FOURTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES 
) 
Second Regular Session 
) 
§ E N A T E  
S. No. 31 
r;g;Y {f(-i"b 
"( 
Introduced by Senator Lacson 
EXPLANATORY NOTE 
Presidential Decree (P.D.) No. 198 institutionalized the concept of Local Water 
Districts (LWDs). As early as 1973, the government recognized the need for reliable and 
economically viable and sound water supply and wastewater disposal system for 
population centers of the Philippines. 
In order to support the growth of LWDs, P.D. No. 198 exempted them from 
paying income taxes, as well as from the payment of all National Government, local 
government and municipal taxes and fees, and all duties or imposts on imported 
machinery, equipment and materials required for its operations. 
Over a period of more than three (3) decades, several laws were enacted either 
granting or withdrawing the tax exemption privileges of LWDs. Also, the juridical 
personality and tax status of LWDs, as gleaned from the provisions of Sections 27 and 
32 of the Tax Code, have been subjected to various interpretations by government 
agencies and judicial bodies. Even more disconcerting is the fact that other public 
utilities of similar nature such as the Metropolitan Waterworks and Sewerage System 
(MWSS) and National Power Corporation (NPC) were granted tax exemptions by the 
Bureau of Internal Revenue (BIR) hinging upon the same Tax Code provisions. 
Such inconsistencies have, in a way, hampered the viable growth and efficient 
provision of safe, adequate and potable water to more than fifteen (15) million people 
outside Metro Manila, contrary to the intentions of its original charter under P.D. No. 
198. 
In order to address the inconsistencies, this proposed bill is recommended as a 
counterpart measure of HB No. 5210 approved by the House of Representatives. 
Premises considered, approval of this bill is earnestly sought. 


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FOURTEENTH CONGRESS OF THE) 
REPUBLJC OF THE PHILIPPINES 
) 
Second Regular Session 
) 
Introduced by Senator Lacson $~~yq/?=s> 
?'. 
1 
AN ACT 
EXEMPTING LOCAL WATER DISTRICTS FROM INCOME TAX, AMENDING FOR 
THE PURPOSE SECTION 27 (C) OF THE NATIONAL INTERNAL REVENUE CODE, 
AS AMENDED 
Be if enacted by the Senate and the House of Represenfatives of the Philippines in 
Congress assembled: 
SECTION 1. Section 27 paragraph (C) of the National Internal Revenue Code of 1997, 
as amended by Republic Act No. 9337, is hereby further amended to read as follows: 
"SEC. 27. Rates of Income Tax on Domestic Corporations. - xxx 
"(C) Government-owned or -Controlled Corporations, Agencies or 
Instrumentalities. - The provisions of existing special or general laws to the 
contrary notwithstanding, all corporations, agencies, or instrumentalities 
owned or controlled by the Government, except the Government Service 
and Insurance System (GSIS), the Social Security System (SSS), the 
Philippine Health Insurance Corporation (PHIC), THE LOCAL WATER 
DISTRICTS (LWD) and the Philippine Charity Sweepstakes Office 
(PCSO), shall pay such rate of tax upon their taxable income as are 
imposed by this Section upon corporations or associations engaged in a 
similar business, industry, or activity. 
"xxx" 
SEC. 2. Repealing Clause. All laws, acts, decrees, executive orders, issuances, 
and rules and regulations or parts thereof which are contrary to and inconsistent with 
Act are hereby repealed, amended or modified accordingly. 
SEC. 3. lmplernenfing Rules and Regulafions. - The Secretary of Finance shall 
promulgate and publish the necessary rules and regulations for the effective 
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enforcement of the provisions of this Act. 


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Approved, 
SEC. 4. Effectivity. - This Act shall take effect fifteen (15) days after its 
publication in at least two (2) newspapers of general circulation.