next level of
development, This window of opportunity, characterized by strong
fmacroeconomic fundamentals, global recognition for the success of the
country, and a popular new government, provides the necessary condition to
tealize the President’s vision for the country, This bill is the author’s humble
contribution to this call to become partner for real positive change.

Given all these, the timely passage of this bill is earnestly sought.

Lome District, Quirino


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Seventeenth Congress
First Regular Session

A774

House Bill No.

Introduced by Representative Dakila Carlo E. Cua

AN ACT AMENDING SECTIONS 6, 22, 24, 25, 31, 33, 34, 79, 84, 86,
99,106, 107, 108, 109, 113, 116 148, 149, 155, 232, 237 AND 288;
CREATING NEW SECTIONS 148-A, 237-A, 264-A AND 264-B; AND
REPEALING SECTIONS 35 AND 62 ALL UNDER REPUBLIC ACT NO.
8424 OTHERWISE KNOWN AS “THE NATIONAL INTERNAL REVENUE
CODE OF 1997”

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

SECTION 1. Title. This Act shall be known as the “Tax Reform for
Acceleration and Inclusion”

SEC. 2. Declaration of Policy. It is hereby declared the policy of the State:

1, To enhance the progressivity of the tax system through the
rationalization of the Philippine internal revenue tax system, thereby
promoting sustainable economic growth;

2. To provide, as much as possible, an equitable relief to a greater
number of taxpayers in order to improve levels of disposable income
and increase economic activity; and

3. To ensure that the government is able to provide for the needs of those
under its jurisdiction and care through the provision of better
infrastructure, health, education and social protection for the people.

SEC. 3. Section 6 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:


“SEC. 6. Power of the Commissioner to Make Assessments and
Prescribe Additional Requirements for Tax Administration and
Enforcement. —

(A) Xxx
(B) Xxx
(C) Xxx
(D) Xxx
(E) xxx

(F) Authority of the Commissioner to Inquire AND RECEIVE
INFORMATION ON [into] Bank Deposit Accounts and Other Related
DATA [Information] Held by Financial Institutions, — Notwithstanding
any contrary provision of Republic Act No. 1405, OTHERWISE
KNOWN AS THE “BANK SECRECY LAW,”, Republic Act No. 6426,
otherwise known as the “Foreign Currency Deposit Act,” and other
general or special laws, the Commissioner is hereby authorized to
inquire into AND RECEIVE INFORMATION ON the bank deposits and
other related DATA [information] held by financial institutions of:

(1) A decedent to determine his gross estate.

(2) Any taxpayer who has filed an application for compromise of his
tax liability under Sec. 204 (A)(2) reason of financial incapacity to pay
his tax liability.

In case a taxpayer files an application to compromise the payment of
his tax liabilities on his claim that his financial position demonstrates
a clear inability to pay the tax assessed, his application shall not be
considered unless and until he waives in writing his privilege under
Republic Act No. 1405, Republic Act No. 6426, [otherwise known as
the Foreign Currency Deposit Act of the Philippines,| or under other
general or special laws, and such waiver shall constitute the authority
of the Commissioner to inquire into the bank deposits of the taxpayer.

(3) A specific taxpayer or taxpayers, UPON AN OBLIGATION TO
EXCHANGE TAX INFORMATION TO A FOREIGN TAX AUTHORITY,
WHETHER ON REQUEST, AUTOMATIC OR SPONTANEOUS, [subject
of a request for the supply of tax information from a foreign tax
authority] pursuant to an international convention or agreement on
tax matters to which the Philippines is a signatory or a party of:
Provided, That the information obtained from the banks and other
financial institutions may be used by the Bureau of Internal Revenue
for tax assessment, verification, audit and enforcement purposes.


Aaweone

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[In case of request from a foreign tax authority for tax information
held by banks and financial institutions,] [the] THE exchange of
information WITH A FOREIGN TAX AUTHORITY, WHETHER ON
REQUEST OR AUTOMATIC, shall be done in a secure manner to
ensure confidentiality thereof under such rules and regulations as
may be promulgated by the Secretary of Finance, upon
recommendation of the Commissioner.

IN CASE THE EXCHANGE OF INFORMATION IS UPON REQUEST
FROM A FOREIGN TAX AUTHORITY, [The] THE Commissioner shall
provide the tax information obtained from banks and financial
institutions pursuant to a convention or agreement upon request of
the foreign tax authority when such requesting foreign tax authority
has provided the following information to demonstrate the foreseeable
relevance of the information to the request:

{a) The identity of the person under examination or investigation;

(b) A statement of the information being sought including its nature
and the form in which the said foreign tax authority prefers to receive
the information from the Commissioner;

(c} The tax purpose for which the information is being sought;

(d) Grounds for believing that the information requested is held in the
Philippines or is in the possession or control of a person within the
jurisdiction of the Philippines;

(e) To the extent known, the name and address of any person believed
to be in possession of the requested information;

( A Statement that the request is in conformity with the law and
administrative practices of the said foreign tax authority, such that if
the requested information was within the jurisdiction of the said
foreign tax authority then it would be able to obtain the information
under its law or in the normal course of administrative practice and
that it is conformity with a convention or international agreement; and

(g) A statement that the requesting foreign tax authority has
exhausted all means available in its own territory to obtain the
information, except those that would give rise to disproportionate
difficulties.

The Commissioner shall forward the information as promptly as
possible to the requesting foreign tax authority. To ensure a prompt
response, the Commissioner shall confirm receipt of a request in
writing to the requesting tax authority and shall notify the latter of
deficiencies in the request, if any, within sixty (60) days from the
receipt of the request.


Saueun—

If the Commissioner is unable to obtain and provide the information
within ninety (90) days from the receipt of the request, due to
obstacles encountered in furnishing the information or when the bank
or financial institution refuses to furnish the information, he shall
immediately inform the requesting tax authority of the same,
explaining the nature of the obstacles encountered or the reasons of
refusal.

The term ‘foreign tax authority’, as used herein, shall refer to the tax
authority or tax administration of the requesting State under the tax
treaty or convention to which the Philippines is a signatory or a party
of.

IN CASE THE EXCHANGE OF INFORMATION IS AUTOMATIC OR
SPONTANEOUS, THE COMMISSIONER SHALL PROVIDE TAX
INFORMATION OBTAINED FROM BANKS AND _ FINANCIAL
INSTITUTIONS IN ACCORDANCE WITH INTERNATIONAL COMMON
REPORTING STANDARDS.

(4) ANY TAXPAYER AGAINST WHOM A CRIMINAL CASE IS INITIATED
FOR OFFENSES COVERED UNDER SECTIONS 254 AND 255 OF R.A.
8424, AS AMENDED, SUBJECT TO RULES AND REGULATIONS
PRESCRIBED BY THE SECRETARY OF FINANCE UPON
RECOMMENDATION OF THE COMMISSIONER OF INTERNAL
REVENUE.”

SEC. 4. Section 22 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 22. Definitions. - When used in this Title:

[(GG) The term “statutory minimum wage” shall refer to the rate
fixed by the Regional Tripartite Wage and Productivity Board, as
defined by the Bureau of Labor and Employment Statistics (BLES) of
the Department of Labor and Employment (DOLE).

(HH) The term “statutory minimum wage earner” shall refer to a
worker in the private sector paid the statutory minimum wage, or to
an employee in the public sector with compensation income of not
more than the statutory minimum wage in the non-agricultural sector
where he/she is assigned.|"

SEC. 5. Section 24 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:


“SEC. 24. Income Tax Rates. -

(A) Rates of Income Tax on Individual Citizen and Individual
Resident Alien of the Philippines. -
(1) An income tax is hereby imposed:

(a) On the taxable income defined in Section 31 of this Code,
other than income subject to tax under Subsections (B), (C) and
(D) of this Section, derived for each taxable year from all sources
within and without the Philippines by every individual citizen of
the Philippines residing therein;

(b) On the taxable income defined in Section 31 of this Code,
other than income subject to tax under Subsections (B), (C) and
D) of this Section, derived for each taxable year from all sources
within the Philippines by an individual citizen of the Philippines
who is residing outside of the Philippines including overseas
contract workers referred to in Subsection (C) of Section 23
hereof; and

() On the taxable income defined in Section 31 of this Code,
other than income subject to tax under Subsections (B), (C) and
(D) of this Section, derived for each taxable year from all sources
within the Philippines by an individual alien who is a resident of
the Philippines.

(2) Rates of Tax on Taxable Income of Individuals. - The tax shall be
computed in accordance with and at the rates established in the
following schedule:

[Not over P10,000 .... . 5%

Over P10,000 but not over P30,000... .-P500 + 10% of the

excess over P10,000

Over P30,000 but not over P70,000 ..... --P2,500 + 15% of the

excess over P30,000

Over P70,000 but not over P140,000.. -P8,500 + 20% of the

excess overP70,000
Over P140,000 but not over P250,000... ---P22,500 +25% of the
excess over P140,000

Over P250,000 but not over P500,000... ---P50,000 +30% of the

excess over P250,000



Over P500,000... ...P125,000+32%of the

excess over P500,000 |

(A) ON COMPENSATION INCOME EARNERS. -

TAX SCHEDULE EFFECTIVE JULY 1, 2017 AND TAXABLE YEARS.
2018 AND 2019

NOT OVER P250,000 ...

OVER P250,000 BUT NOT OVER P400,000 ....

P250,000

OVER P400,000 BUT NOT OVER P800,000 ..... .--P30,000 + 25%
OF THE EXCESS

OVER P400,000

OVER P800,000 BUT NOT OVER P2,000,000. -P130,000 + 30%
OF THE EXCESS

OVER P800,000

OVER P2,000,000 BUT NOT OVER P5,000,000 .P490,000 + 32%
THE EXCESS

OVER P2,000,000

OVER P5,000,000 ..

1,450,000 + 35% OF
THE EXCESS OVER
P5,000,000

TAX SCHEDULE EFFECTIVE JANUARY 1, 2020 AND ONWARDS:

NOT OVER P250,000 .. 0%

OVER P250,000 BUT NOT OVER P400,000 .... 15% OF
THE EXCESS OVER
250,000

OVER P400,000 BUT NOT OVER P800,000 ..... ..P22,500 + 20%

OF THE EXCESS

OVER P400,000
OVER P800,000 BUT NOT OVER P2,000,000 ... -P102,500 + 25%
OF THE EXCESS
OVER P800,000



OVER P2,000,000 BUT NOT OVER P5,000,000 ........P402,500 + 30%
OF THE EXCESS
OVER P2,000,000
OVER P5,000,000 ..... .-P1,302,500 + 35% OF
THE EXCESS OVER
P5,000,000

PROVIDED, THAT AFTER 2020, THE TAXABLE INCOME LEVELS IN
THE ABOVE SCHEDULES SHALL BE ADJUSTED ONCE EVERY FIVE
(5) YEARS THROUGH RULES AND REGULATIONS ISSUED BY THE
SECRETARY OF FINANCE, UPON RECOMMENDATION OF THE
COMMISSIONER, AFTER CONSIDERING AMONG OTHERS, THE
EFFECT ON THE SAME OF THE FIVE-YEAR CUMULATIVE
INFLATION RATE.

For married individuals, the husband and wife, subject to the
provision of Section 51 (D) hereof, shall compute separately their
individual income tax based on their respective total taxable income:
Provided, That if any income cannot be definitely attributed to or
identified as income exclusively earned or realized by either of the
spouses, the same shall be divided equally between the spouses for
the purpose of determining their respective taxable income.

[Provided, That minimum wage earners as defined in Section 22 (HH)
of this Code shall be exempt from the payment of income tax on their
taxable income: Provided, further, That the holiday pay, overtime pay,
night shift differential pay and hazard pay received by such minimum
wage earners shall likewise be exempt from income tax.]

({B) RATE OF TAX FOR SELF-EMPLOYED AND/OR PROFESSIONALS
WHOSE GROSS SALES OR GROSS RECEIPTS IS BELOW THE VAT
THRESHOLD AS PROVIDED IN SECTION 109. - AN EIGHT PERCENT
(8%) INCOME TAX ON GROSS SALES OR GROSS REVENUES SHALL
BE IMPOSED IN LIEU OF VAT AND PERCENTAGE TAX.

(C) RATE OF TAX FOR SELF-EMPLOYED AND/OR PROFESSIONALS
WHOSE GROSS SALES OR GROSS RECEIPTS IS ABOVE THE VAT
THRESHOLD AS PROVIDED IN SECTION 109. —

SELF-EMPLOYED AND/OR PROFESSIONALS SHALL BE TAXED IN
THE SAME MANNER AS CORPORATIONS AS TO APPLICABLE TAX
RATE, MINIMUM INCOME TAX AND ALLOWABLE DEDUCTIONS, AS
PROVIDED IN SECTIONS 27 (A), 27 (E) AND 34, RESPECTIVELY, OF
THIS CODE.

(B) Rate of Tax on Certain Passive Income: ~


(1) Interests, Royalties, Prizes and Other Winnings. — A final tax at
the rate of twenty percent (20%) is hereby imposed upon the
amount of interest from any currency bank deposit and yield or
any other monetary benefit from deposit substitutes and from trust
funds and similar arrangements; royalties, except on books, as well
as other literary works and musical compositions, which shall be
imposed a final tax of ten percent (10%); prizes (except prizes
amounting to Ten thousand pesos (P10,000) or less which shall be
subject to tax under Subsection (A) of section 24; and other
winnings |(except Philippine Charity Sweepstakes and Lotto
winnings)] derived from sources within the Philippines: Provided,
however, That interest income received by an individual taxpayer
(except a nonresident individual) from a depository bank under the
expanded foreign currency deposit system shall be subject to a
final income tax at the rate of seven and on-half percent (7 4%) of
such interest income: Provided, further, That interest income from
long-term deposit or investment in the form of savings, common or
individual trust funds, deposit substitutes, investment
management accounts and other investments evidenced by
certificates in such form prescribed by the Bangko Sentral ng
Pilipinas (BSP) shall be exempt from the tax imposed under this
Subsection: Provided, finally, That should the holder of the
certificate pre-terminate the deposit or investment before the fifth
(5th) year, a final tax shall be imposed on the entire income and
shall be deducted and withheld by the depository bank from the
proceeds of the long-term deposit or investment certificate based
on the remaining maturity thereof:

SEC. 6. Section 25 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 25. Tax on Nonresident Alien Individual. —

(A) Nonresident Alien Engaged in Trade or Business Within the
Philippines. ~


(B) Nonresident Alien Not Engaged in Trade or Business Within
the Philippines.

tte) Alien Individual Employed by Regional or Area Headquarters
Regional Headquarters of Multinational
Goecpantoc: There shall be levied, collected and paid for each taxable
year upon the gross income received by every alien individual
employed by regional or area headquarters and regional operating
headquarters established in the Philippines by multinational
companies as salaries, wages, annuities, compensation, remuneration
and other emoluments, such as honoraria and allowances, from such
regional or area headquarters and regional operating headquarters, a
tax equal to fifteen percent (15%) of such gross income: Provided,
however, That the same tax treatment shall apply to Filipinos
employed and occupying the same position as those of aliens
employed by these multinational companies. For purposes of this
Chapter, the term ‘multinational company’ means a foreign firm or
entity engaged in international trade with affiliates or subsidiaries or
branch offices in the Asia-Pacific Region and other foreign markets.)

[{D) Alien Individual Employed by Offshore Banking Units. - There
shall be levied, collected and paid for each taxable year upon the gross
income received by every alien individual employed by offshore
banking units established in the Philippines as salaries, wages,
annuities, compensation, remuneration and other emoluments, such
as honoraria and allowances, from such off-shore banking units, a tax
equal to fifteen percent (15%) of such gross income: Provided,
however, That the same tax treatment shall apply to Filipinos
employed and occupying the same positions as those of aliens
employed by these offshore banking units. |

|(E) Alien Individual Employed by Petroleum Service Contractor
and Subcontractor. - An Alien individual who is a permanent
resident of a foreign country but who is employed and assigned in the
Philippines by a foreign service contractor or by a foreign service
subcontractor engaged in petroleum operations in the Philippines
shall be liable to a tax of fifteen percent (15%) of the salaries, wages,
annuities, compensation, remuneration and other emoluments, such
as honoraria and allowances, received from such contractor or
subcontractor: Provided, however, That the same tax treatment shall

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apply to a Filipino employed and occupying the same position as an
alien employed by petroleum service contractor and subcontractor.}

{Any income earned from all other sources within the Philippines by
the alien employees referred to under Subsections (C), (D) and (E)
hereof shall be subject to the pertinent income tax, as the case may
be, imposed under this Code, |”

SEC. 7. Section 31 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 31.Taxable Income, Defined. - The term ‘taxable income’
means the pertinent items of gross income specified in this Code less
[the] deductions [and/or personal and additional exemptions], if any,
authorized for such types of income by this Code [or other special
laws).”

SEC. 8. Section 33 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 33. Special Treatment of Fringe Benefit. ~

(A)Imposition of Tax. - A final tax of THIRTY PERCENT (30%)
EFFECTIVE JULY 1, 2017, JANUARY 1, 2018 AND 2019 [thirty-
four percent (34%) effective January 1, 1998; thirty-three percent
(33%) effective January 1, 1999; and thirty-two percent (32%)
effective January 1, 2000 and thereafter], is hereby imposed on the
grossed-up monetary value of fringe benefit furnished or granted to
the employee (except rank and file employees as defined herein) by
the employer, whether an individual or a corporation (unless the
fringe benefit is required by the nature of, or necessary to the
trade, business or profession of the employer, or when the fringe
benefit is for the convenience or advantage of the employer). The
tax herein imposed is payable by the employer which tax shall be
paid in the same manner as provided for under Section 57 (A) of
this Code]. The grossed-up monetary value of the fringe benefit
shall be determined by dividing the actual monetary value of the
fringe benefit by sixty-six percent (66%) effective January 1, 1998;
sixty-seven percent (67%) effective January 1, 1999; and sixty-
eight percent (68%) effective January 1, 2000 and thereafter:]:
Provided, however, That fringe benefit furnished to employees and
taxable under Subsection|s} (B)|, (C), (D) and (E)| of Section 25

B


shall be taxed at the applicable rate[s] imposed thereat: Provided,
further, That the grossed -up monetary value of the fringe benefit
shall be determined by dividing the actual monetary value of the
fringe benefit by the difference between one hundred percent
(100%) and the applicable rate|s| of income tax under Subsection|s}
{B)[, (C), (D), and (E}] of Section 25, PROVIDED, THAT IN 2020 AND
ONWARDS THE FRINGE BENEFIT SHALL FORM PART OF THE
GROSS INCOME SUBJECT TO THE REGULAR INCOME TAX
RATES.”

SEC.9. Section 34 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 34. Deductions from Gross Income.- Except for taxpayers
earning compensation income arising from personal services rendered
under an employer-employee relationship where no deductions shall
be allowed under this Section [other than under subsection (M)
hereof,] in computing taxable income subject to income tax under
Sections {24(A)] 24{C); 25(A); 26; 27(A), (B) and (C); and 28(A)(1), there
shall be allowed the following deductions from gross income;

(L) Optional Standard Deduction (OSD). ~ \n lieu of the
deductions allowed under the preceding Subsections, an
individual subject to tax under Section 24({C), other than a
nonresident alien, may elect a standard deduction in an amount
not exceeding TWENTY PERCENT (20%) OF HIS GROSS SALES
OR GROSS RECEIPTS forty percent (40%) of his gross sales or
gross receipts, as the case maybe,| In the case of a corporation
‘subject to tax under Sections 27 (A) and 28 (A) (1), it may elect a
standard deduction in an amount not exceeding forty percent
(40%) of its gross income as defined in Section 32 of this Code.
Unless the taxpayer signifies in his return his intention to elect
the optional standard deduction, he shall be considered as
having availed himself of the deductions allowed in the
preceding Subsections. Such election when made in the return
shall be irrevocable for the taxable year for which the return is
made: Provided, That an individual who is entitled to and
claimed for the optional standard deduction shall not be
required to submit with his tax return such financial
statements otherwise required under this Code: Provided,
(further, That except when the Commissioner otherwise permits,
the said individual shall keep such records pertaining to his
gross sales or gross receipts, or the said corporation shall keep
such records pertaining to his gross income as defined in

14


Section 32 of this Code during the taxable year, as may be
required by the rules and regulations promulgated by the
Secretary of Finance, upon recommendation of the
Commissioner.

((M) Premium Payments on Health and/or Hospitalization
Insurance of an Individual Taxpayer The amount of
premiums not to exceed Two thousand four hundred pesos
(P2,400) per family or Two hundred pesos (P200) a month paid
during the taxable year for health and/or hospitalization
insurance taken by the taxpayer for himself, including his
family, shall be allowed as a deduction from his gross income:
Provided, That said family has a gross income of not more than
Two hundred fifty thousand pesos (P250,000) for the taxable
year: Provided, finally, That in the case of married taxpayers,
only the spouse claiming the additional exemption for
dependents shall be entitled to this deduction.|

XK XR XXX”

SEC. 10. Section 35 of the National Internal Revenue Code of 1997, as
amended, is hereby repealed.

SEC. 11. Section 62 of the National Internal Revenue Code of 1997, as
amended, is hereby repealed.

SEC. 12. Section 79 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 79. Income Tax Collected at Source.-

((D) Personal Exemptions.—

(1) In General. - Unless otherwise provided by this
Chapter, the personal and additional exemptions
applicable under this Chapter shall be determined in
accordance with the main provisions of this Title.


(2) Exemption Certificate. -

(a) When to File. - On or before the date of
commencement of employment with an employer,
the employee shall furnish the employer with a
signed withholding exemption certificate relating to
the personal and additional exemptions to which he
is entitled.

{b) Change of Status, - In case of change of status of
an employee as a result of which he would be
entitled to a lesser or greater amount of exemption,
the employee shall, within ten (10) days from such
change, file with the employer a new withholding
exemption certificate reflecting the change.

(c} Use of Certificates. - The certificates filed
hereunder shall be used by the employer in the
determination of the amount of taxes to be
withheld.

(d) Failure to Furnish Certificate. - Where an
employee, in violation of this Chapter, either fails or
refuses to file a withholding exemption certificate,
the employer shall withhold the taxes prescribed
under the schedule for zero exemption of the
withholding tax table determined pursuant to
Subsection (A) hereof.]

((F) Husband and Wife. - When a husband and wife each are
recipients of wages, whether from the same or from different
employers, taxes to be withheld shall be determined on the
following bases:

(1) The husband shall be deemed the head of the family
and proper claimant of the additional exemption in
respect to any dependent children, unless he explicitly
waives his right in favor of his wife in the withholding
exemption certificate.

(2) Taxes shall be withheld from the wages of the wife in
accordance with the schedule for zero exemption of the
withholding tax table prescribed in Subsection (D)(2)(d)
hereof.


SEC. 13. Section 84 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 84. Rates of Estate Tax. - There shall be levied, assessed,
collected and paid upon the transfer of the net estate as determined in
accordance with Sections 85 and 86 of every decedent, whether
resident or nonresident of the Philippines, a SIX PERCENT (6%) TAX
based on the value of such net estate. [as computed in accordance
with the following schedule:

If the net estate is:

Over But not Over The tax Plus Of the Excess

‘shall be Over
200,000 Exempt
200,000 500,000 o 5% P200,000
500,000 2,000,000 P15,000 8% 500,000
2,000,000 5,000,000 135,000 11% 2,000,000
5,000,000 10,000,000 465,000 15% 5,000,000
10,000,000 And Over 1,215,000 20% 10,000,000)"

SEC. 14. Section 86 of the National Internal Revenue Code of 1997, as
amended, are hereby further amended to read as follows:

“SEC. 86. Computation of Net Estate. - For the purpose of the tax
imposed in this Chapter, the value of the net estate shall be
determined:

(A) Deductions Allowed to the Estate -. - in the case of a citizen or
resident of the Philippines, by deducting from the value of the gross
estate —

(1) Expenses, Losses, Indebtedness, and taxes. - Such amounts:

{a) For actual funeral expenses or in an amount equal to five
percent (5%) of the gross estate, whichever is lower, but in no
case to exceed Two hundred thousand pesos (P200,000);

(b) For judicial expenses of the testamentary or intestate
proceedings;


(c) For claims against the estate: Provided, That at the time the
indebtedness was incurred the debt instrument was duly
notarized and, if the loan was contracted within three (3) years
before the death of the decedent, the administrator or executor
shall submit a statement showing the disposition of the
is of the loan;

(d) For claims of the deceased against insolvent persons where
the value of decedent's interest therein is included in the value
of the gross estate; and

(e) For unpaid mortgages upon, or any indebtedness in respect
to, property where the value of decedent's interest therein,
undiminished by such mortgage or indebtedness, is included in
the value of the gross estate, but not including any income tax
upon income received after the death of the decedent, or
property taxes not accrued before his death, or any estate tax.
The deduction herein allowed in the case of claims against the
estate, unpaid mortgages or any indebtedness shall, when
founded upon a promise or agreement, be limited to the extent
that they were contracted bona fide and for an adequate and
full consideration in money or money's worth. There shall also
be deducted losses incurred during the settlement of the estate
arising from fires, storms, shipwreck, or other casualties, or
from robbery, theft or embezzlement, when such losses are not
compensated for by insurance or otherwise, and if at the time
of the filing of the return such losses have not been claimed as
a deduction for the income tax purposes in an income tax
return, and provided that such losses were incurred not later
than the last day for the payment of the estate tax as
prescribed in Subsection (A) of Section 91.]

[(2)] (1) Property Previously Taxed. - An amount equal to the value
specified below of any property forming a part of the gross estate
situated in the Philippines of any person who died within five (5)
years prior to the death of the decedent, or transferred to the
decedent by gift within five (5) years prior to his death, where such
property can be identified as having been received by the decedent
from the donor by gift, or from such prior decedent by gift, bequest,
devise or inheritance, or which can be identified as having been
acquired in exchange for property so received:

One hundred percent (100%) of the value, if the prior decedent
died within one (1) year prior to the death of the decedent, or if
the property was transferred to him by gift within the same
period prior to his death;

Eighty percent (80%) of the value, if the prior decedent died
more than one (1) year but not more than two (2) years prior to

18


the death of the decedent, or if the property was transferred to
him by gift within the same period prior to his death;

Sixty percent (60%) of the value, if the prior decedent died more
than two (2) years but not more than three (3) years prior to the
death of the decedent, or if the property was transferred to him
by gift within the same period prior to his death;

Forty percent (40%) of the value, if the prior decedent died
more than three (3) years but not more than four (4) years prior
to the death of the decedent, or if the property was transferred
to him by gift within the same period prior to his death;

Twenty percent (20%) of the value, if the prior decedent died
more than four (4) years but not more than five (5) years prior
to the death of the decedent, or if the property was transferred
to him by gift within the same period prior to his death;

These deductions shall be allowed only where a donor's tax or
estate tax imposed under this Title was finally determined and
paid by or on behalf of such donor, or the estate of such prior
decedent, as the case may be, and only in the amount finally
determined as the value of such property in determining the
value of the gift, or the gross estate of such prior decedent, and
only to the extent that the value of such property is included in
the decedent's gross estate, and only if in determining the value
of the estate of the prior decedent, no deduction was allowable
under paragraph (2) in respect of the property or properties
given in exchange therefor. Where a deduction was allowed of
any mortgage or other lien in determining the donor's tax, or
the estate tax of the prior decedent, which was paid in whole or
in part prior to the decedent's death, then the deduction
allowable under said Subsection shall be reduced by the
amount so paid. Such deduction allowable shall be reduced by
an amount which bears the same ratio to the amounts allowed
as deductions under paragraphs (1) and (3) of this Subsection
as the amount otherwise deductible under said paragraph (2)
bears to the value of the decedent's estate. Where the property
referred to consists of two or more items, the aggregate value of
such items shall be used for the purpose of computing the
deduction.]

{(3)] (2) Transfers for Public Use. - The amount of all the bequests,
legacies, devises or transfers to or for the use of the Government of
the Republic of the Philippines, or any political subdivision thereof,
for exclusively public purposes.

[(4)(3) The Family Home. - An amount equivalent to the current
fair market value of the decedent's family home: Provided,
That if the said current fair market value exceeds [One] THREE

19


million pesos (P[1] 3,000,000), the excess shall be subject to estate
tax. As a sine qua non condition for the exemption or deduction,
said family home must have been the decedent's family home as
certified by the barangay captain of the locality.

{(5)] (4) Standard Deduction. - An amount equivalent to One million
pesos (P1,000,000).

[(6) Medical Expenses. - Medical Expenses incurred by the decedent
within one (1) year prior to his death which shall be duly
substantiated with receipts: Provided, That in no case shall the
deductible medical expenses exceed Five Hundred Thousand Pesos
(P500,000),

{(7) Amount Received by Heirs Under Republic Act No. 4917. - Any
amount received by the heirs from the decedent - employee as a
consequence of the death of the decedent-employee in accordance
with Republic Act No. 4917: Provided, That such amount is
included in the gross estate of the decedent.|

(B) Deductions Allowed to Nonresident Estates. - in the case of a
nonresident not a citizen of the Philippines, by deducting from the
value of that part of his gross estate which at the time of his death is
situated in the Philippines:

IQ) Expenses, Losses, Indebtedness and Taxes. - That proportion of
the deductions specified in paragraph (1) of Subsection (A) of thi
Section which the value of such part bears to the value of his
entire gross estate wherever situated;)

(2)](1)Property Previously Taxed.- An amount equal to the value
specified below of any property forming part of the gross estate
situated in the Philippines of any person who died within five (5)
years prior to the death of the decedent, or transferred to the
decedent by gift within five (5) years prior to his death, where such
property can be identified as having been received by the decedent
from the donor by gift, or from such prior decedent by gift,
bequest, devise or inheritance, or which can be identified as
having been acquired in exchange for property so received:

One hundred percent (100%) of the value if the prior decedent died
within one (1) year prior to the death of the decedent, or if the
Property was transferred to him by gift, within the same period prior
to his death;

20



Eighty percent (80%) of the value, if the prior decedent died more than
one (1) year but not more than two (2) years prior to the death of the
decedent, or if the property was transferred to him by gift within the
same period prior to his death;

Sixty percent (60%) of the value, if the prior decedent died more than
two (2) years but not more than three (3) years prior to the death of
the decedent, or if the property was transferred to him by gift within
the same period prior to his death;

Forty percent (40%) of the value, if the prior decedent died more than
three (3) years but not more than four (4) years prior to the death of
the decedent, or if the property was transferred to him by gift within
the same period prior to his death; and

Twenty percent (20%) of the value, if the prior decedent died more
than four (4) years but not more than five (5) years prior to the death
of the decedent, or if the property was transferred to him by gift within
the same period prior to his death.

These deductions shall be allowed only where a donor's tax, or estate
tax imposed under this Title is finally determined and paid by or on
behalf of such donor, or the estate of such prior decedent, as the case
may be, and only in the amount finally determined as the value of
such property in determining the value of the gift, or the gross estate
of such prior decedent, and only to the extent that the value of such
Property is included in that part of the decedent's gross estate which
at the time of his death is situated in the Philippines; and only if, in
determining the value of the net estate of the prior decedent, no
deduction is allowable under paragraph (2) of Subsection (B) of this
Section, in respect of the property or properties given in exchange
therefore. Where a deduction was allowed of any mortgage or other
lien in determining the donor's tax, or the estate tax of the prior
decedent, which was paid in whole or in part prior to the decedent's
death, then the deduction allowable under said paragraph shall be
reduced by the amount so paid. Such deduction allowable shall be
reduced by an amount which bears the same ratio to the amounts
allowed as deductions under paragraphs (1) and (3) of this Subsection
as the amount otherwise deductible under paragraph (2) bears to the
value of that part of the decedent's gross estate which at the time of
his death is situated in the Philippines. Where the property referred to

21


consists of two (2) or more items, the aggregate value of such items
shall be used for the purpose of computing the deduction.

[(3)] (2) Transfers for Public Use. - The amount of all bequests, legacies,
devises or transfers to or for the use of the Government of the
Republic of the Philippines or any political subdivision thereof, for
exclusively public purposes.]

{C) Share in the Conjugal Property. - The net share of the surviving
spouse in the conjugal partnership property as diminished by the
obligations properly chargeable to such property shall, for the purpose
of this Section, be deducted from the net estate of the decedent.

[(D) Miscetlaneous Provisions. - No deduction shall be allowed in the
case of a nonresident not a citizen of the Philippines, unless the
executor, administrator, or anyone of the heirs, as the case may be,
includes in the return required to be filed under Section 90 the value
at the time of his death of that part of the gross estate of the
nonresident not situated in ~—sthe_~—_—~Phiilippines.|

{(£)] (D) Tax Credit for Estate Taxes paid to a Foreign Country, —

(1) In General. - The tax imposed by this Title shall be credited with
the amounts of any estate tax imposed by the authority of a foreign
country.

(2) Limitations on Credit. - The amount of the credit taken under this
Section shall be subject to each of the following limitations:

{a) The amount of the credit in respect to the tax paid to any country
shall not exceed the same proportion of the tax against which such
credit is taken, which the decedent's net estate situated within
such country taxable under this Title bears to his entire net estate;
and

(b) The total amount of the credit shall not exceed the same proportion

of the tax against which such credit is taken, which the decedent's
net estate situated outside the Philippines taxable under this Title
bears to his entire net estate.”

SEC. 15. Section 99 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:


“SEC. 99. Rates of Tax Payable by Donor.-

(A) In General. ~ The tax for each calendar year SHALL BE 6% AND
shall be computed on the basis of the total net gifts made during
the calendar year, PROVIDED THAT ANNUAL NET GIFTS NOT
EXCEEDING P100,000 SHALL BE EXEMPT. |in accordance with
the following schedule:

[ If the net gift is:

Over But not Over The tax Plus Of the Excess

shall be Over
P100,000 Exempt

P100,000 200,000 oO 2% P100,000

200,000 500,000 2,000 4% 200,000

500,000 1,000,000 14,000 6% 500,000

1,000,000 3,000,000 44,000 8% 1,000,000

3,000,000 5,000,000 204,000 10% 3,000,000

5,000,000 10,000,000 404,000 12% 5,000,000
10,000,000 1,004,000 15% 10,000,000 |

((B) Tax Payable by Donor if Donee is a Stranger. - When the done or
beneficiary is a stranger, the tax payable by the donor shall be thirty
percent (30%) of the net gifts. For the purpose of this tax, a ‘stranger’
is a person who is not a:

(1) Brother, sister (whether by whole of half-blood), spouse,
ancestor and lineal descendant; or

(2) Relative by consanguinity in the collateral line within the
fourth degree of relationship]

{(C}] (8) Any contribution in cash or in kind to any candidate, political
party or coalition of parties for campaign purposes shall be governed
by the Election Code, as amended.”

SEC. 16. 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 on every sale, barter or exchange of goods or
properties, a value-added tax equivalent to TWELVE [ten]
percent (12%) {(10%)} 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:
(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%).)

(2) The following sales by VAT-registered persons shall be
subject to zero-percent (0%) rate:

(a) Export Sates, - The term ‘export sales’ means:

(1) The sale and actual shipment of goods
from the Philippines to a foreign country,
irrespective of any shipping arrangement that
may be agreed upon which may influence or
determine the transfer of ownership of the
goods so exported and paid for in acceptable
foreign currency or its equivalent in goods or
services, and accounted for in accordance
with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP);

[(2) Sale of raw materials or packaging
materials to a nonresident buyer for delivery
to a resident local export-oriented enterprise
to be used in manufacturing, processing,
packing or repacking in the Philippines of the
said buyer's goods and paid for in acceptable
foreign currency and accounted for in
accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP};]

a4


[(3} Sale of raw materials or packaging
materials to export-oriented enterprise whose
export sales exceed seventy percent (70%) of
total annual production;}

(4) Sale of gold to the Bangko Sentral ng
Pilipinas (BSP)];

(5) Those considered export sales under
Executive Order No. 226, otherwise known as
the Omnibus Investment Code of 1987, and
other special laws; and]

[6] (2) The sale of goods, supplies, equipment
and fuel to persons engaged in international
shipping or international air transport
operations; PROVIDED, THAT THE GOODS,
SUPPLIES, EQUIPMENT AND FUEL SHALL
BE USED FOR INTERNATIONAL SHIPPING
AND AIR TRANSPORT OPERATIONS;

(3) DIRECT EXPORTS BY A REGISTERED
EXPORT PRODUCER OF EXPORTS
PRODUCTS, OR THE SALES OF EXPORT
PRODUCTS TO ANOTHER EXPORT
PRODUCER OR TO AN EXPORT TRADER, AS
DEFINED UNDER EXECUTIVE ORDER NO.
226 AND OTHER SPECIAL LAWS:
PROVIDED, THAT THE EXPORTS OF
EXPORT TRADERS SHALL ONLY BE
DEEMED EXPORT SALES WHEN ACTUALLY
EXPORTED BY THE EXPORT TRADER, AS
EVIDENCED BY LANDING CERTIFICATES
OR SIMILAR COMMERCIAL DOCUMENTS.

[ (b) Foreign Currency Denominated Sale. - The
phrase “foreign currency denominated sale’ means
sale to a nonresident of goods, except those
mentioned in Sections 149 and 150, assembled or
manufactured in the Philippines for delivery to a
resident in the Philippines, paid for in acceptable
foreign currency and accounted for in accordance
with the rules and regulations of the Bangko Sentral
ng Pilipinas (BSP|;]

[c] (B) Sales to persons or entities whose exemption
under [special laws or] international agreements to
which the Philippines is a signatory. [effectively
subjects such sales to zero rate]; AND

3


(C) SALE OF GOLD TO THE BANGKO SENTRAL NG
PILIPINAS (BSP).”

SEC. 17. Section 107 of 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
TWELVE [ten] percent (12(10]%) 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. [Provided, further, 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%)]

(B) Transfer of Goods by Tax-exempt Persons. -

XXX XXX XXX"

SEC. 18. Section 108 of the National Internal Revenue Code of 1997, as

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 TWELVE [ten] percent

26


(12%) [(10%)] of gross receipts derived from the sale or

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, resthouses, pension houses, inns, resorts;
proprietors or operators of restaurants, refreshment parlors, cafes and
other eating places, including clubs and caterers; dealers in
securities; MONEY REMITTANCE CENTERS; 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;

27


(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 rights
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.

(B) Transactions Subject to Zero Percent (0%) Rate.:The
following services performed in the Philippines by VAT-
registered persons shall be subject to zero percent (0%) rate.

(3) Services rendered to persons or entities whose exemption
under [special laws or] international agreements to which the

28


Philippines is a signatory effectively subjects the supply of such
‘services to zero percent (0%) rate;

(4) Services rendered to persons engaged in international
shipping or international air transport operations, including
leases of property for use thereof; PROVIDED, THAT THESE
SERVICES SHALL BE EXCLUSIVELY FOR INTERNATIONAL
SHIPPING AND AIR TRANSPORT OPERATIONS;

{(5) Services performed by subcontractors and/or contractors in
processing, converting, or manufacturing goods for an
enterprise whose export sales exceed seventy percent (70%) of
total annual production;}

(5{6]) Transport of passengers and cargo by DOMESTIC air or
sea vessels from the Philippines to a foreign country;

[(7) Sale of power or fuel generated through renewable sources
of energy such as, but not limited to, biomass, solar, wind,
hydropower, geothermal, ocean energy, and other emerging
energy sources using technologies such as fuel cells and
hydrogen fuels.|

SEC. 19. Section 109 of the National Internal Revenue Code of 1997, as
amended, is hereby further 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:

(A) Xxx;
(B) Xxx;
(C) Xxx;

{(D) Importation of professional instruments and implements,
wearing apparel, domestic animals, and personal household

29


effects (except any vehicle, vessel, aircraft, machinery other
goods for use in the manufacture and merchandise of any kind
in commercial quantity) belonging to persons coming to settle in
the Philippines, for their own use and not for sale, barter or
exchange, accompanying such persons, or arriving within
ninety (90) days before or after their arrival, upon the
production of evidence satisfactory to the Commissioner, that
such persons are actually coming to settle in the Philippines
and that the change of residence is bona fide;]

{D) IMPORTATION OF PROFESSIONAL INSTRUMENTS AND
IMPLEMENTS, TOOLS OF TRADE, OCCUPATION OR
EMPLOYMENT, WEARING APPAREL, DOMESTIC ANIMALS,
AND PERSONAL AND HOUSEHOLD EFFECTS BELONGING TO
PERSONS COMING TO SETTLE IN THE PHILIPPINES OR
FILIPINOS OR THEIR FAMILIES AND DESCENDANTS WHO
ARE NOW RESIDENTS OR CITIZENS OF OTHER COUNTRIES,
SUCH PARTIES HEREINAFTER REFERRED TO AS OVERSEAS
FILIPINOS, IN QUANTITIES AND OF THE CLASS SUITABLE TO
THE PROFESSION, RANK OR POSITION OF THE PERSONS
IMPORTING SAID ITEMS, FOR THEIR OWN USE AND NOT FOR
BARTER OR SALE, ACCOMPANYING SUCH PERSONS, OR
ARRIVING WITHIN A REASONABLE TIME: PROVIDED, THAT
THE BUREAU OF CUSTOMS MAY, UPON THE PRODUCTION
OF SATISFACTORY EVIDENCE THAT SUCH PERSONS ARE
ACTUALLY COMING TO SETTLE IN THE PHILIPPINES AND
THAT THE GOODS ARE BROUGHT FROM THEIR FORMER
PLACE OF ABODE; PROVIDED, FURTHER, THAT VEHICLES,
VESSELS, AIRCRAFTS, MACHINERIES AND OTHER SIMILAR
GOODS FOR USE IN MANUFACTURE, SHALL NOT FALL
WITHIN THIS CLASSIFICATION AND SHALL THEREFORE BE
SUBJECT TO DUTIES, TAXES AND OTHER CHARGES;

(E) Services subject to percentage tax under Title V;

(F) Services by agricultural contract growers and milling for
others of palay into rice, corn into grits and sugar cane into raw
sugar;

(G) Medical, dental, hospital and veterinary services except
those rendered by professionals.

(H) Educational services rendered by private educational
institutions, duly accredited by the Department of Education
(DepED), the Commission on Higher Education (CHED), the

30


Technical Education and Skills Development Authority (TESDA)
and those rendered by government educational institutions;

(I) Services rendered by individuals pursuant to an employer-
employee relationship;

()_ Services rendered by regional or area headquarters
established in the Philippines by multinational corporations
which act as supervisory, communications and coordinating
centers for their affiliates, subsidiaries or branches in the Asia-
Pacific Region and do not earn or derive income from the
Philippines;

(K) Transactions which are exempt under international
agreements to which the Philippines is a signatory [or under
special laws, except those under Presidential Decree No. 529];

[(L) Sales by agricultural cooperatives duly registered with the
Cooperative Development Authority to their members as well as
sale of their produce, whether in its original state or processed
form, to non-members; their importation of direct farm inputs,
machineries and equipment, including spare parts thereof, to be
used directly and exclusively in the Production and/or
processing of their produce;]

[(M) Gross receipts from lending activities by credit or multi-
Purpose cooperatives duly registered with the Cooperative
Development Authority;]

{(N) Sales by non-agricultural, non- electric and non-credit
cooperatives duly registered with the Cooperative Development
Authority: Provided, That the share capital contribution of each
member does not exceed Fifteen thousand pesos (P15, 000) and
regardless of the aggregate capital and net surplus ratably
distributed among the members;]

(O] (L) Export sales by persons who are not VAT-registered;

[P] (M) Sale of real properties not primarily held for sale to
customers Nor held for lease in the ordinary course of trade or
business [or real property utilized for low-cost and socialized
housing as defined by Republic Act No. 7279, otherwise known
as the Urban Development and Housing Act of 1992, and other
related laws, residential lot valued at One million pesos
(P1,500,000) and below, house and lot, and other residential
dwellings valued at Two million five hundred thousand pesos
(P2, 500, 000) and below: Provided, That not later than
January 31, 2009 and every three (3) years thereafter, the
amount herein stated shall be adjusted to their present values

e}


using the Consumer Price Index, as published by the National
Statistics Office (NSO}];

[(Q) Lease of a residential unit with a monthly rental not
exceeding Ten thousand pesos (P10, 000): Provided, That not
later than January 31, 2009 and every three (3) years
thereafter, the amount herein stated shall be adjusted to its
present value using the Consumer Price Index as published by
the National Statistics Office (NSO);]

IR] (N) Sale, importation, printing or publication of books and
any newspaper, magazine review or bulletin which appears at
regular intervals with fixed prices for subscription and sale and
which is not devoted principally to the publication of paid
advertisements;

[5] (O) Transport of passengers by international carriers;

{(T)] (P) Sale, importation or lease of passenger or cargo vessels
and aircraft, including engine, equipment and spare parts
thereof for domestic or international transport operations;

{(U)] (Q) Importation of fuel, goods and supplies by persons

in international shipping or air transport operations;
PROVIDED, THAT THE FUEL, GOODS, AND SUPPLIES, SHALL
BE USED FOR INTERNATIONAL SHIPPING OR AIR TRANSPORT
OPERATIONS;

IV] (R) Services of bank, non-bank financial intermediaries
performing quasi-banking functions, and other non-bank
financial intermediaries; [and]

(S) SALE OF POWER OR FUEL GENERATED THROUGH
RENEWABLE SOURCES OF ENERGY SUCH AS, BUT NOT
LIMITED TO, BIOMASS, SOLAR, WIND, HYDROPOWER,
GEOTHERMAL, OCEAN ENERGY, AND OTHER EMERGING
ENERGY SOURCES USING TECHNOLOGIES SUCH AS FUEL
CELLS AND HYDROGEN FUELS; AND

{W] (T) 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 THREE MILLION [One million five
hundred thousand] pesos (P3,000,000.00 _[P1,500,000)):
Provided, That not later than January 31, 2017 and every three
(3) years thereafter, the amount herein stated shall be adjusted
to its present value using the Consumer Price Index, as
published by the [National Statistics-Office (NSO).|PHILIPPINE
STATISTICS AUTHORITY (PSA).”

32


SEC. 20. Section 113 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 113. Invoicing and Accounting Requirements for VAT-
Registered Persons. —

(A) Invoicing Requirements. - A VAT-registered person shall issue:

(1) A VAT Invoice for every sale, barter or exchange of goods or
properties; and

(2) A VAT official receipt for every lease of goods or properties, and
for every sale, barter or exchange of services.

FOR THIS PURPOSE, ELECTRONICALLY-GENERATED VAT
INVOICES AND RECEIPTS, DULY REGISTERED IN ACCORDANCE
WITH THE REQUIREMENTS PRESCRIBED BY THE COMMISSIONER
OF INTERNAL REVENUE, AS APPROVED BY THE SECRETARY OF
FINANCE, SHALL BE RECOGNIZED FOR INPUT TAX PURPOSES.

XXX XXX XXX”

SEC. 21. Section 116 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 116. Tax on Persons Exempt from Value-added Tax (VAT). -
Any person whose sales or receipts are exempt under Section
109[(V)|(7) of this Code from the payment of value-added tax and who
is not a VAT-registered person shall pay a tax equivalent to three
percent (3%) of his gross quarterly sales or receipts: Provided, That
cooperatives shall be exempt from the three percent (3%) gross
receipts tax herein imposed.”

SEC. 22. Chapter 5 of Title V of the National Internal Revenue Code of 1997,
as amended, is hereby further amended to read as follows:

“CHAPTER V
EXCISE TAX ON PETROLEUM PRODUCTS

SEC. 148. Manufactured Oils and Other Fuels. - There shall be
collected on refined and manufactured mineral oils and motor fuels,

33


the following excise taxes which shall attach to the goods hereunder
enumerated as soon as they are in existence as such:
EFFECTIVE JULY 1, 2017

(a) Lubricating oils and greases, including but not limited to,
basestock for lube oils and greases, high vacuum distillates, aromatic
extracts, and other similar preparations, and additives for lubricating
oils and greases, whether such additives are petroleum based or not,
per liter and kilogram respectively, of volume capacity or weight, [Four
pesos and fifty centavos (P4.50)] SEVEN PESOS (P7.00) Provided,
however, That the excise taxes paid on the purchased feedstock
(bunker) used in the manufacture of excisable articles and forming
part thereof shall be credited against the excise tax due therefrom:
Provided, further, That lubricating oils and greases produced from
basestocks and additives on which the excise tax has already been
paid shall no longer be subject to excise tax: Provided, finally, That
locally produced or imported oils previously taxed as such but are
subsequently reprocessed, re-refined or recycled shall likewise be
subject to the tax imposed under this Section.

(b) Processed gas, per liter of volume capacity, [Five centavos (P0.05)]
THREE PESOS (P3.00);

(c) Waxes and petrolatum, per kilogram, [Three pesos and fifty
centavos (P3.50)] SEVEN PESOS (P7.00);

(4) On denatured alcohol to be used for motive power, per liter of
volume capacity, [Five centavos (P0.05)] THREE PESOS (P3.00):
Provided, That unless otherwise provided by special laws, if the
denatured alcohol is mixed with gasoline, the excise tax on which has
already been paid, only the alcohol content shall be subject to the tax
herein prescribed. For purposes of this Subsection, the removal of
denatured alcohol of not less than one hundred eighty degrees (180")
proof (ninety percent (90%) absolute alcohol) shall be deemed to have
been removed for motive power, unless shown otherwise;

(c) Naphtha, regular gasoline and other similar products of distillation,
per liter of volume capacity, [Four pesos and thirty five centavos
(P4.35)] SEVEN PESOS (P7.00): Provided, however, That naphtha,
when used as a raw material in the production of petrochemical
products or as replacement fuel for natural-gas-fired-combined cycle
power plant, in lieu of locally-extracted natural gas during the non-
availability thereof, subject to the rules and regulations to be
promulgated by the Secretary of Energy, in consultation with the
Secretary of Finance, per liter of volume capacity, Zero (P0.00):
Provided, further, That the by-product including fuel oil, diesel fuel,
kerosene, pyrolysis gasoline, liquefied petroleum gases and similar oils
having more or less the same generating power, which are produced
in the processing of naphtha into petrochemical products shall be
subject to the applicable excise tax specified in this Section, except

4


when such by-products are transferred to any of the local oil refineries
through sale, barter or exchange, for the purpose of further processing
or blending into finished products which are subject to excise tax
under this Section;

(f Leaded premium gasoline, per liter of volume capacity, [Five pesos
and thirty-five centavos (P5.35)| SEVEN PESOS (P7.00); unleaded
premium gasoline, per liter of volume capacity, [Four pesos and thirty-
five centavos (P4.35)] SEVEN PESOS (P7.00);

(g) Aviation turbo jet fuel, per liter of volume capacity, [Three pesos
and sixty-seven centavos (P3.67)] SEVEN PESOS (P7.00);

(h) Kerosene, per liter of volume capacity, [Zero (P0.00)] THREE
PESOS (P3.00): Provided, That kerosene, when used as aviation fuel,
shall be subject to the same tax on aviation turbo jet fuel under the
preceding paragraph (g), such tax to be assessed on the user thereof;

(i) Diesel fuel oil, and on similar fuel oils having more or less the same
generating power, per liter of volume capacity, [zero (P0.00)] THREE
PESOS (P3.00);

(i) Liquefied petroleum gas, per liter, [zero (P0.00)] THREE PESOS
(P3.00): Provided, That liquefied petroleum gas used for motive power
shall be taxed at the equivalent rate as the excise tax on diesel fuel oil;

(k) Asphalts, per kilogram, [Fifty-six centavos (P0.56)] THREE PESOS
(P3.00); and

() Bunker fuel oil, and on similar fuel oils having more or less the
same generating power, per liter of volume capacity, [zero (P0.00)]
THREE PESOS (P3.00).

EFFECTIVE JANUARY 1, 2018

(a) Lubricating oils and greases, including but not limited to,
basestock for lube oils and greases, high vacuum distillates, aromatic
extracts, and other similar preparations, and additives for lubricating
oils and greases, whether such additives are petroleum based or not,
per liter and kilogram respectively, of volume capacity or weight, |Four
pesos and fifty centavos (P4.50)] NINE PESOS (P9.00) Provided,
however, That the excise taxes paid on the purchased feedstock
(bunker) used in the manufacture of excisable articles and forming
part thereof shall be credited against the excise tax due therefrom:
Provided, further, That lubricating oils and greases produced from
basestocks and additives on which the excise tax has already been
paid shall no longer be subject to excise tax: Provided, finally, That
locally produced or imported oils previously taxed as such but are

35


subsequently reprocessed, re-refined or recycled shall likewise be
subject to the tax imposed under this Section.

(b) Processed gas, per liter of volume capacity, [Five centavos (P0.05]]
FIVE PESOS (P5.00);

(c) Waxes and petrolatum, per kilogram, [Three pesos and fifty
centavos (P3.50}] NINE PESOS (P9.00};

(4) On denatured alcohol to be used for motive power, per liter of
volume capacity, [Five centavos (P0.05)] FIVE PESOS (P5.00):
Provided, That unless otherwise provided by special laws, if the
denatured alcohol is mixed with gasoline, the excise tax on which has
already been paid, only the alcohol content shall be subject to the tax
herein prescribed. For purposes of this Subsection, the removal of
denatured alcohol of not less than one hundred eighty degrees (180°)
proof (ninety percent (90%) absolute alcohol) shall be deemed to have
been removed for motive power, unless shown otherwise;

() Naphtha, regular gasoline and other similar products of distillation,
per liter of volume capacity, [Four pesos and thirty five centavos}
(P4.35)] NINE PESOS (P9.00): Provided, however, That naphtha, when
used as a raw material in the production of petrochemical products or
as replacement fuel for natural-gas-fired-combined cycle power plant,
in lieu of locally-extracted natural gas during the non-availability
thereof, subject to the rules and regulations to be promulgated by the
Secretary of Energy, in consultation with the Secretary of Finance, per
liter of volume capacity, Zero (P0.00): Provided, further, That the by-
Product including fuel oil, diesel fuel, kerosene, pyrolysis gasoline,
liquefied petroleum gases and similar oils having more or less the
same generating power, which are produced in the processing of
naphtha into petrochemical products shall be subject to the
applicable excise tax specified in this Section, except when such by-
products are transferred to any of the local oil refineries through sale,
barter or exchange, for the purpose of further processing or blending
into finished products which are subject to excise tax under this
Section;

( Leaded premium gasoline, per liter of volume capacity, [Five pesos
and thirty-five centavos (P5.35)] NINE PESOS (P9.00}; unleaded
premium gasoline, per liter of volume capacity, [Four pesos and thirty-
five centavos (P4.35)] NINE PESOS (P9.00);

(g) Aviation turbo jet fuel, per liter of volume capacity, [Three pesos
and sixty-seven centavos (P3.67)] NINE PESOS (P9.00);

36


(h) Kerosene, per liter of volume capacity, [Zero (P0.00)] FIVE PESOS
(P5.00): Provided, That kerosene, when used as aviation fuel, shall be
‘subject to the same tax on aviation turbo jet fuel under the preceding
paragraph (g), such tax to be assessed on the user thereof;

(i) Diesel fuel oil, and on similar fuel oils having more or less the same
generating power, per liter of volume capacity, [zero (P0.00)] FIVE
PESOS (P5.00);

{j) Liquefied petroleum gas, per liter, [zero (P0.00)] FIVE PESOS
(P5.00): Provided, That liquefied petroleum gas used for motive power
shall be taxed at the equivalent rate as the excise tax on diesel fuel oil;
(k) Asphalts, per kilogram, [Fifty-six centavos (P0.56)] FIVE PESOS
(P5.00); and

() Bunker fuel oil, and on similar fuel oils having more or less the
same generating power, per liter of volume capacity, [zero (PO.00)]
FIVE PESOS (P5.00).

EFFECTIVE JANUARY 1, 2019

(a) Lubricating oils and greases, including but not limited to,
basestock for lube oils and greases, high vacuum distillates, aromatic
extracts, and other similar preparations, and additives for lubricating
oils and greases, whether such additives are petroleum based or not,
per liter and kilogram respectively, of volume capacity or weight, [Four
pesos and fifty centavos (P4.50)] TEN PESOS (P10.00): Provided,
however, That the excise taxes paid on the purchased feedstock
(bunker) used in the manufacture of excisable articles and forming
part thereof shall be credited against the excise tax due therefrom:
Provided, further, That lubricating oils and greases produced from
basestocks and additives on which the excise tax has already been
paid shall no longer be subject to excise tax: Provided, finally, That
locally produced or imported oils previously taxed as such but are
subsequently reprocessed, re-refined or recycled shall likewise be
subject to the tax imposed under this Section.

(b) Processed gas, per liter of volume capacity, [Five centavos (P0.05)]
SIX PESOS (P6.00);

(c) Waxes and petrolatum, per kilogram, [Three pesos and fifty
centavos (P3.50}] TEN PESOS (P10.00);

(4) On denatured alcohol to be used for motive power, per liter of
volume capacity, [Five centavos (P0.05)] SIX PESOS (P6.00): Provided,
That unless otherwise provided by special laws, if the denatured
alcohol is mixed with gasoline, the excise tax on which has already

37


been paid, only the alcohol content shall be subject to the tax herein
prescribed. For purposes of this Subsection, the removal of denatured
alcohol of not less than one hundred eighty degrees (180°) proof
{ninety percent (90%) absolute alcohol) shall be deemed to have been
removed for motive power, unless shown otherwise;

(c) Naphtha, regular gasoline and other similar products of distillation,
per liter of volume capacity, (Four pesos and thirty five centavos
(P4.35)] TEN PESOS (P10.00): Provided, however, That naphtha, when
used as a raw material in the production of petrochemical products or
as replacement fuel for natural-gas-fired-combined cycle power plant,
in lieu of locally-extracted natural gas during the non-availability
thereof, subject to the rules and regulations to be promulgated by the
Secretary of Energy, in consultation with the Secretary of Finance, per
liter of volume capacity, Zero (P0.00): Provided, further, That the by-
product including fuel oil, diesel fuel, kerosene, pyrolysis gasoline,
liquefied petroleum gases and similar oils having more or less the
same generating power, which are produced in the processing of
naphtha into petrochemical products shall be subject to. the
applicable excise tax specified in this Section, except when such by-
products are transferred to any of the local oil refineries through sale,
barter or exchange, for the purpose of further processing or blending
into finished products which are subject to excise tax under this
Section;

( Leaded premium gasoline, per liter of volume capacity, [Five pesos
and thirty-five centavos (P5.35)] TEN PESOS (P10.00); unleaded
premium gasoline, per liter of volume capacity, [Four pesos and thirty-
five centavos (P4.35)] TEN PESOS (P10.0

(g) Aviation turbo jet fuel, per liter of volume capacity, [Three pesos
and sixty-seven centavos (P3.67)] TEN PESOS (P10.00);

(h) Kerosene, per liter of volume capacity, [Zero (P0.00)] SIX PESOS
(P6.00): Provided, That kerosene, when used as aviation fuel, shall be
subject to the same tax on aviation turbo jet fuel under the preceding
paragraph (g), such tax to be assessed on the user thereof;

(i) Diesel fuel oil, and on similar fuel oils having more or less the same
generating power, per liter of volume capacity, [zero (PO.00)] SIX
PESOS (P6.00);

() Liquefied petroleum gas, per liter, [zero (PO.00)] SIX PESOS (P6.00):
Provided, That liquefied petroleum gas used for motive power shall be
taxed at the equivalent rate as the excise tax on diesel fuel oil;

(kj) Asphalts, per kilogram, [Fifty-six centavos (P0.56)] SIX PESOS
(P6.00); and

38


weene

Sears

17
18
19
20
21

() Bunker fuel oil, and on similar fuel oils having more or less the
same generating power, per liter of volume capacity, [zero (PO.00)| SIX
PESOS (P6.00).

“PROVIDED, HOWEVER, THAT THE EXCISE TAXES PAID ON
THE PURCHASED FEEDSTOCK (BUNKER) USED IN THE
MANUFACTURE OF EXCISABLE ARTICLES AND FORMING PART
THEREOF SHALL BE CREDITED AGAINST THE EXCISE TAX DUE
THEREFROM),

“PROVIDED, FURTHER, THAT LUBRICATING OILS AND
GREASES PRODUCED FROM BASESTOCKS AND ADDITIVES ON
WHICH THE EXCISE TAX HAS ALREADY BEEN PAID SHALL NO
LONGER BE SUBJECT TO EXCISE TAX|:],

“PROVIDED, FINALLY, THAT LOCALLY PRODUCED OR
IMPORTED OILS PREVIOUSLY TAXED AS SUCH BUT ARE
SUBSEQUENTLY REPROCESSED, REREFINED OR RECYCLED
SHALL LIKEWISE BE SUBJECT TO THE TAX IMPOSED UNDER THIS
SUBSECTION.

“THE TAX RATES IMPOSED UNDER THIS SUBSECTION SHALL
BE INCREASED BY FOUR PERCENT (4%) EVERY YEAR
THEREAFTER EFFECTIVE ON JANUARY 1, 2020 THROUGH
REVENUE REGULATIONS ISSUED BY THE SECRETARY OF
FINANCE, UNLESS THE AVERAGE DUBAI CRUDE OIL PRICE IN THE
MONTH PRECEEDING THE SCHEDULED INDEXATION EXCEEDS
ONE HUNDRED U.S. DOLLARS (USD 100) PER BARREL.”

SEC. 23. Anew section designated as Section 148-A under Chapter V of the
National Internal Revenue Code (NIRC) of 1997, as amended, is hereby
inserted to read as follows:

“SECTION 148-A. MANDATORY MARKING OF ALL PETROLEUM
PRODUCTS. — ALL PETROLEUM PRODUCTS, (MANUFACTURED OIL
AND OTHER FUEL) REFINED, MANUFACTURED AND/OR IMPORTED
INTO THE PHILIPPINES, WHETHER THE SAME WERE EXEMPT
FROM THE PAYMENT OF TAXES AND DUTIES, OR ENTERED INTO A
FREE ZONE SHALL BE MARKED WITH THE OFFICIAL MARKING

39


AGENT DESIGNATED BY THE DEPARTMENT OF FINANCE (DOF) IN
ACCORDANCE WITH EXISTING RULES:

THE PERSON, ENTITY OR TAXPAYER WHO OWNS OR ENTERS THE
PETROLEUM PRODUCTS TO WHOM THE SAID PETROLEUM
PRODUCTS ARE CONSIGNED, OR WHOEVER BRINGS THE SAME
INTO THE COUNTRY SHALL CAUSE THE MARKING OF SAID
PETROLEUM PRODUCTS WITH THE OFFICIAL MARKING AGENT,

A. ABSENCE OF MARKER; PRESUMPTION. - 1N THE EVENT THAT
THE PETROLEUM PRODUCTS WHICH DO NOT CONTAIN THE
OFFICIAL MARKER ARE FOUND IN THE DOMESTIC MARKET OR IN
POSSESSION OF ANYONE OR UNDER ANY SITUATION WHERE SAID
PETROLEUM PRODUCTS ARE SUBJECT TO DUTIES AND TAXES, IT
SHALL BE PRESUMED THAT THE SAME WERE REFINED,
MANUFACTURED, AND/OR IMPORTED OR WITHDRAWN WITH THE
INTENTION TO EVADE THE PAYMENT OF THE TAXES AND DUTIES
DUE THEREON AND SHALL BE PROCEEDED AGAINST PURSUANT
TO LAW, UNLESS THE CONTRARY BE PROVEN THROUGH THE
PRESENTATION OF VALID DOCUMENTS AND/OR OTHER
EVIDENCE TO THE CONTRARY.

THE ABSENCE OF THE MARKER OR THE USE OF FRAUDULENT
MARKER ON THE PETROLEUM PRODUCTS SHALL BE CONSIDERED
PRIMA FACIE EVIDENCE THAT THE SAME HAVE BEEN
WITHDRAWN OR IMPORTED WITHOUT THE PAYMENT OF THE
EXCISE TAX.

THE FAILURE OF THE PERSON, ENTITY OR TAXPAYER
RESPONSIBLE FOR THE MARKING OF THE PETROLEUM
PRODUCTS AS HEREIN REQUIRED WITHIN FIFTEEN (15) DAYS
FROM DUE NOTICE SHALL SUBJECT SUCH OWNER, CONSIGNEE
OR IMPORTER AND THE ARTICLES TO SUCH SANCTIONS AS MAY
BE IMPOSED IN ACCORDANCE WITH THE NATIONAL INTERNAL
REVENUE CODE OF 1997, AS AMENDED AND THE TARIFF AND
CUSTOMS CODE OF THE PHILIPPINES, AS AMENDED, AND OTHER
RELEVANT EXISTING LAWS AND RULES AND REGULATIONS IN
PURSUANCE OF LAW.

B. PROGRAM IMPLEMENTATION OFFICE (PIO). - A PiO, HEADED
BY A DOF SENIOR OFFICER TO BE DESIGNATED BY THE
SECRETARY OF FINANCE, AND WITH THE COMMISSIONER OF THE
BUREAU OF CUSTOMS (BOC) AND THE COMMISSIONER OF
BUREAU OF INTERNAL REVENUE (BIR) OR THEIR DULY
AUTHORIZED REPRESENTATIVES WITH THE RANK OF DEPUTY
COMMISSIONER AS MEMBERS SHALL DIRECTLY COORDINATE
AND SUPERVISE THE PROPER AND EFFECTIVE IMPLEMENTATION
OF THIS ACT. THE PIO SHALL BE SUPPORTED BY PERSONNEL OF
THE DOF, AS WELL AS THOSE ASSIGNED OR SECONDED FROM
AGENCIES ATTACHED TO THE DOF.

40


SEC.
1997,

THE PIO, WHICH IS HEREBY AUTHORIZED TO CALL ON ANY
OFFICIAL OF THE DEPARTMENT OF ENERGY AND ITS ATTACHED
AGENCIES FOR SUCH ASSISTANCE AS MAY BE NECESSARY, AS
WELL AS TO REQUIRE THE PARTICIPATION OF EXPERTS TO HELP
ACHIEVE THE OBJECTIVES OF THE ACT, SHALL HAVE THE
FOLLOWING DUTIES AND RESPONSIBILITIES:

(A) TO ISSUE THE TERMS OF REFERENCE AND ENGAGEMENT OF
THE OFFICIAL MARKING PROVIDER;

(B) TO ENSURE THAT ALL OPERATIONAL AND TECHNICAL
WRITTEN INSTRUCTIONS ARE IN PLACE AND PROPERLY
DISSEMINATED TO ALL CONCERNED TO ENSURE THE
EFFECTIVENESS OF THE MARKING SYSTEM;

(C) TO IDENTIFY AND RESOLVE OPERATIONAL AND TECHNICAL
DIFFICULTIES IDENTIFIED IN THE COURSE OF IMPLEMENTATION;
AND

(D) SUBMIT MONTHLY PROGRESS REPORT TO THE
SECRETARY OF FINANCE ON THE IMPLEMENTATION OF THIS ACT.

THE PIO, IN LAUNCHING THE NATIONWIDE ROLL-OUT OF THE
PROGRAM, IN CONSULTATIONS WITH THE BOC AND THE BIR
SHALL SUBMIT TO THE SECRETARY OF FINANCE, AMONG
OTHERS, THE FOLLOWING: {A) SPECIFICATIONS OF THE
NATIONAL MARKER; (B) THE MARKER TO BE USED AND THE
MARKING SERVICE PROVIDER; (C) TERMS OF REFERENCE AND
ENGAGEMENT OF THE PROVIDER; (D) PERFORMANCE MEASURES
OF THE PROGRAM; (E) PORTS/PLACES WHERE THE FUEL
MARKING PROGRAM WILL BE ROLLED-OUT.

24. Chapter 5 of Title VI of the National Internal Revenue Code of
as amended, is hereby further amended to read as follows:

“CHAPTER VI - EXCISE TAX ON MISCELLANEOUS ARTICLES

‘SEC. 149. Automobiles There shall be levied, assessed and collected
an ad valorem tax on automobiles based on the manufacturer's or
importer's selling price, net of excise and value-added tax, in
accordance with the following schedule:

41


Net manufacturer's

price/importer's selling Rate
price
Up to P600 Thousand 4% (2%)

[P12, 000 + 20%] P24,000 +
Over P600 Thousand to 40% of value in excess of P600
P1.1 million thousand

{P112, 000 + 40%] P224,000 +
Over P1.1 Million to P2.1 100% of value in excess of P1.1
Million Million

[P512,000 + 60%] P1,224,000 +
200% of value in excess of P2.1

Over P2.1 Million illion

[Provided, That the brackets reflecting the manufacturer's price or
importer's selling price, net of excise and value-added taxes, will be indexed
by the Secretary of Finance once every two (2) years if the change in the
exchange rate of the Philippine peso against the United States (U.S,) dollar
is more than ten percent (10%) from the date of effectivity of this Act, in the
case of initial adjustment and from the last revision date in the case of
subsequent adjustments.

‘The manufacturer's price or importer’s selling price, net of excise and
value-added taxes, shall be indexed by the full rate of the peso depreciation
or appreciation, as the case may be.

Provided, further, That in case the change in the exchange rate of the
Philippine peso against the U.S. dollar is at least twenty percent (20%) at
anytime within the two-year period referred to above, the Secretary of
Finance shall index the brackets reflecting the manufacturer’s price or
importer's selling price, net of excise and value-added taxes, by the full rate
of the peso depreciation or appreciation, as the case may be.|

As used in this Section —
{a) Automobile shall mean any four (4) or more wheeled motor vehicle

of seating capacity, which is propelled by gasoline, diesel, OR
ANY OTHER MOTIVE POWER EXCEPT PURELY POWERED BY electricity {or

a2


any other motive power]: Provided, That for purposes of this Act, buses,
trucks, cargo vans, jeeps/jeepneys/jeepney substitutes, single cab chassis,
and special-purpose vehicles shall not be considered automobiles.

(b) Truck/cargo van shall mean a motor vehicle of any configuration
that is exclusively designed for the carriage of goods and with any number of
wheels and axles: Provided, That pick-ups shall [not] be considered as
trucks.

(c) Jeep/jeepney /jeepney substitutes shall mean as “Philippine jeep or
jeepney” which are of the jitney type locally designed and manufactured
generally from surplus parts and components. It shall also include jeepney
substitutes that are manufactured from brand-new single cab chassis or
cowl chassis and locally customized rear body that has continuous sideway
row seats with open rear door and without retractable glass windows.

(d) Bus shall mean a motor vehicle of any configuration with gross
vehicle weight of 4.0 tons or more with any number of wheels and axles,
which is generally accepted and specially designed for mass or public
transportation.

(c) Single cab chassis shall mean a motor vehicle with complete engine
power train and chassis equipped with a cab that has a maximum of two (2)
doors and only one (1) row of seats.

() Special purpose vehicle shall mean a motor vehicle designed for
specific applications such as cement mixer, fire truck, boom truck,
ambulance and/or medical unit, and off-road vehicles for heavy industries
and not for recreational activities.

Provided, That in the case of imported automobiles not for sale, the
tax imposed herein shall be based on the total landed value, including
transaction value, customs duty and all other charges.

Automobiles used exclusively within the freeport zone shall be exempt from
excise tax.”

SEC. 25. Section 155 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

"SECTION 155, Manufacturers’ AND IMPORTERS’ [to Provide
‘Themselves with] Counting or Metering Devices to Determine

— Manufacturers AND IMPORTERS of cigarettes,
alcoholic products, oil products and other articles subject to excise
tax that can be similarly measured [shall provide themselves] SHALL
HAVE [with such] THE necessary number of suitable counting or
metering devices, INCLUDING FUEL MARKING IN THE CASE OF
PETROLEUM PRODUCTS, to determine as accurately as possible the

B


volume, quantity or number of the articles produced by them under
rules and regulations promulgated by the Secretary of Finance, upon
recommendation of the Commissioner.

This requirement shall be complied with before commencement of
operations.”

SEC, 26. Section 232 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

"SECTION 232. Keeping of Books of Accounts. —

(A) Corporations, Companies, Partnerships or Persons Required to Keep
Books of Accounts. — All corporations, companies, partnerships or
persons required by law to pay internal revenue taxes shall keep a
journal and a ledger or their equivalents: Provided, however, That
those whose quarterly sales, earnings, receipts, or output do not
exceed [Fifty] TWO HUNDRED FIFTY thousand pesos |P50,000)]
(P250,000) shall keep and use simplified set of bookkeeping records
duly authorized by the Secretary of Finance wherein all transactions
and results of operations are shown and from which alll taxes due the
Government may readily and accurately be ascertained and
determined any time of the year: Provided, further, That corporations,
companies, partnerships or persons whose gross quarterly sales,
earnings, receipts or output exceed [One] SEVEN hundred fifty
thousand pesos (P750,000) |(P150,000)}, shall have their books of
accounts audited and examined yearly by independent Certified
Public Accountants and their income tax returns accompanied with a
duly accomplished Account Information Form (AIF) which shall
contain, among others, information lifted from certified balance
sheets, profit and loss statements, schedules listing income-
producing properties and the corresponding income therefrom and
other relevant statements; PROVIDED FURTHER, THAT THE
SECRETARY OF FINANCE, UPON RECOMMENDATION OF THE
COMMISSIONER, SHALL REQUIRE THE MANDATORY
INTERCONNECTION OF CERTAIN BOOKS OF ACCOUNTS TO THE
BUREAU OF INTERNAL REVENUE SYSTEMS.”

SEC. 27. Section 237 of the National Internal Revenue Code (NIRC) of 1997,
as amended, is hereby further amended to read as follows:


“SEC, 237. [[ssuance of Receipts or Sales or Commercial
Invoices.] ELECTRONIC RECEIPTS OR ELECTRONIC SALES OR
COMMERCIAL INVOICES. —

(A) ISSUANCE. - All persons subject to an internal revenue tax shall,
for each sale or transfer of merchandise or for services rendered
valued at Twenty-five pesos (P25.00) or more, issue duly registered
ELECTRONIC receipts or ELECTRONIC sales or commercial
invoices, [prepared at least in duplicate,] showing the date of
transaction, quantity, unit cost and description of merchandise or
nature of service: Provided, however, That in the case of sales,
receipts or transfers in the amount of One hundred pesos
(P100.00) or more, or regardless of amount, where the sale or
transfer is made by a person liable to value-added tax to another
person also liable to value-added tax; or where the ELECTRONIC
receipt is issued to cover payment made as rentals, commissions,
compensations or fees, ELECTRONIC receipts or ELECTRONIC
invoices shall be issued which shall show the name, business
style, if any, and address of the purchaser is a VAT-registered
person, in addition to the information herein required, the
ELECTRONIC invoice or ELECTRONIC receipt shall further show
the Taxpayer Identification Number (TIN) of the purchaser:
PROVIDED, FURTHER, THAT, THE ISSUANCE TO THE BUYER
OF AN ELECTRONIC RECEIPT OR ELECTRONIC INVOICE SHALL
BE ACCOMPLISHED EITHER ELECTRONICALLY OR BY
TENDERING A PRINTED COPY THEREOF.

(B) TRANSMISSION. = THE PRECEDING PARAGRAPH
NOTWITHSTANDING, AN ELECTRONIC RECEIPT OR
ELECTRONIC INVOICE, AS THE CASE MAYBE, SHALL BE
TRANSMITTED DIRECTLY TO THE BUREAU OF INTERNAL
REVENUE (BIR) AT THE SAME TIME AND DATE OF EACH SALE
TRANSACTION.”

SEC. 28, A new section designated as Section 237-A under Chapter II Title
IX of the National Internal Revenue Code (NIRC) of 1997, as amended, is
inserted to read as follows:

“SEC. 237-A. ELECTRONIC SALES REPORTING SYSTEM. ~

A. CREATION. - THE BUREAU SHALL CREATE AN ELECTRONIC
SYSTEM THAT WILL LINK SALES AND PURCHASE DATA
ENTERED ON CASH REGISTER/POINT-OF-SALES MACHINES

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(CRM/POS MACHINES) OF VAT-REGISTERED TAXPAYERS TO
THE BUREAU’S SERVERS FOR SIMULTANEOUS REPORTING OF
SALES AND PURCHASE DATA.

VAT-REGISTERED TAXPAYERS SHALL ACQUIRE CRM/POS
MACHINES AND SECURE SAID MACHINES’ LINKAGE TO THE
BIR'S SERVERS AT THEIR EXPENSE. THEY SHALL LIKEWISE
ENSURE THAT THE CRM/POS MACHINES HAVE THE CAPACITY
TO SIMULTANEOUSLY TRANSMIT DATA ENTERED ON THE
MACHINES TO THE SERVERS OF THE BUREAU OF INTERNAL
REVENUE.

THE ESTABLISHMENT BY THE BUREAU OF THE ELECTRONIC
SYSTEM AND LINKAGE THERETO BY VAT-REGISTERED
TAXPAYERS OF THEIR CRM/POS MACHINES SHALL BE DONE
WITHIN ONE (1) YEAR AND SIX (6) MONTHS FROM THE
EFFECTIVITY OF THIS ACT.

}. ELECTRONIC INTERCONNECTIVITY WITH THE BUREAU OF

CUSTOMS (BOC), LAND TRANSPORTATION OFFICE (LTO),
DEPARTMENT OF TRADE AND INDUSTRY (DTI), DEPARTMENT
OF AGRICULTURE (DA), SECURITIES AND EXCHANGE
COMMISSION (SEC) AND OTHER APPROPRIATE GOVERNMENT
AGENCIES. - WITHIN ONE (1) YEAR AND SIX (6) MONTHS FROM
THE EFFECTIVITY OF THIS ACT, THE BUREAU SHALL
ESTABLISH ELECTRONIC INTERCONNECTIVITY WITH THE BOC,
LTO, DTI, DA, SEC AND OTHER APPROPRIATE GOVERNMENT
AGENCIES TO FURTHER ENHANCE THE REVENUE COLLECTION
EFFORT OF GOVERNMENT.

. CONFIDENTIALITY OF TAXPAYER INFORMATION AND

COMPLIANCE WITH THE ‘DATA PRIVACY ACT. - THE
PROVISIONS OF SECTION 270 OF THE NATIONAL INTERNAL
REVENUE CODE OF 1997, AS AMENDED, ON UNLAWFUL
DIVULGENCE OF TAXPAYER INFORMATION SHALL BE STRICTLY
COMPLIED WITH.

THE DATA PROCESSING OF SALES AND PURCHASE DATA
SHALL ALSO COMPLY WITH THE PROVISIONS OF REPUBLIC ACT
NO. 10173 OR THE ‘DATA PRIVACY ACT.”


SEC. 29. A new section designated as Section 264-A under Chapter II Title
X of the National Internal Revenue Code (NIRC) of 1997, as amended, is
inserted as follows:

“SEC. 264-A. FAILURE TO LINK SALES AND PURCHASE DATA
ENTERED ON CRM/POS MACHINES TO THE BIR’S SERVERS DUE
TO NEGLIGENCE OR INTENT TO DEFRAUD THE GOVERNMENT. ~

ANY VAT REGISTERED TAXPAYER WHO FAILS TO UTILIZE
CRM/POS MACHINES CONNECTED TO THE BUREAU'S SERVERS IN
THE TAXPAYER'S BUSINESS OPERATIONS/TRANSACTIONS DUE TO
NEGLIGENCE OR WITH INTENT TO DEFRAUD THE GOVERNMENT
SHALL PAY A PENALTY AMOUNTING TO ONE-HALF OF ONE
PERCENT (1/2 OF 1%) OF THE ANNUAL NET INCOME AS
REFLECTED IN THE VAT-REGISTERED TAXPAYER'S AUDITED
FINANCIAL STATEMENT FOR THE SECOND YEAR PRECEDING THE
CURRENT TAXABLE YEAR FOR EACH DAY OF VIOLATION;
PROVIDED, THAT PAYMENT OF THE PENALTY SHALL BE MADE
SIMULTANEOUSLY WITH THE PAYMENT FOR VAT ON A MONTHLY
BASIS AS PROVIDED IN SECTION 114 (A) OF THIS CODE;
PROVIDED, FURTHER, THAT SHOULD THE AGGREGATE NUMBER
OF DAYS OF VIOLATION EXCEED ONE-HUNDRED EIGHTY (180)
DAYS WITHIN A TAXABLE YEAR, AN ADDITIONAL PENALTY OF
PERMANENT CLOSURE OF THE VAT-REGISTERED TAXPAYER
SHALL BE IMPOSED.”

SEC. 30. A new section designated as Section 264-B under Chapter II Title
X of the National Internal Revenue Code (NIRC) of 1997, as amended, is
inserted to read as follows:

“SEC. 264-B. AUTOMATED SALES SUPPRESSION DEVICES. -

CRIMINAL LIABILITY SHALL BE INCURRED BY ANY PERSON WHO
SHALL PURCHASE, USE, POSSESS, SELL OR OFFER TO SELL,
UPDATE, UPGRADE, KEEP OR MAINTAIN ANY SOFTWARE OR
DEVICE DESIGNED FOR, OR IS CAPABLE OF:

A. SUPPRESSING THE CREATION OF ELECTRONIC RECORDS
OF SALE TRANSACTIONS THAT A TAXPAYER IS REQUIRED
TO KEEP UNDER EXISTING TAX LAWS AND/OR
REGULATIONS; OR

47


B, MODIFYING, HIDING, OR DELETING ELECTRONIC
RECORDS OF SALES TRANSACTIONS AND PROVIDING A
READY MEANS OF ACCESS TO THEM.

ANY PERSON CONVICTED OF A VIOLATION OF THIS SECTION
SHALL BE PUNISHED BY A FINE OF NOT LESS THAN TWO
HUNDRED THOUSAND PESOS (P200,000.00) BUT NOT MORE THAN
FIVE HUNDRED THOUSAND PESOS (P500,000.00) AND SUFFER
IMPRISONMENT OF NOT LESS THAN TWO (2) YEARS BUT NOT
MORE THAN (4) YEARS.”

SEC. 31. Section 288 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“A, Xxx
B. Xxx
C, Xxx
D. Xxx

E, Xxx

F. EARMARKING OF INCREMENTAL REVENUES FROM THE
TAX REFORM FOR ACCELERATION AND INCLUSION ACT.
FORTY PERCENT (40%) OF THE FIRST YEAR INCREMENTAL
REVENUES GENERATED FROM THE PETROLEUM EXCISE
TAX UNDER SECTION 21 OF THIS ACT SHALL BE ALLOCATED
TO FUND HIGHLY TARGETED TRANSFER PROGRAMS AND
SUBSIDIES TO PUBLIC UTILITY VEHICLES FOR ONE YEAR
FROM THE EFFECTIVITY OF THIS ACT. AN INTER-AGENCY
COMMITTEE LED BY THE DEPARTMENT OF FINANCE, AND
COMPRISING THE DEPARTMENT OF SOCIAL WELFARE AND
DEVELOPMENT, DEPARTMENT OF ENERGY, DEPARTMENT
OF BUDGET AND MANAGEMENT, AND THE NATIONAL
ECONOMIC DEVELOPMENT AUTHORITY SHALL PREPARE
THE TRANSFER PROGRAMS USING THE NATIONAL
HOUSEHOLD TARGETING SYSTEM FOR POVERTY
REDUCTION, AS THE BASIS, AS WELL AS THE SUBSIDY FOR
PUBLIC UTILITY VEHICLES.

THE REMAINING SIXTY PERCENT (60%) OF THE FIRST YEAR
REVENUE, AND INCREMENTAL REVENUES IN SUCCEEDING

48


YEARS SHALL BE ALLOCATED FOR INFRASTRUCTURE,
HEALTH, EDUCATION, AND SOCIAL PROTECTION
EXPENDITURES.”

SEC. 32. Implementing Rules and Regulation. ~ The Secretary of Finance
shall, upon the recommendation of the Commissioner of Internal Revenue,
promulgate upon the effectivity of this Act the necessary Rules and
Regulations for its effective implementation.

SEC. 33. Separability Clause. - If any provision of this Act is subsequently
declared invalid or unconstitutional, other provisions hereof which are not
affected thereby shall remain in full force and effect.

SEC. 34. Repealing Clause. - The following laws or provisions of laws are
hereby repealed and the persons and/or transactions affected herein are
made subject to the value-added Tax subject to the provision of Title IV of
the National Internal Revenue Code of 1997, as amended:

(a) Section 9, with respect to Value-added Tax, or R.A. 9511 or the
National Grid Corporation of the Philippines Act;

(b) Articles 60 and 61 (1) with respect to the VAT, and Article 61 (2)(b)
of R.A. 9520 or The Philippine Cooperative Code of 2008;

(c) Section 9 of RA 10744 or the Credit Surety Fund Cooperative Act
of 2015;

(d) Section 4(a) and (b) and Section 19(a) of RA 9295 or the Domestic
Shipping Development Act of 2004;

(e) Section 11(a) and (b) of R.A. 10073 or The Girl Scout of the
Philippines Charter of 2009;

(9 Section 22(b) of RA 10747 or Rare Diseases Act of the Philippines;

(g) Section 13 (1) and (2), with respect to Value-added Tax, or P.D.
1869 s. 1983 or the Franchise and Powers of The Philippine
Amusement and Gaming Corporation;

(h) Section 15(g) of RA 9513 or the Renewable Energy Act of 2008;

49


(i) Last paragraph of Section 8 of RA 7278 or the Boy Scout of the
Philippines with respect to Value-added tax; and

() Section 16 (a) and (b), and Section 17 (a) of P.D. 972 s. 1976 or
The Coal Development Act of 1976, with respect to excise tax and
VAT.

Provided, further, the following special provisions under specific laws are
hereby repealed:

{a) Section 33(A) of R.A. 7277, as amended by R.A. 10754 or the
Magna Carta for Persons with Disabilities;

{b) Section 22(B) of R.A. 10165 or the Foster Care Act of 2012; and

{c) Section 4 or RA 1169 or “An Act Providing For Charity
‘Sweepstakes, Horse Races and Lotteries”.

All other laws, acts, presidential decrees, executive orders, issuances,
presidential proclamations, rules and regulations or parts thereof, which are
contrary to and inconsistent with any provisions of this Act are hereby
repealed, amended or modified ingly.

SEC. 35, Effectivity Clause. - This Act shall take effect fifteen (15) days after
its complete publication in the Official Gazette or in at least two (2)
newspapers of general circulation.

Approved.