Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session
0176

HOUSE BILL NO.

Introduced by Representatives
HORACIO P. SUANSING, JR. and ESTRELLITA B. SUANSING

AN ACT
AMENDING SECTIONS 4, 5, 20, 22, 27, 28, 34, 40, 50, 73, 112, 117, 204, 222, 237, 237-
A, 255, 256, 257, 258, 260, 261, 262, 263, 264, 265, 266, 275, 288, 290 AND ADDING
SECTIONS 6-A, 282-A, 291, 292, 293, 294, 295, 296, 297, 298, 299, 300, 301, 301-A, 301-
B, 302, 303, 304, 305, 306, 307, 308, 309, 310, 311, 312, 313, AND 314 UNDER THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR
OTHER PURPOSES

EXPLANATORY NOTE

This bill, otherwise known as the Tax Reform for Attracting Better and High-Quality
Opportunities or TRABAHO Bill, is part of the Comprehensive Tax Reform Program (CTRP)
envisioned by the administration of President Rodrigo Roa Duterte. It complements Republic
‘Act No. 10963, also known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
This proposed measure seeks to lower the corporate income tax rate, reform the corporate
income tax system and broaden the tax base by modernizing investment tax incentives to
enhance fairness, improve competitiveness, plug tax leakages and achieve fiscal sustainability.

To achieve such purposes, this bill endeavors to address the following major policy issues:

1. The Philippines’ corporate income tax system is characterized by a high rate
and a narrow base. Despite having the highest corporate income tax rate in the
ASEAN region at 30%, the country’s tax collection efficiency is one of the lowest.
This is due to very generous tax incentives that are given in perpetuity and in lieu
of other taxes (including local taxes), and thus seriously erode the tax base.

2. The country’s investment tax incentive system is very complex. It has 14
investment promotion agencies and around 123 laws that grant various types
of investment tax incentives with little regard to cost-efficiency and effectiveness.
Moreover, another 192 laws grant various non-investment tax incentives. All
these result to a tax incentive system that is less transparent, less targeted, not
time-bound and not performance-based.

3. The outdated tax code lacks adequate provisions to address transfer pricing and
other tax avoidance practices that have led to an erosion in tax revenues.

4. Ironically, the Department of Finance (DOF), which is the steward of the
government's fiscal health and mandated to formulate sound fiscal policy, has very
little involvement in the formulation and granting of tax incentives to registered
business enterprises. This is contrary to best practice employed in other
government institutions where the finance minister holds a significant role in the
decision-making process in matters relating to the design and granting of tax


incentives. To date, tax incentives are being administered by the Department of
Trade and Industry (DTI); through the Board of Investments (BOI) and Investment
Promotion Agencies (IPAs).

5. Despite granting generous tax incentives, both foreign and domestic investments in
the Philippines, and consequently the rate of job creation, have not increased
significantly and are much lower than those of the country’s ASEAN neighbors.
Tax incentives play a critical role in attracting investments and addressing market
failures, but they need to be modernized and disciplined to ensure that the country
reaps the most benefit from forgoing its scarce tax revenues.

6. Finally, incentives alone are not enough to attract investments, and consequently
create jobs. A more comprehensive strategy is needed, and must include key
investments and improvements in infrastructure, skilled labor, ease of doing
business, and integration of the domestic supply chain. Implementing such
strategy in order to develop a favorable investment climate requires, among others,
a stable source of revenues.

‘The cost of investment tax incentives to the country is significant. In 2015, the Department
of Finance, using data required by the Tax Investment Management and Transparency Act
(TIMTA) Law (Republic Act No. 10708) and other available data, estimated that the
investment tax incentive system costs the government around Php 301 billion in forgone
income tax, value added tax (gross of refund) and customs duties. This estimate does not yet
include forgone local taxes and leakages that arise from tax avoidance and tax evasion due to
the complicated system. While the country benefits from these incentives in terms of
investments, jobs, exports and rural development, the staggering cost, which stands at more
than 2% of the country’s Gross Domestic Product (GDP), warrants the government to review
its incentives system and make it time-bound, performance-based, transparent and targeted to
ensure that redundant incentives are removed, that the benefits fully outweigh the costs and
that fiscal prudence is maintained at all times.

It must be stressed that despite the Philippines being the most generous provider of tax
incentives in the region, its share of investments and its export performance relative to its
‘ASEAN neighbors is not high. This means that the government is not able to successfully
translate its tax incentive scheme into investments and overseas business. The Philippines has
‘one of the lowest export-to-GDP ratio among the ASEANS, while its foreign direct
investments-to-GDP ratio, while increasing in recent years, remains lackluster relative to its
neighbors. The answer to this conundrum lies in the fact that investments and exports are
mainly influenced by a country’s ability to provide efficient infrastructure, modern logistics,
effective governance, low cost of doing business and a productive workforce. In general,
while tax incentives can help a country improve its competitiveness, these do not provide
the real solution over the long-term and often only serve as band-aid solutions to compensate
for a country’s inability to provide reliable infrastructure and basic services. In line with
this, the administration of President Duterte seeks to reform the tax system by removing
redundant and costly tax incentives in order to generate more tax revenues which would be
used to fund priority programs geared towards improving the country’s investment climate in
the long-term.

With tax incentives modernized and the tax base expanded, the corporate income tax rate can
be reduced to correct the present inequitable and unjust system which benefits a few industries
while negatively impacting the rest of the business community ~ notably micro-, small- and
medium-size enterprises which are made to pay the regular 30% corporate income tax rate.


The reduction in the corporate income tax rate would be a welcome relief that will benefit
all corporate taxpayers - whether large or small, whether domestic or foreign ~ and will
attract more investments. Further, the reduction in corporate income tax rate will also boost the
Philippines’ competitiveness in the global business landscape by making the country’s CIT rate
at par with neighboring ASEAN countries.

Ultimately, this bill aims to yield benefits not just for the government, but more importantly,
for Filipino taxpayers who have been diligently fulfilling their tax obligations by making the
tax system more progressive, more efficient and simpler.

In view of the foregoing, urgent approval of this bill is earnestly sought."

HORAC UANSING, JR. ESTRELLITA B. SUANSING
2" Distrief of Sultan Kudarat 1* District of Nueva Ecija|

"This bill was originally filed by Rep. Horacio P. Suansing, Jr. and Rep. Estrelita B. Suansing during the 17th Congress,
‘Second Regular Session. It was approved on Third Reading on September 10, 2018.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL No.21T6

Introduced by Representatives
HORACIO P. SUANSING, JR. and ESTRELLITA B. SUANSING

AN ACT
AMENDING SECTIONS 4, 5, 20, 22, 27, 28, 34, 40, $0, 73, 112, 117, 204, 222, 237, 237-A, 255, 256, 257,
258, 260, 261, 262, 263, 264, 265, 266, 275, 288, 290 AND ADDING SECTIONS 6-A, 282-A, 291, 292, 293,
294, 295, 296, 297, 298, 299, 300, 301, 301-A, 301-B, 302, 303, 304, 305, 306, 307, 308, 309, 310, 311, 312, 313,
‘AND 314 UNDER THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR
OTHER PURPOSES

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

assembled:

SECTION 1. Title. — This Act shall be known as the “Tax Reform for Attracting Better
and High-quality Opportunities,” or “TRABAHO.”

SEC. 2. Section 4 of the National Internal Revenue Code of 1997, as amended, is hereby
further amended to read as follows:

“SEC, 4. Power of the Commissioner to Interpret Tax Laws and to Decide

Tax Cases. ~ The power to interpret the provisions of the Code and other tax laws

shall be under the exclusive and original jurisdiction of the Commissioner, subject

to review by the Secretary of Finance: PROVIDED, THAT THE POWER TO

INTERPRET THE PROVISIONS OF TITLE XII OF THIS CODE SHALL

BE UNDER THE EXCLUSIVE AND ORIGINAL JURISDICTION OF THE

SECRETARY OF FINANCE.

“The power to decide disputed assessments, refunds of internal revenue taxes,
fees or other charges, penalties imposed in relation thereto, or other matters arising
under this Code or other laws or portions thereof administered by the Bureau of
Internal Revenue is vested in the Commissioner, subject to the exclusive appellate
jurisdiction of the Court of Tax Appeals.”

SEC. 3. Section 5 of the National Internal Revenue Code of 1997, as amended, is hereby
further amended to read as follows:
“SEC. 5. Power of the Commissioner to Obtain Information and to Summon,

Examine, and Take Testimony of Persons. — In ascertaining the correctness of any


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return, or in making a return when none has been made, or in determining the
liability of any person for any internal revenue tax, or in collecting any such

liability, or in evaluating tax compliance, the Commissioner is authorized:

“(AX Xx
“(B)X Xx
“(OC)Xxx

“(D) x x x; [and]
“(E) xx xL.J; AND

“(F) IN CASE THE INFORMATION OR RECORDS REQUESTED
ARE NOT FURNISHED WITHIN THE PERIOD PRESCRIBED IN THE
WRITTEN NOTICE, OR WHEN THE INFORMATION OR RECORDS
SUBMITTED ARE INCOMPLETE, THE COMMISSIONER OR HIS
DULY AUTHORIZED REPRESENTATIVE, SHALL ISSUE A SUBPOENA
DUCES TECUM STATING THEREIN THE RELEVANT FACTS,
SPECIFYING THE PARTICULAR DOCUMENTS OR RECORDS NOT
MADE AVAILABLE AND THE TAXPAYER LIABLE OR THE THIRD
PARTY/OFFICE CONCERNED: PROVIDED, THAT INFORMATION OR
RECORDS DULY RECEIVED OR ALREADY WITHIN THE CUSTODY
OF THE BUREAU SHALL NOT BE COVERED BY ANY SUBPOENA
DUCES TECUM.

“THE SERVICE OF A SUBPOENA DUCES TECUM SHALL BE
EFFECTED BY THE REVENUE OFFICERS ASSIGNED TO
INVESTIGATE THE CASE. HOWEVER, SUCH SERVICE MAY BE
MADE BY ANY OTHER INTERNAL REVENUE OFFICER
AUTHORIZED FOR THE PURPOSE.

“THE SUBPOENA DUCES TECUM SHALL BE SERVED THROUGH
PERSONAL SERVICE, BUT IF NOT PRACTICABLE, IT SHALL BE
SERVED BY SUBSTITUTED SERVICE IN ACCORDANCE WITH THE
RULES OF THE COURT.

“A CRIMINAL ACTION SHALL BE INSTITUTED FOR FAILURE
TO OBEY THE SUBPOENA DUCES TECUM.

“BOOKS, RECORDS, AND DOCUMENTS SUBMITTED AS A
RESULT OF A SUBPOENA DUCES TECUM SHALL BE UNDER THE
CUSTODIANSHIP OF THE RECEIVING OFFICER WHO SHALL BE


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Code

RESPONSIBLE FOR ITS SAFEKEEPING AND PRESERVATION,
SUBJECT TO APPLICABLE RULES.”

SEC. 4, A new section shall be inserted as Section 6-A of the National Internal Revenue

of 1997, as amended, to read as follows:

“SEC. 6-A. SERVICE OF LETTER OF AUTHORITY, AND
ASSESSMENT NOTICES ISSUED BY THE BUREAU. - THE NOTICE TO
THE TAXPAYER HEREIN REQUIRED MAY BE SERVED BY THE
COMMISSIONER OR HIS DULY AUTHORIZED REPRESENTATIVE
THROUGH PERSONAL SERVICE AT HIS REGISTERED ADDRESS. IN
CASE PERSONAL SERVICE IS NOT PRACTICABLE, THE NOTICE
SHALL BE SERVED BY SUBSTITUTED SERVICE IN ACCORDANCE
WITH THE RULES OF THE COURT.”

SEC. 5. Section 20 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 20. Submission of Report and Pertinent Information by the
Commissioner. ~

“(A) Xxx

“(B) SUBMISSION OF TAX-RELATED INFORMATION TO THE
DEPARTMENT OF FINANCE. THE PROVISIONS OF SECTION 71,
NOTWITHSTANDING, THE COMMISSIONER SHALL, UPON THE
REQUEST OF THE SECRETARY OF FINANCE SPECIFICALLY
IDENTIFYING THE NEEDED INFORMATION AND JUSTIFICATION
FOR SUCH REQUEST, FURNISH THE SECRETARY PERTINENT
TAXPAYER INFORMATION: PROVIDED, HOWEVER, THAT THE
SECRETARY AND THE RELEVANT OFFICERS HANDLING SUCH
SPECIFIC INFORMATION SHALL BE COVERED BY THE PROVISIONS
OF SECTION 270.

“[(B)] (©) Report to Oversight Committee. — The Commissioner shall, with
reference to Section 204 of this Code, submit to the Oversight Committee referred
to in Section 290 hereof, through the Chairmen of the Committee on Ways and
Means of the Senate and House of Representatives, a report on the exercise of his

powers pursuant to the said Section, every six (6) months of each calendar year.”

SEC. 6, Section 22 of the National Internal Revenue Code of 1997, as amended, is hereby

further amended to read as follows:

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“SEC. 22. Definitions. ~ xxx

(AX XX

“(B) xxx

“(C)xxx

“(D)xxx

“(E) The term ‘nonresident citizen’ means:

“(1) A citizen of the Philippines who establishes to the satisfaction of the
Commissioner the fact of his physical presence abroad with a definite intention to
reside therein,

“(2) A citizen of the Philippines who leaves the Philippines during the taxable
year to reside abroad, either as an immigrant or for employment on a permanent
basis.

“(3) A citizen of the Philippines who works and derives income from abroad
and whose employment thereat requires him to be physically present abroad [most
of the time] FOR ONE HUNDRED EIGHTY-THREE (183) DAYS OR MORE
during the taxable year.

“(4) A citizen who has been previously considered as nonresident citizen and
who arrives in the Philippines at any time during the taxable year to reside
permanently in the Philippines shall likewise be treated as a nonresident citizen for
the taxable year in which he arrives in the Philippines with respect to his income
derived from sources abroad until the date of his arrival in the Philippines.

“(5)The taxpayer shall submit proof to the Commissioner to show his
intention of leaving the Philippines to reside permanently abroad or to return to and
reside in the Philippines as the case may be for purpose of this Section.

XXX,

SEC. 7. Section 27 of the National Internal Revenue Code of 1997, as amended, is

hereby further amended to read as follows:

“SEC. 27. Rates of Income Tax on Domestic Corporations. ~

“(A) In General. ~ Except as otherwise provided in this Code, [an income
tax of thirty-five percent (35%)] AN INCOME TAX RATE OF THIRTY
PERCENT (30%), is hereby imposed upon the taxable income derived during
each taxable year from all sources within and without the Philippines by every
corporation, as defined in Section 22(B) of this Code and taxable under this Title

as a corporation, organized in, or existing under the laws of the Philippines:


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[Provided, That effective January 1, 2009, the rate of income tax shall be thirty
percent (30%).] PROVIDED, THAT THE RATE OF CORPORATE INCOME
TAX SHALL BE TWENTY-EIGHT PERCENT (28%) BEGINNING
JANUARY 1, 2021; TWENTY-SIX PERCENT (26%) BEGINNING
JANUARY 1, 2023; TWENTY-FOUR PERCENT (24%) BEGINNING
JANUARY 1, 2025; TWENTY-TWO PERCENT (22%) BEGINNING
JANUARY 1, 2027; AND TWENTY PERCENT (20%) BEGINNING
JANUARY 1, 2029: PROVIDED, FURTHER, THAT THE PRESIDENT MAY
ADVANCE THE SCHEDULED REDUCTION IN THE CORPORATE
INCOME TAX RATE WHEN ADEQUATE SAVINGS ARE REALIZED
FROM THE RATIONALIZATION OF FISCAL INCENTIVES UNDER
TITLE XIII OF THIS CODE, AS CERTIFIED BY THE SECRETARY OF
FINANCE.

“In the case of corporations adopting the fiscal-year accounting period, the
taxable income shall be computed without regard to the specific date when specific
sales, purchases and other transactions occur. Their income and expenses for the
fiscal year shall be deemed to have been earned and spent equally for each month
of the period.

“The corporate income tax rate shall be applied on the amount computed by
multiplying the number of months covered by the new rate within the fiscal year
by the taxable income of the corporation for the period, divided by twelve.

“[Provided, further, That the President, upon the recommendation of the
Secretary of Finance, may, effective January 1, 2000, allow corporations the option
to be taxed at fifteen percent (15%) of gross income as defined herein, after the
following conditions have been satisfied:

“(1)A tax effort ratio of twenty percent (20%) of Gross National Product
(GNP);

“(2)A ratio of forty percent (40%) of income tax collection to total tax
revenues;

“(3) A VAT tax effort of four percent (4%) of GNP; and]

“[(4) A.0.9 percent (0.9%) ratio of the Consolidated Public Sector Financial
Position (CPSFP) to GNP.


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“The option to be taxed based on gross income shall be available only to firms
whose ratio of cost of sales to gross sales or receipts from all sources does not
exceed fifty-five percent (55%).

“The election of the gross income tax option by the corporation shall be
irrevocable for three (3) consecutive taxable years during which the corporation is
qualified under the scheme.

“For purposes of this Section, the term ‘gross income’ derived from business
shall be equivalent to gross sales less sales returns, discounts and allowances and
cost of goods sold. ‘Cost of goods sold’ shall include all business expenses directly
incurred to produce the merchandise to bring them to their present location and use

“For a trading or merchandising concern, ‘cost of goods sold” shall include
the invoice cost of the goods sold, plus import duties, freight in transporting the
‘2004s to the place where the goods are actually sold, including insurance while the
goods are in transit.

“For a manufacturing concern, ‘cost of goods manufactured and sold” shall
include all costs of production of finished goods, such as raw materials used, direct
labor and manufacturing overhead, freight cost, insurance premiums and other
costs incurred to bring the raw materials to the factory or warehouse. |

“[In the case of taxpayers engaged in the sale of service, ‘gross income’
‘means gross receipts less sales returns, allowances and discounts]

“(B) Proprietary Educational Institutions and Hospitals. —

“xxx.”

“Provided, That if the gross income from ‘unrelated trade, business or other
activity’ exceeds fifty percent (50%) of the total gross income derived by such
educational institutions or hospitals from all sources, the tax prescribed in
‘Subsection (A) hereof shall be imposed on the entire taxable income. For purposes
of this Subsection, the term ‘unrelated trade, business or other activity’ means any
trade, business or other activity, the conduct of which is not substantially related
to the exercise or performance by such educational institution or hospital of its
primary purpose or function, A ‘proprietary educational institution’ is any private
school maintained and administered by private individuals or groups with an issued
permit to operate from the Department of Education|, Culture and Sports (DECS)]
(DEPED), or the Commission on Higher Education (CHED), or the Technical


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Education and Skills Development Authority (TESDA), as the case may be, in
accordance with existing laws and regulations.

(©) Government-owned or Controlled Corporations, Agencies or
Instrumemtalities. ~ 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 Insurance System
(GSIS), the Social Security System (SSS), HOME DEVELOPMENT MUTUAL
FUND, the Philippine Health Insurance Corporation (PHIC), and the local water
districts (LWDs) 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.

“(D) xxx

“(B) xxx.”

SEC. 8. Section 28 of the National Internal Revenue Code of 1997, as amended, is

hereby further amended to read as follows

“SEC. 28. Rates of Income Tax on Foreign Corporations. ~

“(A) Tax on Resident Foreign Corporations. ~

“(1) In General. ~ Except as otherwise provided in this Code, a corporation
organized, authorized, or existing under the laws of any foreign country, engaged
in trade or business within the Philippines, shall be subject to an income tax
equivalent to [thirty-five percent (35%)] THIRTY PERCENT (30%) of the
taxable income derived in the preceding taxable year from all sources within the
Philippines: (Provided, That effective January 1, 2009, the rate of income tax shall
be thirty percent (30%).] PROVIDED, THAT THE RATE OF CORPORATE
INCOME TAX SHALL BE TWENTY-EIGHT PERCENT (28%)
BEGINNING JANUARY 1, 2021; TWENTY-SIX PERCENT (26%)
BEGINNING JANUARY 1, 2023; TWENTY-FOUR PERCENT (24%)
BEGINNING JANUARY 1, 2025; TWENTY-TWO PERCENT (22%)
BEGINNING JANUARY 1, 2027; AND TWENTY PERCENT (20%)
BEGINNING JANUARY 1, 2029: PROVIDED, FURTHER, THAT THE
PRESIDENT MAY ADVANCE THE SCHEDULED REDUCTION IN THE
CORPORATE INCOME TAX RATE WHEN ADEQUATE SAVINGS ARE
REALIZED FROM THE RATIONALIZATION OF FISCAL INCENTIVES

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UNDER TITLE XIII OF THIS CODE, AS CERTIFIED BY THE
SECRETARY OF FINANCE.

“In the case of corporations adopting the fiscal-year accounting period, the
taxable income shall be computed without regard to the specific date when sales,
purchases and other transactions occur. Their income and expenses for the fiscal
year shall be deemed to have been eared and spent equally for each month of the
period.

“The corporate income tax rate shall be applied on the amount computed by
multiplying the number of months covered by the new rate within the fiscal year
by the taxable income of the corporation for the period, divided by twelve.

“[Provided, however, that a resident foreign corporation shall be granted the
option to be taxed at fifteen percent (15%) on gross income under the same
conditions, as provided in Section 27(A).]

“Q)xxx

“Q)xxx

“[(4) Offshore Banking Units. — The provisions of any law to the contrary
notwithstanding, income derived by offshore banking units authorized by the
Bangko Sentral ng Pilipinas (BSP), from foreign currency transactions with
nonresidents, other offshore banking units, local commercial banks, including
branches of foreign banks that may be authorized by the Bangko Sentral ng
Pilipinas (BSP) to transact business with offshore banking units shall be exempt
from all taxes except net income from such transactions as may be specified by the
Secretary of Finance, upon recommendation of the Monetary Board which shall be
subject to the regular income tax payable by banks: Provided, however, That any
interest income derived from foreign currency loans granted to residents other than
offshore banking units or local commercial banks, including local branches of
foreign banks that may be authorized by the BSP to transact business with offshore
banking units, shall be subject only to a final tax at the rate of ten percent (10%).

“Any income of nonresidents, whether individuals or corporations, from
transactions with said offshore banking units shall be exempt from income tax.]

“{(5)] (4) Tax on Branch Profits Remittances. — Any profit remitted by a
branch to its head office shall be subject to a tax of fifteen percent (15%) which

shall be based on the total profits applied or earmarked for remittance without any


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deduction for the tax component thereof [(except those activities which are
registered with the Philippine Economic Zone Authority)]. x x x

“[()| () Regional or Area Headquarters and Regional Operating
Headquarters of Multinational Companies. ~

“(a) Regional or area headquarters as defined in Section 22(DD) shall not be
subject to income tax.

“(b) Regional operating headquarters as defined in Section 22(EE) shall pay
a tax of ten percent (10%) of their taxable income.

“PROVIDED, THAT REGIONAL OPERATING HEADQUARTERS
SHALL BE SUBJECT TO THE REGULAR CORPORATE INCOME TAX
TWO (2) YEARS FROM THE EFFECTIVITY OF THIS ACT.

“[(7)] (© Tax on Certain Incomes Received by a Resident Foreign
Corporation. ~

“(a) Interest from Deposits and Yield or any other Monetary Benefit from
Deposit Substitutes, Trust Funds and Similar Arrangements and Royalties. —
Interest from any currency bank deposit and yield or any other monetary benefit
from deposit substitutes and from trust funds and similar arrangements and
royalties derived from sources within the Philippines shall be subject to a final
income tax at the rate of twenty percent (20%) of such interest: Provided, however,
That interest income derived by a resident foreign corporation from a depository
bank under the expanded foreign currency deposit system shall be subject to a final
income tax at the rate of [seven and one-half percent (7'/3%)] FIFTEEN
PERCENT (15%) of such interest income.

“(b) Income Derived under the Expanded Foreign Currency Deposit System.
~ Xxx

“(c) Capital Gains from Sale of Shares of Stock Not Traded in the Stock
Exchange. ~ A final tax at the rate|s prescribed below] OF FIFTEEN PERCENT
(15%) is hereby imposed upon the net capital gains realized during the taxable year
from the sale, barter, exchange or other disposition of shares of stock in a domestic
corporation except shares sold or disposed of through the stock exchange:

“[Not over P100,000 ee srreeeeee 5%
“On any amount in excess of P100,000 ..... 10%I

“(@) Intercorporate Dividends. — xx x

“(B) Tax on Nonresident Foreign Corporation. ~

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“(1) In General. — Except as otherwise provided in this Code, a foreign
corporation not engaged in trade or business in the Philippines shall pay a tax equal
to [thirty-five percent (35%)] THIRTY PERCENT (30%) of the gross income
received during each taxable year from all sources within the Philippines, such as
interests, dividends, rents, royalties, salaries, premiums (except reinsurance
premiums), annuities, emoluments or other fixed or determinable annual, periodic
or casual gains, profits and income, and capital gains, except capital gains subject
to tax under subparagraph S(c): (Provided, That effective January 1, 2009, the
rate of income tax shall be thirty percent (30%).] PROVIDED, THAT THE RATE
OF CORPORATE INCOME TAX SHALL BE TWENTY-EIGHT
PERCENT (28%) BEGINNING JANUARY 1, 2021; TWENTY-SIX
PERCENT (26%) BEGINNING JANUARY 1, 2023; TWENTY-FOUR
PERCENT (24%) BEGINNING JANUARY 1, 2025; TWENTY-TWO
PERCENT (22%) BEGINNING JANUARY 1, 2027; AND TWENTY
PERCENT (20%) BEGINNING JANUARY 1, 2029: PROVIDED, FURTHER,
THAT THE PRESIDENT MAY ADVANCE THE SCHEDULED
REDUCTION IN THE CORPORATE INCOME TAX RATE WHEN
ADEQUATE SAVINGS ARE REALIZED. FROM _— THE
RATIONALIZATION OF FISCAL INCENTIVES UNDER TITLE XIII OF
THIS CODE, AS CERTIFIED BY THE SECRETARY OF FINANCE.

“(2) Nonresident Cinematographic Film Owner, Lessor or Distributor. ~ A

cinematographic film owner, lessor, or distributor shall pay a tax of twenty-five
percent (25%) of its gross income from all sources within the Philippines.

“Q)XXX

“(A)KXX

“(8)Tax on Certain Incomes Received by a Nonresident Foreign
Corporation. ~

“(a) Interest on Foreign Loans. — x x x

“(b) Intercorporate Dividends. — A final withholding tax at the rate of fifteen
percent (15%) is hereby imposed on the amount of cash and/or property dividends
received from a domestic corporation, which shall be collected and paid as provided
in Section 57(A) of this Code, subject to the condition that the country in which the
nonresident foreign corporation is domiciled, shall allow a credit against the tax

due from the nonresident foreign corporation taxes deemed to have been paid in the

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Philippines equivalent to [twenty percent (20%)] FIFTEEN PERCENT (15%),
which represents the difference between the regular income tax [of thirty-five
percent (35%)] and the fifteen percent (15%) tax on dividends as provided in this
subparagraph: Provided, That [effective January 1, 2009] EFFECTIVE
JANUARY 1, 2020, the credit against the tax due shall be equivalent to [fifteen
percent (15%), which represents] the difference between the regular income tax
RATE [of thirty percent (30%)] and the fifteen percent (15%) tax on dividends;

“(c) Capital Gains from Sale of Shares of Stock not Traded in the Stock
Exchange. ~ A final tax at the rate[s prescribed below] OF FIFTEEN PERCENT
(15%) is hereby imposed upon the net capital gains realized during the taxable year
from the sale, barter, exchange or other disposition of shares of stock in a domestic
corporation, except shares sold, or disposed of through the stock exchange.

“Not over P100,000 ... 5%

“On any amount in excess of 100,000 .... 10%)”

SEC. 9. Section 34 of the National Internal Revenue Code of 1997, as amended, is

hereby further amended to read as follows:

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

“(A) Expenses. —

“(1) Ordinary and Necessary Trade, Business or Professional Expenses. —

“XXX

“(B) Interest. ~

“(1) In General. ~ The amount of interest paid or incurred within a taxable
year on indebtedness in connection with the taxpayer's profession, trade or business
shall be allowed as deduction from gross income: Provided, however, That the
taxpayer's otherwise allowable deduction for interest expense shall be reduced by
[forty-two percent (42%)] THIRTY-THREE PERCENT (33%) of the interest
income subjected to final tax[: Provided, That effective January 1, 2009, the
percentage shall be thirty-three percent (33%).|: PROVIDED, FURTHER, THAT
THE FOLLOWING PERCENTAGES SHALL APPLY IF THE


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CORPORATE INCOME TAX RATE AS PROVIDED IN SECTIONS 27(A)
AND 28(A)(1) IS ADJUSTED AS FOLLOWS:

“IF RATE IS TWENTY-EIGHT PERCENT (28%), INTEREST

EXPENSE REDUCTION RATE IS TWENTY-NINE PERCENT (29%);
“IF RATE IS TWENTY-SIX PERCENT (26%), INTEREST EXPENSE
REDUCTION RATE IS TWENTY-THREE PERCENT (23%);

“IF RATE IS TWENTY-FOUR PERCENT (24%), INTEREST
EXPENSE REDUCTION RATE IS SIXTEEN PERCENT (16%);

“IF RATE IS TWENTY-TWO PERCENT (22%), INTEREST
EXPENSE REDUCTION RATE IS NINE PERCENT (9%);

“IF RATE IS TWENTY PERCENT (20%), INTEREST EXPENSE
REDUCTION RATE IS ZERO PERCENT (0%).

“PROVIDED, FINALLY, THAT IF THE INTEREST INCOME TAX IS
ADJUSTED IN THE FUTURE, THE INTEREST EXPENSE REDUCTION
RATE SHALL BE ADJUSTED ACCORDINGLY BASED ON THE
PRESCRIBED STANDARD FORMULA AS DEFINED IN THE RULES
AND REGULATIONS TO BE PROMULGATED BY THE SECRETARY OF
FINANCE, UPON THE RECOMMENDATION OF THE
COMMISSIONER.

“Q) xxx

“(C) Taxes. — xxx

“(D) Losses, — xxx

“(E) Bad Debts. — xxx

“(F) Depreciation. — xx x

“(G) Depletion of Oil and Gas Wells and Mines. ~ xx x

“(H) Charitable and Other Contributions, ~ xxx

“(D) Research and Development. — xxx

“(D) Pension Trusts. ~ xxx

“(K) Additional Requirements for Deductibility of Certain Payments. -x x x

“(L) Optional Standard Deduction (OSD). - In lieu of the deductions
allowed under the preceding Subsections, an individual subject to tax under Section
24, other than a nonresident alien, [may elect a standard deduction in an amount
not exceeding forty percent (40%) of his gross sales or gross receipts, as the case
maybe. In the case of a] AND A corporation CLASSIFIED AS A MICRO,


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SMALL AND MEDIUM-SIZED ENTERPRISE AS DETERMINED BY THE
DEPARTMENT OF TRADE AND INDUSTRY AND subject to tax under
Sections 27(A) and 28(A)(1), [it] may elect a standard deduction in an amount not
exceeding forty percent (40%) of its gross income as defined in Section 32 of this
Code. Unless the taxpayer signifies in his return his intention to elect the optional
standard deduction, he shall be considered as having availed himself of the
deductions allowed in the preceding Subsections. Such election when made in the
return shall be irrevocable for the taxable year for which the retum is made:
Provided, That an individual who is entitled to and claimed for the optional
standard deduction shall not be required to submit with his tax return such financial
statements otherwise required under this Code: |Provided, further, That a general
professional partnership and the partners comprising such partnership may avail of
the optional standard deduction only once, either by the general professional
partnership or the partners comprising the partnership: Provided, [finally,]
FURTHER, That except when the Commissioner otherwise permits, the said
individual shall keep such records pertaining to his gross sales or gross receipts, or
the said corporation shall keep such records pertaining to his gross income as
defined in Section 32 of this Code during the taxable year, as may be required by
the rules and regulations promulgated by the Secretary of Finance, upon

recommendation of the Commissioner.

lotwithstanding the provisions of the preceding Subsections, the Secretary

of Finance, upon recommendation of the Commissioner, after a public hearing shall
have been held for this purpose, may prescribe by rules and regulations, limitations
or ceilings for any of the itemized deductions under Subsections (A) to (J) of this
Section: Provided, That for purposes of determining such ceilings or limitations,
the Secretary of Finance shall consider the following factors: (1) adequacy of the
prescribed limits on the actual expenditure requirements of each
particular industry; and (2) effects of inflation on expenditure levels: Provided,
further, That no ceilings shall further be imposed on items of expense already

subject to ceilings under present law.”

SEC. 10.Section 40(C)(2) of the National Internal Revenue Code of 1997, as amended,

is hereby further amended to read as follows:

“SEC. 40. Determination of Amount and Recognition of Gain or Loss. ~

(A)XXX

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“(B)xxx

“(C) Exchange of Property.

(I) xxx

“(2) Exception. — No gain or loss shall be recognized TO A
CORPORATION OR ON ITS STOCK OR SECURITIES IF SUCH
CORPORATION IS A PARTY TO A REORGANIZATION AND
EXCHANGES PROPERTY, [if] in pursuance of a plan of {merger or
consolidation] REORGANIZATION SOLELY FOR STOCK OR
SECURITIES IN ANOTHER CORPORATION THAT IS A PARTY TO
THE REORGANIZATION. A REORGANIZATION IS DEFINED AS:

“(a) A corporation, which is a party to a merger or consolidation, exchanges
property solely for stock in a corporation, which is a party to the merger or
consolidation; or

“(b) [A shareholder exchanges stock in a corporation, which is a party to the
merger or consolidation, solely for the stock of another corporation also a party to
the merger or consolidation; or] THE ACQUISITION BY ONE
CORPORATION, IN EXCHANGE SOLELY FOR ALL OR A PART OF ITS
VOTING STOCK,OR IN EXCHANGE SOLELY FOR ALL OR A PART
OF THE VOTING STOCK OF A CORPORATION WHICH IS IN
CONTROL OF THE ACQUIRING CORPORATION, OF STOCK OF
ANOTHER CORPORATION IF, IMMEDIATELY AFTER THE
ACQUISITION, THE ACQUIRING CORPORATION HAS CONTROL OF
SUCH OTHER CORPORATION WHETHER OR NOT SUCH
ACQUIRING CORPORATION HAD CONTROL IMMEDIATELY
BEFORE THE ACQUISITIO!

“(c) [A security holder of a corporation, which is a party to the merger or

consolidation, exchanges his securities in such corporation, solely for stock or
securities in another corporation, a party to the merger or consolidation.] THE
ACQUISITION BY ONE CORPORATION, IN EXCHANGE SOLELY FOR
ALL OR A PART OF ITS VOTING STOCK OR IN EXCHANGE SOLELY
FOR ALL OR A PART OF THE VOTING STOCK OF A CORPORATION
WHICH IS IN CONTROL OF THE ACQUIRING CORPORATION, OR
SUBSTANTIALLY ALL OF THE PROPERTIES OF ANOTHER
CORPORATION, BUT IN DETERMINING WHETHER THE EXCHANGE



IS SOLELY FOR STOCK THE ASSUMPTION BY THE ACQUIRING
CORPORATION OF A LIABILITY OF THE OTHER SHALL BE
DISREGARDED;

“(D) A RECAPITALIZATION; OR

“(E) A REINCORPORATION.

“No gain or loss shall also be recognized if property is transferred to a
corporation by a person in exchange for stock or unit of participation in such a
corporation of which as a result of such exchange said person, alone or together
with others, not exceeding four (4) persons, [gains control of said corporation]
AND, IMMEDIATELY AFTER, SUCH PERSON OR PERSONS ARE IN
CONTROL: Provided, That stocks issued for services shall not be considered as
issued in return for property.

“IN ALL OF THE ABOVE INSTANCES, THE TRANSACTION OR
ARRANGEMENT MUST BE UNDERTAKEN FOR A LEGITIMATE OR
BONA FIDE BUSINESS PURPOSE AND NOT SOLELY FOR THE
PURPOSE OF AVOIDING OR ESCAPING THE BURDEN OF TAXATION.

“THE PROVISION OF SECTION $0 OF THIS CODE SHALL BE
APPLIED AND ENFORCED IN CASES WHERE THE TRANSACTION OR
ARRANGEMENT ENTERED INTO IS FOUND TO BE NOT FOR
LEGITIMATE OR BONA FIDE BUSINESS PURPOSE.

“SALE OR EXCHANGES OF PROPERTY USED FOR BUSINESS
FOR SHARES OF STOCK COVERED UNDER THIS SUBSECTION
SHALL NOT BE SUBJECT TO VALUE-ADDED TAX (VAT).

sexx

SEC. 11. Section 50 of the National Internal Revenue Code of 1997, as amended, is

hereby further amended to read as follows:

“SEC. 50. [Allocation of Income and Deductions. —In the case of two or
more organizations, trades or businesses (whether or not incorporated and whether
or not organized in the Philippines) owned or controlled directly or indirectly by
the same interests, the Commissioner is authorized to distribute, apportion or
allocate gross income or deductions between or among such organization, trade or
business, if he determines that such distribution, apportionment or allocation is
necessary in order to prevent evasion of taxes or clearly to reflect the income of
any such organization, trade or business.| AUTHORITY OF THE


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COMMISSIONER TO DISTRIBUTE, APPORTION, ALLOCATE, AND
IMPUTE INCOME AND DEDUCTIONS TO DISREGARD AND
COUNTERACT TAX AVOIDANCE ARRANGEMENTS. - IN CASE OF TWO
(2) OR MORE ORGANIZATIONS, TRADES OR BUSINESSES,
WHETHER OR NOT ORGANIZED IN THE PHILIPPINES, OWNED OR
CONTROLLED DIRECTLY OR INDIRECTLY BY THE SAME
INTERESTS, THE COMMISSIONER IS AUTHORIZED TO DISTRIBUTE,
APPORTION, ALLOCATE, OR IMPUTE INCOME OR DEDUCTIONS
BETWEEN OR AMONG SUCH ORGANIZATIONS, TRADES OR
BUSINESSES, IF THE COMMISSIONER DETERMINES THAT SUCH
DISTRIBUTION, APPORTIONMENT, ALLOCATION, OR IMPUTATION
IS NECESSARY IN ORDER TO PREVENT AVOIDANCE OF TAXES OR
TO CLEARLY REFLECT THE INCOME OF ANY SUCH
ORGANIZATION, TRADE, OR BUSINESS.

“IN CASES WHEN A TRANSACTION OR ARRANGEMENT,
WHETHER ENTERED INTO BY THE PERSON AFFECTED BY THE
TRANSACTION OR ARRANGEMENT OR BY ANOTHER PERSON,
THAT DIRECTLY OR INDIRECTLY HAS TAX AVOIDANCE AS ITS
PURPOSE OR EFFECT, WHETHER OR NOT ANY OTHER PURPOSE OR
EFFECT IS ATTRIBUTABLE TO ORDINARY BUSINESS OR FAMILY
DEALINGS, IF THE TAX AVOIDANCE PURPOSE OR EFFECT IS NOT
MERELY INCIDENTAL, THE COMMISSIONER IS AUTHORIZED TO
DISREGARD AND CONSIDER SUCH TRANSACTION OR
ARRANGEMENT AS VOID FOR INCOME TAX PURPOSES, AND MAY
ADJUST THE TAXABLE INCOME OF A PERSON AFFECTED BY THE
ARRANGEMENT IN A WAY THE COMMISSIONER THINKS
APPROPRIATE, IN ORDER TO COUNTERACT A TAX ADVANTAGE
OBTAINED BY THE PERSON FROM OR UNDER THE ARRANGEMENT.

“FOR PURPOSES OF THIS SECTION, THE TERM ‘TAX
AVOIDANCE’ INCLUDES: (A) DIRECTLY OR INDIRECTLY
ALTERING THE INCIDENCE OF ANY INCOME TAX; (B) DIRECTLY
OR INDIRECTLY RELIEVING A PERSON FROM LIABILITY TO PAY
INCOME TAX OR FROM A POTENTIAL OR PROSPECTIVE LIABILITY
TO FUTURE INCOME TAX; OR (C) DIRECTLY OR INDIRECTLY


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AVOIDING, POSTPONING, OR REDUCING ANY LIABILITY TO
INCOME TAX, OR ANY POTENTIAL OR PROSPECTIVE LIABILITY
TO FUTURE INCOME TAX. THERE IS TAX AVOIDANCE IN THE
AFOREMENTIONED INSTANCES, WHERE THE TRANSACTION OR
ARRANGEMENT IS MOTIVATED BY OBTAINING TAX BENEFIT OR
ADVANTAGE WITH NO COMMERCIAL REALITY OR ECONOMIC
EFFECT AND THE USE OF THE PROVISIONS OF TAX LAWS ON SUCH
TRANSACTION OR ARRANGEMENT WOULD NOT HAVE BEEN THE
INTENTION OF THE LAW.”

SEC. 12. Section 73 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

“SEC. 73. Distribution of Dividends or Assets by Corporations. —

“(A) Definition of Dividends. ~The term ‘dividends’ when used in this Title
means any distribution made by a corporation to its shareholders out of its earnings
or profits and payable to its shareholders, whether in money or in other property.

“[Where a corporation distributes all of its assets in complete liquidation or
dissolution, the gain realized or loss sustained by the stockholder, whether
individual or corporate, is a taxable income or a deductible loss, as the case may
be]

“(B) Stock Dividend. — A stock dividend representing the transfer of surplus
to capital account shall not be subject to tax. However, if a corporation cancels or
redeems stock issued as a dividend at such time and in such manner as to make the
distribution and cancellation or redemption, in whole or in part, essentially
equivalent to the distribution of a taxable dividend, the amount so distributed in
redemption or cancellation of the stock shall be considered as taxable income to the
extent that it represents a distribution of earnings or profits.

“(©) LIQUIDATING DIVIDENDS. - LIQUIDATING DIVIDENDS
ARE DIVIDENDS REPRESENTING THE REMAINING GAINS
REALIZED OR LOSS SUSTAINED BY THE STOCKHOLDER IN A
COMPLETE LIQUIDATION OR DISSOLUTION BY A CORPORATION
AND SHALL BE CONSIDERED AS TAXABLE INCOME OR A
DEDUCTIBLE LOSS, AS THE CASE MAY BE.

“(OJ (D) Dividends Distributed are Deemed Made from Most Recently

Accumulated Profits. — Any distribution made to the shareholders or members of a

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corporation shall be deemed to have been made from the most recently accumulated
profits or surplus, and shall constitute a part of the annual income of the distributee
for the year in which received

“[(D)] () Net Income of a Partnership Deemed Constructively Received by
Partners. ~ The taxable income declared by a partnership for a taxable year which
is subject to tax under Section 27(A) of this Code, after deducting the corporate
income tax imposed therein, shall be deemed to have been actually or

constructively received by the partners in the same taxable year and shall be taxed

to them in their individual capacity, whether actually distributed or not

SEC. 13.Section 112(A) and 112(B) of the National Internal Revenue Code of 1997, as

amended, is hereby further amended to read as follows:

“SEC. 112. Refunds for Tax Credits} of Input Tax. —

“(A) Zero-Rated or Effectively Zero-Rated Sales. — Any VAT-registered
person, whose sales are zero-rated or effectively zero-rated may, within two (2)
years after the close of the taxable quarter when the sales were made, apply for [the
issuance of a tax credit certificate or] refund of creditable input tax due or paid
attributable to such sales, except transitional input tax, to the extent that such input
tax has not been applied against output tax: Provided, however, That in the case of
zero-rated sales under Section 106(A)(2)(a)(1), (2) and [(b) and] Section 108 (B)(1)
and (2), the acceptable foreign currency exchange proceeds thereof had been duly
accounted for in accordance with the rules and regulations of the Bangko Sentral
ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-
rated or effectively zero-rated sale and also in taxable or exempt sale of goods ot
properties or services, and the amount of creditable input tax due or paid cannot be
directly and entirely attributed to any one of the transactions, it shall be allocated
proportionately on the basis of the volume of sales: Provided, finally, That for a
person making sales that are zero-rated under Section 108(B)(6), the input taxes
shall be allocated ratably between his zero-rated and non-zero-rated sales.

“(B) Cancellation of VAT Registration. — A person whose registration has
been cancelled due to retirement from or cessation of business, or due to changes
in or cessation of status under Section 106(C) of this Code may, within two (2)
years from the date of cancellation, apply for [the issuance of a tax credit certificate
for any unused input tax which may be used in payment of his other internal
revenue taxes] REFUND.

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SEC. 14.Section 117 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

“SEC. 117. Percentage Tax on Domestic Carriers and Keepers of Garages.
— Cars for rent or hire driven by the lessee; transportation contractors, including
persons who transport passengers for hire, and other domestic carriers by land for
the transport of passengers (except OWNERS/OPERATORS OF TRICYCLES
OPERATING NOT MORE THAN TWO (2) UNITS, owners of bancas, and
‘owners of animal-drawn two-wheeled vehicle), and keepers of garages shall pay a
tax equivalent to three percent (3%) of their quarterly gross receipts.

“xxx”

SEC. 15. Section 204 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

“SEC. 204, Authority of the Commissioner to Compromise, Abate and Refund
or Credit Taxes. ~ The Commissioner may —

“(A) Compromise the payment of any internal revenue tax, when:

“(1)A reasonable doubt as to the validity of the claim against the taxpayer
exists; or

“(2) The financial position of the taxpayer demonstrates a clear inability to
pay the assessed tax

“The compromise settlement of any tax liability shall be subject to the
following minimum amounts:

“For cases of financial incapacity, a minimum compromise rate equivalent to
ten percent (10%) of the basic assessed tax; and

“For other cases, a minimum compromise rate equivalent to forty percent
(40%) of the basic assessed tax

“Where the basic tax involved exceeds [One] TEN million pesos
[(P1,000.000)] (P 10,000,000) or where the settlement offered is less than the
prescribed minimum rates, the compromise shall be subject to the approval of the
Evaluation Board which shall be composed of the Commissioner and the four (4)
Deputy Commissioners.

KKK”

SEC. 16.Section 222 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

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“SEC, 222. Exceptions as to Period of Limitation of Assessment and
Collection of Taxes. —

“(a)xxx

“(b)If before the expiration of the time prescribed in Section 203 for the
assessment of the tax, [both the Commissioner and] the taxpayer [have agreed]
APPLIES WITH THE COMMISSIONER in writing to its assessment after such
time, the tax may be assessed within the period [agreed upon] SPECIFIED IN
THE APPLICATION WHICH SHALL NOT EXCEED SIX (6) MONTHS AT
ANY ONE TIME. The FOREGOING period [so agreed upon] may be extended
by subsequent written [agreement] APPLICATION made before the expiration of
the period previously [agreed upon] APPLIED FOR.

KKK”

SEC. 17.Section 237 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

“SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. —

“(A) Issuance. ~ xxx

“Within five (5) years from the effectivity of this Act and upon the
establishment of a system capable of storing and processing the required data, the
Bureau shall require taxpayers engaged in the export of goods and services,
taxpayers engaged in e-commerce, and taxpayers under the jurisdiction of the Large
Taxpayers Service to issue AND TRANSMIT electronic receipts or sales or
commercial invoices [in lieu of manual receipts or sales or commercial invoices}
THRU DESIGNATED ELECTRONIC CHANNELS WITH A PUBLIC
CERTIFICATION SYSTEM ACCREDITED BY THE BUREAU, subject to

the rules and regulations to be issued by the Secretary of Finance upon

recommendation of the Commissioner [and after a] following a public hearing

[shall have been] held for this purpose: Provided, That taxpayers not covered by
the mandate of this provision may issue electronic receipts of sales or commercial
invoices in licu of manual receipts or sales or commercial invoices: PROVIDED,
FURTHER, SUBJECT TO THE RULES AND REGULATIONS TO BE
ISSUED BY THE SECRETARY OF FINANCE, THE COMMISSIONER
MAY REQUIRE ANY TAXPAYER TO COMPLY WITH THE
PROVISIONS OF THIS SECTION,

2B


“A PUBLIC CERTIFICATION SYSTEM SHALL REFER TO A
DIGITAL PERSONAL AUTHENTICATION PROGRAM WITH ABILITY
TO VERIFY THE IDENTITY OF ISSUING TAXPAYER AND ATTEST TO
THE AUTHENTICITY OF THE INFORMATION IN THE ELECTRONIC
RECEIPTS OR SALES OR COMMERCIAL INVOICES. THIS MAY
INCLUDE THE USE OF DIGITAL SIGNATURE ISSUED BY
CERTIFICATION AUTHORITY AS ACCREDITED BY THE BUREAU OF
INTERNAL REVENUE.

“A DESIGNATED ELECTRONIC CHANNEL SHALL REFER TO
ANY MEDIUM OR PORTAL IDENTIFIED BY THE BUREAU WITH AN
ABILITY TO RECEIVE THE TRANSACTION DATA OF THE
ELECTRONIC RECEIPTS OF SALES OR COMMERCIAL INVOICES
FOR ASSIGNMENT OF AN APPROVED ELECTRONIC TAX
TRANSACTION NUMBER.

“AN APPROVED TAX TRANSACTION NUMBER SHALL REFER
TO THE UNIQUE ASSIGNED SERVICE NUMBERS AND/OR LETTERS
LINKED TO A VALIDATED SALES TRANSACTION REPORTED
THROUGH THE DESIGNATED ELECTRONIC CHANNEL.

“The original of each receipt or invoice shall be issued to the purchaser,
customer, or client at the time the transaction is effected, who, if engaged in the
business or in the exercise of profession, shall keep and preserve the same in his
place of business for a period of three (3) years from the close of the taxable year
in which such invoice or receipt was issued, while the duplicate shall be kept and
preserved by the issuer, also in his place of business, for a like period: Provided,
That in case of electronic receipts or sales or commercial invoices, digital record of
the same [shall be kept by the purchaser, customer or client and the issuer for the
same period above stated] BEARING THE APPROVED ELECTRONIC TAX
TRANSACTION NUMBER SHALL BE SUFFICIENT COMPLIANCE.

“The Commissioner may, in meritorious cases, exempt any person subject to

internal revenue tax from compliance with the provision of this Section.”

SEC. 18, Section 237-A of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

“SEC. 237-A. Electronic Sales Reporting System. — Within five (5) years

from the effectivity of this Act and upon the establishment of a system capable of

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storing and processing the required data, the Bureau shall require taxpayers
engaged in the export of goods and services, and taxpayers engaged in e-commerce
and taxpayers under the jurisdiction of the Large Taxpayers Service to USE A
SYSTEM CAPABLE OF ISSUING ELECTRONIC RECEIPTS OR SALES
OR COMMERCIAL INVOICES, COLLECT TRANSACTION RECORDS,
AND TRANSMIT THE SAME THROUGH THE DESIGNATED
ELECTRONIC CHANNELS OF THE BUREAU IN THE STANDARD
FORMAT REQUIRED [electronically report their sales data to the Bureau
through the use of electronic point of sales systems,] subject to the rules and
regulations to be issued by the Secretary of Finance upon recommendation of the
Commissioner of Internal Revenue: Provided, That the POINT OF SALE (POS)
machines, VALUE-ADDED NETWORK (VAN) TERMINALS, fiscal devices,
and fiscal memory devices WITH CAPACITY TO MAKE SUCH
TRANSMISSION shall be at the expense of the taxpayers: PROVIDED,
FURTHER, SUBJECT TO THE RULES AND REGULATIONS TO BE
ISSUED BY THE SECRETARY OF FINANCE, THE COMMISSIONER
MAY REQUIRE ANY TAXPAYER TO COMPLY WITH THE
PROVISIONS OF THIS SECTION.

“IN YEAR ONE (1) TO YEAR FOUR (4) OF THE
IMPLEMENTATION PERIOD, A TAXPAYER WHO ADOPTS THE
REQUIRED SYSTEM SHALL BE GRANTED A TAX CREDIT OF 0.1% OF
THE PURCHASE VALUE, NET OF VALUE-ADDED TAX, FOR EVERY
ELECTRONIC RECEIPT OR SALE OR COMMERCIAL INVOICE
TRANSMITTED THROUGH THE DESIGNATED ELECTRONIC
CHANNELS OF THE BUREAU AND ISSUED AN ELECTRONIC TAX
TRANSACTION NUMBER.

“IN SUPPORT OF THE ELECTRONIC SALES REPORTING
SYSTEM, THE BUREAU OF INTERNAL REVENUE MAY GRANT TAX
INCENTIVES FOR ELECTRONICALLY TRACEABLE PAYMENTS
(ETP) IN THE FORM OF ALLOWABLE DEDUCTIBLE EXPENSE OF UP
TO TEN PERCENT (10%) OF THE ETP MADE BY THE TAXPAYER. AN
ANNUAL LIMIT ON THE ALLOWED ETP DEDUCTIBLE EXPENSE PER
TAXPAYER MAY BE SET BY THE COMMISSIONER WITH THE
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“ELECTRONICALLY TRACEABLE PAYMENTS REFER TO
CREDIT CARD, DEBIT CARD, OR OTHER METHODS OF PAYMENT
WITH A SYSTEM TO VERIFY OR LINK THE PAYMENT TO THE
IDENTITY OF PAYOR.

“THE BUREAU MAY LIKEWISE ESTABLISH A RECEIPT AND
INVOICE LOTTERY PROGRAM FOR ELECTRONIC RECEIPTS OR
SALES OR COMMERCIAL INVOICES TRANSMITTED THROUGH THE
DESIGNATED ELECTRONIC CHANNELS OF THE BUREAU AND
ISSUED AN ELECTRONIC TAX TRANSACTION NUMBER.

“The data processing of sales and purchase data shall comply with the

provisions of Republic Act No. 10173, otherwise known as the “Data Privacy Act”
and Section 270 of the NIRC, as amended, on unlawful divulgence of taxpayer
information and such other laws relating to the confidentiality of information.

“The Bureau shall also establish policies, risk management approaches,
actions, trainings, and technologies to protect the cyber environment, organization,
and data in compliance with Republic Act No. 10175 or the ‘Cybercrime
Prevention Act of 2012.’ ”

SEC. 19. Section 255 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

“SEC. 255. Failure to File Return, Supply Correct and Accurate Information,
Pay Tax Withhold and Remit Tax and Refund Excess Taxes Withheld on
Compensation. ~ Any person required under this Code or by rules and regulations
promulgated thereunder to pay any tax, make a return, keep any record, or supply
correct and accurate information, who willfully fails to pay such tax, make such
return, keep such record, or supply correct and accurate information, or withhold
or remit taxes withheld, or refund excess taxes withheld on compensation, at the
time or times required by law or rules and regulations shall, in addition to other
penalties provided by law, upon conviction thereof, be punished by a fine of not
less than [Ten thousand pesos (P10,000)| ONE HUNDRED THOUSAND
PESOS (P100,000) BUT NOT MORE THAN ONE MILLION TWO
HUNDRED THOUSAND PESOS (P1,200,000) and suffer imprisonment of not
less than one (1) year but not more than ten (10) years.

“Any person who attempts to make it appear for any reason that he or another

has in fact filed a return or statement, or actually files a return or statement and

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subsequently withdraws the same return or statement after securing the official
receiving seal or stamp of receipt of internal revenue office wherein the same was
actually filed shall, upon conviction therefore, be punished by a fine of not less than
[Ten thousand pesos (P10,000) but not more than Twenty thousand pesos
(P20,000)] ONE HUNDRED THOUSAND PESOS (P100,000) BUT NOT
MORE THAN ONE MILLION TWO HUNDRED THOUSAND PESOS
(P1,200,000) and suffer imprisonment of not less than one (1) year but not more
than three (3) years.”

SEC. 20. Section 256 of the National Intemal Revenue Code of 1997, as
amended, is hereby amended to read as follows:

“SEC, 256. Penal Liability of Corporations. — Any corporation, association
or general co-partnership liable for any of the acts or omissions penalized under
this Code, in addition to the penalties imposed herein upon the responsible
corporate officers, partners, or employees shall, upon conviction for each act or
omission, be punished by a fine of not less than [Fifty thousand pesos (P50,000)
but not more than One hundred thousand pesos (P100,000)] TWO HUNDRED
THOUSAND PESOS (P200,000) BUT NOT MORE THAN TWO MILLION
FOUR HUNDRED THOUSAND PESOS (P2,400,000).”

SEC. 21.Section 257 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

“SEC. 257. Penal Liability for Making False Entries, Records or Reports, or
Using Falsified or Fake Accountable Forms. ~

“(A) Any financial officer or independent Certified Public Accountant
engaged to examine and audit books of accounts of taxpayers under Section 232(A)
and any person under his direction who:

“(1) Willfully falsifies any report or statement bearing on any examination
or audit, or renders a report, including exhibits, statements, schedules or other
forms of accountancy work which has not been verified by him personally or under
his supervision or by a member of his firm or by a member of his staff'in accordance
with sound auditing practices; or

“(2)Certifies financial statements of a business enterprise containing an
essential misstatement of facts or omission in respect of the transactions, taxable
income, deduction and exemption of his client; or

“(B) Any person who:

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“(1)Not being an independent Certified Public Accountant according to
Section 232(B) or a financial officer, examines and audits books of accounts of
taxpayers; or

“(2) Offers to sign and certify financial statements without audit; or

“(3) Offers any taxpayer the use of accounting bookkeeping records for
internal revenue purposes not in conformity with the requirements prescribed in
this Code or rules and regulations promulgated thereunder; or

“(4) Knowingly makes any false entry or enters any false or fictitious name
in the books of accounts or record mentioned in the preceding paragraphs; or

“(5) Keeps two (2) or more sets of such records or books of accounts; or

“(6)In any way commits an act or omission, in violation of the provisions of
this Section; or

“(7) Fails to keep the books of accounts or records mentioned in Section 232
in a native language, English or Spanish, or to make a true and complete translation
as required in Section 234 of this Code, or whose books of accounts or records kept
ina native language, English or Spanish, and found to be at material variance with
books or records kept by him in another language; or

“(8) Willfully attempts in any manner to evade or defeat any tax imposed
under this Code, or knowingly uses fake or falsified revenue official receipts,
Letters of Authority, certificates authorizing registration, Tax Credit Certificates,
Tax Debit Memoranda and other accountable forms shall, upon conviction for each
act or omission, be punished by a fine not less than [Fifty thousand pesos (P50,000)
but not more than One hundred thousand pesos (P100,000)] THREE HUNDRED
THOUSAND PESOS (P300,000) BUT NOT MORE THAN ONE MILLION
TWO HUNDRED THOUSAND PESOS (P1,200,000) and suffer imprisonment
of not less than two (2) years but not more than six (6) years.

“Ifthe offender is a Certified Public Accountant, his certificate as a Certified
Public Accountant shall be automatically revoked or cancelled upon conviction.

“In the case of foreigners, conviction under this Code shall result in [his]
‘THEIR immediate deportation after serving sentence, without further proceedings

for deportation.”

SEC. 22.Section 258 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

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34

“SEC. 258. Unlawful Pursuit of Business. — Any person who carries on any
business for which an annual registration fee is imposed without paying the tax as.
required by law shall, upon conviction for cach act or omission, be punished by a
fine of not less than [Five thousand pesos (P5,000) but not more than Twenty
thousand pesos (P20,000)] FIFTY THOUSAND PESOS (P50,000) BUT NOT
MORE THAN THREE HUNDRED THOUSAND PESOS (P300,000) and
suffer imprisonment of not less than six (6) months but not more than two (2) years:
Provided, That in the case of a person engaged in the business of distilling,
rectifying, repacking, compounding or manufacturing any article subject to excise
tax, he shall, upon conviction for each act or omission, be punished by a fine of not
less than [Thirty thousand pesos (P30,000) but not more than Fifty thousand pesos
(P50,000)] THREE HUNDRED THOUSAND PESOS (P300,000) BUT NOT
MORE THAN SEVEN HUNDRED THOUSAND PESOS (P700,000) and

suffer imprisonment of not less than two (2) years but not more than four (4) years.”

SEC. 23.Section 260 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

“SEC. 260. Unlawful Possession of Cigarette Paper in Bobbins or Rolls, Etc.
— It shall be unlawful for any person to have in his possession cigarette paper in
bobbins or rolls, cigarette tipping paper or cigarette filter tips, without the
corresponding authority therefor issued by the Commissioner. Any person,
importer, manufacturer of cigar and cigarettes, who has been found guilty under
this Section, shall, upon conviction for each act or omission, be punished by a fine
of not less than [Twenty thousand pesos (P20,000) but not more than One hundred
thousand pesos (P100,000)] ONE MILLION FIVE HUNDRED THOUSAND
PESOS (P1,500,000) BUT NOT MORE THAN FIFTEEN MILLION PESOS
(P15,000,000) and suffer imprisonment for a term of not less than six (6) years and

one (1) day but not more than twelve (12) years.”

SEC. 24,Section 261 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows

“SEC. 261. Unlawful Use of Denatured Alcohol. ~ Any person who for the
purpose of manufacturing any beverage, uses denatured alcohol or alcohol
specially denatured to be used for motive power or withdrawn under bond for
industrial uses or alcohol knowingly misrepresented to be denatured to be unfit for

oral intake or who knowingly sells or offers for sale any beverage made in whole

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or in part from such alcohol or who uses such alcohol for the manufacture of liquid
medicinal preparations taken internally, or knowingly sells or offers for sale such
preparations containing as an ingredient such alcohol, shall upon conviction for
each act or omission be punished by a fine of not less than [Twenty thousand pesos
(P20,000) but not more than One hundred thousand pesos (P100,000)] ONE
MILLION FIVE HUNDRED THOUSAND PESOS (P1,500,000) BUT NOT
MORE THAN FIFTEEN MILLION PESOS (P15,000,000) and suffer
imprisonment for a term of not less than six (6) years and one (1) day but not more
than twelve (12) years.

“Any person who shall unlawfully recover or attempt to recover by
distillation or other process any denatured alcohol or who knowingly sells or offers
for sale, conceals or otherwise disposes of alcohol so recovered or redistilled shall

be subject to the same penalties imposed under this Section.”

SEC. 25. Section 262 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

“SEC. 262. Shipment or Removal of Liquor or Tobacco Products under False
Name or Brand or as an Imitation of any Existing or Otherwise Known Product
Name or Brand. — Any person who ships, transports or removes spirituous,
compounded or fermented liquors, wines or any manufactured products of tobacco
under any other than the proper name or brand known to the trade as designating
the kind and quality of the contents of the cask, bottle or package containing the
same or as an imitation of any existing or otherwise known product name or brand
‘or causes such act to be done, shall, upon conviction for each act or omission, be
punished by a fine of not less than [Twenty thousand pesos (P20,000) but not more
than One hundred thousand pesos (P100,000)] ONE MILLION FIVE
HUNDRED THOUSAND PESOS (P1,500,000) BUT NOT MORE THAN
FIFTEEN MILLION PESOS (P15,000,000) and suffer imprisonment of not less

than six (6) years and one (1) day but not more than twelve (12) years.”

SEC. 26, Section 263 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows

“SEC. 263. Unlavfl Possession or Removal of Articles Subject to Excise Tax
Without Payment of the Tax. ~ Any person who owns and/or is found in possession
of imported articles subject to excise tax, the tax on which has not been paid in

accordance with law, or any person who owns and/or is found in possession of

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imported tax-exempt articles other than those to whom they are legally issued shall
be punished by:

“(a) A fine of not less than [One thousand pesos (P1,000)] TWENTY-FIVE
THOUSAND PESOS (P25,000) [nor] BUT NOT more than [Two thousand pesos
(P2,000)| SEVENTY-FIVE THOUSAND PESOS (P75,000) and_ suffer
imprisonment of not less than [sixty (60) days but not more than one hundred (100)
days] THIRTY (30) DAYS BUT NOT MORE THAN SIX (6) MONTHS if the
appraised value, to be determined in the manner prescribed in the [Tariff and
Customs Code] CUSTOMS MODERNIZATION AND TARIFF ACT,
including duties and taxes, of the articles does not exceed [One thousand pesos
(P1,000)] TWO HUNDRED FIFTY THOUSAND PESOS (P250,000);

“(b)A fine of not less than [Ten thousand pesos (P10,000)] SEVENTY-
FIVE THOUSAND PESOS (P75,000) but not more than [Twenty thousand pesos
(P20,000)] ONE HUNDRED FIFTY THOUSAND PESOS (P150,000) and
suffer imprisonment of not less than [two (2) years but not more than four (4) years]
SIX (6) MONTHS AND ONE (1) DAY BUT NOT MORE THAN ONE (1)
YEAR if the appraised value, to be determined in the manner prescribed in the
{Tariff and Customs Code ] CUSTOMS MODERNIZATION AND TARIFF
ACT, including duties and taxes, of the articles exceeds [One thousand pesos
(P1,000)| TWO HUNDRED FIFTY THOUSAND PESOS (P250,000) but does
not exceed [Fifty thousand pesos (P50,000)] FIVE HUNDRED THOUSAND
PESOS (P500,000);

“()A fine of not less than [Thirty thousand pesos (P30,000)] ONE
HUNDRED FIFTY THOUSAND PESOS (P150,000) but not more than [Sixty
thousand pesos (P60,000)| THREE HUNDRED THOUSAND PESOS
(P300,000) and suffer imprisonment of not less than [four (4) years but not more
than six (6) years] ONE (1) YEAR AND ONE (1) DAY BUT NOT MORE
THAN THREE (3) YEARS, if the appraised value, to be determined in the
manner prescribed in the (Tariff and Customs Code] CUSTOMS
MODERNIZATION AND TARIFF ACT, including duties and taxes, of the
articles is more than [Fifty thousand pesos (PS0,000) but does not exceed One
hundred fifty thousand pesos (P150,000)] FIVE HUNDRED THOUSAND
PESOS (P500,000) BUT DOES NOT EXCEED ONE MILLION PESOS
(P 1,000,000); for]

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“(@)A fine of not less than [Fifty thousand pesos (PS0,000)| THREE
HUNDRED THOUSAND PESOS (P300,000) but not more than [One hundred
thousand pesos (P100,000)] ONE MILLION FIVE HUNDRED THOUSAND
PESOS (P1,500,000) and suffer imprisonment of [not less than ten (10) years but
not more than twelve (12) years] THREE (3) YEARS AND ONE (1) DAY BUT
NOT MORE THAN SIX (6) YEARS, if the appraised value, to be determined in
the manner prescribed in the [Tariff and Customs Code] CUSTOMS
MODERNIZATION AND TARIFF ACT, including duties and taxes, of the
articles exceeds [One hundred fifty thousand pesos (P150,000)] IS MORE THAN
ONE MILLION PESOS (P1,000,000) BUT NOT MORE THAN FIVE
MILLION PESOS (P5,000,000)].;

“(E) A FINE OF NOT LESS THAN ONE MILLION FIVE HUNDRED
THOUSAND PESOS (P1,500,000) BUT NOT MORE THAN FIFTEEN
MILLION PESOS (P 15,000,000), AND SUFFER IMPRISONMENT OF NOT
LESS THAN SIX (6) YEARS AND ONE (1) DAY BUT NOT MORE THAN
TWELVE (12) YEARS, IF THE APPRAISED VALUE, TO BE
DETERMINED IN THE MANNER PRESCRIBED IN THE CUSTOMS
MODERNIZATION AND TARIFF ACT, INCLUDING DUTIES AND
TAXES, OF THE ARTICLES IS MORE THAN FIVE MILLION PESOS
(P5,000,000) BUT NOT MORE THAN FIFTY MILLION PESOS
(P50,000,000);

“(F) A FINE OF NOT LESS THAN FIFTEEN MILLION PESOS
(P 15,000,000) BUT NOT MORE THAN FIFTY MILLION PESOS
(P50,000,000), AND SUFFER IMPRISONMENT OF NOT LESS THAN
TWELVE (12) YEARS AND ONE (1) DAY BUT NOT MORE THAN
TWENTY (20) YEARS, IF THE APPRAISED VALUE, TO BE
DETERMINED IN THE MANNER PRESCRIBED IN THE CUSTOMS
MODERNIZATION AND TARIFF ACT, INCLUDING DUTIES AND
TAXES, OF THE ARTICLES IS MORE THAN FIFTY MILLION PESOS
(P50,000,000) BUT NOT MORE THAN TWO HUNDRED MILLION PESOS
(P200,000,000); OR

“(G) IF THE APPRAISED VALUE OF THE GOODS UNLAWFULLY
IMPORTED TO BE DETERMINED IN THE MANNER PRESCRIBED IN
THE CUSTOMS MODERNIZATION AND TARIFF ACT, INCLUDING

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DUTIES AND TAXES, EXCEEDS TWO HUNDRED MILLION PESOS
(P200,000,000) OR IF THE AGGREGATE AMOUNT OF THE APPRAISED
VALUE OF THE GOODS WHICH ARE THE SUBJECT OF UNLAWFUL
IMPORTATION COMMITTED IN MORE THAN ONE INSTANCE,
INCLUDING DUTIES AND TAXES, EXCEEDS TWO HUNDRED
MILLION PESOS (P200,000,000), THE SAME SHALL BE PUNISHABLE
WITH A PENALTY OF TWENTY (20) YEARS AND ONE (1) DAY BUT
NOT MORE THAN THIRTY (30) YEARS AND A FINE OF NOT LESS
THAN FIFTY MILLION PESOS (P50,000,000).

“Any person who is found in possession of locally manufactured articles
subject to excise tax, the tax on which has not been paid in accordance with law,
or any person who is found in possession of such articles which are exempt from
excise tax other than those to whom the same is lawfully issued shall be punished
with a fine of not less than ten (10) times the amount of excise tax due on the
articles found but not less than [Five hundred pesos (P500)] TWENTY-FIVE
THOUSAND PESOS (P25,000) and suffer imprisonment of not less than two (2)
years but not more than four (4) years.

“Any manufacturer, owner or person in charge of any article subject to excise
tax who removes or allows or causes the unlawful removal of any such articles
from the place of production or bonded warehouse, upon which the excise tax has
not been paid at the time and in the manner required, and any person who
knowingly aids or abets in the removal of such articles as aforesaid, or conceals the
same after illegal removal shall, for the first offense, be punished with a fine of not
less than ten (10) times the amount of excise tax due on the articles but not less
than [One thousand pesos (P1,000)} TWENTY-FIVE THOUSAND PESOS
(P25,000) and suffer imprisonment of not less than fone (1) year but not more than
two (2) years] TWO (2) YEARS BUT NOT MORE THAN FOUR (4) YEARS.

“The mere unexplained possession of articles subject to excise tax, the tax on
which has not been paid in accordance with law, shall be punishable under this

Section.”

SEC. 27.Section 264 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

3


1 “SEC. 264. Failure or Refusal to Issue Receipts or Sales or Commercial

2 Invoices, Violations Related to the Printing of such Receipts or Invoices and Other
3 Violations. ~
4 “(a) Any person who, being required under Section 237 to issue receipts or
5 sales or commercial invoices, fails or refuses to issue such receipts or invoices,
6 issues receipts or invoices that do not truly reflect and/or contain all the information
7 required to be shown therein, or uses multiple or double receipts or invoices, shall,
8 upon conviction for each act or omission, be punished by a fine of not less than
9 [One thousand pesos (P1,000) but not more than Fifty thousand pesos (P50,000)]
10 ONE HUNDRED THOUSAND PESOS (P 100,000) BUT NOT MORE THAN
n FIVE HUNDRED THOUSAND PESOS (P500,000) and suffer imprisonment of
2 not less than [two (2) years but not more than four (4) years] FOUR (4) YEARS
B BUT NOT MORE THAN EIGHT (8) YEARS.
4 “(b) Any person who commits any of the acts enumerated hereunder shall be
15 penalized in the same manner and to the same extent as provided for in this Section:
16 “(1) Printing of receipts or sales or commercial invoices without authority
7 from the Bureau of Internal Revenue; or
18 “(2) Printing of double or multiple sets of invoices or receipts; or
19 “(3) Printing of unnumbered receipts or sales or commercial invoices, not
20 bearing the name, business style, Taxpayer Identification Number, and business
2 address of the person or entity.”
n SEC. 28. Section 265 of the National Internal Revenue Code of 1997, as amended, is

23._hereby amended to read as follows:

24 “SEC. 265. Offenses Relating to Stamps. — Any person who commits any of
2s the acts enumerated hereunder shall, upon conviction thereof, be punished by a fine
26 of not less than [Twenty thousand pesos (P20,000)| SEVEN HUNDRED
27 THOUSAND PESOS (P700,000) but not more than [Fifty thousand pesos
28 (P50,000)] ONE MILLION TWO HUNDRED THOUSAND PESOS
2» (P1,200,000) and suffer imprisonment of not less than four (4) years but not more
30 than eight (8) years:

31 “(a) Making, importing, selling, using or possessing without express
2 authority from the Commissioner, any die for printing or making stamps, labels,
3 tags or playing cards;

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“(b) Erasing the cancellation marks of any stamp previously used, or altering
the written figures or letters or cancellation marks on internal revenue stamps;

“(c) Possessing false, counterfeit, restored or altered stamps, labels or tags or
causing the commission of any such offense by another;

“(d) Selling or offering for sale any box or package containing articles subject
to excise tax with false, spurious or counterfeit stamps or labels or selling from any
such fraudulent box, package or container as aforementioned; or

“(e) Giving away or accepting from another, or selling, buying or using

containers on which the stamps are not completely destroyed.”

SEC. 29.Section 266 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

“SEC. 266. Failure to Obey Summons. ~ Any person who, being duly
summoned to appear to testify, or to appear and produce books of accounts,
records, memoranda or other papers, or to furnish information as required under
the pertinent provisions of this Code, neglects to appear or to produce such books
of accounts, records, memoranda or other papers, or to furnish such information,
shall, upon conviction, be punished by a fine of not less than [Five thousand pesos
(P5,000)] ONE HUNDRED THOUSAND PESOS (P100,000) but not more than
[Ten thousand pesos (P10,000)] THREE HUNDRED THOUSAND PESOS
(P300,000) and suffer imprisonment of not less than one (1) year but not more than

‘two (2) years.”

SEC. 30.Section 275 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

“SEC. 275. Violation of Other Provisions of this Code or Rules and
Regulations in General. — Any person who violates any provision of this Code or
any rule or regulation promulgated by the Department of Finance, for which no
specific penalty is provided by law, shall, upon conviction for each act or omission,
be punished by a fine of not more than [One thousand pesos (P1,000)] TEN
THOUSAND PESOS (P10,000) or suffer imprisonment of not more than [six (6)
months] TWO (2) YEARS, or both.”

SEC. 31.A new section is hereby inserted after Section 282 of the National Internal

Revenue Code of 1997, as amended, to read as follows:

“SEC. 282-A. VIOLATION OF THE PROVISIONS OF THIS CODE
AMOUNTING TO ECONOMIC SABOTAGE. —- ANY VIOLATION OF

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SECTION 254 OF THIS CODE THAT UNDERMINES, WEAKENS OR
RENDERS INTO DISREPUTE THE ECONOMIC SYSTEM OR
VIABILITY OF THE COUNTRY OR TENDS TO BRING OUT SUCH
EFFECTS, IN LIEU OF THE PENALTY SET IN THE PRECEDING
PROVISIONS, SHALL CONSTITUTE ECONOMIC SABOTAGE, AND,
UPON CONVICTION FOR EACH ACT OR OMISSION, BE PUNISHED
BY A FINE OF NOT LESS THAN FIFTY MILLION PESOS (P50,000,000)
AND IMPRISONMENT OF TWELVE (12) YEARS AND ONE (1) DAY BUT
NOT MORE THAN TWENTY (20) YEARS.”

SEC. 32.Section 288 of the National Internal Revenue Code of 1997, as amended, is

hereby amended to read as follows:

“SEC. 288. Disposition of Incremental Revenue. ~
“(A)X XX

“(B)XXX

“(XXX

“(D)XXX

“(E)XXX

“PXXX

“(G) STUDENT VOUCHERS. ~ INCREMENTAL REVENUE FROM
TAX PAYMENTS OF EDUCATIONAL INSTITUTIONS THAT FAIL TO
MEET THE ESTABLISHED PERFORMANCE CRITERIA SHALL FUND
A STUDENT VOUCHER PROGRAM TO BE IMPLEMENTED UNDER
THE COMMISSION ON HIGHER EDUCATION (CHED) OR THE
DEPARTMENT OF EDUCATION (DEPED).

“(H) UNIVERSAL HEALTHCARE. — INCREMENTAL REVENUE
FROM TAX PAYMENTS OF HOSPITALS THAT FAIL TO MEET THE
ESTABLISHED PERFORMANCE CRITERIA SHALL FUND THE
UNIVERSAL HEALTHCARE PROGRAM TO BE IMPLEMENTED
UNDER THE DEPARTMENT OF HEALTH (DOH).

“() HOUSING VOUCHERS. — INCREMENTAL REVENUES FROM
TAX PAYMENTS OF REAL ESTATE DEVELOPERS SHALL FUND A
HOUSING VOUCHER PROGRAM TO BE IMPLEMENTED UNDER THE
NATIONAL HOUSING AUTHORITY.”

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1 SEC. 33.Section 290 of the National Internal Revenue Code of 1997, as amended, is

2 hereby further amended to read as follows:
3 “SEC. 290. Congressional Oversight Committee. ~

XXX

5 “The Committee shall, among others, in aid of legislation:
6 “() xxx;

7 “(2) Xxx;

8 “(3) xxx; [and]

9 “(4) xx x15 AND

10 “(5) REVIEW THE PERFORMANCE OF FUNCTIONS OF THE
u INVESTMENT PROMOTION AGENCIES AND THE FISCAL,
2 INCENTIVES REVIEW BOARD, PARTICULARLY IN THE GRANT.
B OF INCENTIVES TO REGISTERED ENTERPRISES AND IN THE
4 REVIEW AND EVALUATION OF GRANTED INCENTIVES,
15 RESPECTIVELY, AS WELL AS IN THE FORMULATION OF THE
16 STRATEGIC INVESTMENT PRIORITY PLAN.

7 “XXX”

18 SEC. 34.A new title is hereby inserted beginning Section 291, Title XIII of the National
19 Internal Revenue Code of 1997, as amended, to read as follows:

20 “TITLE XI

21 “CHAPTER I

2 “GENERAL PROVISIONS ON TAX INCENTIVES

2B “SEC 291. SCOPE AND COVERAGE. - THIS TITLE SHALL COVER
4 ALL EXISTING INVESTMENT PROMOTION AGENCIES (IPAS) AS
25 DEFINED IN THIS CODE OR RELATED LAWS, AND ALL OTHER IPAS
26 AND OTHER SIMILAR AUTHORITIES THAT MAY BE CREATED BY
27 LAW.

28 “THE IPAS SHALL MAINTAIN THEIR FUNCTIONS AND POWERS
2» AS PROVIDED UNDER THE SPECIAL LAWS GOVERNING THEM
30 EXCEPT ON THE EXTENT MODIFIED BY THE PROVISIONS OF THIS
31 CODE.

32 “SEC. 292. GOVERNING PROVISION FOR IPAS. — ALL IPAS
33 VESTED WITH THE POWER TO CONFER AND ADMINISTER

34 INCENTIVES SHALL GRANT TAX INCENTIVES PROVIDED IN THIS

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TITLE TO REGISTERED ENTERPRISES ONLY TO THE EXTENT OF
THEIR APPROVED REGISTERED PROJECTS OR ACTIVITIES UNDER
THE STRATEGIC INVESTMENT PRIORITY PLAN (SIPP). THE PERIOD
OF AVAILMENT OF INCENTIVES SHALL BE RECKONED FROM THE
START OF COMMERCIAL OPERATION.

‘SALES RECEIPTS AND/OR OTHER INCOME DERIVED FROM
NON-REGISTERED ACTIVITY OR PROJECT SHALL BE SUBJECT TO
APPROPRIATE TAXES UNDER THIS CODE.

LESS OTHERWISE PROVIDED IN THIS CODE, DIRECT
EXPORTS ARE SUBJECT TO VALUE-ADDED TAX (VAT) ZERO-
RATING AND DOMESTIC SALES ARE SUBJECT TO THE REGULAR
VALUE-ADDED TAX RATE.

“SEC. 293. DEFINITIONS. - WHEN USED IN THIS TITLE:

“(A) THE TERM ‘CAPITAL EQUIPMENT’ REFERS TO
MACHINERY, EQUIPMENT, MAJOR COMPONENTS THEREOF,
FITTINGS AND ACCOMPANIMENTS WHICH ARE DIRECTLY AND
REASONABLY NEEDED IN THE REGISTERED ACTIVITY OF THE
REGISTERED ENTERPRISE.

“(B) THE TERM ‘EXPORT SALES OF GOODS’ SHALL MEAN THE
SALES OF AN EXPORT ENTERPRISE PAID FOR IN FREELY
CONVERTIBLE FOREIGN CURRENCY INWARDLY REMITTED TO
THE PHILIPPINES, FROM THE FOLLOWING:

“(1) THE SALE AND ACTUAL SHIPMENT OF GOODS FROM THE
PHILIPPINES TO A FOREIGN COUNTRY BY AN EXPORT
ENTERPRISE INCLUDING OURSOURCED SERVICES USED TO
PRODUCE FINAL EXPORT GOODS;

“() SALES TO DIPLOMATIC MISSIONS AND INSTITUTIONS
COVERED BY INTERNATIONAL TREATY;

“@)SALES OF AN EXPORT ENTERPRISE TO AN
INTERNATIONAL SEA OR AIR TRANSPORT OPERATIONS OF
GOODS, EQUIPMENT, SPARE PARTS, AND SUPPLIES, EXCEPT FUEL,
FORMING PART OF DIRECT COSTS AND TO BE USED IN THE
AIRCRAFT OR SEACRAFT, AND CAPITAL EQUIPMENT NEEDED FOR
THE SHIPPING OR AIR TRANSPORT OPERATIONS.

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“(C) THE TERM ‘EXPORT SALES OF SERVICES’ SHALL MEAN
THE SALES OF AN EXPORT ENTERPRISE, PAID FOR IN FREELY
CONVERTIBLE FOREIGN CURRENCY INWARDLY REMITTED TO
‘THE PHILIPPINES, FOR THE FOLLOWING:

“(1) SERVICES RENDERED TO NON-RESIDENT FOREIGN
CLIENTS BY EXPORT ENTERPRISES;

“(2) SERVICES RENDERED TO DIPLOMATIC MISSIONS AND
INSTITUTIONS COVERED BY INTERNATIONAL TREATY;

“@) SERVICES FOR THE OVERHAUL, REPAIR, AND
MAINTENANCE OF INTERNATIONAL SHIPPING, OR AIR
TRANSPORT OPERATIONS.

“(D) THE TERM ‘INVESTMENT PROMOTION AGENCIES’ (IPAS)
SHALL REFER TO GOVERNMENT ENTITIES CREATED BY LAW,
EXECUTIVE ORDER, DECREE OR OTHER ISSUANCE, IN CHARGE OF
PROMOTING INVESTMENTS, ADMINISTERING TAX AND NON-TAX
INCENTIVES, AND/OR OVERSEEING THE OPERATIONS FOR THE
DIFFERENT ECONOMIC ZONES AND FREEPORTS IN ACCORDANCE
WITH THEIR RESPECTIVE CHARTERS. THESE INCLUDE THE
BOARD OF INVESTMENTS (BOI), REGIONAL BOARD OF
INVESTMENTS AUTONOMOUS REGION IN MUSLIM MINDANAO
(RBOI-ARMM), PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA),
BASES CONVERSION AND DEVELOPMENT AUTHORITY (BCDA),
SUBIC BAY METROPOLITAN AUTHORITY (SBMA), CLARK
DEVELOPMENT CORPORATION (CDC), JOHN HAY MANAGEMENT
CORPORATION (JHMC), PORO POINT MANAGEMENT
CORPORATION (PPMC), CAGAYAN ECONOMIC ZONE AUTHORITY
(CEZA), ZAMBOANGA CITY SPECIAL ECONOMIC ZONE
AUTHORITY (ZCSEZA), PHIVIDEC INDUSTRIAL AUTHORITY (PIA),
AURORA PACIFIC ECONOMIC ZONE AND FREEPORT AUTHORITY
(APECO), AUTHORITY OF THE FREEPORT AREA OF BATAAN
(AFAB), TOURISM INFRASTRUCTURE AND ENTERPRISE ZONE
AUTHORITY (TIEZA), AND ALL OTHER SIMILAR AUTHORITIES
EXISTING OR THAT MAY BE CREATED BY LAW IN THE FUTURE.

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“(E) THE TERM ‘REGISTERED ENTERPRISE’ SHALL MEAN ANY
INDIVIDUAL, PARTNERSHIP, CORPORATION, PHILIPPINE BRANCH
OF A FOREIGN CORPORATION, OR OTHER ENTITY ORGANIZED
AND EXISTING UNDER PHILIPPINE LAWS AND REGISTERED WITH
AN INVESTMENT PROMOTION AGENCY (IPA) AS DEFINED UNDER
REPUBLIC ACT NO. 10708, OR THE TIMTA LAW: PROVIDED,
HOWEVER, THAT THE TERM ‘REGISTERED ENTERPRISE’ SHALL
NOT INCLUDE ANY OF THE FOLLOWING SERVICE ENTERPRISES
SUCH AS, BUT NOT LIMITED TO, THOSE ENGAGED IN CUSTOMS
BROKERAGE, TRUCKING OR FORWARDING SERVICES,
JANITORIAL SERVICES, SECURITY SERVICES, INSURANCE,
BANKING, AND OTHER FINANCIAL SERVICES, CONSUMERS’
COOPERATIVES, CREDIT UNIONS, CONSULTANCY SERVICES,
RETAIL BUSINESS, RESTAURANTS, OR SUCH OTHER SIMILAR
SERVICES, AS MAY BE DETERMINED BY THE IPA BOARD,
IRRESPECTIVE OF LOCATION, WHETHER INSIDE OR OUTSIDE THE
ZONES, DULY ACCREDITED AND/OR LICENSED BY ANY OF THE
IPAS AND WHOSE INCOME DELIVERED WITHIN THE ECONOMIC
ZONES SHALL BE SUBJECT TO TAXES UNDER THE NATIONAL
INTERNAL REVENUE CODE OF 1997, AS AMENDED.

“(F) THE TERM ‘SPECIAL ECONOMIC ZONE’ OR ‘ECOZONE’
SHALL REFER TO A SELECTED AREA, WHICH SHALL BE
OPERATED AND MANAGED AS A SEPARATE CUSTOMS TERRITORY
THAT IS HIGHLY DEVELOPED OR HAS THE POTENTIAL TO BE
DEVELOPED INTO AN  AGRO-INDUSTRIAL, INDUSTRIAL,
INFORMATION TECHNOLOGY, OR TOURIST/RECREATIONAL,
WHOSE METES AND BOUNDS ARE FIXED OR DELIMITED BY
PRESIDENTIAL PROCLAMATIONS AND WITHIN A SPECIFIC
GEOGRAPHICAL AREA: PROVIDED, THAT FOR THE ECOZONE TO
QUALIFY AS A SEPARATE CUSTOMS TERRITORY, IT SHALL HAVE
A PERMANENT CUSTOMS CONTROL OR CUSTOMS OFFICE AT ITS
PERIMETER. AN ECOZONE MAY CONTAIN ANY OR ALL OF THE
FOLLOWING: INDUSTRIAL ESTATES (IES), EXPORT PROCESSING
ZONES (EPZS), ICT PARKS AND CENTERS, AND FREE TRADE


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ZONES: PROVIDED, HOWEVER, THAT AREAS WHERE MINING
EXTRACTIONS ARE UNDERTAKEN SHALL NOT BE DECLARED AS
ECOZONES: PROVIDED, FURTHER, THAT VERTICAL ECONOMIC
ZONES, SUCH AS, BUT NOT LIMITED TO, BUILDINGS, SELECTED
FLOORS WITHIN BUILDINGS, AND SELECTED AREAS ON A FLOOR,
SHOULD COMPLY WITH THE MINIMUM CONTIGUOUS LAND AREA
AS DETERMINED BY THE FISCAL INCENTIVES REVIEW BOARD
(FIRB).

“(G) THE TERM ‘FREEPORT ZONES’ REFERS TO AN ISOLATED
AND POLICED AREA ADJACENT TO A PORT OF ENTRY, WHICH
SHALL BE OPERATED AND MANAGED AS A SEPARATE CUSTOMS
TERRITORY TO ENSURE FREE FLOW OR MOVEMENT OF GOODS,
EXCEPT THOSE EXPRESSLY PROHIBITED BY LAW, WITHIN, INTO,
AND EXPORTED OUT OF THE FREEPORT ZONE WHERE IMPORTED
GOODS MAY BE UNLOADED FOR IMMEDIATE TRANSSHIPMENT OR
STORED, REPACKED, SORTED, MIXED, OR OTHERWISE
MANIPULATED WITHOUT BEING SUBJECT TO IMPORT DUTIES.
HOWEVER, MOVEMENT OF THESE IMPORTED GOODS FROM THE
FREE-TRADE AREA TO A NON-FREE TRADE AREA IN THE
COUNTRY SHALL BE SUBJECT TO ALL APPLICABLE INTERNAL
REVENUE TAXES AND DUTIES: PROVIDED, THAT FOR THE
FREEPORT ZONE TO QUALIFY AS A SEPARATE CUSTOMS
TERRITORY, IT SHALL HAVE A PERMANENT CUSTOMS CONTROL
OR CUSTOMS OFFICE AT ITS PERIMETER.

“CHAPTER IL
“TAX AND DUTY INCENTIVES

“SEC. 294. INCENTIVES. - REGISTERED PROJECTS OR
ACTIVITIES UNDER THE STRATEGIC INVESTMENT PRIORITY
PLAN SHALL BE QUALIFIED TO ANY OF THE FOLLOWING
INCENTIVES:

“(A) INCOME TAX INCENTIVES

“(1) INCOME TAX HOLIDAY (ITH). - THE ITH SHALL BE
GRANTED FOR A PERIOD NOT EXCEEDING THREE (3) YEARS:
PROVIDED, THAT AFTER THE EXPIRATION OF THE ITH, THE


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FOLLOWING INCENTIVES MAY BE APPLIED FOR A PERIOD NOT
EXCEEDING FIVE (5) YEARS, WHICH INCLUDES THE PERIOD OF
ITH AVAILMENT, EXCEPT THOSE PROVIDED UNDER SECTIONS
294(7) and (9), 295, 296, AND 297.

“(2) REDUCED CORPORATE INCOME TAX. - A REDUCED TAX
RATE OF EIGHTEEN PERCENT (18%) OF THE TAXABLE INCOME AS
DEFINED UNDER SECTION 31 OF THIS CODE: PROVIDED, THAT THE
RATE OF CORPORATE INCOME TAX SHALL BE SEVENTEEN
PERCENT (17%) BEGINNING JANUARY 1, 2021; SIXTEEN PERCENT
(16%) BEGINNING JANUARY 1, 2023; FIFTEEN PERCENT (15%)
BEGINNING JANUARY 1, 2025; FOURTEEN PERCENT (14%)
BEGINNING JANUARY 1, 2027; AND THIRTEEN PERCENT (13%)
BEGINNING JANUARY 1, 2029: PROVIDED, FURTHER, THAT IN THE
CASE OF REGISTERED ENTERPRISES WITHIN ECONOMIC ZONES
AND FREEPORTS, THE TAX SHALL BE DIRECTLY REMITTED AS
FOLLOWS:

“FIFTEEN PERCENT (15%) TO THE NATIONAL GOVERNMENT
IN 2019 AND 2020; FOURTEEN PERCENT (14%) TO THE NATIONAL
GOVERNMENT IN 2021 AND 2022; THIRTEEN PERCENT (13%) TO
THE NATIONAL GOVERNMENT IN 2023 AND 2024; TWELVE
PERCENT (12%) TO THE NATIONAL GOVERNMENT IN 2025 AND
2026; ELEVEN PERCENT (11%) TO THE NATIONAL GOVERNMENT IN
2027 AND 2028; AND TEN PERCENT (10%) TO THE NATIONAL
GOVERNMENT IN 2029 AND THEREAFTER;

“ONE POINT FIVE PERCENT (1.5%) TO THE TREASURER’S
OFFICE OF THE PROVINCE WHERE THE ENTERPRISE IS LOCATED,
IN LIEU OF THE LOCAL BUSINESS TAX;

“ONE POINT FIVE PERCENT (1.5%) TO THE TREASURER'S
OFFICE OF THE MUNICIPALITY OR COMPONENT CITY WHERE
THE ENTERPRISE IS LOCATED, IN LIEU OF THE LOCAL BUSINESS
TAX;

“PROVIDED, THAT IF THE ENTERPRISE IS UNDER THE
JURISDICTION OF A HIGHLY URBANIZED CITY (HUC) OR
INDEPENDENT COMPONENT CITY (ICC), THE THREE PERCENT

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(3%) SHARE OF THE LGU SHALL BE DIRECTLY REMITTED TO THE
‘TREASURER’S OFFICE OF THE HUC OR ICC.

“(3) DEPRECIATION ALLOWANCE OF THE ASSETS ACQUIRED
FOR THE ENTITY'S PRODUCTION OF GOODS AND SERVICES
(QUALIFIED CAPITAL EXPENDITURE) — TEN PERCENT (10%) FOR
BUILDINGS; AND TWENTY PERCENT (20%) FOR MACHINERIES
AND EQUIPMENT: PROVIDED, THAT DEPRECIATION MAY BE
COMPUTED USING ACCELERATED DEPRECIATION METHOD ON A
RATE NOT EXCEEDING TWICE THE RATE WHICH WOULD HAVE
BEEN USED HAD THE ANNUAL ALLOWANCE BEEN COMPUT IN
ACCORDANCE WITH THE RULES AND REGULATIONS PRESCRIBED
BY THE SECRETARY OF FINANCE AND THE PROVISIONS OF THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED:
PROVIDED, FURTHER, THAT THE ASSETS ARE ACQUIRED
DIRECTLY FOR THE REGISTERED ENTERPRISE’S PRODUCTION OF
GOODS AND SERVICES OTHER THAN ADMINISTRATIVE AND
OTHER SUPPORT SERVICES.

“(4) UP TO FIFTY PERCENT (50%) ADDITIONAL DEDUCTION
ON THE LABOR EXPENSE IN THE TAXABLE YEAR AS A
CONSEQUENCE OF AN INCREASE IN DIRECT LOCAL
EMPLOYMENT: PROVIDED, THAT THIS DOES NOT INCLUDE
INDIRECT LABOR, SALARIES AND WAGES, AND OTHER
PERSONNEL COSTS INCURRED FOR ADMINISTRATIVE AND OTHER
SUPPORT SERVICES.

“(5) UP TO ONE HUNDRED PERCENT (100%) ADDITIONAL
DEDUCTION ON THE INCREMENT OF RESEARCH AND
DEVELOPMENT INCURRED IN THE TAXABLE YEAR: PROVIDED,
THAT IT IS DIRECTLY RELATED TO THE REGISTERED
ACTIVITY/IES OF THE ENTITY.

“(6) UP TO ONE HUNDRED PERCENT (100%) ADDITIONAL
DEDUCTION ON TRAININGS INCURRED: PROVIDED, THAT IT IS
GIVEN TO THE EMPLOYEES ENGAGED DIRECTLY IN THE
ENTITY’S PRODUCTION OF GOODS AND SERVICES: PROVIDED,
FURTHER, THAT THE CONCERNED IPA HAS ISSUED A

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CORRESPONDING CERTIFICATE OF ENTITLEMENT UPON
APPLICATION, AND A CERTIFICATE OF APPROVAL AFTER A
REVIEW OF DOCUMENTATION OF TRAININGS SUBMITTED BY THE
ENTERPRISE AT THE END OF THE TAXABLE YEAR, OTHERWISE,
THIS INCENTIVE SHALL BE DEEMED WAIVED.

“(7) UP TO ONE HUNDRED PERCENT (100%) DEDUCTION ON
INFRASTRUCTURE DEVELOPMENT. ~ REGISTERED ENTERPRISES
ESTABLISHING THEIR ACTIVITY IN AN AREA THAT THE
STRATEGIC INVESTM! PRIORITY PLAN (SIPP) DESIGNATES
AS NECESSARY FOR COUNTRYWIDE DEVELOPMENT OR IN AN
AREA FOUND TO BE DEFICIENT IN INFRASTRUCTURE, PUBLIC
UTILITIES, AND OTHER FACILITIES, SUCH AS IRRIGATION,
DRAINAGE, OR OTHER SIMILAR WATERWORKS
INFRASTRUCTURE MAY DEDUCT FROM THE GROSS INCOME AN
AMOUNT EQUIVALENT TO UP TO ONE HUNDRED PERCENT
(100%) OF NECESSARY AND MAJOR INFRASTRUCTURE WORKS IT
MAY HAVE UNDERTAKEN WITH THE PRIOR APPROVAL AND
RECOMMENDATION OF THE IPA CONCERNED: PROVIDED, THAT
THE INFRASTRUCTURE SHALL BE OPEN FOR USE BY THE
GENERAL PUBLIC: PROVIDED, FURTHER, THAT THE TITLE TO ALL.
SUCH INFRASTRUCTURE WORKS SHALL UPON COMPLETION, BE
TRANSFERRED TO THE PHILIPPINE GOVERNMENT: PROVIDED,
FINALLY, THAT ANY AMOUNT NOT DEDUCTED FOR A
PARTICULAR YEAR MAY BE CARRIED OVER FOR DEDUCTION FOR
SUBSEQUENT YEARS NOT EXCEEDING FIVE (5) YEARS FROM
COMMERCIAL OPERATION.

“(8)DEDUCTION FOR REINVESTMENT ALLOWANCE TO
MANUFACTURING INDUSTRY. - WHEN A MANUFACTURING
REGISTERED ENTERPRISE REINVESTS ITS UNDISTRIBUTED
PROFIT OR SURPLUS IN ANY OF THE ACTIVITIES LISTED IN THE
SIPP, THE AMOUNT SO REINVESTED TO A MAXIMUM OF FIFTY
PERCENT (50%) SHALL BE ALLOWED AS A DEDUCTION FROM ITS
TAXABLE INCOME WITHIN A PERIOD OF FIVE (5) YEARS FROM
THE TIME OF SUCH REINVESTMENT: PROVIDED, THAT PRIOR



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APPROVAL AND RECOMMENDATION BY THE IPA CONCERNED OF
SUCH REINVESTMENT WAS OBTAINED BY THE REGISTERED
ENTERPRISE PLANNING SUCH REINVESTMENT.

“(9) ENHANCED NET OPERATING LOSS CARRY-OVER
(NOLCO). - THE NET OPERATING LOSS OF THE REGISTERED
ACTIVITY DURING THE FIRST THREE (3) YEARS FROM THE START
OF COMMERCIAL OPERATION WHICH HAD NOT BEEN
PREVIOUSLY OFFSET AS DEDUCTION FROM GROSS INCOME MAY
BE CARRIED OVER AS DEDUCTION FROM GROSS INCOME WITHIN
‘THE NEXT FIVE (5) CONSECUTIVE TAXABLE YEARS IMMEDIATELY
FOLLOWING THE YEAR OF SUCH LOSS.

“(10) UP TO FIFTY PERCENT (50%) ADDITIONAL DEDUCTION
ON THE INCREMENT OF THE DOMESTIC INPUT EXPENSE
INCURRED IN THE TAXABLE YEAR: PROVIDED, THAT IT IS
DIRECTLY RELATED TO AND ACTUALLY USED IN THE
REGISTERED EXPORT ACTIVITY OF THE REGISTERED ENTITY.

“PROVIDED, THAT IN LIEU OF THE ITH UNDER SECTION
294(A)(1) OR THE REDUCED TAX RATE OF EIGHTEEN PERCENT
(18%) UNDER SECTION 294(A)(2), THE TAX INCENTIVES UNDER
SECTION 294(A)(3), (4), (5), (6), (7), (8), (9), AND (10) MAY BE GRANTED
ON AN INDUSTRY-SPECIFIC BASIS AS DETERMINED BY THE BOI IN
THE STRATEGIC INVESTMENT PRIORITY PLAN. THE BOI SHALL
PRESCRIBED THE LEVEL OF ADDITIONAL DEDUCTION FOR
SELECTED INDUSTRIES.

“PROVIDED, FURTHER, THAT IN NO SUCH CASE SHALL AN
INCOME TAX INCENTIVE BE EXTENDED BEYOND THE INITIAL
GRANT OF FIVE (5) YEARS, EXCEPT THOSE PROVIDED UNDER
SECTION 294(A)(7) AND (9), SECTIONS 295, 296, AND 297.

“(B) EXEMPTION FROM CUSTOMS DUTY ON IMPORTATION OF
CAPITAL EQUIPMENT AND RAW MATERIALS DIRECTLY AND
EXCLUSIVELY USED IN THE REGISTERED ACTIVITY BY
REGISTERED ENTERPRISES: PROVIDED, THAT THE FIVE (5) YEARS
LIMIT IN THIS SUBSECTION SHALL NOT APPLY TO FREEPORT
ZONES AS DEFINED UNDER THIS TITLE.

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27
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“PROVIDED, FURTHER, THAT EXPANSION OF REGISTERED
ACTIVITIES MAY BE GRANTED DUTY EXEMPTION ON CAPITAL
EQUIPMENT ONLY, SUBJECT TO THE FOLLOWING CONDITIONS:

“(I) THE ACTIVITY IS STILL COVERED BY THE STRATEGIC
INVESTMENT PRIORITY PLAN (SIPP) OR IS AN INNOVATION
PROJECT AS DEFINED IN THE STRATEGIC INVESTMENT PRIORITY
PLAN;

(2) CUSTOMS DUTY EXEMPTION WILL ONLY APPLY ON THE
iCREMENTAL PORTION OF THE ACTIVITY; AND

“(3) THE CUSTOMS DUTY EXEMPTION EXTENSION SHALL NOT
EXCEED FIVE (5) YEARS.
(C) VALUE-ADDED TAX (VAT)

“(1) REGISTERED ENTERPRISES WHOSE EXPORT SALES MEET
THE NINETY PERCENT (90%) THRESHOLD AND ARE LOCATED
WITHIN AN ECOZONE, FREEPORT, OR THOSE UTILIZING
CUSTOMS BONDED MANUFACTURING WAREHOUSE: VAT
EXEMPTION ON IMPORTATION AND VAT ZERO-RATING ON
DOMESTIC PURCHASES OF CAPITAL EQUIPMENT AND RAW
MATERIALS USED IN THE MANUFACTURING AND PROCESSING OF
PRODUCTS AND IMPORTATION OF SOURCE DOCUMENTS SHALL
APPLY.

“(2) REGISTERED ENTERPRISES WHOSE EXPORT SALES ARE
BELOW THE NINETY PERCENT (90%) THRESHOLD AND ARE
LOCATED WITHIN AN ECOZONE, FREEPORT, OR THOSE
UTILIZING CUSTOMS BONDED MANUFACTURING WAREHOUSE:
VAT EXEMPTION ON IMPORTATION AND VAT ZERO-RATING ON
DOMESTIC PURCHASES OF CAPITAL EQUIPMENT AND RAW
MATERIALS USED IN THE MANUFACTURING AND PROCESSING OF
PRODUCTS AND IMPORTATION OF SOURCE DOCUMENTS:
PROVIDED, THAT THEY COMPLY WITH THE ELECTRONIC
RECEIPTS OR INVOICING UNDER SECTIONS 237 AND 237-A OF THIS
CODE.

“(3) REGISTERED ENTERPRISES WHOSE EXPORT SALES ARE
BELOW NINETY PERCENT (90%) OR ARE LOCATED OUTSIDE AN

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ECOZONE OR FREEPORT REGARDLESS OF EXPORT SALES
THRESHOLD: THE VALUE-ADDED TAX PROVISION IN TITLE IV OF
THIS CODE AND SECTION 307 OF THIS ACT SHALL APPLY.

“FOR THIS PURPOSE, ‘PROCESSING’ SHALL REFER TO THE
CONVERSION OF RAW MATERIALS INTO MARKETABLE FORM
THROUGH PHYSICAL, MECHANICAL, CHEMICAL, ELECTRICAL,
BIOCHEMICAL, BIOLOGICAL, OR OTHER MEANS, OR BY A
SPECIAL TREATMENT OR A SERIES OF ACTIONS, SUCH AS
SLAUGHTERING, MILLING, PASTEURIZING, DRYING, OR
DESICCATING, QUICK FREEZING, THAT RESULTS IN A CHANGE IN
THE NATURE OR STATE OF A PRODUCT. MERE PACKING OR
PACKAGING SHALL NOT CONSTITUTE PROCESSING.

“*SOURCE DOCUMENTS’ REFER TO INPUT MATERIALS AND
DOCUMENTS REASONABLY NEEDED BY LT. AND LT.-ENABLED
INDUSTRIES SUCH AS, BUT NOT LIMITED TO, BOOKS,
DIRECTORIES, MAGAZINES, NEWSPAPERS, BROCHURES,
PAMPHLETS, MEDICAL RECORDS/FILES, LEGAL RECORDS/FILES,
INSTRUCTION MATERIALS, AND
DRAWINGS/BLUEPRINTS/OUTLINES.

“SEC. 295. INCENTIVES FOR AGRIBUSINESS. ~AGRIBUSINESS
PROJECTS OR ACTIVITIES OF REGISTERED ENTERPRISES
LOCATED OUTSIDE METRO MANILA AND OTHER URBAN AREAS
AS IDENTIFIED IN THE STRATEGIC INVESTMENT PRIORITY PLAN
SHALL BE ENTITLED TO ADDITIONAL TWO (2) YEARS OF
INCENTIVE UNDER SECTION 294, OF WHICH ONE (1) YEAR MAY BE
AN ADDITIONAL YEAR OF INCOME TAX HOLIDAY.

“SEC. 296. PROJECTS OR ACTIVITIES LOCATED IN LESS
DEVELOPED AREAS OR THOSE RECOVERING FROM ARMED
CONFLICT OR A MAJOR DISASTER. — PROJECTS OR ACTIVITIES OF
REGISTERED ENTERPRISES LOCATING IN LESS DEVELOPED
AREAS AS IDENTIFIED IN THE STRATEGIC INVESTMENT PRIORITY
PLAN, OR THOSE RECOVERING FROM ARMED CONFLICT AND/OR
A MAJOR DISASTER AS DETERMINED BY THE OFFICE OF THE
PRESIDENT SHALL BE ENTITLED TO ADDITIONAL TWO (2) YEARS

47


OF INCENTIVE UNDER SECTION 294, OF WHICH ONE (1) YEAR MAY
BE AN ADDITIONAL YEAR OF INCOME TAX HOLIDAY.

“SEC. 297. RELOCATION PROJECTS OR ACTIVITIES. - PRIOR TO
THE EFFECTIVITY OF THIS ACT, REGISTERED PROJECTS OR
ACTIVITIES RELOCATING FROM METRO MANILA AND SELECTED
URBANIZED AREAS ADJACENT TO METRO MANILA TO OTHER
AREAS OF THE COUNTRY SHALL BE ENTITLED TO ADDITIONAL
TWO (2) YEARS OF INCENTIVE UNDER SECTION 294, OF WHICH
ONE (1) YEAR MAY BE AN ADDITIONAL YEAR OF INCOME TAX
HOLIDAY.

“CHAPTER III
“THE FISCAL INCENTIVES REVIEW BOARD

“SEC. 298. EXPANDED FUNCTIONS OF THE FISCAL INCENTIVES
REVIEW BOARD. ~ THE FUNCTIONS AND POWERS OF THE FISCAL
INCENTIVES REVIEW BOARD OR FIRB CREATED UNDER
PRESIDENTIAL DECREE (PD) NO. 776, AS AMENDED BY PD NO. 1931
AND PD NO, 1955, OFFICE OF THE PRESIDENT MEMORANDUM
ORDER NO. 23, SERIES OF 1986 AND EXECUTIVE ORDER NO. 93,
SERIES OF 1986, SHALL BE EXPANDED AS FOLLOWS:

“(A) TO EXERCISE OVERSIGHT FUNCTIONS OVER IPAS.

“(B) TO REQUIRE THE IPAS TO SUBMIT THE FOLLOWING:

“(1) LIST OF REGISTERED ENTERPRISES ANNUALLY WITH
CORRESPONDING FIRM-LEVEL DATA AS MANDATED UNDER THE
TAX INCENTIVES MANAGEMENT AND TRANSPARENCY ACT OR
TIMTA LAW;

“Q) APPROVED AMOUNT OF INVESTMENTS AND
EMPLOYMENT GENERATION AND OTHER BENEFITS ON A FIRM-
LEVEL BASIS ANNUALLY; AND.

“(3) APPROVED AMOUNT OF TAX INCENTIVES, BOTH INCOME
AND NON-INCOME TAX BASED INCENTIVES, ON A FIRM-LEVEL
BASIS ANNUALLY.

“(©) FOR PROJECTS OR ACTIVITIES THAT POSE RISK TO THE
ENVIRONMENT, HEALTH, AND ECONOMIC STABILITY AND

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PROJECTS OR ACTIVITIES THE APPROVAL OF WHICH
ENCOUNTERS A DEADLOCK IN THE IPAS BOARD, THE FIRB:

“(1) SHALL FORMULATE POLICIES ON TAX INCENTIVE!
ACCORDANCE WITH THE PROVISIONS OF THIS CODE;

“(2) SHALL REVIEW IPAS’ COMPLIANCE WITH THE POLICIES
SET FORTH IN THIS CODE: PROVIDED, THAT THE FIRB MAY
CANCEL OR SUSPEND THE POWER OF IPAS TO GRANT INCENTIVES,
FOR VIOLATIONS OF SUCH POLICIES;

“(3) SHALL APPROVE THE GRANT OF INCENTIVES ON THE
ABOVE INSTANCES; AND

“(4) ON THE ABOVE INSTANCES MAY SUSPEND OR CANCEL

THE TAX INCENTIVES GRANTED TO REGISTERED ENTERPRISES
WHICH ARE NOT COMPLIANT WITH THE CONDITIONS ON THE
AVAILMENT OF TAX INCENTIVES AS WELL AS THE POLICIES SET
FORTH BY THE IPAS.
(D) TO PUBLISH THE NAMES OF THE REGISTERED
ENTERPRISES OR BENEFICIARIES OF TAX INCENTIVES WITH
APPROVED ESTIMATED AMOUNT OF THE CORRESPONDING TAX
INCENTIVES.

“(E) TO GRANT TAX SUBSIDIES TO
GOVERNMENT -OWNED AND/OR -CONTROLLED CORPORATIONS
(GOCCS), GOVERNMENT INSTRUMENTALITIES (GIs),
GOVERNMENT COMMISSARIES, AND STATE UNIVERSITIES
AND COLLEGES (SUCS) AS MAY BE PROVIDED UNDER THE
ANNUAL GENERAL APPROPRIATIONS ACT.

“PROVIDED, THAT, AS CHAIR OF THE FIRB AND AS THE
CUSTODIAN OF FISCAL PRUDENCE AND RESPONSIBILITY, THE
SECRETARY OF FINANCE SHALL EXERCISE OVERSIGHT
FUNCTIONS AND SHALL HAVE VETO POWER OVER THE
APPROVAL AND CANCELLATION OF TAX INCENTIVES UNDER
SECTION 298 (C).

“PROVIDED, FURTHER, THAT THE SECRETARY OF FINANCE
SHALL AUTOMATICALLY BE THE CO-CHAIR OF ALL THE
EXISTING AND FUTURE IPAS.

IN

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“PROVIDED, FINALLY, THAT THE NATIONAL ECONOMIC AND
DEVELOPMENT AUTHORITY (NEDA) AND THE DEPARTMENT OF
TRADE AND INDUSTRY (DTI) SHALL BE MEMBERS OF ALL THE
EXISTING AND FUTURE IPAS.

“SEC. 299. COMPOSITION OF THE FIRB. ~ THE FIRB SHALL BE
RECONSTITUTED AS FOLLOWS:

“BOARD PROPER:

“CHAIRPERSON
“MEMBERS

- SECRETARY OF FINANCE

SECRETARY OF TRADE AND INDUSTRY
DIRECTOR GENERAL OF THE NATIONAL
ECONOMIC AND DEVELOPMENT AUTHORITY
(NEDA)

SECRETARY OF BUDGET AND MANAGEMENT
EXECUTIVE SECRETARY OF THE OFFICE OF
THE PRESIDENT

“TECHNICAL COMMITTEE:

“CHAIRPERSON
“MEMBERS —

“SECRETARIAT:

-— UNDERSECRETARY OF FINANCE

UNDERSECRETARY OF TRADE AND

INDUSTRY/BOARD OF INVESTMENTS

MANAGING HEAD

UNDERSECRETARY OF BUDGET AND

MANAGEMENT

DEPUTY DIRECTOR GENERAL OF THE

NATIONAL ECONOMIC AND DEVELOPMENT

AUTHORITY

COMMISSIONER OF INTERNAL REVENUE

COMMISSIONER OF CUSTOMS

EXECUTIVE DIRECTOR OF THE NATIONAL.

TAX RESEARCH CENTER (NTRC)

— NATIONAL TAX RESEARCH CENTER
“CHAPTER IV

“QUALIFIED ACTIVITIES FOR TAX INCENTIVES

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“SEC. 300. STRATEGIC INVESTMENT PRIORITY PLAN
(SIPP), - THE BOARD OF INVESTMENTS (BO1), IN COORDINATION
WITH THE OFFICE OF THE PRESIDENT, THE FISCAL INCENTIVES
REVIEW BOARD, THE CONCERNED IPAS, AND OTHER
GOVERNMENT AGENCIES AND THE PRIVATE SECTOR, SHALL
FORMULATE THE SIPP TO BE SUBMITTED TO THE PRESIDENT FOR
HIS APPROVAL NOT LATER THAN DECEMBER OF THE THIRD
YEAR SET FOR PERIODIC REVIEW. THE PLAN SHALL BE VALID
FOR A PERIOD OF THREE (3) YEARS SUBJECT TO REVIEW AND
AMENDMENT AS THE NEED ARISES. ALL SECTORS OR INDUSTRIES
THAT MAY BE INCLUDED IN THE SIPP SHALL UNDERGO AN
EVALUATION PROCESS TO DETERMINE THE SUITABILITY AND
POTENTIAL OF THE INDUSTRY OR THE SECTOR IN PROMOTING
LONG-TERM GROWTH AND DEVELOPMENT, AND THE NATIONAL
INTEREST.

“THE SIPP SHALL:

“(A) INCLUDE ACTIVITIES THAT COMPLY WITH THE
FOLLOWING:

“(1) THE ACTIVITY SHALL BE COVERED BY THE PHILIPPINE
DEVELOPMENT PLAN OR ITS EQUIVALENT AND OTHER
GOVERNMENT PROGRAMS;

(2) THE ACTIVITY SHALL TAKE INTO ACCOUNT ANY OF THE
FOLLOWING:

“(i) SUBSTANTIAL AMOUNT OF INVESTMENTS;

“(ii), CONSIDERABLE GENERATION OF EMPLOYMENT;

“(iii) ADOPT INCLUSIVE BUSINESS ACTIVITIES AND VALUE-
ADDING PRODUCTION BY MSMES;

“(iv) USE OF MODERN OR NEW TECHNOLOGY;

“(v) ADOPTION OF ADEQUATE ENVIRONMENTAL
PROTECTION SYSTEMS;

“(vi) ADDRESS MISSING GAPS IN THE SUPPLY/VALUE CHAIN
OR MOVE UP THE VALUE CHAIN OR PRODUCT LADDER; OR

“(vii) PROMOTION OF MARKET COMPETITIVENESS.

s1


“(B) IDENTIFY AGRIBUSINESS ACTIVITIES, THE LESS
DEVELOPED AREAS OR THOSE RECOVERING FROM ARMED
CONFLICT OR A MAJOR DISASTER.

“(C) DETERMINE SERVICES AND ACTIVITIES THAT CAN SPUR
REGIONAL OR GLOBAL OPERATIONS IN THE COUNTRY.

“(D) INCLUDE EXISTING REGISTERED PROJECTS OR
ACTIVITIES THAT SHALL RELOCATE FROM METRO MANILA TO
OTHER AREAS OF THE COUNTRY.

“THE ACTIVITIES MUST COMPLY WITH THE SPECIFIC
QUALIFICATION REQUIREMENTS OR CONDITIONS FOR A
PARTICULAR SECTOR OR INDUSTRY AND OTHER LIMITATIONS AS
SET AND DETERMINED BY THE BOI.

“THE THRESHOLD AMOUNT OF INVESTMENTS AND
EMPLOYMENT GENERATION REQUIRED FOR A_ SPECIFIC
ACTIVITY SHALL BE SUBJECT TO A PERIODIC REVIEW EVERY
THREE (3) YEARS TAKING INTO CONSIDERATION
{TERNATIONAL STANDARDS AND OTHER INDICATORS.

“SEC. 301. | POWER OF THE PRESIDENT TO GRANT
INCENTIVES. —- THE PRESIDENT MAY, IN THE INTEREST OF
NATIONAL ECONOMIC DEVELOPMENT AND UPON THE
RECOMMENDATION OF THE FISCAL INCENTIVES REVIEW BOARD,
GRANT INCENTIVES IN ADDITION TO THOSE THAT ARE PROVIDED
UNDER THIS CODE, INCLUDING A LONGER PERIOD, TO HIGHLY
DESIRABLE PROJECTS: PROVIDED, THAT THE BENEFITS THAT
THE GOVERNMENT MAY DERIVE FROM SUCH INVESTMENT
THERETO IS CLEAR AND CONVINCING AND FAR OUTWEIGH THE
COST OF INCENTIVES THAT WILL BE GRANTED.”

“SEC. 301-A. | CRITERIA FOR AVAILMENT. ~ THE BOARD OF
\VESTMENTS SHALL CONSIDER THE FOLLOWING CRITERIA IN
DETERMINING THE TYPES OF INCENTIVES AND THE DURATION
‘THEREOF THAT MAY BE GRANTED:

“(A) THE PROJECT HAS A COMPREHENSIVE SUSTAINABLE
DEVELOPMENT PLAN WITH CLEAR INCLUSIVE BUSINESS
APPROACHES AND INNOVATIONS; OR

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“(B) MINIMUM INVESTMENT OF TWO HUNDRED MILLION US
DOLLARS (US$200,000,000) OR A MINIMUM DIRECT EMPLOYMENT
GENERATION OF AT LEAST ONE THOUSAND FIVE HUNDRED (1,500)
WITHIN THREE (3) YEARS FROM THE START OF COMMERCIAL
OPERATION.

“THE THRESHOLD SHALL BE SUBJECT TO A PERIODIC
REVIEW EVERY THREE (3) YEARS TAKING INTO CONSIDERATION
INTERNATIONAL STANDARDS AND OTHER INDICATORS.

“THE BOI MAY IMPOSE OTHER TERMS AND CONDITIONS
TAKING INTO CONSIDERATION THE AMOUNT OR KIND OF
INCENTIVES THAT WILL BE GRANTED TO SUCH INVESTMENTS.”

“SEC. 301-B. USE OF RESOURCES. — IN THE EXERCISE OF THE
POWER OF THE PRESIDENT TO GRANT INCENTIVES, THE
GOVERNMENT MAY UTILIZE ITS RESOURCES SUCH AS LAND USE,
WATER APPROPRIATION, POWER PROVISION, AMONG OTHERS,
AS MAY BE IDENTIFED BY THE BOI.”

“SEC. 302. AMENDMENTS. - SUBJECT TO
PUBLICATION REQUIREMENTS AND THE CRITERIA FOR
INVESTMENT PRIORITY DETERMINATION, THE BOI MAY, AT ANY
TIME, INCLUDE ADDITIONAL AREAS IN THE SIPP, ALTER ANY OF
THE TERMS OF THE DECLARATION OF AN INVESTMENT AREA,
AND TEMPORARILY OR PERMANENTLY SUSPEND ACTIVITIES ON
THE SIPP IF IT CONSIDERS THAT SUCH ACTIVITY IS NO LONGER A
PRIORITY. IN NO CASE SHALL THE IPAS ACCEPT APPLICATIONS
UNLESS THE ACTIVITY IS LISTED IN THE SIPP.”

“SEC. 303.PUBLICATION. - UPON APPROVAL OF THE PLAN, IN
WHOLE OR IN PART, OR UPON APPROVAL OF AN AMENDMENT
THEREOF, THE PLAN OR THE AMENDMENT, SPECIFYING AND
DECLARING THE AREAS OF INVESTMENTS SHALL BE PUBLISHED
IN AT LEAST ONE (1) NEWSPAPER OF GENERAL CIRCULATION OR
THE OFFICIAL GAZETTE AND ALL SUCH AREAS SHALL BE OPEN
FOR APPLICATION UNTIL PUBLICATION OF AN AMENDMENT OR
DELETION THEREOF.”

3


“SEC. 304.QUALIFICATIONS OF A REGISTERED ENTERPRISE
FOR TAX INCENTIVES. —- IN THE REVIEW AND GRANT OF TAX
INCENTIVES, A REGISTERED ENTERPRISE MUST:

“(A) BE ENGAGED IN AN ACTIVITY INCLUDED IN THE SIPP;

“(B) INSTALL AN ADEQUATE ACCOUNTING SYSTEM THAT
SHALL IDENTIFY THE INVESTMENTS, REVENUES, COSTS AND
PROFITS OR LOSSES OF EACH REGISTERED PROJECT
UNDERTAKEN BY THE ENTERPRISE SEPARATELY FROM THE
AGGREGATE INVESTMENTS, REVENUES, COSTS AND PROFITS OR
LOSSES OF THE WHOLE ENTERPRISE; OR ESTABLISH A SEPARATE
CORPORATION FOR EACH REGISTERED PROJECT IF THE IPA
SHOULD SO REQUIRE;

“(C) COMPLY WITH THE E-INVOICE AND E-SALES
REQUIREMENT IN ACCORDANCE WITH SECTION 237-A OF THIS
CODE.”

“CHAPTER V
“AVAILMENT OF TAX INCENTIVES
“SEC. 305. INCOME TAX-BASED INCENTIVES. -

ALL REGISTERED ENTERPRISES ARE REQUIRED TO
FILE ALL THEIR TAX RETURNS USING THE ELECTRONIC/ONLINE
FACILITIES OF THE BUREAU OF INTERNAL REVENUE (BIR). IN
AVAILING THE INCOME TAX-BASED INCENTIVES, THE
REGISTERED ENTERPRISE SHALL BE REQUIRED TO SECURE A
CERTIFICATE OF ENTITLEMENT ISSUED BY THE IPA AND ATTACH
THE SAME TO ITS INCOME TAX RETURN (ITR) OR ANNUAL
INFORMATION RETURN (AIR), WHICHEVER IS APPLICABLE.
THEREAFTER, THE REGISTERED ENTERPRISE SHALL FILE ITS
CLAIM WITH THE BIR FOR VALIDATION.

“FAILURE TO SECURE AND ATTACH THE CERTIFICATION TO
THE ITR OR AIR, AND/OR FILE THE INCENTIVE AVAILMEN’
APPLICATION SHALL CAUSE THE FORFEITURE OF THE
INCENTIVE FOR THAT TAXABLE PERIOD.”

“SEC. 306. CUSTOMS DUTY EXEMPTION ON _ CAPITAL
EQUIPMENT. — IMPORTATION OF CAPITAL EQUIPMENT,

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MACHINERY AND SPARE PARTS EXCLUSIVELY USED FOR
CAPITAL EQUIPMENT AND MACHINERY — INCLUDING
CONSIGNMENT THEREOF BY REGISTERED ENTERPRISES MAY BE
EXEMPTED TO THE EXTENT OF ONE HUNDRED PERCENT (100%)
OF THE CUSTOMS DUTY: PROVIDED, THAT THE FOLLOWING
CONDITIONS ARE COMPLIED WITH:

“(A) THE CAPITAL EQUIPMENT AND/OR SPARE PARTS ARE
DIRECTLY AND REASONABLY NEEDED AND WILL BE USED
EXCLUSIVELY IN AND AS PART OF THE DIRECT COST OF THE
REGISTERED ACTIVITY OF THE REGISTERED ENTERPRISE, AND
ARE NOT MANUFACTURED DOMESTICALLY IN SUFFICIENT
QUANTITY, OF COMPARABLE QUALITY AND AT REASONABLE
PRICES. PRIOR APPROVAL OF THE IPA MAY BE SECURED FOR THE
PART-TIME UTILIZATION OF SAID EQUIPMENT IN A NON-
REGISTERED ACTIVITY TO MAXIMIZE USAGE THEREOF:
PROVIDED, THAT THE PROPORTIONATE TAXES AND DUTIES ARE
PAID ON A SPECIFIC EQUIPMENT AND MACHINERY IN
PROPORTION TO ITS UTILIZATION FOR NON-REGISTERED
ACTIVITIES. IN THE EVENT THAT IT SHALL BE USED FOR A
NON-REGISTERED ACTIVITY OF THE REGISTERED ENTERPRISE
AT ANY TIME WITHIN THE FIRST FIVE (5) YEARS FROM DATE OF
IMPORTATION, THE REGISTERED ENTERPRISE SHALL FIRST SEEK
PRIOR APPROVAL OF THE AUTHORITY, AND PAY THE TAXES AND
CUSTOMS DUTIES THAT WERE NOT PAID UPON ITS IMPORTATION:
AND

“(B) THE APPROVAL OF THE IPA WAS OBTAINED BY THE
REGISTERED ENTERPRISE PRIOR TO THE IMPORTATION OF SUCH
CAPITAL EQUIPMENT AND/OR SPARE PARTS.

“APPROVAL OF THE IPA MUST BE SECURED BEFORE THE
SALE, TRANSFER OR DISPOSITION OF THE CAPITAL EQUIPMENT
AND/OR SPARE PARTS WHICH WERE GRANTED TAX AND
CUSTOMS DUTY EXEMPTION HEREUNDER, AND SHALL BE
ALLOWED ONLY UNDER THE FOLLOWING CIRCUMSTANCES:

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“(1) IF MADE TO ANOTHER ENTERPRISE ENJOYING CUSTOMS
DUTY EXEMPTION ON IMPORTED CAPITAL EQUIPMENT AND/OR
SPARE PARTS;

“Q)IF MADE TO ANOTHER ENTERPRISE NOT DUTY
EXEMPTION ON IMPORTED CAPITAL EQUIPMENT AND/OR SPARE
PARTS, UPON PAYMENT OF ANY TAXES AND DUTIES DUE ON THE
NET BOOK VALUE OF THE CAPITAL EQUIPMENT AND/OR SPARE
PARTS TO BE SOLD;

“@)EXPORTATION OF CAPITAL EQUIPMENT, MACHINERY,
SPARE PARTS OR SOURCE DOCUMENTS, OR THOSE REQUIRED FOR
POLLUTION ABATEMENT AND CONTROL; OR

“(4) FOR REASONS OF PROVEN TECHNICAL OBSOLESCENCE.

“PROVIDED, THAT IF THE REGISTERED ENTERPRISE SELLS,
TRANSFERS OR DISPOSES THE AFOREMENTIONED IMPORTED
ITEMS WITHOUT PRIOR APPROVAL, THE REGISTERED
ENTERPRISE AND THE VENDEE, TRANSFEREE, OR ASSIGNEE
SHALL BE SOLIDARILY LIABLE TO PAY TWICE THE AMOUNT OF
THE DUTY EXEMPTION THAT SHOULD HAVE BEEN PAID DURING
ITS IMPORTATION: PROVIDED, FURTHER, THAT EVEN IF THE SALE,
TRANSFER OR DISPOSITION OF THE CAPITAL EQUIPMENT WAS
MADE AFTER FIVE (5) YEARS FROM DATE OF IMPORTATION WITH
THE APPROVAL OF THE IPA, THE REGISTERED ENTERPRISE IS
STILL LIABLE TO PAY THE DUTIES BASED ON THE NET BOOK
VALUE OF THE CAPITAL EQUIPMENT IF IT HAS VIOLATED ANY OF
ITS REGISTRATION TERMS AND CONDITIONS.”

“SEC. 307.VAT REFUND MECHANISM ON IMPORTATION OF
CAPITAL EQUIPMENT AND RAW MATERIALS. - THE VAT ON
IMPORTATION OF CAPITAL EQUIPMENT AND RAW MATERIALS
PAID BY EXPORT REGISTERED ENTERPRISES THAT DID NOT MEET
THE NINETY PERCENT (90%) EXPORT SALES THRESHOLD OR ARE
LOCATED OUTSIDE THE ECOZONE, FREEPORT, OR THOSE
UTILIZING THE CUSTOMS BONDED MANUFACTURING
WAREHOUSE REGARDLESS OF THE THRESHOLD SHALL BE

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REFUNDED PURSUANT TO THE ENHANCED VAT REFUND SYSTEM
UNDER SECTIONS 106 AND 108 OF THIS CODE.”
“CHAPTER VI.
“FINAL PROVISIONS

“SEC. 308.NO DOUBLE REGISTRATION OF ENTERPRISE:
REGISTERED ENTERPRISES SHALL NOT BE ALLOWED TO
REGISTER THEIR ACTIVITIES IN MORE THAN ONE (1) IPA.”

“SEC. 309.GOVERNANCE RULES. - THE DIFFERENT IPAS MAY
REQUIRE DOMESTIC REGISTERED ENTERPRISES TO LIST THEIR
SHARES OF STOCK IN ANY ACCREDITED STOCK EXCHANGE OR
DIRECTLY OFFER A PORTION OF THEIR CAPITAL STOCK TO THE
PUBLIC AND/OR THEIR EMPLOYEES WITHIN FIVE (5) YEARS FROM
DATE OF REGISTRATION.”

“SEC. 310.INVESTMENTS PRIOR TO THE EFFECTIVITY OF THIS
ACT. - EXISTING REGISTERED ACTIVITIES GRANTED THE INCOME,
TAX HOLIDAY SHALL BE ALLOWED TO CONTINUE WITH THE
AVAILMENT OF THE SAID INCENTIVE FOR THE REMAINING
PERIOD OF THE ITH OR FOR A PERIOD OF FIVE (5) YEARS ONLY,
WHICHEVER COMES FIRST: PROVIDED, THAT OTHER TAX
INCENTIVES GRANTED TO EXISTING REGISTERED ACTIVITIES,
SUCH AS THE FIVE PERCENT (5%) TAX ON GROSS INCOME EARNED
IN LIEU OF ALL TAXES, BOTH NATIONAL AND LOCAL, SHALL BE
ALLOWED TO CONTINUE FOLLOWING THE SCHEDULE STATED
HEREIN:

“(A) TWO (2) YEARS FOR ACTIVITIES ENJOYING THE TAX
INCENTIVE FOR MORE THAN TEN (10) YEARS;

“(B) THREE (3) YEARS FOR ACTIVITIES ENJOYING THE TAX
INCENTIVE BETWEEN FIVE (5) AND TEN (10) YEARS;

“(C) FIVE (5) YEARS FOR ACTIVITIES ENJOYING THE TAX
INCENTIVE BELOW FIVE (5) YEARS.

“PROVIDED, THAT THE FIVE PERCENT (5%) TAX ON GROSS
INCOME EARNED SHALL COMMENCE AFTER THE ITH PERIOD HAS
LAPSED ONLY FOR THE REMAINING YEARS WITHIN THE FIVE (5)-
YEAR PERIOD.”

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30
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3
34

“SEC. 311. SUSPENSION AND FORFEITURE OF TAX INCENTIVES
OF REGISTERED ENTERPRISES, REFUND AND PENALTIES; WAIVER
AND CONDONATION. — THE IPA MAY IMPOSE FINES AND
PENALTIES, SUSPEND AND/OR FORFEIT THE INCENTIVES
GRANTED TO THE REGISTERED ENTERPRISES WHENEVER THERE
ARE VIOLATIONS OF THE REGISTRATION TERMS AND
CONDITIONS BY THE LATTER, WITHOUT PREJUDICE TO THE
CANCELLATION OF THE REGISTRATION OF SAID ENTERPRISE.

“WHEN THERE IS PROBABLE CAUSE TO BELIEVE THAT THE
REGISTERED ENTERPRISE HAS VIOLATED ITS REGISTRATION
TERMS AND CONDITIONS, THE IPA SHALL SUSPEND THE
AVAILMENT OF INCENTIVES UNTIL PROVEN OTHERWISE:
PROVIDED, THAT FOR PROJECTS UNDER SECTION 298(C), THE
CONCERNED IPA SHALL RECOMMEND TO THE FIRB THE
SUSPENSION OF ITS AVAILMENT OF INCENTIVES.

“IN CASE OF CANCELLATION OF THE CERTIFICATE OF
REGISTRATION, THE CONCERNED IPA MAY, IN APPROPRIATE
CASES, REQUIRE THE PAYMENT OF TAXES, CUSTOMS DUTIES AND
ANY APPLICABLE PENALTIES THEREON TO THE APPROPRIATE
AGENCY, AND IMPOSE ADDITIONAL FINES AND PENALTIES.

“FOR THIS PURPOSE, THE IPAS SHALL PREPARE A SCHEDULE
OF FEES, FINES AND PENALTIES TO BE IMPOSED ON ERRING
REGISTERED ENTERPRISES DEPENDING ON THE GRAVITY OF THE
VIOLATION INCURRED IN ADDITION TO THE FINES AND
PENALTIES IMPOSABLE UNDER THIS CODE.

“IN MERITORIOUS CASES, THE IPA MAY WAIVE, CONDONE OR
REDUCE FINES OR PENALTIES IMPOSED ON REGISTERED
ENTERPRISES BY THE IPAS: PROVIDED, THAT THE MINIMUM
COMPROMISE RATE, IN CASE OF REDUCTION, SHALL NOT BE LESS
THAN FORTY PERCENT (40%) OF THE BASIC ASSESSED FINES OR
PENALTIES.”

“SEC. 312. STRUCTURAL ADJUSTMENT FUND. - THE
FOLLOWING AMOUNTS SHALL BE APPROPRIATED TO
COMPENSATE WORKERS THAT MAY BE DISPLACED BY THE

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25
26

28
29
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RATIONALIZATION OF FISCAL INCENTIVES TO IMPROVE
EMPLOYABILITY OF WORKERS:

“(1) THE AMOUNT OF FIVE HUNDRED MILLION PESOS
(P500,000,000) SHALL BE APPROPRIATED ANNUALLY, IN ADDITION
TO ANY ADJUSTMENT FUND APPROPRIATED UNDER THE BUDGET
OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, TO
PROVIDE TARGETED CASH GRA‘ OR OTHER SUPPORT
PROGRAMS TO DISPLACED WORKERS OF FIRMS THAT MAY BE
AFFECTED BY THE RATIONALIZATION OF FISCAL INCENTIVES;

“Q) THE AMOUNT OF FIVE HUNDRED MILLION PESOS
(500,000,000) SHALL BE APPROPRIATED ANNUALLY TO PROVIDE
TARGETED TRAININGS TO DISPLACED WORKERS OF FIRMS THAT
MAY BE AFFECTED BY THE RATIONALIZATION OF FISCAL
ENTIVES;

“(3) THE AMOUNT OF FIVE BILLION PESOS (P5,000,000,000)
SHALL BE ALLOCATED ANNUALLY FOR THE SKILLS UPGRADE
PROGRAM OF THE IT-BPO INDUSTRY. THE FUND SHALL BE
SOLELY USED TO PAY FOR FORMAL ACADEMIC OR TRAINING
PROGRAMS OF ACCREDITED PRIVATE OR PUBLIC SCHOOLS AND
TRAINING CENTERS; AND

“(4) THE AMOUNT OF FIFTEEN BILLION PESOS
(P15,000,000,000), IN ADDITION TO ANY ADJUSTMENT FUND
APPROPRIATED UNDER THE BUDGET OF PERTINENT
GOVERNMENT DEPARTMENTS/AGENCIES, = SHALL BE
APPROPRIATED FOR THE DEVELOPMENT OF INFRASTRUCTURE
SURROUNDING AND WITHIN THE AREAS/LOCALITIES OF SPECIAL
ECONOMIC ZONES AND FREEPORTS TO BE AFFECTED BY THIS
ACT. THIS SUBSIDY SHALL LIKEWISE BE UTILIZED TO SUPPORT
RESEARCH AND DEVELOPMENT; COSTS OF POWER, WATER AND
OTHER UTILITIES; LEASE OF PROPERTIES; AND OTHER
ECONOMIC ACTIVITIES RELEVANT
TO DEVELOPING THE ABOVEMENTIONED AREAS/LOCALITIES.

“PROVIDED, THAT RELEASES TO THE INVESTMENT
PROMOTION AGENCIES SHALL BE GOVERNED BY IMPLEMENTING

N’

59


GUIDELINES TO BE PROMULGATED BY THE DEPARTMENT OF
FINANCE AND THE DEPARTMENT OF BUDGET AND MANAGEMENT.

“PROVIDED, FURTHER, THAT EARMARKING FOR THESE
FUNDS IN THIS SECTION SHALL BE TERMINATED FIVE (5) YEARS
ABTER THE EFFECTIVITY OF THIS AC

“SEC. 313. ENHANCED TAX EXPENDITURE FUND SYSTEM. - ALL
INTERNAL REVENUE TAX AND DUTY OBLIGATIONS OF
GOVERNMENT-OWNED AND/OR CONTROLLED CORPORATIONS
SHALL BE CHARGEABLE TO THE TAX EXPENDITURE FUND OF THE
GOVERNMENT UPON THE ESTABLISHMENT AND
IMPLEMENTATION OF AN ENHANCED TAX EXPENDITURE FUND
SYSTEM THAT GRANTS TAX SUBSIDY WITHIN THIRTY (30) DAYS
FROM THE FILING OF APPLICATION WITH THE FIRB.”

“SEC. 314.THE NAME OF RECIPIENTS OF INCENTIVES AND
THE AMOUNT OF INCENTIVES AVAILED SHALL BE REPORTED BY
THE INVESTMENT PROMOTION AGENCIES ANNUALLY TO
CONGRESS. THE REPORT SHALL BE MADE AVAILABLE TO THE
PUBLIC.”

SEC. 35. Title XIII of the National Internal Revenue Code of 1997, as amended, is hereby
retitled as Title XIV.

SEC. 36. Title XIV of the National Internal Revenue Code of 1997, as amended, is hereby
retitled as Title XV.

SEC. 37. Amendatory Clause. —

(a) To ensure that the DOF, NEDA and DTI are represented in the Governing Boards of
all IPAS, where the DOF shall automatically serve as Co-chair, and DTI and NEDA as
members, pursuant to Section 299 of this Act, the following provisions, among others, are
amended accordingly:

(1) Article 4 of Executive Order No. 226, as amended, entitled “The Omnibus
Investments Code of 1987”;

(2) Sections 9 and 13(c) of Republic Act No. 7227, _ entitled
“An Act Accelerating the Conversion of Military Reservations into Other Productive Uses,
Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds

Therefor and for Other Purposes”;

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a
28
29
30
31
32
3B

(8) Section 3 of Executive Order No. 80, series of 1993, entitled “Authorizing the
Establishment of the Clark Development Corporation as the Implementing Arm of the Bases
Conversion and Development Authority for the Clark Special Economic Zone, and Directing
all Heads of Departments, Bureaus, Offices, Agencies and Instrumentalities of Government to
Support the Program”;

(4) Section 6 of Executive Order No. 132, series of 2002, entitled “Authorizing the
Creation of the Poro Point Management Corporation as the Implementing Arm of the Bases
Conversion Development Authority Over the Poro Point Special Economic and Freeport Zone
and Renaming the John Hay Poro Point Development Corporation as the John Hay
Management Corporation”;

(8) Section 9 of Republic Act No. 7903, entitled “An Act Creating a Special Economic
Zone and Freeport in the City of Zamboanga Creating for this Purpose the Zamboanga City
Special Economic Zone Authority, Appropriating Funds Therefor, and for Other Purposes”;

(6) Section 14 of Republic Act No. 9728, entitled “An Act Converting the Bataan
Economic Zone Located in the Municipality of Mariveles, Province of Bataan, into the Freeport
Area of Bataan (FAB), Creating for this Purpose the Authority of the Freeport Area of Bataan
(AFAB), Appropriating Funds Therefor and for Other Purposes”;

(7) Section 65 of Republic Act No. 9593, entitled “An Act Declaring a National Policy
for Tourism as an Engine of Investment, Employment, Growth and National Development, and
Strengthening the Department of Tourism and its Attached Agencies to Effectively and
Efficiently Implement that Policy, and Appropriating Funds Therefor”;

(8) Section 15 of Republic Act No. 9490, entitled “An Act Establishing the Aurora
Special Economic Zone in the Province of Aurora, Creating for the Purpose the Aurora Special
Economic Zone Authority, Appropriating Funds Therefor and for Other Purposes”, as amended
by Republic Act No. 10083;

(9) Section 7 of Republic Act No. 7922, entitled “An Act Establishing a Special Economic
Zone and Freeport in the Municipality of Santa Ana and the Neighboring Islands in the
Municipality of Aparri, Province of Cagayan, Providing Funds Therefor, and for Other
Purposes”;

(10) Section 6 of Presidential Decree No. 538, entitled “Creating and Establishing the
PHIVIDEC Industrial Authority and Making it a Subsidiary Agency of the Philippine Veterans
Investment Development Corporation, Defining its Powers, Functions and Responsibilities,

and for Other Purposes,” as amended by Executive Order No. 1031, series of 1985; and

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"7
18
19
20
21

2
23

24
25
26
ar
28
29
30
3
32
33

(11) Section 11 of Republic Act No. 7916, entitled “An Act Providing for the Legal
Framework and Mechanisms for the Creation, Operation, Administration, and Coordination of
Special Economic Zones in the Philippines, Creating for this Purpose, the Philippine Economic
Zone Authority (PEZA), and for Other Purposes”

(b) The following laws are hereby amended to mandate all internal revenue tax and duty

obligations of the relevant entities be chargeable to the Tax Expenditure Fund (TEF) pursuant
to Section 313 of this Act:

(1) Section 18 of Republic Act No. 7884, entitled “An Act Creating the National Dairy
Authority to Accelerate the Development of the Dairy Industry in the Philippines, Providing
for a Dairy Development Fund, and for Other Purposes”;

(2) Section 8 of Republic Act No. 7903, entitled “An Act Creating Special Economic
Zone and Freeport in the City of Zamboanga for this Purpose the Zamboanga City Special
Economic Zone Authority, Appropriating Funds Therefor, and for Other Purpose”;

(3) Section 12(a) of Republic Act No. 10083, entitled “An Act Amending Republic Act
‘No. 9490, Otherwise Known as the ‘Aurora Special Economic Zone Act of 2007” ";

(4) Sections 29, 57, 74, 95(c) of Republic Act «No. 9593,
entitled “An Act Declaring Tourism as Engine of Investment, Employment, Growth and
National Development and Strengthening the Department of Tourism or Tourism Act of 2009”;

(5) Section 10 of Presidential Decree No. 538, entitled “Creating and Establishing the
PHIVIDEC Industrial Authority and Making it a Subsidiary Agency of the Philippine Veterans
Investment Development Corporation, Defining its Powers, Functions and Responsibilities,
and for Other Purposes”;

(6) Section 16(a)(b) of Republic Act No, 9497, entitled “An
Act Creating the Civil Aviation Authority of the Philippines, Authorizing the Appropriation of
Funds Therefor, and for Other Purposes”;

(7) Section 14 of Republic Act No. 7354, entitled “An Act Creating the PI

Corporation, Defining its Powers, Functions and Responsibilities, Providing for Regulation of

ippine Postal

the Industry and for Other Purposes Connected Therewith”;
(8) Sections 8 and 14 of Presidential Decree No. 269, entitled “Creating the National

Electrification Administration as a Corporation, Prescribing its Powers and Activi
Appropriating the Necessary Funds Therefore and Declaring a National Policy Objective for
the Total Electrification of the Philippines on an Area Coverage Service Basis, the

Organization, Promotion and Development of Electric Cooperatives to Attain the Said

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20
21
2
B
4
25
26
2
28
29
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31
32

Objective, Prescribing Terms and Conditions for their Operations, the Repeal of Republic Act
No. 6038, and for Other Purposes”;

(9) Sections 2 and 19 of Republic Act No. 9679, entitled “An Act Amending the Home
Development Mutual Fund, Otherwise Known as the Pag-IBIG Fund”;

(10) Section 17(c) under Section 8 of Republic Act No. 9576, entitled “An Act
Increasing the Maximum Deposit Insurance Coverage, and in Connection Therewith, to
Strengthen the Regulatory and Administrative Authority, and Financial Capability of the
Philippine Deposit Insurance Corporation (PDIC), Amending for this Purpose Republic Act
Numbered Three Thousand Five Hundred Ninety-One, as Amended, Otherwise Known as the
PDIC Charter and for Other Purposes”;

(11) Section 13 of Republic Act No. 7820, entitled “An Act Creating the Partido
Development Administration, Defining its Powers and Functions, Providing Funds Therefor,
and for Other Purposes”;

(12) Section 5(j) of Republic Act No. 9510, entitled “An Act Establishing the Credit
Information System and for Other Purposes”;

(13) Section 13(e) of Presidential Decree No. 857, entitled “Providing for the
Reorganization of Port Administrative and Operation Functions in the Philippines, Revising
Presidential Decree No. 505 dated July 11, 1974, Creating the Philippine Port Authority, by
Substitution, and for Other Purposes”;

(14) Section 19 of Republic Act No. 6847, entitled “An Act Creating and Establishing
the Philippine Sports Commission, Defining its Powers, Functions, and Responsibilities,
Appropriating Funds Therefor, and for Other Purposes”;

(15) Section 8(a(b) and Section 13 of Republic Act No. 6395, entitled “An Act Revising
the Charter of the National Power Corporation”; and

(16) Section 21 of Republic Act No. 7306, entitled “An Act Providing for the
Establishment of the People’s Television Network, Inc., Defining its Powers and Functions,
Providing for its Sources of Funding and for Other Purposes.”

SEC. 38. Repealing Clauses. ~

(a) The tax treatment provisions of entities covered by the following franchise laws are
hereby amended or repealed effective two (2) years from the implementation of this Act:
Provided, That the tax treatment provisions of entities covered by franchise laws pertaining to

energy and telecommunications shall be deferred for an additional two (2) years:

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2B
4
25
26
2
28
29
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31

(1) Section 9 of Republic Act No. 7953, entitled “An Act Amending Republic Act
Numbered Sixty-Six Hundred Thirty-Two, entitled “An Act Granting the Philippine Racing
Act, Inc., a Franchise to Operate and Maintain a Race Track for Horse Racing in the Province
of Rizal, and Extending the Said Franchise by Twenty-five (25) Years From the Expiration of
the Term Thereof *";

(2) Section 12 of Republic Act No. 8407, entitled “An Act Amending Republic Act
Numbered Sixty-Six Hundred Thirty-One, entitled ‘An Act Granting Manila Jockey Club, Inc.,
a Franchise to Construct, Operate and Maintain a Race Track for Horse Racing in the City of
Manila or any Place Within the Provinces of Bulacan, Cavite or Rizal and Extending the Said
Franchise by Twenty-five (25) Years From the Expiration of the Term Thereof *”;

(8) Section 9 of — Republic Act. No. 8298, entitled “An
Act Amending Republic Act. ~—- Numbered —Seventy-Nine_—- Hundred
Seventy-Eight, entitled ‘An Act Granting the Metro Manila Turf Club, Inc., a Franchise to
Construct, Operate and Maintain a Racetrack for Horse Racing in the City of Kalookan’ ”; and

(4) Section 12 of Republic Act No. 8446, entitled “An Act Granting the Fil-Asia Racing
Club a Franchise to Construct, Operate and Maintain a Racetrack for Horse Racing in Rizal or
Tarlac, or Pampanga or Batangas or Quezon City”,

(b) The provisions of the following laws, including the tax incentives, that are
inconsistent with this Act are hereby amended or repealed effective two (2) years from the
implementation of this Act: Provided, That the tax treatment provisions of entities covered by
special laws pertaining to energy, agriculture, and telecommunications shall be deferred for an
additional two (2) years:

(1) Section 37 of Republic Act No. 6848, entitled “An Act Providing for the 1989
Charter ofthe Al-Amanah Islamic Investment Bank of the Philippines, Authorizing its Conduct
of Islamic Banking Business, and Repealing for this Purpose Presidential Decree Numbered
Two Hundred and Sixty-Four as Amended by Presidential Decree Numbered Five Hundred
and Forty-Two”;

(2) Section 17 of Republic Act No. 7906, entitled “An Act Providing for the Regulation
of the Organization and Operations of Thrift Banks, and for Other Purposes”;

(8) Section 15 of Republic Act No. 7353, entitled “An Act Providing for the Creation,
Organization and Operation of Rural Banks, and for Other Purposes”;


27
28
29
30
31
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33

(4) Book I, Title Ill, Article 39(A), (B), (C), (D), (E), (G), (I) and (J); Title IV, Article
40; Book III, Articles 59, 60, 61; Book IV Article 69; Book VI, Articles 77 and 78 of Executive
Order No. 226, series of 1987, entitled “The Omnibus Investments Code of 1987";

(5) Section | of Republic Act No. 7918, entitled “An Act Amending Article 39, Title III
of Executive Order No. 226, Otherwise Known as the Omnibus Investments Code of 1987, as
Amended, and for Other Purposes”;

(6) Articles 62, 63, 64, 65, 66, 67, and 69 of Republic Act No. 8756, entitled “An Act
Providing for the Terms, Conditions and Licensing Requirements of Regional or Area
Headquarters, Regional Operating Headquarters, Regional Warehouses of Multinational
Companies, Amending for the Purpose Certain Provisions of Executive Order No. 226,
Otherwise Known as the Omnibus Investment Code of 1987”;

(7) Executive Order No. 22, series of 2017, amending Executive Order No. 70, series of
2012 and Executive Order No. 528, series of 2006 and Executive Order No. 313, series of 2004,
entitled “Reducing the Rates of Duty on Capital Equipment, Spare Parts and Accessories
Imported by Board of Investments - Registered New and Expanding Enterprises”;

(8) Section 12 of Republic Act No. 8047, entitled “An Act Providing for the
Development of the Book Publishing Industry Through the Formulation and Implementation
of a National Book Policy and a National Book Development Plan”;

(9) Section 17(1) to (8) insofar as tax exemption and/or VAT zero-rating on domestic
merchandise is concerned, and Section 18(a), (b), (c), and (f) of Presidential Decree No. 66,
entitled “Creating the Export Processing Zone Authority and Revising Republic Act No. 5490”;

(10) Section 4(e) and (£), insofar as tax exemption and/or VAT zero-rating on domestic
merchandise is concerned, of Republic Act No. 7903, entitled “An Act Creating Special
Economic Zone and Freeport in the City of Zamboanga and Establishing for this Purpose the
Zamboanga City Special Economic Zone Authority, Appropriating Funds Therefor, and for
Other Purposes”;

(11)Section 4(b)(c), insofar as._—stax exemption and/or: VAT.
zero-rating on domestic merchandise is concerned, of Republic Act No. 7922, entitled “An Act
Establishing a Special Economic Zone and Freeport in the Municipality of Santa Ana and the
Neighboring Islands in the Municipality of Aparri, Province of Cagayan Providing Funds
Therefor, and for Other Purposes”;

(12) Section 4 of Republic Act No. 8748, entitled “An Act Amending Republic Act No
7916, Otherwise Known as the Special Economic Zone Act of 1995”;

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19
20
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26
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(13) Sections 23 and 24 of Republic Act No. 7916, entitled “An Act Providing for the
Legal Framework and Mechanisms for the Creation, Operation, Administration, and

Coordination of Special Economic Zones in the Philippines, Creating for the Purpose the

Philippine Economic Zone Authority (PEZA), and for Other Purposes

(14)Section 1 of Republic Act No. 9400, amending Section 12(b) of Republic Act No.
7227, insofar as tax exemption and VAT zero-rating of domestic merchandise and capital
equipment are concerned, Section 12(c), Section 2 amending Section 15, second, third and last
paragraph of Republic Act No. 7227, Section 3, first and second paragraph; Sections 4 and 5
entitled “An Act Amending Republic Act No. 7227, as Amended, Otherwise Known as the
Bases Conversion and Development Act of 1982, and for Other Purposes”;

(15) Section 1 of Executive Order No. 619, entitled “Creating and Designating Special
Economic Zones Pursuant to Republic Act No. 7916, as Amended by Republic Act No. 8784,
in Relation to Republic Act No. 7227, as Amended by Republic Act No. 9400, Inside the Clark
Freeport Zone”;

(16) Sections 5, 6, 7, 8, and 9 of Republic Act No. 9490, entitled “An Act Establishing
the Aurora Special Economic Zone in the Province of Aurora, Creating for the Purpose the
Aurora Special Economic Zone Authority, Appropriating Funds Therefor and for Other
Purposes”;

(17) Sections 3(e)(f)(h) and 4 of Republic Act No. 10083, entitled “An Act Amending
Republic Act No. 9490”;

(18) Section 4(f), insofar as tax exemption and/or value-added tax or VAT zero-rating
on domestic merchandise and capital equipment are concerned, and Sections 5, 6, and 10 of
Republic Act No. 9728, entitled “An Act Converting the Bataan Economic Zone Located in
the Municipality of Mariveles, Province of Bataan, into the Freeport Area of Bataan (FAB),
Creating for this Purpose the Authority of the Freeport Area of Bataan (AFAB), Appropriating
Funds Therefor and for Other Purposes”;

(19) Section 36(e) and (f) of Presidential Decree No. 705, entitled “Revising PD No. 389,
Otherwise Known as the Forestry Reform Code of the Philippines”;

(20)Section (b)(1)(c) of Republic Act No. 9003, entitled “An Act Providing for an
Ecological Solid Waste Management Program, Creating the Necessary Institutional

Mechanisms and Incentives, Declaring Certain Acts Prohibited and Providing Penalties,

Appropriating Funds Therefor and for Other Purposes”;

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(21) Section 26(a)(1)(3) of Republic Act No. 9275, entitled “An Act Providing for
Comprehensive Water Quality Management and for Other Purposes”;

(22) Sections 16 and 17 of Republic Act No. 7844, entitled “An Act to Develop Exports
as a Key Towards the Achievement of the National Goals Towards the Year 2000”;

(23) Section 13 of Republic Act No. 10817, entitled “An Act Instituting the Philippine
Halal Export Development and Promotion Program, Creating for the Purpose the Philippine
Halal Export Development and Promotion Board, and for Other Purposes”;

(24)Section 14 of Republic Act No. 8423, entitled “An Act Creating the Philippine
Institute of Traditional and Alternative Health Care (PITAHC) to Accelerate the Development
of Traditional and Alternative Health Care in the Philippines, Providing for a Traditional and
Alternative Health Care Development Fund and for Other Purposes”;

(25) Section 20(4)(1) to (5) of Republic Act No. 10884, entitled “An Act Strengthening
the Balanced Housing Development Program, Amending for the Purpose Republic Act No.
7279, as Amended, Otherwise Known as the Urban Development and Housing Act of 1992”;

(26) Republic Act No. 7718, entitled “An Act Amending Certain Sections of Republic
Act No. 6957, Entitled ‘An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes’

(27) Section 6(c)(d)(f) and Sections 7 and 8 of Republic Act No. 7103, entitled “An Act
to Strengthen the Iron and Stee! Industry and Promote Philippine Industrialization and for Other

Purposes”;

(28) Section 3(a) to (d) and (h) of Republic Act No. 8502, entitled “An Act to Promote
the Development of the Jewelry Manufacturing Industry, Providing Incentives Therefor and
for Other Purposes”;

(29) Section 5(a)(b) of Republic Act No. 10771, entitled “An Act Promoting the Creation
of Green Jobs, Granting Incentives and Appropriating Funds Therefor”;

(30) Sections 9(h)(10) of Republic Act No. 9501, entitled “Promoting Entrepreneurship
by Strengthening Development and Assistance Programs to Micro, Small and Medium Scale
Enterprises Amending Republic Act No. 6977, Otherwise Known as the Magna Carta For
‘Small Enterprises”;

(31) Section 7 of Republic Act No. 9178, entitled “An Act to Promote the Establishment
of Barangay Micro Business Enterprises (BMBES), Providing Incentives and Benefits
Therefor, and for Other Purposes”;

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(32) Chapter XV, Section 83; Chapter XVI, Sections 90, 91, 92, and 93 of Republic Act
No. 7942, entitled “An Act Instituting a New System of Mineral Resources Exploration,
Development, Utilization and Conservation”;

(33) Chapter Il, Section 4 and Chapter VIII, Section 19 of Republic Act No. 9295, entitled
“An Act Promoting the Development of Philippine Domestic Shipping, Shipbuilding, Ship
Repair and Ship Breaking, Ordaining Reforms in Government Policies Towards Shipping in
the Philippines and for Other Purposes”;

(84) Section 6 of Republic Act No. 7471, as amended, entitled “An Act to Promote the
Development of Philippine Overseas Shippin;

(35) Sections 86, 88, and 95(a) and (b) of Republic Act No. 9593, entitled “An Act

Declaring a National Policy for Tourism as an Engine of Investment, Employment, Growth

and National Development, and Strengthening the Department of Tourism and its Attached
Agencies to Effectively and Efficiently Implement That Policy, and Appropriating Funds
Therefor”;

(36) Section 8, insofar as investment incentives are concerned, of Republic Act No.
10816, entitled “An Act Providing for the Development and Promotion of Farm Tourism in the
Philippines”;

(37) Section 8 of Presidential Decree No. 1491, Amending Section 8 of Presidential
Decree No. 538 (Philippine Veterans Investment Development Corporation);

(38) Section 8, insofar as tax exemption and VAT zero-rating of domestic merchandise
are concemed, and Section 9 of Presidential Decree No. 538, entitled “Creating and
Establishing the PHIVIDEC Industrial Authority and Making it a Subsidiary Agency of the
Philippine Veterans Development Corporation, Defining its Powers, Functions and
Responsibilities, and for Other Purposes”;

(39)Section I(1.1) of Executive Order No. 97-A, series of 1993, entitled “Further
Clarifying the Tax and Duty-Free Privilege Within the Subic Special Economic and Free Port
Zone”;

(40)Sections 4(f) and 5(c)(k), insofar as tax exemption and/or VAT zero-rating on
domestic merchandise is concerned, and Section 12(b) of Republic Act No. 10083, entitled
“An Act Amending Republic Act No. 9490, Otherwise Known as the Aurora Special Economic
Zone Act of 2007”;

(41)Section 5(5.1) and (5.2) of Executive Order No. 290, series of 2004, entitled
“Implementing the Natural Gas Vehicle Program for Public Transport”;

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(42)Sections 18 and 20 of Republic Act No. 6847, entitled “An Act Creating and
Establishing the Philippine Sports Commission, Defining its Powers, Functions, and
Responsibilities, Appropriating Funds Therefor, and for Other Purposes”;

(43) Section 22 of Republic Act No. 9337, entitled “An Act Amending Sections 27, 28,
34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237, and
288 of the National Internal Revenue Code of 1997, as Amended, and for Other Purposes”;

(44) Sections 1(6) and 2 of Presidential Decree No. 776, entitled “Repealing All Laws,
Acts, Decrees, Orders and Ordinances, Granting Exemptions from Taxes, Duties, Fees,
Imposts and Other Charges Under Certain Exceptions and Creating a Fiscal Incentives Board”;

(45) Section 2 of Presidential Decree No. 1931, series of 1984, entitled “Directing the
Rationalization of Duty and Tax Exemption Privileges Granted to Government-Owned ot -
Controlled Corporations and All Other Units of Government”;

(46) Section 1(c) and (d) of Executive Order No. 93, series of 1986, entitled
“Withdrawing All Tax and Duty Incentives, Subject to Certain Exceptions, Expanding the
Powers of the Fiscal Incentives Review Board and for Other Purposes”; and

(47) Section 1(a) and (b) of Presidential Decree No. 1955, entitled “Withdrawing,
Subject to Certain Conditions, the Duty and Tax Privileges Granted to Private Business
Enterprises and/or Persons Engaged in Any Economic Activity and for Other Purposes”.

(c) Memorandum Order No. 23, series of 1986, entitled “Expanding the Membership of
the Fiscal Incentives Review Board”, is hereby repealed.

(d) In General. — All other laws, decrees, executive orders, rules and regulations or parts
thereof which are contrary to or inconsistent with this Code are hereby repealed, amended or
modified accordingly.

SEC. 39. Implementing Rules and Regulations, ~ Within ninety (90) days from the
effectivity of this Act, the Secretaries of Finance and Trade and Industry shall, upon
consultations with the Commissioner of Internal Revenue and the Board of Investments and
other Investment Promotion Agencies, promulgate the necessary rules and regulations for its
effective implementation.

SEC. 40. Separability Clause. — If any clause, sentence, paragraph, or part of this Code
shall be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not
affect, impair, or invalidate the remainder of said Code, but shall be confined in its operation

to the clause, sentence, paragraph, or part thereof directly involved in the controversy.

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SEC. 41. Effectivity. ~ This Act shall take effect on January 1, 2020 following its
complete publication in the Official Gazette or in a newspaper of general circulation.

Approved,

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