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FIFTEENTH CONGRESS OF THE REPUBLIC 
) 
Ol"I'!(,,;'J" 'f,b ,r('<HAR'<' 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
• SENATE 
S. B. No. 2342 
Introduced by Senator JUAN PONCE ENRILE 
EXPLANATORY NOTE 
Our society, today, depends heavily upon technological advancements, most 
especially, information technology. In order for the Filipinos to be at par with the global 
trend, we need to encourage and expand our knowledge regarding information 
technology. 
We need to give the people 'a chance to educate and familiarize themselves with 
the use of computers. Unfortunately, high-tech computer units are very costly, thus 
rendering it beyond the reach of the "common-tao". It is, therefore, the goal 'of-this' ._. __ .-
proposed measure to make computer hardware and software cheaper and affordable to the 
pUblic. 
With the lower rates at which computers are to be sold and bought, it is hoped that 
more people will be able to afford such equipment. With this, more schools will be able 
to acquire computers and in the process, integrate information technology courses in their 
curriculum. 
In the end, it is Our country that will benefit from the citizenry's broad knowledge 
of information technology. 
In view thereof, the early passage of this bill is earnestly sought. 
Senator 


FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
) 
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) 
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Or,;~~CE O~· .' f" 
W lilJG"3 1\10 ~)1 
Introduced by Senator JUAN PONCE ENRILE 
AN ACT 
EXEMPTING THE SALE OR IMPORTATION OF COMPUTER HARDWARE 
AND SOFTWARE FROM THE PAYMENT OF VALUE ADDED TAX AND 
DONATIONS THEREOF FROM DONOR'S TAX, AMENDING FOR THE 
PURPOSE CERTAIN SECTIONS 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: 
1 
SECTION 1. Section 109 of the National Internal Revenue Code of 1997, as 
2 
amended, is hereby further amended to read as follows: 
3 
"SEC. 109. 
Exempt Transactions. -
The following shall be 
4 
exempt from the value added tax: 
5 
(a) 
Sale of nonfood agricultural products; marine and forest 
6 
products in their original state by the primary producer or 
7 
the owner of the land where the same are produced; 
8 
(b) 
Sale of cotton and cotton seeds in their original state; and 
9 
copra; 
10 
(c) 
Sale or impprtation of agricultural and manne food 
11 
products in their original state, livestock and poultry of a 
12 
kind generally used as, or yielding or producing foods for 
13 
human consumption; and breeding stock and genetic 
14 
materials therefor; 
15 
16 
1 


Products cIas'sified under this paragraph and paragraph (a) 
2 
shall 
be considered in their original state even if they have 
3 
undergone the simple processes of preparation or preservation for 
4 
the market, such as freezing, drying, salting, broiling, roasting, 
5 
smoking or stripping. Polished and/or husked rice, corn grits, raw 
6 
cane sugar and molasses, and ordinary salt shall be considered in 
7 
their original state; 
8 
(d) 
Sale or importation of fertilizers; seeds, seedlings and 
9 
fingerlings; fish, prawn, livestock and poultry feeds, 
10 
including ingredients, whether locally produced or 
II 
imported, used in the manufacture of finished feeds (except 
12 
specialty feeqs for race horses, fighting cocks, aquarium 
13 
fish, zoo animals and other animals generally considered as _ .. 
14 
pets); 
15 
(e) 
Sale or importation of coal and natural gas, in whatever 
16 
form or state, and petroleum products (except lubricating 
17 
oil, processed gas, grease, wax and petrolatum) subject to 
18 
excise tax imposed under Title VI; 
19 
(f) 
Sale or importation of raw materials to be used by the 
20 
buyer or importer himself in the manufacture of petroleum 
• 
21 
products subject to excise tax, except 
lubricating oil, 
22 
processed gas, grease, wax and petrolatum; 
23 
(g) 
Importation of passenger andlor cargo vessels of more 
24 
than five thousand tons (5,000), whether coastwise or 
25 
ocean-going, including engine and spare parts of said 
26 
vessel to be 'used by the importer himself as operator 
27 
thereof; 
28 
29 
2 


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(h) 
(i) 
G) 
(k) 
(1) 
(m) 
Importation of personal and household effects belonging 
to the residents of the Philippines returning from abroad 
and non-resident 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; 
Importation of professional instruments and implements, 
wearmg 
apparel, 
domestic 
animals, 
and 
personal 
household elfects (except any vehicle, vessels, 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; 
Services subject to percentage tax under Title V; 
Services by agricultural contract growers and milling for 
others of palay into rice, corn into grits and sugar cane into 
raw sugar; 
Medical, dental, hospital and veterinary services subject to 
the provisions' of Section 17 of Republic Act No. 7716, as 
amended; 
Educational services rendered by private educational 
institutions, duly accredited by the Department of 
Education, 
Culture 
and 
Sports 
(DECS) 
and 
the 
3 


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27 
28 
29 
(n) 
(0) 
(p) 
(q) 
(r) 
(s) 
Commission on Higher Education (CHED), and those 
rendered by government educational institutions; 
Sale by the artist himself of his works of art, literary 
works, musical compositions and similar creations, or his 
services performed for the production of such works; 
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; 
Transactions which are exempt under international 
agreements to which the Philippines is a signatory or 
under special laws, except those under Presidential Decree 
Nos. 66, 529 and 1590; 
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; 
Sales by electric cooperatives duly registered with the 
Cooperative 
Development 
Authority 
or 
National 
Electrification Administration, relative to the generation 
and distribution of electricity as well as their importation 
of machineri~s and equipment, including spare parts which 
4 
, 
~ ---


shall be directly used in the generation and distribution of 
2 
electricity; 
3 
(t) 
Gross receipts from lending activities by credit or multi-
4 
purpose cooperatives duly registered with the Cooperative 
5 
Development Authority whose lending operation is limited 
6 
to their members; 
7 
(u) 
Sales by non-agricultural, non-electric and non-credit 
8 
cooperatives duly registered with 
the 
Cooperative 
9 
Development Authority: Provided, That the share capital 
10 
contribution of each member does not exceed Fifteen 
II 
Thousand Pesos (PI5,000.00) and regardless of the 
12 
aggregate capital and net surplus ratably distributed 
13 
among the members; 
14 
(v) 
Export sales by persons who are not VAT-registered; 
15 
(w) 
Sale of real properties not primarily held for sale to 
16 
customers or held for lease in the ordinary course of trade 
17 
or business or real property utilized for low-cost and 
18 
socialized housing as defined by Republic Act No. 7279, 
19 
otherwise known as the Urban Development and Housing 
20 
Act of 1992, and other related laws, house and lot and 
21 
other residential dwellings valued at One Million Pesos 
22 
(Pl,OOO,OOO.OO) and below: Provided, That not later than 
23 
January 31 st of the calendar year subsequent to the 
24 
effectivity of this Act and each calendar year thereafter, 
25 
the amount of One Million Pesos (Pl,OOO,OOO.OO) shall be 
26 
• 
adjusted to its present value using the Consumer Price 
27 
Index, as published by the National Statistics Office 
28 
(NSO); 
5 


(x) 
Lease of a residential unit with a monthly rental not 
2 
exceeding Eight Thousand Pesos (P8,000.00): Provided, 
3 
That not later than January 31 st of the calendar year 
4 
subsequent to the effectivity of Republic Act No. 8241 and 
5 
each calendar year thereafter, the amount of 
Eight 
6 
Thousand Pesos (P8,000.OO) shall be adjusted to its 
7 
present value using the Consumer Price Index as published 
8 
by the National Statistics Office (NSO); 
9 
(y) 
Sale, importation, printing or publication of books and any 
10 
newspaper, magazine, review or bulletin which appears at 
11 
regular intervals with fixed prices for subscription and sale 
12 
and which is not devoted principally to the publication of 
13 
paid advertisements; and 
14 
(z) 
Sale or lease of goods or properties or the performance of 
• 
15 
services other than the transactions mentioned in the 
16 
preceding paragraphs, the gross annual sales and/or receipts 
17 
do not exceed the amount of Five Hundred Fifty Thousand 
18 
Pesos (P550,OOO.OO): Provided, That not later than January 
19 
31 st of the calendar year subsequent to the effectivity of 
20 
Repuolic Act No.8241 and each calendar year thereafter, 
21 
the amount of Five Hundred Fifty Thousand Pesos 
22 
(P550,000.OO) shall be adjusted to its present value using 
23 
the Consumer Price Index, as published by the National 
24 
Statistics Office (NSO). 
25 
(aa) 
Services of banks, non-bank financial intermediaries performing 
26 
quasi-banking 
functions, 
and 
other 
non-bank 
financial 
27 
intermediaries; 
6 


I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
(bb) 
Services rendered by doctors of medicine duly registered with the 
professional regulatory commission (PRC); and 
(cc) 
Services rendered by lawyers duly registered with the Integrated 
Bar of the Philippines (IBP). 
(dd) 
SALE 
OR 
IMPORTATION 
OF 
COMPUTERS, 
INCLUDING 
COMPUTER 
SOFTWARE 
AND 
HARDWARE. 
The foregoing exemptions to the contrary notwithstanding, 
any person whose sale of goods or properties or services which are 
otherwise not subject to VAT, but who issues a VAT invoice or 
receipt therefor shall, in addition to his liability to other applicable 
percentage tax, if any, be liable to the tax imposed in Section 106 
or 108 without the benefit of input tax credit, and such tax shall 
also be recognized as input tax credit to the purchaser under 
Section 110, all of this Code." 
18 
SEC. 2. 
EXEMPTION PROM DONOR'S TAX. -
ANY PERSON WHO 
19 
SHALL MAKE ADONA TION OF ANY COMPUTER INCLUDING COMPUTER 
20 
SOFTWARE AND HARDWARE TO ANY EDUCATIONAL INSTITUTION 
21 
WHETHER PUBLIC OR PRIVATE, TO THE NATIONAL GOVERNMENT, ANY 
22 
ENTITY CREATED BY ANY OF ITS AGENCIES WHICH IS NOT CONDUCTED 
23 
FOR PROFIT, TO ANY OF ITS POLITICAL SUBDIVISION, OR TO AN 
24 
ACCREDITED NON-GOVERNMENTAL ORGANIZATION SHALL BE EXEMPT 
25 
FROM THE PAYMENT OF THE CORRESPONDING GIFT TAX. 
26 
7 


• 
1 
SEC. 3. Separability Clause. - If any provision of this Act is declared invalid or 
2 
unconstitutional, other provisions hereof which are not affected thereby shall continue to 
3 
be in full force and effect. 
4 
5 
SEC. 4. Repealing Clause. - All provisions of law, orders, decrees, including 
6 
rules and regulations inconsistent herewith are hereby repealed or modified accordingly. 
7 
8 
SEC. 5. Effectivity Clause. 
-
This Act shall take effect fifteen (15) days 
9 
following its publication in the Official Gazette or at least two (2) national newspapers of 
10 
general circulation. 
11 
12 
Approved, 
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8