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Republic of the Philippines =
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House of Representatives

Quezon City oe,
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EIGHTEENTH CONGRESS és
SDA
First Regular Session
House Bill No. 6653

Introduced by Representative Jose Enrique S. Garcia Ill

EXPLANATORY NOTE

In 1987, the government replaced the sales tax regime with a multi-stage
value-added tax (VAT) system. The adoption of the VAT was one of the structural
reforms of the 1986 Tax Reform Program allegedly designed to simplify tax
administration and make the tax system more equitable."

Even before the VAT system could actually be imposed, however, efforts to
suspend or stop its implementation gathered steam in the House of
Representatives because of its perceived evils compared to the tax regime it
replaced. The initiative proved unsuccessful though but opposition to the VAT in
different fora continued.

VAT opponents such as the American think-tank The Heritage Foundation
have argued that the tax expands the cost of government. This could be attributed
to the fact that the VAT is based on full billing system which makes VAT
implementation expensive.” All purchases and sales records are required to be
maintained, causing an increase in compliance costs.

The more potent argument against the VAT system, however, is its
loophole for corruption. One columnist* wrote that the VAT expands the venue for
corruption and tax evasion. In this regime, a manufacturer can easily cheat by
fabricating spurious purchase invoices to increase his tax credits, thus reducing
his tax liability to the government. Since the country's tax administration is weak,
the BIR cannot monitor the use of these invoices, which nullifies the self-policing
mechanism of the VAT.

* See Executive Order No. 273 dated 25 July 1987.
? www.obmwortwide.com/blog/advantages-and-disadvantages-of-vat/; date last accessed: 22
‘September 2018.

www.obmwortwide.com/blog/advantages-and-disadvantages-of-vat; date last accessed: 22
September 2019.
* Article of Cielo Magno published in the 16 April 2002 issue of “TODAY.”



Another columnist echoed this sentiment and asked: "How does a
handicapped BIR monitor VAT collections in the vast tax jungle infested with
dishonest merchants and tax collectors?° He noted that even the mighty US
stepped back from the daunting task.”*

The foregoing apprehensions have, in fact, become a reality as evidenced
by the data from the Bureau of Internal Revenue (BIR). From 2008 to 2019, the
total input tax reported perennially exceeded the total output tax at an increasing
rate of 25% to 47%. As of the end of 2019, the excess of input tax over output tax
amounted to P924.6 billion.

Fundamentally, when all “VATable" transactions are truthfully and faithfully
declared, a net VAT payable equivalent to the amount of the output tax passed on
to the consumer less allowable input tax is paid to the government. What could
possibly make the input tax exceed the output tax are zero-rated and VAT-exempt
transactions without any counterpart local output tax against which the input taxes
may be deducted. Even then, this could not have been the only reason why the
input tax exceeded the output tax by such a huge amount.

The BIR records showing input tax significantly exceeding the output tax for
the past 12 years unquestionably demonstrate the adverse effects of the nagging
loopholes that beset our VAT system. These loopholes emanate from the inherent
complexity of the VAT system, particularly its deceitful input tax mechanism, and
the difficulty of administering and monitoring the same. These challenges
emboldened tax cheats to resort to a combination of schemes in order to lessen or
totally eliminate their tax liabilities. The schemes could involve under-reporting of
sales or over-reporting of input taxes through the use of spurious receipts or
receipts issued by fly-by-night companies.

The BIR disclosed that the effective collection rate of the 12% VAT for the
past 12 years ranged from 2.8% to 3.1%. In other words, while the 12% VAT
passed on to consumers is dutifully paid by the latter, an average of only 3% is
being collected by the government out of the 12% VAT. This translates to a
collection efficiency of only 25%, a rate dismally lower compared to some of our
ASEAN neighbors.

In 2015, Cambodia and Laos registered collection efficiency of 40% and
38%, respectively, with VAT rates of only 10%. Thailand, which only imposes 7%
VAT, has a significantly better collection efficiency rate of 68%.

The BIR records also disclose that, on the average, only about one per cent
(1%) of the VAT-registered taxpayers are randomly audited to validate the
allowable input taxes that were deducted from their output taxes. The BIR blames
this low validation rate to the inadequacy of their manpower and resources. This
accentuates the enormity of manpower and corresponding cost which the BIR
needs to carry out a larger validation coverage.

* Federico Pascual Jr., Postscript, The Philippine Star, 22 September 2011.


All the foregoing unquestionably justifies the imperative of abandoning the
VAT system. By shifting to sales tax system, the government will achieve the
following advantages:

1. Do away with the tax loopholes and tremendously increase internal
revenue tax by pegging a tax rate much lower than the 12% VAT;

2. The lower tax rate will significantly reduce the tax which consumers
pay on goods and services;

3. Gross taxation eliminates the deceitful input tax credit and all the taxes
paid are remitted to the government's treasury;

4. Gross tax system is relatively easier and simpler to monitor and
administer. This undoubtedly reduces the cost of administration.

5. Gross tax system eases cost of doing business benefiting employers.
At the same time, it is favorable to the consumers due to lower prices
of goods. Both advantages lead to lower overall inflation rate;

6. Gross taxation assures steady cash collection. It deters taxpayers
from employing tax avoidance schemes by eliminating the option to
inflate their input tax in order to avoid paying VAT; and

7. The shift to gross sales tax system enables the BIR to avoid the
accumulation of input tax refund and eliminates the cumulative input
tax claim by taxpayers amounting to P924.6 Billion as of December
31, 2019.

Support for this bill is therefore earnestly requested from my colleagues.

hare

REP. JOSE ENRIQUE S. GARCIA Ill
Se id District, Bataan


Republic of the Philippines
House of Representatives
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House Bill No,__©553

Introduced by Representative Jose Enrique S. Garcia Ill

AN ACT
IMPOSING SALES TAX IN LIEU OF VALUE-ADDED TAX,
REPLACING FOR THE PURPOSE THE ENTIRE PROVISIONS OF
TITLE IV, AND AMENDING SECTION 116, TITLE V, AND SECTION
236, TITLE IX, OF THE NATIONAL INTERNAL REVENUE CODE OF
1997, AS AMENDED, AND FOR OTHER PURPOSES

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

SECTION 1. The provisions of Title IV of the National Internal Revenue
Code of 1997, as amended, governing value-added tax are hereby repealed and
replaced with new provisions imposing sales tax, to read as follows:

“TITLE IV
“SALES TAX

“CHAPTER | — IMPOSITION OF TAX

“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 SALES TAX IMPOSED IN SECTIONS 106
TO 108 OF THIS CODE.

“THE SALES TAX IS A CONSUMPTION TAX IMPOSED ON
THE SALE OF GOODS, PROPERTIES AND SERVICES. IT MAY
BE SHIFTED OR PASSED ON TO THE BUYER, TRANSFEREE
OR LESSEE OF THE GOODS, PROPERTIES OR SERVICES.

“THE PHRASE “IN THE COURSE OF TRADE OR
BUSINESS” MEANS THE REGULAR CONDUCT OR PURSUIT OF


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A COMMERCIAL OR AN ECONOMIC ACTIVITY, INCLUDING
TRANSACTIONS INCIDENTAL THERETO, BY ANY PERSON
REGARDLESS OF WHETHER OR NOT THE PERSON ENGAGED
THEREIN IS A _NON-STOCK, NONPROFIT PRIVATE
ORGANIZATION (IRRESPECTIVE OF THE DISPOSITION OF ITS
NET INCOME AND WHETHER OR NOT IT SELLS EXCLUSIVELY
TO MEMBERS OR 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.”

“SEC. 106. 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, SALES
TAX EQUIVALENT TO FOUR PER CENT (4%) 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.

“(1) GOOD OR PROPERTIES, - THE TERM “GOODS” OR
“PROPERTIES” SHALL MEAN ALL TANGIBLE AND
INTANGIBLE OBJECTS WHICH ARE CAPABLE OF PECUNIARY
ESTIMATION AND SHALL INCLUDE:

“(A) REAL PROPERTY HELD PRIMARILY FOR SALE TO
CUSTOMERS OR HELD FOR LEASE 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;

“(C) THE RIGHT OR THE PRIVILEGE TO USE IN THE
PHILIPPINES OF ANY INDUSTRIAL, COMMERCIAL OR
SCIENTIFIC EQUIPMENT;

“(D) THE RIGHT OR THE PRIVILEGE TO USE MOTION
PICTURE FILMS, TAPES AND DISCS; 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
THE GOODS OR PROPERTIES, EXCLUDING THE SALES TAX.
THE EXCISE TAX, IF ANY, ON SUCH GOODS OR PROPERTIES
SHALL FORM PART OF THE GROSS SELLING PRICE.

“(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 TO:

“(A) SHAREHOLDERS OR INVESTORS AS SHARE IN THE
PROFITS; 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.

“(C) CHANGES IN OR CESSATION OF STATUS OF A
SALES TAX 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 SALES TAX
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 TAXPAYER 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.

“(E) 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.

“SEC. 107. TAX ON IMPORTATION OF GOODS. —

“(A) IN GENERAL. — THERE SHALL BE LEVIED, ASSESSED
AND COLLECTED ON EVERY IMPORTATION OF GOODS A
SALES TAX EQUIVALENT TO FOUR PER CENT (4%) 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 SALES TAX SHALL BE BASED
ON THE LANDED COST PLUS EXCISE TAXES, IF ANY;

“(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 WHERE 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.”

“SEC. 108. TAX ON SALE OF SERVICES AND USE OR
LEASE OF PROPERTIES. - THERE SHALL BE LEVIED,
ASSESSED AND COLLECTED, A SALES TAX EQUIVALENT TO
FOUR PER CENT (4%) OF GROSS RECEIPTS DERIVED FROM
THE SALE OR EXCHANGE OF SERVICES, INCLUDING THE USE
OR LEASE OF PROPERTIES;


“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, REST HOUSES, PENSION HOUSES, INNS,
RESORTS; PROPRIETORS 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 ANOTHER
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 116 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 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;

“(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 THE
SALES TAX.”

“SEC. 109. EXEMPT TRANSACTIONS. — THE FOLLOWING
TRANSACTIONS SHALL BE EXEMPT FROM THE SALES TAX:


CaIanueon—

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“(A) SALE OR IMPORTATION OF AGRICULTURAL AND
MARINE FOOD PRODUCTS IN THEIR ORIGINAL STATE,
LIVESTOCK AND POULTRY OF OR 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,
CORN 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 FEEDS (EXCEPT SPECIALTY
FEEDS FOR RACE HORSES, FIGHTING COCKS, AQUARIUM
FISH, ZOO ANIMALS AND OTHER ANIMALS GENERALLY
CONSIDERED AS PETS);

“(C) IMPORTATION OF PERSONAL AND HOUSEHOLD
EFFECTS BELONGING TO THE RESIDENTS OF THE
PHILIPPINES RETURNING FROM ABROAD AND
NONRESIDENT CITIZENS COMING TO RESETTLE IN THE
PHILIPPINES: PROVIDED, THAT SUCH GOODS ARE EXEMPT
FROM CUSTOMS DUTIES UNDER THE CUSTOMS
MODERNIZATION AND TARIFF ACT;

“(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,

10


“(E) SERVICES SUBJECT TO PERCENTAGE TAX UNDER
EV:

“(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;

“(l) SERVICES RENDERED BY INDIVIDUALS PURSUANT
TO AN EMPLOYER-EMPLOYEE RELATIONSHIP;

“(J) 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) SERVICES RENDERED IN 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);

“(L) 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
BSP;

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“(M) SERVICES RENDERED TO PERSONS OR ENTITIES
WHOSE EXEMPTION UNDER SPECIAL LAWS OR
INTERNATIONAL AGREEMENTS TO WHICH THE PHILIPPINES
1S A SIGNATORY EFFECTIVELY EXEMPTS THE SUPPLY OF
SUCH SERVICES;

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

“(0) SERVICES PERFORMED BY SUBCONTRACTORS
AND/OR CONTRACTORS IN PROCESSING, CONVERTING, OF
MANUFACTURING GOODS FOR AN ENTERPRISE WHOSE
EXPORT SALES EXCEED SEVENTY PERCENT (70%) OF
TOTAL ANNUAL PRODUCTION;

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

“(Q) 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;

“(R) 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;

“(S) 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;

“(T) GROSS RECEIPTS FROM LENDING ACTIVITIES BY
CREDIT OR MULTI-PURPOSE COOPERATIVES DULY
REGISTERED WITH THE COOPERATIVE DEVELOPMENT
AUTHORITY;

“(U) 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;

“(V) EXPORT SALES, OR 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
BSP;

THE 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 BSP; SALE OF RAW
MATERIALS OR PACKAGING MATERIALS TO EXPORT-
ORIENTED ENTERPRISE WHOSE EXPORT SALES EXCEED
SEVENTY PERCENT (70%) OF TOTAL ANNUAL PRODUCTION;
THOSE CONSIDERED EXPORT SALES UNDER EXECUTIVE
ORDER NO. 226, OTHERWISE KNOWN AS THE “OMNIBUS
INVESTMENT CODE OF 1987", AND OTHER SPECIAL LAWS;
AND SALE OF GOODS, SUPPLIES, EQUIPMENT AND FUEL TO
PERSONS ENGAGED IN INTERNATIONAL SHIPPING OR
INTERNATIONAL AIR TRANSPORT OPERATIONS SHALL BE
CONSIDERED AS EXPORT SALES;

“(W) FOREIGN-CURRENCY DENOMINATED SALE, OR
SALE TO A NONRESIDENT OF GOODS, EXCEPT THOSE
MENTIONED IN SECTIONS 146 AND 147, 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
BSP;

“(X) 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

13


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 TWO MILLION PESOS
(P2,000,000.00) AND BELOW, HOUSE AND LOT, AND OTHER
RESIDENTIAL DWELLINGS VALUED AT THREE MILLION
PESOS (P3,000,000.00) AND BELOW: PROVIDED, THAT NOT
LATER THAN JANUARY 31, 2023 AND EVERY THREE (3)
YEARS THEREAFTER, THE AMOUNT HEREIN STATED SHALL
BE ADJUSTED TO THEIR PRESENT VALUES USING THE
CONSUMER PRICE INDEX, AS PUBLISHED BY THE
PHILIPPINE STATISTICS AUTHORITY (PSA);

“(Y) LEASE OF A RESIDENTIAL UNIT WITH A MONTHLY
RENTAL NOT EXCEEDING TEN THOUSAND PESOS
(P10,000.00): PROVIDED, THAT NOT LATER THAN JANUARY
31, 2023 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 PSA;

“(Z) 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;

“(AA) TRANSPORT OF PASSENGERS BY INTERNATIONAL
CARRIERS;

“(BB) SALE, IMPORTATION OR LEASE OF PASSENGER
OR CARGO VESSELS AND AIRCRAFT, INCLUDING ENGINE,
EQUIPMENT AND SPARE PARTS THEREOF FOR DOMESTIC
OR INTERNATIONAL TRANSPORT OPERATIONS;

“(CC) IMPORTATION OF FUEL, GOODS AND SUPPLIES
BY PERSONS ENGAGED IN INTERNATIONAL SHIPPING OR
AIR TRANSPORT OPERATIONS;

“(DD) SALE OF GOLD TO THE BSP;

“(EE) SERVICES OF BANK, NON-BANK FINANCIAL
INTERMEDIARIES PERFORMING QUASI-BANKING
FUNCTIONS, AND OTHER NON-BANK = FINANCIAL
INTERMEDIARIES; AND

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“(FF) 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 PESOS (P3,000,000): PROVIDED, THAT NOT LATER
THAN JANUARY 31, 2023 AND EVERY THREE (3) YEARS
THEREAFTER, THE AMOUNT HEREIN STATED SHALL BE
ADJUSTED TO ITS PRESENT VALUE WITH FOOTNOTE IN THE
BOOK VALUE USING THE CONSUMER PRICE INDEX, AS
PUBLISHED BY THE PSA;

CHAPTER Il —- COMPLIANCE REQUIREMENTS

“SEC. 110. INVOICING AND ACCOUNTING
REQUIREMENTS FOR SALES TAX REGISTERED PERSONS. —

“(A) INVOICING REQUIREMENT. — A SELLER, PROVIDER
OR LESSOR OF GOODS, SERVICES OR PROPERTIES SHALL
ISSUE:

“(1) INVOICE FOR EVERY SALE, BARTER OR EXCHANGE
OF GOODS OR PROPERTIES; AND

“(2) OFFICIAL RECEIPT FOR EVERY LEASE OF GOODS
OR PROPERTIES, AND FOR EVERY SALE, BARTER OR
EXCHANGE OF SERVICES.

“(B) INFORMATION CONTAINED IN THE INVOICE OR
OFFICIAL RECEIPT. — THE FOLLOWING INFORMATION SHALL
BE INDICATED IN THE INVOICE OR OFFICIAL RECEIPT:

“(1) THE 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 SALES
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 SALES TAX, THE
TERM “TAX EXEMPT SALE” SHALL BE WRITTEN OR PRINTED
PROMINENTLY ON THE INVOICE OR RECEIPT;

“(C) IF THE SALE INVOLVES GOODS, PROPERTIES OR
SERVICES SOME OF WHICH ARE SUBJECT TO AND SOME OF
WHICH ARE SALES TAX EXEMPT, THE INVOICE OR RECEIPT


SHALL CLEARLY INDICATE THE BREAK-DOWN OF THE SALE
PRICE BETWEEN ITS TAXABLE AND EXEMPT COMPONENTS,
AND THE CALCULATION OF THE SALES 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 AND
EXEMPT COMPONENTS OF THE SALE.

“(3) THE DATE OF TRANSACTION, QUANTITY, UNIT
COST, AND DESCRIPTION OF THE GOODS OR PROPERTIES
OR NATURE OF THE SERVICE; AND

“(4) IN THE CASE OF SALES AMOUNTING TO ONE
THOUSAND PESOS (P1,000.00) OR MORE, THE NAME,
BUSINESS STYLE, IF ANY, ADDRESS AND TAXPAYER
IDENTIFICATION NUMBER (TIN) OF THE PURCHASER,
CUSTOMER OR CLIENT.

“(C) ACCOUNTING REQUIREMENTS. =
NOTWITHSTANDING THE PROVISIONS OF SECTION 230, ALL
PERSON SUBJECT TO THE SALES 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 INVOICE
OR OFFICIAL RECEIPT. — IF A SELLER ISSUES AN INVOICE
OR OFFICIAL RECEIPT FOR A TAX-EXEMPT TRANSACTION,
BUT FAILS TO DISPLAY PROMINENTLY ON THE INVOICE OR
RECEIPT THE TERM “TAX EXEMPT SALE”, THE ISSUER
SHALL BE LIABLE TO ACCOUNT FOR THE TAX IMPOSED IN
SECTION 106 OR SECTION 108 AS IF SECTION 109 DID NOT
APPLY.

“(E) TRANSITIONAL PERIOD. - NOTWITHSTANDING
SUBSECTION (B) HEREOF, TAXPAYERS MAY CONTINUE TO
ISSUE VAT INVOICES AND VAT OFFICIAL RECEIPTS UNTIL
DECEMBER 31, 2020 IN ACCORDANCE WITH DEPARTMENT
OF FINANCE ISSUANCES AND BUREAU OF INTERNAL
REVENUE ADMINISTRATIVE PRACTICES THAT EXISTED AS
OF DECEMBER 31, 2019.”

“SEC. 111. RETURN AND PAYMENT OF SALES TAX. —

“(A) IN GENERAL. - EVERY PERSON LIABLE TO PAY THE
SALES 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 THE TAXPAYER SHALL PAY THE SALES TAX ON A
MONTHLY BASIS.

“ANY PERSON, WHOSE REGISTRATION HAS BEEN
CANCELLED IN ACCORDANCE WITH SECTION 233, 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) WHEN TO FILE THE RETURN AND PAY THE TAX. —
EXCEPT AS THE COMMISSIONER OTHERWISE PERMITS, THE
RETURN 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 SALES TAX. - THE GOVERNMENT
OR ANY OF its POLITICAL SUBDIVISIONS,
INSTRUMENTALITIES OR AGENCIES, INCLUDING
GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS
(GOCCs) SHALL, BEFORE MAKING PAYMENT ON ACCOUNT
OF EACH PURCHASE OF GOODS AND SERVICES WHICH ARE
SUBJECT TO THE SALES TAX IMPOSED IN SECTIONS 106
AND 108 OF THIS CODE, DEDUCT AND WITHHOLD THE
SALES TAX IMPOSED IN SECTIONS 106 AND 108 OF THIS
CODE AT THE RATE OF FOUR PER CENT (4%) OF THE GROSS
PAYMENT THEREOF. PAYMENT FOR LEASE OR USE OF
PROPERTIES OR PROPERTY RIGHTS TO NONRESIDENT
OWNERS SHALL ALSO BE SUBJECT TO FOUR PER CENT
(4%) 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 SALES TAX WITHHELD UNDER THIS SECTION
SHALL BE REMITTED WITHIN TEN (10) DAYS FOLLOWING
THE END OF THE MONTH THE WITHHOLDING WAS MADE.”

“SEC. 112. POWER OF THE COMMISSIONER TO
SUSPEND THE BUSINESS OPERATIONS OF A TAXPAYER. —
THE COMMISSIONER OR HIS AUTHORIZED REPRESENTATIVE

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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 SALES TAX REGISTERED PERSON.

“(1) FAILURE TO ISSUE RECEIPTS OR INVOICES;

“(2) FAILURE TO FILE A SALES TAX RETURN AS
REQUIRED UNDER SECTION 111; OR

“(3) UNDERSTATEMENT OF TAXABLE SALES OR
RECEIPTS BY THIRTY PER CENT (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 233.

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.”

SEC. 2. Section 116, Title V of the National Internal Revenue Code, as
amended, is hereby renumbered and amended to read as follows:

“SEC. 113 [116]. Tax on Persons Exempt from SALES TAX
[Value-Added Tax (VAT)]. — Any person whose sales or receipts
are exempt under Section 109(FF) [(V)] of this Code from the
payment of SALES [value-added] tax and who is not a SALES TAX
IVAT-] registered person shall pay a tax equivalent to three percent
(8%) of his gross quarterly sales or receipts: Provided, That
cooperatives shall be exempt from the three percent (3%) gross
receipts tax herein imposed.”

All succeeding sections of the Code are hereby renumbered accordingly.

SEC. 3. Section 236, Chapter II, Title IX of the National Internal Revenue
Code, as amended, is hereby renumbered and amended to read as follows:

“SEC. 233 [236]. Registration Requirements. -
“(A)XXX

“(B) XXX


“(C)XXX
“(D) XXX
“(E)XXX
“(F) Cancellation of Registration. —

*(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 SALES [Value-Added] Tax Registration. —
A SALES TAX [VAT-] registered person may cancel his registration
for SALES TAX [VAT] 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 (EE) [(U)], will not exceed THREE
MILLION PESOS (P3,000,000.00) [One million five hundred
thousand pesos (P1,500,000)]; 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 SALES [Value-Added]
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 SALES [value-
added] 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
(FF) [(V)] have exceeded THREE MILLION PESOS
(P3,000,000.00) [One million five hundred thousand pesos
(P1,500,000)}; 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 (FF) [(V)], will exceed
THREE MILLION PESOS (P3,000,000.00) [One million five
hundred thousand pesos (P1,500,000)]; or

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“(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 SALES TAX [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 SALES [Value-Added] Tax of
Exempt Person. —

“(1) Any person who is not required to register for SALES
[value-added] tax under Subsection (G) hereof may elect to register
for SALES [value-added] tax by registering with the Revenue
District Office that has a 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 SALES [value-added] tax as a tax type in accordance
with the provisions of Subsection (C) hereof shall be referred to as
a "SALES TAX [VAT-] registered person" who shall be assigned
only one Taxpayer Identification Number (TIN).

SEC. 4. All exemptions from value-added tax mandated in other special
laws shall continue to be recognized as exemptions from the sales tax imposed by
this Act.

All other reference to value-added tax elsewhere in the Code or in other
laws, executive orders, and rules and regulations shall henceforth be understood
as referring to sales tax.

SEC. 5. Upon the effectivity of this Act, no carry-over of excess input taxes
as of December 31, 2020 shall be allowed. Nonetheless, all VAT-registered
persons may claim for refund or apply for the issuance of tax credit certificate of
their excess input taxes as of December 31, 2020. Claims for refund or application
for tax credit certificate from zero-rated or effectively zero-rated sales as of
December 31, 2020 shall also be allowed. All such claims for refund or application
of tax credit certificates should be filed before the Commissioner of Internal
Revenue not later than December 31, 2022.

SEC. 6. The Department of Finance and the Bureau of Internal Revenue
shall promulgate the necessary rules and regulations for the effective
implementation of this Act.

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SEC. 7. If any part or provision of this Act is declared invalid or
unconstitutional, the remaining parts or provisions not affected shall remain in full
force and effect.

SEC. 8. All laws, decrees, executive orders, rules and regulations or parts
thereof which are contrary to or inconsistent with the provisions of this Act are
hereby repealed, amended or modified accordingly.

SEC. 9. This Act shall take effect on January 1, 2021, following its complete
publication in the Official Gazette or in a newspaper of general circulation.

Approved.

a