Republic of the Phitippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. H

Introduced by Honorable HERMILANDO I, MANDANAS.
Second District, Batangas

EXPLANATORY NOTE

This bill seeks to amend the National Internal Revenue Code (NIRC)
of 1997, as amended, to institute the Value Simplified Tax system (VAST)
that will effectively substitute the highly unpopular and complicated Value
Added Tax (VAT).

Without Congress being perceived to be attempting to increase taxes
imposed on the consumers or ultimate users of goods and services, this bill
aims to increase the collection of taxes under the NIRC of 1997, as amended
by:

1. Simplifying the taxation system; and

2. Reducing the discretion or interpretations of tax applicability that
increase temptation for corruption, and reduce the tax collection
efficiency of the Government.

The significant features of the bill are :

1, Reduction of the tax rate by fifty (50%) percent: From twelve
percent (12%) to six percent (6%);

. Allowing all the exemptions under the VAT system to continue
under the VAST;

3. Increasing further the exemptions under the VAST system by
including all the retired AFP, PNP, Coast Guards and Customs
Police, and also retired public school teachers who served over a
period of not less than thirty (30) years, or even earlier, if
retirement is due to injuries or sickness suffered while in the line of
duty; and in addition, the threshold of the exempted maximum sale
to be subject to VAST be increased for small vendors and
sales/lease of real estates;

4. Provisions applying three percent (3%) tax on sales amounting to
Php 2.5 Million and below will continue;

ow

. Repeal of the input tax and claims of presumptive VAT provisions,
which were found to be occasions of corruption, and causes of
material reduction in the expected tax collections of Government;


6. Establish the framework to facilitate further reduction in the VAST
rate through simplifications of the System and reduction of
complicated and retionary tax provisions.

Motivated by the need to increase tax collections, improve the
people’s perception regarding tax impositions by Government, system.
that eliminates the scheme predisposed to leakages and loopholes,
avoid occasion of corruption, and putting in place a more efficient
means to maximize the revenue take of the Government, approval of
this is earnestly sought.

RMILANDO I. MANDANAS


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

FIFTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. _i

Introduced by the Honorable Hermilando I. Mandanas
Second District, Batangas

AN ACT

IMPOSING A VALUE SIMPLIFIED TAX IN LIEU OF THE VALUE-ADDED TAX

AMENDING FOR THE PUPRPOSE TITLE IV.

OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED

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

SECTION 1. Section 105 of the National Internal Revenue Code (NIRC) is hereby
amended to read as follows:

“SEC. 105. Persons Liable. - Any person who, in the course of trade
or business, sells barters, exchanges, leases goods or properties, renders
services, and any person who imports goods shall be subject to the [value-
added tax (VAT)] VALUE SIMPLIFIED TAX (VAST) imposed in Sections
106 to 108 of this Code.

“The [value-added tax] VALUE SIMPLIFIED TAX is an indirect tax
and the amount of may be shifted or passed on to the buyer, transferee or
lessee of the goods, properties or services. This rule shall likewise apply to
existing contracts of sale or lease of goods, properties or services at the time
of the effectivity of Republic Act No,.7716.

“The phrase “in the course of trade or business” means the regular conduct or
pursuit of a commercial or an economic activity, including transactions
incidental thereto, by any person regardless of whether or not the person
engaged therein is a nonstock, nonprofit private organization (irrespective of
the disposition of its net income and whether or not it sells exclusively to
members of their guests), or government entity.

“The rule of regularity, to the contrary notwithstanding, services as defined in
this Code rendered in the Philippines by nonresident foreign persons shall be
considered as being rendered in the course of trade or business.”

SECTION. 2. Section 106 of the NIRC is hereby amended to read as follows:

“SEC. 106. [Value-Added Tax] VALUE SIMPLIFIED 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 [value-added] VALUE


Cer AauEENne

SIMPLIFIED tax equivalent to [ten percent (10%)] SIX PERCENT (6%) 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 been
satisfied:

{(@) 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%).]

(1) The term “goods” or “properties” shall mean all tangible and intangible
objects which are capable of pecuniary estimation and shall include:

(a) Real properties held primarily for sale to customers or held for
Jease in the ordinary course of trade or business;

(b) The right or the privilege to use patent, copyright, design or model,
plan, secret formula or process, goodwill, trademark, trade brand or
other like property or right;

(©) The right or the privilege to use in the Philippines of any industrial,
commercial or scientific equipment;

(@) The right or the privilege to use motion picture films, tapes and
dises; and

(e) Radio, television, satellite transmission and cable television time.

“The term “gross selling price” means the total amount of money or its
equivalent which the purchaser pays or is obligated to pay to the seller in
consideration of the sale, barter or exchange of goods or properties, excluding
the [value-added] VALUE SIMPLIFIED tax. The excise tax, if any, on such
goods or properties shall form part of the gross selling price.

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

{(a) Export Sales, - 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

[(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);]

{@) 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) The sale of goods, supplies, equipment and fuel to persons
engaged in international shipping or international air transport
operations}

{() 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 of 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) Sales to persons or entites whose exemption under special laws or
international agreements to which the Philippines is a signatory [effectively
subjects such sales to zero rate].

“(B) Transactions Deemed Sale. - The following transactions shall be deemed
sale:

(1) Transfer, use or consumption not in the course of business of goods
or properties originally intended for sale or for use in the course of
business;

(2) Distribution or transfer refers to:

(a) Shareholders or investors as share in the profits of the
[VAT] VAST-registered persons; or

(b) Creditors in payment of debt;

(3) Consignment of goods if actual sale is not made within sixty (60)
days following the date such goods were consigned; and

(4) Retirement from or cessation of business with respect to
inventories of taxable goods existing as of such retirement or
cessation.

“(©) Changes in or Cessation of Status of a [VAT]-VAST registered person. -
The tax imposed in Subsection (A) of this Section shall also apply to goods
disposed of or existing as of a certain date if under circumstances to be
prescribed in rules and regulations to be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner, the status of a person as
a [VAT] VAST-registered person changes or is terminated.


“(D) Sales Returns, Allowances and Sales Discounts. - The value of goods or
properties sold and subsequently returned or for which allowances were
granted by a [VAT] VAST-registered person may be deducted from the gross
sales or receipts for the quarter in which a refund is made or a credit
memorandum or refund is issued. Sales discount granted and indicated in the
invoice at the time of sale and the grant of which does not depend upon the
happening of a future event may be excluded from the gross sales within the
same quarter it was given.

“(B) Authority of the Commissioner to Determine the Appropriate Tax Base. -
The Commissioner shall, by rules and regulations prescribed by the Secretary
of Finance, determine the appropriate tax base in cases where a transaction is
deemed a sale, barter or exchange of goods or properties under Subsection (B)
hereof, or where the gross selling price is unreasonably lower than the actual
market value.

ECTION 3. Section 107 of the same Code is hereby amended to read as follows

“SEC. 105. [Value-Added] VALUE SIMPLIFIED Tax on Importation of
Goods. -

“(A) In General. - There shall be levied, assessed and collection on every
importation of goods a [value-added] VALUE SIMPLIFIED tax equivalent to
{ten percent [10%] SIX PERCENT (6%) based on the total value used by the
Bureau of Customs in determining tariff and customs duties, plus customs
duties, excise waxes, 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, 2008,
raise the rate of the value-added tax to twelve percent (12%), after any of the
following conditions has been satisfied:]

[() 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}

(i) 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. - In the case of tax-free
importation of goods into the Philippines by persons, entities or agencies
exempt from tax wherein such goods are subsequently sold, transferred or
exchanged in the Philippines to non-exempt persons or entities, the
purchasers, transferees, or recipients shall be considered the importers
thereof, who shall be liable for any internal revenue tax on such importation,
The tax due on such importation shall constitute a lien on the goods superior
to all charges or liens on the goods, irrespective of the possessor thereof.

SECTION 4. Section 108 of the same Code is hereby amended to read as follows:

“SEC. 108, [Value-Added] VALUE SIMPLIFIED 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] VALUE SIMPLIFIED tax equivalent to [ten percent (10%)]


SIX PERCENT (6%) of gross receipts derived from the sale or exchange of
services, including the use or lease of properties. [Provided, That the
President, upon the recommendation of the Secretary of Finance, shall,
efiiective January 1, 2006 raise the rate of value-added tax to twelve percent
(12%), after any of the following conditions has been satisfied:]

{@) 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]

(Gi) 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; proprietor or operators of restaurants, refreshment parlors, cafes and
other eating places, including clubs and caterers; dealers in securities; 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; telephone and telegraph, radio and television
broadcasting and all other franchise grantees except those under Section 119
of the 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 of the use of, or the right to use of any industrial,
commercial or scientific equipment;

(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.


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SECTION 5. Section 109 of the same Code is hereby amended to read as follows:

“SEC. 109, Exempt Transactions. - The following shall be exempt
from the [value-added] VALUE SIMPLIFIED tax:

[(1) Subject to the provisions of Subsection (2) hereof, the following
transactions shall be exempt from the value-added tax:]

(A) Sale or importation of agricultural and marine food products in their
original state, livestock and poultry of a kind generally used as, or yielding
or producing foods for human consumption, and breeding stock and genetic
materials therefor;

“Products classified under this paragraph shall be considered in their original
state even if they have undergone the simple processes of preparation or
preservation for the market, such as freezing, drying, salting broiling,
roasting, smoking or stripping. Polished and/or husked rice, com grits, raw
cane sugar and molasses, ordinary salt, and copra shall be considered in their
original state;

“(B) Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish,
prawn, livestock and poultry feeds, including ingredients, whether locally
produced or imported, used in the manufacture of finished fees (except
specialty feeds for race horses, fighting cocks, aquarium fish, 200 animals
and other animals generally considered as pets);

“(© Importation of personal and household effects belonging to the
residents of the Philippines retuming from abroad and nonresident citizens
coming to resettle in the Philippines: Provided, That such goods are exempt
from customs duties under the Tariff and Customs Code of the Philippines;

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

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

“() 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. $29;

“(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)] FIFTY THOUSAND PESOS (P50,000.00) and regardless
of the aggregate capital and net surplus ratably distributed among the
members;

“(O) Export sales by persons who are not [VAT] VAST-registered;

“(P) Sale of real properties not primarily held for sale to customers or 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 five hundred
thousand pesos (P1,500,000)]} | TWO MILLION FIVE HUNDRED
THOUSAND PESOS (P2,500,000) and below, house and lot, and other
residential dwellings valued at [Two million five hundred thousand pesos
(P2,500,000)] THREE MILLION FIVE HUNDRED THOUSAND PESOS
(P3,500,000) and below: Provided, That not later than [January 31, 2009]
JANUARY 31, 2012 and every three (3) years thereafter, the amounts herein
stated shall be adjusted to their present values 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)] TWENTY THOUSAND PESOS (P20,000)
Provided, That not later than [January 31, 2009] JANUARY 31, 2012 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);

“(R) 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;

“(S) Sale, importation or lease of passenger or cargo vessels and aircraft,
including engine, equipment and spare parts thereof for domestic or


international transport operations;

“(1) Importation of fuel, goods and supplies by persons engaged in
international shipping or air transport operations;

“(U) Services of banks, non-bank financial intermediaries performing quasi-
banking functions, and other non-bank financial intermediaries; and

“(V) 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);

“(W) 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);

“(X) SALE OF RAW MATERIALS OR PACKAGING MATERIALS TO
EXPORT-ORIENTED ENTERPRISE WHOSE EXPORT SALES EXCEED
SEVENTY PERCENT (70%) OF TOTAL ANNUAL PRODUCTION;

“(Y) SALE OF GOLD TO THE BANGKO SENTRAL NG PILIPINAS
(BSP);

“(Z) SALES UNDER EXECUTIVE ORDER NO. 226, OTHERWISE
KNOWN AS THE OMNIBUS INVESTMENT CODE OF 1987, AND
OTHER SPECIAL LAWS; AND

“(AA) THE SALE OF GOODS, SUPPLIES, EQUIPMENT AND FUEL TO
PERSONS ENGAGED IN INTERNATIONAL SHIPPING OR
INTERNATIONAL AIR TRANSPORT — OPERATIONS.

“(BB) 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 OF 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).

“(CC) SALES TO PERSONS OR ENTITES WHOSE EXEMPTION
UNDER SPECIAL LAWS OR INTERNATIONAL AGREEMENTS TO
WHICH THE PHILIPPINES IS A SIGNATORY.

“(DD) PROCESSING, MANUFACTURING OR REPACKING GOODS
FOR OTHER PERSONS DOING BUSINESS OUTSIDE THE
PHILIPPINES WHICH GOODS ARE SUBSEQUENTLY EXPORTED,


WHERE THE SERVICES ARE PAID FOR IN ACCEPTABLE FOREIGN
CURRENCY AND ACCOUNTED FOR IN ACCORDANCE WITH THE
RULES AND REGULATIONS OF THE BANGKO SENTRAL NG
PILIPINAS (BSP);

“(EE) SERVICES OTHER THAN THOSE MENTIONED IN THE
PRECEDING PARAGRAPH RENDERED TO A PERSON ENGAGED IN
BUSINESS CONDUCTED OUTSIDE THE PHILIPPINES OR TO A
NONRESIDENT PERSON NOT ENGAGED IN BUSINESS WHO IS
OUTSIDE THE PHILIPPINES WHEN THE SERVICES ARE
PERFORMED, THE CONSIDERATION FOR WHICH IS PAID FOR IN
ACCEPTABLE FOREIGN CURRENCY AND ACCOUNTED FOR IN
ACCORDANCE WITH THE RULES AND REGULATIONS OF THE
BANGKO SENTRAL NG PILIPINAS (BSP);

“(FF) SERVICES RENDERED TO PERSONS OR ENTITIES WHOSE
EXEMPTION UNDER SPECIAL LAWS OR INTERNATIONAL
AGREEMENTS TO WHICH THE PHILIPPINES IS A SIGNATORY
EFFECTIVELY SUBJECTS THE SUPPLY OF SUCH SERVICES TO
ZERO PERCENT (0%) RATE;

“(GG) SERVICES RENDERED TO PERSONS ENGAGED IN
INTERNATIONAL SHIPPING OR INTERNATIONAL AIR TRANSPORT
OPERATIONS, INCLUDING LEASES OF PROPERTY FOR USE
THEREOF;

“(HH) 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;

“(II) TRANSPORT OF PASSENGERS AND CARGO BY AIR OR SEA
VESSELS FROM THE PHILIPPINES TO A FOREIGN COUNTRY;

“WJ) 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.

“(KK) PRIVILEGES GRANTED TO SENIOR CITIZENS UNDER
REPUBLIC ACT NO. 9994 WHICH TOOK EFFECT ON FEBRUARY 15,
2010; PROVIDED, THAT SUCH EXEMPT SALES OF GOODS AND
SERVICES TO SENIOR CITIZENS HEREUNDER SHALL LIKEWISE
EXTEND TO RETIRED PUBLIC SCHOOL TEACHERS WHO HAVE
RENDERED AT LEAST THIRTY (30) YEARS OF SERVICE, MILITARY
PERSONNEL AND OFFICERS OF THE PHILIPPINE NATIONAL
POLICE.

[V] “(LL) Sale or lease of goods or properties or the performance of services
other than the transactions mentioned in the preceding paragraphs, the gross
annual sales and/or receipts do not exceed the amount of [One million five
hundred thousand pesos (P1,500,000)] TWO MILLION FIVE HUNDRED
THOUSAND PESOS (P2,500,000) Provided, That not later than [January 31,
2009] JANUARY 31, 2012 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);

[@) A VAT-registered person may elect that subsection (1) not apply to its
sale of goods or properties or services: provided, that an election made under
this subsection shall be irrevocable for a period of three (3) years from the
quarter the election was made.]

SECTION 6. Section 110 of the same Code is hereby amended to read as follows:

“SEC. 110. ANY TAX CREDIT MECHANISM OR SCHEME SHALL
NOT BE ALLOWED UNDER THE VALUE SIMPLIFIED TAX.

[Sec. 110, Tax Credits. -
{(A) Creditable Input Tax. -
{(1) Any input tax evidenced by a VAT invoice or official receipt
issued in accordance with Section 113 hereof on the following
transactions shall be creditable against the output tax:]
[(a) Purchase or importation of goods:]
[6 For sale; or]
[(i) For conversion into or intended to form part of a
finished product for sale including packaging materials;
or)

t

[(iv) For use as materials supplied in the sale of service;
or]

For use as supplies in the course of business; or]

[(v) For use in trade or business for which deduction for
depreciation or amortization is allowed under this
Code.]

[(b) Purchase of services on which a value-added tax has
actually been paid.]

{(2) The input tax on domestic purchase or importation of goods or
properties by a VAT-registered person shall be creditable:]

[(@) To the purchaser upon consummation of sale and on
importation of goods or properties; and]

[(b) To the importer upon payment of the value-added tax prior
to the release of the goods from the custody of the Bureau of
Customs. Provided, That the input tax on goods purchased or
imported in a calendar month for use in trade or business for
which deduction for depreciation is allowed under this Code,
shall be spread evenly over the month of acquisition and the
fifty-nine (59) succeeding months if the aggregate acquisition
cost for such goods, excluding the VAT component thereof,


exceeds One million pesos (P1,000,000): Provided, however,
‘That if the estimated useful life of the capital good is less than
five (5) years, as used for depreciation purposes, then the input
VAT shall be spread over such a shorter period: Provided,
finally, that in the case of purchase of services, lease or use of
properties, the input tax shall be creditable to the purchaser,
lessee or licensee upon payment of the compensation, rental,
royalty or fee.]

[G) A VAT-registered person who is also engaged in transactions not
subject to the value-added tax shalll be allowed tax credit as follows:]

{(@) Total input tax which, can be directly attributed to
transactions subject to value-add tax; and]

{(b) A ratable portion of any input tax which cannot be directly
attributed to either activity.]

[The term ‘input tax' means the value-added tax due from or paid by a VAT-
registered person in the course of his trade or business on importation. of
goods or local purchase of goods or services, including lease or use of
property, from a VAT-registered person. It shall also include the transitional
input tax determined in accordance with Section 111 of this Code.)

[The term ‘output tax' means the value-added tax due on the sale or lease of
taxable goods or properties or services by any person registered or required to
register under Section 236 of this Code.]

{(B) Excess Output or Input Tax. - If at the end of any taxable quarter the
output tax exceeds the input tax, the excess shall be paid by the VAT-
registered person. If the input tax exceeds the output tax, the excess shall be
carried over to the succeeding quarter or quarters: Provided, That the input tax
inclusive of input VAT carried over from the previous quarter that may be
credited in every quarter shall not exceed seventy percent (70%) of the output
VAT: Provided, however, That any input tax attributable to zero-rated sales
by a VAT-registered person may at his option be refunded or credited against
other internal revenue taxes, subject to the provisions of Section 112.]

[(C) Determination of Creditable Input Tax. - The sum of the excess input tax
carried over from the preceding month or quarter and the input tax creditable
to a VAT-registered person during the taxable month or quarter shall be
reduced by the amount of claim for refund or tax credit for value-added tax
and other adjustments, such as purchase returns or allowances and input tax
attributable to exempt sale.]

[The claim for tax credit referred to in the foregoing paragraph shall include
not only those filed with the Bureau of Internal Revenue but also those filed
with other government agencies, such as the Board of Investments and the
Bureau of Customs.]

SECTION 7. Sections 111 and 112 of the same Code is hereby repealed.
SECTION 8. Section 113 of the Code is hereby amended to read as follows:

“SEC. 113. Invoicing and Accounting Requirements for [VAT-Registered]
VAST-REGISTERED Persons. -


"(A) Invoicing Requirements. - A [VAT] VAST-registered person shall issue:

(1) A [VAT] VAST invoice for every sale, barter or exchange of
goods or properties; and

@) A [VAT] VAST official receipt for every lease of goods or
properties, and for every sale, barter or exchange of services.

"(B) Information Contained in the [VAT] VAST Invoice or [VAT] VAST
Official Receipt. - The following information shall be indicated in the [VAT]
VAST invoice or [VAT] VAST official receipt:

(1) A statement that the seller is a [VAT] VAST-registered person,
followed by his taxpayer's identification number (TIN);

(2) The total amount which the purchaser pays or is obligated to pay to
the seller with the indication that such amount includes the [value-
added] VALUE SIMPLIFIED tax: Provided, That:

(a) The amount of the tax shall be shown as a separate item in
the invoice or receipt;

(b) If the sale is exempt from [value-added tax} VALUE
SIMPLIFIED TAX, the term ["VAT-exempt sale"] VAST-
EXEMPT SALE shall be written or printed prominently on the
invoice or receipt [;].

{(©) If the sale is subject to zero percent (0%) value-added tax,
the term "zero-rated sale" shall be written or printed
prominently on the invoice or receipt;)

{(@) If the sale involves goods, properties or services some of
which are subject to and some of which are VAT zero-rated or
VAT-exempt, the invoice or receipt shall clearly indicate the
breakdown of the sale price between its taxable, exempt and
zero-rated components, and the calculation of the value-added
tax on each portion of the sale shall be shown on the invoice or
receipt: "Provided, That the seller may issue separate invoices
or receipts for the taxable, exempt, and zero-rated components
of the sale.)

(3) The date of transaction, quantity, unit cost and description of the
g00ds or properties or nature of the service; and

(4) In the case of sales in the amount of one thousand pesos (P1,000)
or more where the sale or transfer is made to a [VAT] VAST-
registered person, the name, business style, if any, address and
taxpayer identification number (TIN) of the purchaser, customer or
client.

“(©) Accounting Requirements. - Notwithstanding the provisions of Section
233, all persons subject to the [value-added tax] VALUE SIMPLIFIED TAX
under Sections 106 and 108 shall, in addition to the regular accounting records
required, maintain a subsidiary sales journal and subsidiary purchase journal
on which the daily sales and purchases are recorded. The subsidiary journals
shall contain such information as may be required by the Secretary of Finance.


"(D) Consequence of Issuing Erroneous [VAT] VAST Invoice or [VAT]
VAST Official Receipt. -

(1) If a person who is not a [VAT] VAST-registered person issues an
invoice or receipt showing his Taxpayer Identification Number (TIN),
followed by the word ["VAT"] “VAST”:

[(@)] The issuer shall, in addition to any liability to other
percentage taxes, be liable to:

(@ The tax imposed in Section 106 or 108 without the
benefit of any input tax credit; and

(ii) A 50% surcharge under Section 248 (B) of this
code;

{(b) The VAT shall, if the other requisite information required
under Subsection (B) hereof is shown on the invoice or receipt,
be recognized as an input tax credit to the purchaser under
Section 110 of this Code.]

(2) Ifa [VAT] VAST-registered person issues a [VAT] VAST invoice
or [VAT] VAST official receipt for a [VAT] VAST-exempt
transaction, but fails to display prominently on the invoice or receipt
the term "VAT-exempt Sale", the issuer shall be liable to account for
the tax imposed in Section 106 or 108 as if Section 109 did not apply.

“(B) Transitional Period. - [Notwithstanding Subsection (B) hereof, taxpayers
may continue to issue VAT invoices and VAT official receipts for the period
July 1, 2005 to December 31, 2005 in accordance with Bureau of Internal
Revenue administrative practices that existed as of December 31, 2004.]

THE SECRETARY OF FINANCE, IN CONSULTATION WITH THE
CONGRESSIONAL OVERSIGHT COMMITTEE, SHALL PROMULGATE
THE NECESSARY RULES AND REGULATIONS WITHIN THIRTY (30)
DAYS FROM THE EFFECTIVITY OF THIS ACT RELATIVE TO
UNUSED TAX CREDITS, WHICH SHALL, WITHIN ONE (1) YEAR
UPON PROMULGATION OF SAID RULES ABND REGULATIONS, BE
ALLOWED AS A DEDUCTION FROM THE GROSS INCOME OF THE
TAXPAYER IN COMPUTING THE INCOME TAX DUE.

SECTION 9. Section 114 of the Code is hereby amended to read as follows:
“SEC. 114. Return and Payment of [Value-Added] VALUE SIMPLIFIED Tax. -

"(A) In General. - Every person liable to pay the [value-added] VALUE
SIMPLIFIED tax imposed under this Title shall file a quarterly return of the
amount of his gross sales or receipts within twenty-five (25) days following
the close of each taxable quarter prescribed for each taxpayer: Provided,
however, That [VAT] VAST-registered persons shall pay the value-added tax
on a monthly basis.

"Any person, whose registration has been cancelled in accordance with
Section 236, shall file a return and pay the tax due thereon within twenty-five
(25) days from the date of cancellation of registration: Provided, That only
one consolidated return shall be filed by the taxpayer for his principal place of
business or head office and all branches.


"(B) Where to File the Return and Pay the Tax. - Except as the Commissioner
otherwise permits, the retum shall be filed with and the tax paid to an
authorized agent bank, Revenue Collection Officer or duly authorized city or
municipal Treasurer in the Philippines located within the revenue district
where the taxpayer is registered or required to register.

"(C) Withholding of [Value-Added] VALUE SIMPLIFIED Tax. - The
Government or any of its political subdivisions, instrumentalities or agencies,
including govemment-owned or -controlled corporations (GOCCs) shall,
before making payment on account of each purchase of goods and services
which are subject to the value-added tax imposed in Sections 106 and 108 of
this Code, deduct and withhold a final value-added tax at the rate of [five
percent (5%)] THREE PERCENT (3%) of the gross payment thereof:
[Provided, That the payment for lease or use of properties or property rights to
nonresident owners shall be subject to ten percent (10%) withholding tax at
the time of payment. For purposes of this Section, the payor or person in
control of the payment shall be considered as the withholding agent.]

"The [value-added] VALUE SIMPLIFIED tax withheld under this Section
shall be remitted within ten (10) days following the end of the month the
withholding was made."

SECTION 11. Section 115 of the Code is hereby amended to read as follows:

“SEC. 115. Power of the Commissioner to Suspend the Business Operations
of a Taxpayer. - The Commissioner or his authorized representative is hereby
empowered — to suspend the business operations and temporarily close the
business establishment of any person for any of the following
violations.

“(a) In the case of a [VAT] VAST-registered Person, -
(1) Failure to issue receipts or invoices;

(2) Failure to file a [value-added] VALUE SIMPLIFIED tax
return as required under Section 114; or

(3) Understatement of taxable sales or receipts by thirty percent
(30%) or more of his correct taxable sales or receipts for the
taxable quarter.”

“(b) Failure of any Person to Register as Required under Section 236. -
The temporary closure of the establishment shall be for the duration of
not less than five (5) days and shall be lifted only upon compliance
with whatever requirements prescribed by the Commissioner in the
closure order.”

SECTION 12. Section 236 of the same Code is hereby amended to read as follows:

“SEC. 236. Registration Requirements. —

"(A) Requirements. - Every person subject to any internal revenue tax shall
register once with the appropriate Revenue District Officer:

"(1) Within ten (10) days from date of employment, or

"(2) On or before the commencement of business, or


"(3) Before payment of any tax due, or

"(4) Upon filing of a return, statement or declaration as required in this
Code.

"The registration shall contain the taxpayer's name, style, place of residence,
business, and such other information as may be required by the Commissioner
in the form prescribed therefor.

“A person maintaining a head office, branch or facility shall register with the
Revenue District Officer having jurisdiction over the head office, branch or
facility. For purposes of this Section, the term ‘facility’ may include but not be
limited to sales outlets, places of production, warehouses or storage places.

"(B) Annual Registration Fee. - An annual registration fee in the amount of
Five hundred pesos (P500) for every separate or distinct establishment or
place of business, including facility types where sales transactions occur, shall
be paid upon registration and every year thereafter on or before the last day of
January: Provided, however, That cooperatives, individuals earning purely
compensation income, whether locally or abroad, and overseas workers are
not liable to the registration fee herein imposed.

"The registration fee shall be paid to an authorized agent bank located within
the revenue district, or to the Revenue Collection Officer, or duly authorized
Treasurer of the city or municipality where each place of business or branch is
registered.

"(©) Registration of Each Type of Internal Revenue Tax. - Every person who
is required to register with the Bureau of Internal Revenue under Subsection
(A) hereof, shall register each type of internal revenue tax for which he is
obligated, shall file a return and shall pay such taxes, and shall update such
registration of any changes in accordance with Subsection (E) hereof,

"(D) Transfer of Registration. - In case a registered person decides to transfer
his place of business or his head office or branches, it shall be his duty to
update his registration status by filing an application for registration
information update in the form prescribed therefor.

"(E) Other Updates. - Any person registered in accordance with this Section
shall, whenever applicable, update his registration information with the
Revenue District Office where he is registered, specifying therein any change
in tax type and other taxpayer details.

"() Cancellation of Registrati

(1) General Rule. - The registration of any person who ceases to be
liable to a tax type shall be cancelled upon filing with the Revenue
District Office where he is registered, an application for registration
information update in a form prescribed therefor;

(2) Cancellation of [Value-Added] VALUE SIMPLIFIED Tax
Registration. - A [VAT] VAST-registered person may cancel his
registration for [VAT] VAST if:

(a) He makes written application and can demonstrate to the
Commissioner's satisfaction that his gross sales or receipts for
the following twelve (12) months, other than those that are


exempt under Section 109 (A) TO (U), will not exceed [One
million five hundred thousand pesos (P1,500,000)] TWO
MILLION FIVE HUNDRED THOUSAND PESOS
(P2,500,000); or

(b) He has ceased to carry on his trade or business, and does
not expect to recommence any trade or business within the next
twelve (12) months.

“The cancellation of registration will be effective from the first day of
the following month.

“(G) Persons Required to Register for [Value-added] VALUE SIMPLIFIED
Tax. -

(1) Any person who, in the course of trade or business, sells, barters or
exchanges goods or properties, or engages in the sale or exchange of
services, shall be liable to register for [Value-added] VALUE
SIMPLIFIED tax if:

(a) His gross sales or receipts for the past twelve (12) months,
other than those that are exempt under section 109 (a) to (u),
have exceeded [One million five hundred thousand pesos
(P1,500,000)} TWO MILLION FIVE HUNDRED
THOUSAND PESOS (P2,500,000); or

(b) There are reasonable grounds to believe that his gross sales
or receipts for the next twelve (12) months, other than those
that are exempt under Section 109 (A) to (U), will exceed [One
million five hundred thousand pesos (P1,500,000)} TWO
MILLION FIVE HUNDRED THOUSAND PESOS
(P2,500,000),

(2) Every person who becomes liable to be registered under paragraph
(1) of this Subsection shall register with the Revenue District Office
which has jurisdiction over the head office or branch of that person,
and shall pay the annual registration fee prescribed in Subsection (B)
hereof. If he fails to register, he shall be liable to pay the tax under
Title IV as if he were a VAT-registered person, but without the benefit
of input tax credits for the period in which he was not properly
registered.

“(H) Optional Registration for [Value-added] VALUE SIMPLIFIED Tax of
Exempt Person. - (1) Any person who is not required to register for [Value-
added] VALUE SIMPLIFIED tax under Subsection (G) hereof may elect to
register for [Value-added] VALUE SIMPLIFIED tax by registering with the
Revenue District Office that has jurisdiction over the head office of that
person, and paying the annual registration fee in Subsection (B) hereof.

(2) Any person who elects to register under this Subsection shall not be
entitled to cancel his registration under Subsection (F)(2) for the next three (3)
years.

"For purposes of Title IV of this Code, any person who has registered [value-
added] VALUE SIMPLIFIED tax as a tax type in accordance with the
provisions of Subsection (C) hereof shall be referred to as a "VAT-registered
person" who shall be assigned only one Taxpayer Identification Number
(TIN).


"© Supplying of Taxpayer Identification Number (TIN). - Any person
required under the authority of this Code to make, render or file a return,
statement or other document shall be supplied with or assigned a Taxpayer
Identification Number (TIN) which he shall indicate in such return, statement
or document filed with the Bureau of Internal Revenue for his proper
identification for tax purposes, and which he shall indicate in certain
documents, such as, but not limited to, the following:

(1) Sugar quedans, refined sugac release order or similar instruments;
(2) Domestic bills of lading;

(3) Documents to be registered with the Register of Deeds or
Assessor's Office;

(4) Registration certificate of transportation equipment by land, sea or
air;

(5) Documents to be registered with the Securities and Exchange
Commission;

(6) Building construction permits;

(7) Application for loan with banks, financial institutions, or other
financial intermedieries;

(8) Application for mayor's permit;

(9) Application for business license with the Department of Trade and
Industry; and

(10) Such other documents which may hereafter be required under
rules and regulations to be promulgated by the Secretary of Finance,
upon recommendation of the Commissioner.

"In cases where a registered taxpayer dies, the administrator or executor shall
register the estate of the decedent in accordance with Subsection (A) hereof
and a new Taxpayer Identification Number (TIN) shall be supplied in
accordance with the provisions of this Section.

“In the case of a nonresident decedent, the executor or administrator of the
estate shall register the estate with the Revenue District Office where he is
registered: Provided, however; That in case such executor or administrator is
not registered, registration of the estate shall be made with and the Taxpayer
Identification Number (TIN) supplied by the Revenue District Office having
jurisdiction over his legal residence.

"Only one Taxpayer Identification Number (TIN) shall be assigned to a
taxpayer. Any person who shall secure more than one Taxpayer Identification
Number shall be criminally liable under the provisions of Section 275 on
‘Violation of Other Provisions of this Code or Regulations in General."

SECTION 13. Severability. - The provisions of the Act are declared to be severable,
and if any provision, word, phrase, or clause of the Act or the application thereof to any
person shall be held invalid, such invalidity shall not affect the validity of the remaining
portions of this Act.


SIAKEENS

SECTION 14. Repealing Clause. - All laws, presidential decrees, executive orders,
presidential proclamations, rules and regulations or parts thereof inconsistent with this Act
are hereby repealed or modified accordingly.

SECTION 15. Effectivity. - This Act shall take effect after fifteen (15) days from
publication in at least two (2) newspapers of general circulation.

APPROVED.