Section 1. 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%) 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: Provided, That effective January 1, 2009, the
rate of income tax shall be thirty percent (30%).
"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.
"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 good 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 goods 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. - Proprietary educational institutions and
hospitals which are non-profit shall pay a tax of ten percent (10%) on
their taxable income except those covered by Subsection (D) hereof:
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 Subdection (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), or the Commission
on Higher Education (CHED), or the Technical Education and Skills
Development Authority (TESDA), as the case may be, in accordance with
existing laws and regulations.
"(C) Government-owned or
-Controlled Corporations, Agencies or Instrumentalities. - The
provisions of existing special or general laws to the contrary
notwithstanding, all corporations, agencies, or instrumentalities owned
or controlled by the Government, except the Government Service and
Insurance System (GSIS), the Social Security System (SSS), the
Philippine Health Insurance Corporation (PHIC), and the Philippine
Charity Sweepstakes Office (PCSO), shall pay such rate of tax upon
their taxable income as are imposed by this Section upon corporations
or associations engaged in a similar business, industry, or activity.
"(D) Rate of Tax on Certain
Passive Incomes. -
"(1)
Interest from Deposits and Yield or any other Monetary Benefit from
Deposit Substitutes and from Trust Funds and Similar Arrangements, and
Royalties. - A final tax at the rate of twenty percent (20%) is hereby
imposed upon the amount of interest on currency bank deposit and yield
or any other monetary benefit from deposit substitutes and from trust
funds and similar arrangements received by domestic corporations, and
royalties, derived from sources within the Philippines: Provided,
however, That interest income derived by a domestic 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 1/2%) of such interest income.
"(2) Capital Gains from the Sale
of Shares of Stock Not Traded in the Stock Exchange. - A final tax at
the rates prescribed below shall be imposed on net capital gains
realized during the taxable year from the sale, 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%
"Amount in excess of P100,000
....................... 10%
"(3) Tax on Income Derived under
the Expanded Foreign Currency Deposit System. - Income derived by a
depository bank under the expanded foreign currency deposit system from
foreign currency transactions with nonresidents, offshore banking units
in the Philippines, local commercial banks including branches of
foreign banks that may be authorized by the Bangko Sentral ng Pilipinas
(BSP) to transact business with foreign currency deposit system units
and other depository banks under the expanded foreign currency deposit
system shall be exempt from all taxes, except net income from such
transactions as may be specified by the Secretary of Finance, upon
recommendation by the Monetary Board to be subject to the regular
income tax payable by banks: Provided, however, That interest income
from foreign currency loans granted by such depository banks under said
expanded system to residents other than offshore banking units in the
Philippines or other depository banks under the expanded system shall
be subject to a final tax at the rate of ten percent (10%).
"Any
income of nonresidents, whether individuals or corporations, from
transactions with depository banks under the expanded system shall be
exempt from income tax.
"(4) Intercorporate Dividends. -
Dividends received by a domestic corporation from another domestic
corporation shall not be subject to tax.
"(5) Capital Gains Realized from
the Sale, Exchange or Disposition of Lands and/or Buildings. - A final
tax of six percent (6%) is hereby imposed on the gain presumed to have
been realized on the sale, exchange or disposition of lands and/or
buildings which are not actually used in the business of a corporation
and are treated as capital assets, based on the gross selling price or
fair market value as determined in accordance with Section , 6(E) of
this Code, whichever is higher, of such lands and/or buildings.
"(E) Minimum Corporate Income
Tax on Domestic Corporations. -
"(1)
Imposition of Tax. - A minimum corporate income tax of two percent (2%)
of the gross income as of the end of the taxable year, as defined
herein, is hereby imposed on a corporation taxable under this Title,
beginning on the fourth taxable year immediately following the year in
which such corporation commenced its business operations, when the
minimum income tax is greater than the tax computed under Subsection
(A) of this Section for the taxable year.
"(2) Carry Forward of Excess
Minimum Tax. - Any excess of the minimum corporate income, tax over the
normal income tax as computed under Subsection (A) of this Section shall be carried forward and credited against the normal income tax for
the three (3) immediately succeeding taxable years.
"(3) Relief from the Minimum
Corporate Income Tax Under Certain Conditions. - The Secretary of
Finance is hereby authorized to suspend the imposition of the minimum
corporate income tax on any corporation which suffers losses on account
of prolonged labor dispute, or because of force majeure, or because of
legitimate business reverses.
"The
Secretary of Finance is hereby authorized to promulgate, upon
recommendation of the Commissioner, the necessary rules and regulations
that shall define the terms and conditions under which he may suspend
the imposition of the minimum corporate income tax in a meritorious
case.
"(4) Gross Income Defined. - For
purposes of applying the minimum corporate income tax provided under
Subsection (E) hereof, the term 'gross income' shall mean 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 of the goods sold, plus import duties, freight in
transporting the goods 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, discounts and cost of services. 'Cost
of services' shall mean all direct costs and expenses necessarily
incurred to provide the services required by the customers and clients
including (A) salaries and employee benefits of personnel, consultants
and specialists directly rendering the service and (B) cost of
facilities directly utilized in providing the service such as
depreciation or rental of equipment used and cost of supplies;
Provided, however, That in the case of banks, 'cost of services' shall
include interest expense."
Sec. 2. Section 28(A)(1) and (B)(1) and (5)(b) of the same Code, as
amended, are 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%) 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%).
"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 tbe fiscal year
shall be deemed to have been earned and spent equdly 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).
"(2) Minimum Corporate Income
Tax on Resident Foreign Corporations. - A minimum corporate income tax
of two percent (2%) of gross income, as prescribed under Section 27(E)
of this Code, shall be imposed, under the same conditions, on a
resident foreign, corporation taxable under, paragraph (1) of this
Subsection.
"(3) International Carrier. - An
international carrier doing business in the Philippines shall pay a tax
of two and one-half percent (2 1/2%) on its 'Gross Philippine Billings'
as defined hereunder:
"(a)
International Air Carrier. - 'Gross Philippine Billings' refers to the
amount of gross revenue derived from carriage of persons, excess
baggage, cargo and mail originating from the Philippines in a
continuous and uninterrupted flight, irrespective of the place of sale
or issue and the place of payment of the ticket or passage document:
Provided, That tickets revalidated, exchanged and/or indorsed to
another international airline form part of the Gross Philippine
Billings if the passenger boards a plane in a port or point in the
Philippines: Provided, further, That for a flight which originates from
the Philippines, but transshipment of passenger takes place at any port
outside the Philippines on another airline, only the aliquot portion of
the cost of the ticket corresponding to the leg flown from the
Philippines to the point of transshipment shall form part of Gross
Philippine Billings.
"(b) International Shipping. -
'Gross Philippine Billings' means gross revenue whether for passenger,
cargo or mail originating from the Philippines up to final destination,
regardless of the place of sale or payments of the passage or freight
documents.
"(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) 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
deduction for the tax component thereof (except those activities which
are registered with the Philippine Economic Zone Authority). The tax
shall be collected and paid in the same manner as provided in Section s
57 and 58 of this Code: Provided, That interests, dividends, rents,
royalties, including renumeration for technical services, salaries,
wages, premiums, annuities, emoluments or other fixed or determinable
annual, periodic or casual gains, profits, income and capital gains
received by a foreign corporation during each taxable year from all
sources within the Philippines shall not be treated as branch profits
unless the same are effectively connected with the conduct of its trade
or business in the Philippines.
"(6) 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.
"(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 1/2%)
of such interest income.
"(b) Income Derived under the
Expanded Foreign Currency Deposit System. - Income derived by a
depository bank under the expanded foreign currency deposit system from
foreign currency transactions with nonresidents, offshore banking units
in the Philippines, local commercial banks including branches of
foreign banks that may be authorized by the Bangko Sentral ng Pilipinas
(BSP) to transact business with foreign currency deposit system units
and other depository banks under the expanded foreign currency deposit
system shall be exempt from all taxes, except net income from such
transactions as may be specified by the Secretary of Finance, upon
recommendation by the Monetary Board to be subject to the regular
income tax payable by banks: Provided, however, That interest income
from foreign currency loans granted by such depository banks under said
expanded system to residents other than depository banks under the
expanded system shall be subject to a final tax at the rate of ten
percent (10%).
"Any income of nonresidents,
whether individuals or corporations, from transactions with depository
banks under the expanded system shall be exempt from income tax.
"(c) Capital Gains from Sale of
Shares of Stock Not Traded in the Stock Exchange. - A final tax at the
rates prescribed below 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
P100,000 ....... 10%
"(d) Intercorporate Dividends. -
Dividends received by a resident foreign corporation from a domestic
corporation liable to tax under this Code shall not be subject to tax
under this Title.
"(B) Tax on Nonresident Foreign
Corporation. -
"(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%) 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 5(c): Provided, That effective January 1, 2009, the rate
of income tax shall be thirty percent (30%).
"(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.
"(3) Nonresident Owner or Lessor
of Vessels Chartered by Philippine Nationals. - A nonresident owner or
lessor of vessels shall be subject to a tax of four and one-half
percent (4 1/2%) of gross rentals, lease or charter fees from leases or
charters to Filipino citizens or corporations, as approved by the
Maritime Industry Authority.
"(4) Nonresident Owner or Lessor
of Aircraft, Machineries and Other Equipment. - Rentals, charters and
other fees derived by a nonresident lessor of aircraft, machineries and
other equipment shall be subject to a tax of seven and one-half percent
(7 1/2%) of gross rentals or fees.
"(5) Tax on Certain Incomes
Received by a Nonresident Foreign Corporation. -
"(a)
Interest on Foreign Loans. - A final withholding tax at the rate of
twenty percent (20%) is hereby imposed on the amount of interest on
foreign loans contracted on or after August 1, 1986;
"(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 Philippines equivalent to twenty
percent (20%), 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, the credit against the tax due shall be
equivalent to fifteen percent (15%), which represents the difference
between the regular income tax 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
rates prescribed below 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
P100,000............... 10%"
Sec. 3. Section 34(B)(1) of the same Code, 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 other than under Subsection (M) hereof, in computing
taxable income subject to income tax under Section s 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. -
"(a)
In General. - There shall be allowed as deduction from gross income all
the ordinary and necessary expenses paid or incurred during the taxable
year in carrying on or which are directly attributable to, the
development, management, operation and/or conduct of the trade,
business or exercise of a profession, including:
"(i)
A reasonable allowance for salaries, wages, and other forms of
compensation for personal services actually rendered, including the
grossed- up monetary value of fringe benefit furnished or granted by
the employer to the employee: Provided, That the final tax imposed
under Section 33 hereof has been paid;
"(ii) A reasonable allowance for
travel expenses, here and abroad, while away from home in the pursuit
of trade, business or profession;
"(iii)A reasonable allowance for
rentals and/or other payments which are required as a condition for the
continued use or possession, for purposes of the trade, business or
profession, of property to which the taxpayer has not taken or is not
taking title or in which he has no equity other than that of a lessee,
user or possessor;
"(iv) A reasonable allowance for
entertainment, amusement and recreation expenses during the taxable
year, that are directly connected to the development, management and
operation of the trade, business or profession of the taxpayer, or that
are directly related to or in furtherance of the conduct of his or its
trade, business or exercise of a profession not to exceed such ceilings
as the Secretary of Finance may, by rules and regulations prescribe,
upon recommendation of the Commissioner, taking into account the needs
as well as the special circumstances, nature and character of the
industry, trade, business, or profession of the taxpayer: Provided,
That any expense incurred for entertainment, amusement or recreation
that is contrary to law, morals, public policy or public order shall in
no case be allowed as a deduction.
"(b) Substantiation
Requirements. - No deduction from gross income shall be allowed under
Subsection (A) hereof unless the taxpayer shall substantiate with
sufficient evidence, such as official receipts or other adequate
records:
(i)
the amount of the expense being deducted; and
(ii) the direct connection or
relation of the expense being deducted to the development, management,
operation and/or conduct of the trade, business or profession of the
taxpayer.
"(c) Bribes, Kickbacks and Other
Similar Payments. - No deduction from gross income shall be allowed
under Subsection (A) hereof for any payment made, directly or
indirectly, to an official or employee of the national government, or
to an official or employee of any local government unit, or to an
official or employee of a government-owned or-controlled corporation,
or to an official or employee or representative of a foreign
government, or to a private corporation, general professional
partnership, or a similar entity, if the payment constitutes a bribe or
kickback.
"(2) Expenses Allowable to
Private Educational Institutions. - In addition to the expenses
allowable as deductions under this Chapter, a private educational
institution; referred to under Section 27(B) of this Code, may at its
option elect either: (a) to deduct expenditures otherwise considered as
capital outlays of depreciable assets incurred during the taxable year
for the expansion of school facilities, or (b) to deduct allowance for
depreciation thereof under 8ubsection (F) hereof.
"(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%) of the
interest income subjected to final tax: Provided, That effective
January 1, 2009, the percentage shall be thirty-three percent (33%).
Sec. 4. Section 106 of the same
Code, as amended, is hereby further amended to read as follows:
"Sec.
106. Value-Added Tax on Sale of Goods or Properties. -
"(A)
Rate and Base of Tax. - There shall be levied, assessed and collected
on every sale, barter or exchange of goods or properties, a value-added
tax equivalent to ten percent (10%) of the gross selling price or gross
value in money of the goods or properties sold, bartered or exchanged,
such tax to be paid by the seller or transferor: Provided, That the
President, upon the recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of value-added tax to twelve
percent (12%), after any of the following conditions has been satisfied:
"(i)
Value-added tax collection as a percentage of Gross Domestic product
(GDP) of the previous year exceeds two and four-fifth percent (2 4/5%);
or
"(ii) National government
deficit as a percentage of GDP of the previous year exceeds one and
one-half percent (1 1/2%).
"(1)
The term 'goods or properties' shall mean all tangible and intangible
objects which are capable of pecuniary estimation and shall include:
"(a)
Real properties held primarily for sale to customers or held for lease
in the ordinary course of trade or business;
"(b) The right or the privilege
to use patent, copyright, design or model, plan secret formula or
process, goodwill, trademark, trade brand or other like property or
right;
"(c) The right or the privilege
to use in the Philippines of any industrial, commercial or scientific
equipment;
"(d) The right or the privilege
to use motion picture films, films, tapes and discs; and
"(e) Radio, television,
satellite transmission and cable television time.
"The
term 'gross selling price' means the total amount of money or its
equivalent which the purchaser pays or is obligated to pay to the
seller in consideration of the sale, barter or exchange of the goods or
properties, excluding the value-added tax. The excise tax, if any, on
such goods or properties shall form part of the gross selling price.
"(2)
The following sales by VAT-registered persons shall be subject to zero
percent (0%) rate:
"(a)
Export Sales. - The term 'export sales' means:
"(1)
The sale and actual shipment of goods from the Philippines to a foreign
country, irrespective of any shipping arrangement that may be agreed
upon which may influence or determine the transfer of ownership of the
goods so exported and paid for in acceptable foreign currency or its
equivalent in goods or services, and accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas,(BSP);
"(2) Sale of raw materials or
packaging materials to a nonresident buyer for delivery to a resident
local export-oriented enterprise to be used in manufacturing,
processing, packing or repacking in the Philippines of the said buyer's
goods and paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP):
"(3) Sale of raw materials or
packaging materials to export-oriented enterprise whose export sales
exceed seventy percent (70%) of total annual production;
"(4) Sale of gold to the Bangko
Sentral ng Pilipinas (BSP);
"(5) Those considered export
sales under Executive Order No. 226, otherwise known as the Omnibus
Investment Code of 1987, and other special laws; and
"(6) The sale of goods,
supplies, equipment and fuel to persons engaged in international
shipping or international air transport operations.
"(b) Foreign Currency
Denominated Sale. - The phrase 'foreign currency denominated sale'
means sale to a nonresident of goods, except those mentioned in
Section s 149 and 150, assembled or manufactured in the Philippines for
delivery to a resident in the Philippines, paid for in acceptable
foreign currency and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP).
"(c) Sales to persons or
entities whose exemption under special laws or international agreements
to which the Philippines is a signatory effectively subjects such sales
to zero rate.
"(B) Transactions Deemed Sale. -
The following transactions shall be deemed sale:
"(1)
Transfer, use or consumption not in the course of business of goods or
properties originally intended for sale or for use in the course of
business;
"(2) Distribution or transfer to:
"(a)
Shareholders or investors as share in the profits of the VAT-registered
persons: or
"(b) Creditors in payment of
debt;
"(3) Consignment of goods if
actual sale is not made within sixty (60) days following the date such
goods, were consigned; and
"(4) Retirement from or
cessation of business, with respect to inventories of taxable aoods
existing as of such retirement or cessation.
"(C) Changes in or Cessation of
Status of a VAT-registered Person. - The tax imposed in Subsection (A)
of this Section shall also apply to goods disposed of or existing as of
a certain date if under circumstances to be prescribed in rules and
regulations to be promulgated by the Secretary of Finance, upon
recommendation of the Commissioner, the status of a person as a
VAT-registered person changes or is terminated.
"(D) Sales Returns, Allowances
and Sales Discounts. - The value of goods or properties sold and
subsequently returned or for which allowances were granted by a
VAT-registered person may be deducted from the gross sales or receipts
for the quarter in which a refund is made or a credit memorandum or
refund is issued. Sales discount granted and indicated in the invoice
at the time of sale and the grant of which does not depend upon the
happening of a future event may be excluded from the gross sales within
the same quarter it was given.
"(E) Authority of the
Commissioner to Determine the Appropriate Tax Base. - The Commissioner
shall, by rules and regulations prescribed by the Secretary of Finance,
determine the appropriate tax base incases where a transaction is
deemed a sale, barter or exchange of goods or properties under
Subsection (B) hereof, or where the gross selling price is unreasonably
lower than the actual market value."
Sec. 5. Section 107 of the same
Code, as amended, is hereby further amended to read as follows:
"Sec.
107. Value-Added Tax on Importation of Goods. -
"(A) In General. - There shall
be levied, assessed and collected on every importation of goods a
value-added tax equivalent to ten percent (10%) based on the total
value used by the Bureau of Customs in determining tariff and customs
duties, plus customs duties, excise taxes, if any, and other charges,
such tax to be paid by the importer prior to the release of such goods
from customs custody: Provided, That where the customs duties are
determined on the basis of the quantity or volume of the goods, the
value-added tax shall be based on the landed cost plus excise taxes, if
any: Provided, further, That the President, upon the recommendation of
the Secretary of Finance, shall, effective January 1, 2006, raise the
rate of value-added tax to twelve percent (12%), after any of the
following conditions has been satisfied:
"(i)
Value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2 4/5%);
or
"(ii) National government
deficit as a percentage of GDP of the previous year exceeds one and
one-half percent (1 1/2%).
"(B) Transfer of Goods by
Tax-exempt Persons. - In the case of tax free importation of goods into
the Philippines by persons, entities or agencies exempt from tax where
such goods are subsequently sold, transferred or exchanged in the
Philippines to non-exempt persons or entities, the purchasers,
transferees or recipients shall be considered the importers thereof,
who shall be liable for any internal revenue tax on such importation.
The tax due on such importation shall constitute a lien on the goods
superior to all charges or liens on the goods, irrespective of the
possessor thereof."
Sec. 6. Section 108 of the same
Code, as amended, is hereby further amended to read as follows:
"Sec.
108. Value-added Tax on Sale of Services and Use or Lease of
Properties. -
(A) Rate and Base of Tax. -
There shall be levied, assessed and collected, a value-added tax
equivalent to ten percent (10%) of gross receipts derived from the sale
or exchange of services, including the use or lease of properties:
Provided, That the President, upon the recommendation of the Secretary
of Finance, shall, effective January 1, 2006, raise the rate of
value-added tax to twelve percent (12%), after any of the following
conditions has been satisfied:
(i)
Value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2 4/5%);
or
(ii) National government deficit
as a percentage of GDP of the previous year exceeds one and one-half
percent (1 1/2%).
"The phrase 'sale or exchange of
services' means the performance of all kinds of services in the
Philippines for others for a fee, remuneration or consideration,
including those performed or rendered by construction and service
contractors; stock, real estate, commercial, customs and immigration
brokers; lessors of property, whether personal or real; warehousing
services; lessors or distributors of cinematographic films; persons
engaged in milling, processing, manufacturing or repacking goods for
others; proprietors, operators or keepers of hotels, motels,
rest-houses, pension houses, inns, resorts; proprietors or operators of
restaurants, refreshment parlors, cafes and other eating places,
including clubs and caterers; dealers in securities; lending investors;
transportation contractors on their transport of goods or cargoes,
including persons who transport goods or cargoes for hire and other
domestic common carriers by land relative to their transport of goods
or cargoes; common carriers by air and sea relative to their transport
of passengers, goods or cargoes from one place in the Philippines to
another place in the Philippines; sales of electricity by generation
companies, transmission, and distribution companies; services of
franchise grantees of electric utilities, telephone and telegraph,
radio and television broadcasting and all other franchise grantees
except those under Section 119 of this Code and non-life insurance
companies (except their crop insurances), including surety, fidelity,
indemnity and bonding companies; and similar services regardless of
whether or not the performance thereof calls for the exercise or use of
the physical or mental faculties. The phrase 'sale or exchange of
services' shall likewise include:
"(1)
The lease or the use of or the right or privilege to use any copyright,
patent, design or model plan, secret formula or process, goodwill,
trademark, trade brand or other like property or right;
"(2) The lease or the use of, or
the right to use of any industrial, commercial or, scientific equipment;
"(3) The supply of scientific,
technical, industrial or commercial knowledge or information;
"(4) The supply of any
assistance that is ancillary and subsidiary to and is furnished as a
means of enabling the application or enjoyment of any such property, or
right as is mentioned in subparagraph (2) or any such knowledge or
information as is mentioned in subparagraph (3);
"(5) The supply of services by a
nonresident person or his employee in connection with the use of
property or rights belonging to, or the installation or operation of
any brand, machinery or other apparatus purchased from such nonresident
person;
"(6) The supply of technicai
advice, assistance or services rendered in connection with technical
management or administration of any scientific, industrial or
commercial undertaking, venture, project or scheme;
"(7) The lease of motion picture
films, films, tapes and discs; and
"(8) The lease or the use of or
the right to use radio, television, satellite transmission and cable
television time.
"Lease of properties shall be
subject to the tax herein imposed irrespective of the place where the
contract of lease or licensing agreement was executed if the property
is leased or used in the Philippines.
"The term 'gross receipts' means
the total amount of money or its equivalent representing the contract
price, compensation, service fee, rental or royalty, including the
amount charged for materials supplied with the services and deposits
and advanced payments actually or constructively received during the
taxable quarter for the services performed or to be performed for
another person, excluding value-added tax.
"(B) Transactions Subject to
Zero Percent (0%) Rate. - The following services performed in the
Philippines by VAT-registered persons shall be subject to zero percent
(0%) rate:
"(1)
Processing, manufacturing or repacking goods for other persons doing
business outside the Philippines which goods are subsequently exported,
where the services are paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP);
"(2) Services other than those
mentioned in the preceding paragraph rendered to a person engaged in
business conducted outside the Philippines or to a nonresident person
not engaged in business who is outside the Philippines when the
services are performed, the consideration for which is paid for in
acceptable foreign currency and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
"(3) Services rendered to
persons or entities whose exemption under special laws or international
agreements to which the Philippines is a signatory effectively subjects
the supply of such services to zero percent (0%) rate;
"(4) Services rendered to
persons engaged in international shipping or international air
transport operations, including leases of property for use thereof;
"(5) Services performed by
subcontractors and/or contractors in processing, converting, or
manufacturing goods for an enterprise whose export sales exceed seventy
percent (70%) of total annual production;
"(6) Transport of passengers and
cargo by air or sea vessels from the Philippines to a foreign country;
and
"(7) Sale of power or fuel
generated through renewable sources of energy such as, but not limited
to, biomass, solar, wind, hydropower, geothermal, ocean energy, and
other emerging energy sources using technologies such as fuel cells and
hydrogen fuels.
Sec. 7. Section 109 of the same Code, as amended, is hereby further
amended to read as follows:
"Sec.
109. Exempt Transactions. - (1) Subject to the provisions of subsection
(2) hereof, the following transactions shall be exempt from the
value-added tax:
"(A)
Sale or importation of agricultural and marine food products in their
original state, livestock and poultry of a kind generally used as, or
yielding or producing foods for human consumption; and breeding stock
and genetic materials therefor.
"Products classified under this
paragraph shall be considered in their original state even if they have
undergone the simple processes of preparation or preservation for the
market, such as freezing, drying, salting, broiling, roasting, smoking
or stripping. Polished and/or husked rice, corn grits, raw cane sugar
and molasses, ordinary salt, and copra shall be considered in their
original state;
"(B) Sale or importation of
fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock
and poultry feeds, including ingredients, whether locally produced or
imported, used in the manufacture of finished feeds (except specialty
feeds for race horses, fighting cocks, aquarium fish, zoo animals and
other animals generally considered as pets);
"(C) Importation of personal and
household effects belonging to the residents of the Philippines
returning from abroad and nonresident citizens coming to resettle in
the Philippines: Provided, That such goods are exempt from customs
duties under the Tariff and Customs Code of the Philippines;
"(D) Importation of professional
instruments and implements, wearing apparel, domestic animals, and
personal household effects (except any vehicle, vessel, aircraft,
machinery, other goods for use in the manufacture and merchandise of
any kind in commercial quantity) belonging to persons coming to settle
in the Philippines, for their own use and not for sale, barter or
exchange, accompanying such persons, or arriving within ninety (90)
days before or after their arrival, upon the production of evidence
satisfactory to the Commissioner, that such persons are actually coming
to settle in the Philippines and that the change of residence is bona
fide;
"(E) Services subject to
percentage tax under Title V;
"(F) Services by agricultural
contract growers and milling for others of palay into rice, corn into
grits and sugar cane into raw sugar;
"(G) Medical, dental, hospital
and veterinary services except those rendered by professionals;
"(H) Educational services
rendered by private educational institutions, duly accredited by the
Department of Education (DEPED), the Commission on Higher Education
(CHED), the Technical Education And Skills Development Authority
(TESDA) and those rendered by government educational institutions;
"(I) Services rendered by
individuals pursuant to an employer-employee relationship;
"(J) Services rendered by
regional or area headquarters established in the Philippines by
multinational corporations which act as supervisory, communications and
coordinating centers for their affiliates, subsidiaries or branches in
the Asia-Pacific Region and do not earn or derive income from the
Philippines;
"(K) Transactions which are
exempt under international agreements to which the Philippines is a
signatory or under special laws, except those under Presidential Decree
No. 529;
"(L) Sales by agricultural
cooperatives duly registered with the Cooperative Development Authority
to their members as well as sale of their produce, whether in its
original state or processed form, to non-members; their importation of
direct farm inputs, machineries and equipment, including spare parts
thereof, to be used directly and exclusively in the production and/or
processing of their produce;
"(M) Gross receipts from lending
activities by credit or multi-purpose cooperatives duly registered with
the Cooperative Development Authority;
"(N) Sales by non-agricultural,
non-electric and non-credit cooperatives duly registered with the
Cooperative Development Authority: Provided, That the share capital
contribution of each member does not exceed Fifteen thousand pesos
(P15,000) and regardless of the aggregate capital and net surplus
ratably distributed among the members;
"(O) Export sales by persons who
are not VAT-registered;
"(P) Sale of real properties not
primarily held for sale to customers or held for lease in the ordinary
course of trade or business, or real property utilized for low-cost and
socialized housing as defined by Republic Act No. 7279, otherwise known
as the Urban Development and Housing Act of 1992, and other related
laws, residential lot valued at One million five hundred thousand pesos
(P1,500,000) and below, house and lot, and other residential dwellings
valued at Two million five hundred thousand pesos (P2,500,000) and
below: Provided, That not later than January 31, 2009 and every three
(3) years thereafter, the amounts herein stated shall be adjusted to
their present values using the Consumer Price Index, as published by
the National Statistics Office (NSO);
"(Q) Lease of a residential unit
with a monthly rental not exceeding Ten thousand pesos (P10,000)
Provided, That not later than January 31, 2009 and every three (3)
years thereafter, the amount herein stated shall be adjusted to its
present value using the Consumer Price Index as published by the
National Statistics Office (NSO);
"(R) Sale, importation, printing
or publication of books and any newspaper, magazine, review or bulletin
which appears at regular intervals with fixed prices for subscription
and sale and which is not devoted principally to the publication of
paid advertisements;
"(S) Sale, importation or lease
of passenger or cargo vessels and aircraft, including engine, equipment
and spare parts thereof for domestic or international transport
operations;
"(T) Importation of fuel, goods
and supplies by persons engaged in international shipping or air
transport operations;
"(U) Services of banks, non-bank
financial intermediaries performing quasi-banking functions, and other
non-bank financial intermediaries; and
"(V) Sale or lease of goods or
properties or the performance of services other than the transactions
mentioned in the preceding paragraphs, the gross annual sales and/or
receipts do not exceed the amount of One million five hundred thousand
pesos (P1,500,000): Provided, That not later than January 31, 2009 and
every three (3) years thereafter, the amount herein stated shall be
adjusted to its present value using the Consumer Price Index as
published by the National Statistics Office (NSO);
"(2) A VAT-registered person may
elect that Subsection (1) not apply to its sale of goods or properties
or services: Provided, That an election made under this Subsection
shall be irrevocable for a period of three (3) years from the quarter
the election was made."
SEC 8. Section 110 of the same Code, as amended, is hereby further
amended to read as follows:
"Sec.
110. Tax Credits. -
"(A) Creditable Input Tax. -
"(1)
Any input tax evidenced by a VAT invoice or official receipt issued in
accordance with Section 113 hereof on the following transactions shall
be creditable against the output tax:
"(a)
Purchase or importation of goods:
"(i)
For sale; or
"(ii) For conversion into or
intended to form part of a finished product for sale including
packaging materials; or
"(iii) For use as supplies in
the course of business; or
"(iv) For use as materials
supplied in the sale of service; or
"(v) For use in trade or
business for which deduction for depreciation or amortization is
allowed under this Code.
"(b) Purchase of services on
which a value-added tax has actually been paid.
"(2) The input tax on domestic
purchase or importation of goods or properties by a VAT-registered
person shall be creditable:
"(a)
To the purchaser upon consummation of sale and on importation of goods
or properties; and
"(b) To the importer upon
payment of the value-added tax prior to the release of the goods from
the custody of the Bureau of Customs.
"Provided, That the input tax on
goods purchased or imported in a calendar month for use in trade or
business for which deduction for depreciation is allowed under this
Code, shall be spread evenly over the month of acquisition and the
fifty-nine (59) succeeding months if the aggregate acquisition cost for
such goods, excluding the VAT component thereof, exceeds One million
pesos (P1,000,000): Provided, however, That if the estimated useful
life of the capital good is less than five (5) years, as used for
depreciation purposes, then the input VAT shall be spread over such a
shorter period: Provided, finally, that in the case of purchase of
services, lease or use of properties, the input tax shall be creditable
to the purchaser, lessee or licensee upon payment of the compensation,
rental, royalty or fee.
"(3) A VAT-registered person who
is also engaged in transactions not subject to the value-added tax
shall be allowed tax credit as follows:
"(a)
Total input tax which, can be directly attributed to transactions
subject to value-add tax; and
"(b) A ratable portion of any
input tax which cannot be directly attributed to either activity.
"The term 'input tax' means the
value-added tax due from or paid by a VAT-registered person in the
course of his trade or business on importation of goods or local
purchase of goods or services, including lease or use of property, from
a VAT-registered person. It shall also include the transitional input
tax determined in accordance with Section 111 of this Code.
"The term 'output tax' means the
value-added tax due on the sale or lease of taxable goods or properties
or services by any person registered or required to register under
Section 236 of this Code.
"(B) Excess Output or Input Tax.
- If at the end of any taxable quarter the output tax exceeds the input
tax, the excess shall be paid by the VAT-registered person. If the
input tax exceeds the output tax, the excess shall be carried over to
the succeeding quarter or quarters: Provided, That the input tax
inclusive of input VAT carried over from the previous quarter that may
be credited in every quarter shall not exceed seventy percent (70%) of
the output VAT: Provided, however, That any input tax attributable to
zero-rated sales by a VAT-registered person may at his option be
refunded or credited against other internal revenue taxes, subject to
the provisions of Section 112.
"(C) Determination of Creditable
Input Tax. - The sum of the excess input tax carried over from the
preceeding month or quarter and the input tax creditable to a
VAT-registered person during the taxable month or quarter shall be
reduced by the amount of claim for refund or tax credit for value-added
tax and other adjustments, such as purchase returns or allowances and
input tax attributable to exempt sale.
"The claim for tax credit
referred to in the foregoing paragraph shall include not only those
filed with the Bureau of Internal Revenue but also those filed with
other government agencies, such as the Board of Investments and the
Bureau of Customs."
Sec. 9. Section 111 of the same
Code, as amended, is hereby further amended to read as follows:
"Sec.
111. Transitional/ Presumptive Input Tax Credits. -
"(A) Transitional Input Tax
Credits. - A person who becomes liable to value-added tax or any person
who elects to be a VAT-registered person shall, subject to the filing
of an inventory according to rules and regulations prescribed by the
Secretary of Finance, upon recommendation of the Commissioner, be
allowed input tax on his beginning inventory of goods, materials and
supplies equivalent to two percent (2%) of the value of such inventory
or the actual value-added tax paid on such goods, materials and
supplies, whichever is higher, which shall be creditable against the
output tax.
"(B) Presumptive Input Tax
Credits. -
"Persons or firms engaged in the
processing of sardines, mackerel and milk, and in manufacturing refined
sugar, cooking oil and packed noodle based instant meals, shall be
allowed a presumptive input tax, creditable against the output tax,
equivalent to four percent (4%) of the gross value in money of their
purchases of primary agricultural products which are used as inputs to
their production.
"As used in this Subsection, the
term 'processing' shall mean pasteurization, canning and activities
which through physical or chemical process alter the exterior texture
or form or inner substance of a product in such manner as to prepare it
for special use to which it could not have been put in its original
form or condition."
Sec. 10. Section 112 of the same
Code, as amended, is hereby further amended to read as follows:
"Sec.
112. Refunds or 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 of 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.
"(C) Period within which Refund
or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate
for creditable input taxes within one hundred twenty (120) days from
the date of submission of complete documents in support of the
application filed in accordance with Subsection (A) hereof.
"In case of full or partial
denial of the claim for tax refund or tax credit, or the failure on the
part of the Commissioner to act on the application within the period
prescribed above, the taxpayer affected may, within thirty (30) days
from the receipt of the decision denying the claim or after the
expiration of the one hundred twenty day-period, appeal the decision or
the unacted claim with the Court of Tax Appeals.
"(D) Manner of Giving Refund. -
Refunds shall be made upon warrants drawn by the Commissioner or by his
duly authorized representative without the necessity of being
countersigned by the Chairman, Commission on Audit, the provisions of
the Administrative Code of 1987 to the contrary notwithstanding:
Provided, That refunds under this paragraph shall be subject to post
audit by the Commission on Audit."
Sec. 11. Section 113 of the same Code, as amended, is hereby further
amended to read as follows:
"Sec.
113. Invoicing and Accounting Requirements for VAT-Registered Persons. -
"(A) Invoicing Requirements. - A
VAT-registered person shall issue:
"(1)
A VAT invoice for every sale, barter or exchange of goods or
properties; and
"(2) A VAT official receipt for
every lease of goods or properties, and for every sale, barter or
exchange of services.
"(B) Information Contained in
the VAT Invoice or VAT Official Receipt. - The following information
shall be indicated in the VAT invoice or VAT official receipt:
"(1)
A statement that the seller is a VAT-registered person, followed by his
taxpayer's identification number (TIN);
"(2) The total amount which the
purchaser pays or is obligated to pay to the seller with the indication
that such amount includes the value-added tax: Provided, That:
"(a)
The amount of the tax shall be shown as a separate item in the invoice
or receipt;
"(b) If the sale is exempt from
value-added tax, the term "VAT-exempt sale" shall be written or printed
prominently on the invoice or receipt;
"(c) If the sale is subject to
zero percent (0%) value-added tax, the term "zero-rated sale" shall be
written or printed prominently on the invoice or receipt;
"(d) If the sale involves goods,
properties or services some of which are subject to and some of which
are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly
indicate the breakdown of the sale price between its taxable, exempt
and zero-rated components, and the calculation of the value-added tax
on each portion of the sale shall be shown on the invoice or receipt:
"Provided, That the seller may issue separate invoices or receipts for
the taxable, exempt, and zero-rated components of the sale.
"(3) The date of transaction,
quantity, unit cost and description of the goods or properties or
nature of the service; and
"(4) In the case of sales in the
amount of one thousand pesos (P1,000) or more where the sale or
transfer is made to a VAT-registered person, the name, business style,
if any, address and taxpayer identification number (TIN) of the
purchaser, customer or client.
"(C) Accounting Requirements. -
Notwithstanding the provisions of Section 233, all persons subject to
the value-added tax under Section s 106 and 108 shall, in addition to
the regular accounting records required, maintain a subsidiary sales
journal and subsidiary purchase journal on which the daily sales and
purchases are recorded. The subsidiary journals shall contain such
information as may be required by the Secretary of Finance.
"(D) Consequence of Issuing
Erroneous Vat Invoice or Vat Official Receipt. -
"(1)
If a person who is not a VAT-registered person issues an invoice or
receipt showing his Taxpayer Identification Number (TIN), followed by
the word "VAT":
"(a)
The issuer shall, in addition to any liability to other percentage
taxes, be liable to:
"(i)
The tax imposed in Section 106 or 108 without the benefit of any input
tax credit; and
"(ii) A 50% surcharge under
Section 248 (B) of this code;
"(b) The VAT shall, if the other
requisite information required under Subsection (B) hereof is shown on
the invoice or receipt, be recognized as an input tax credit to the
purchaser under Section 110 of this Code.
"(2) If a VAT-registered person
issues a VAT invoice or VAT official receipt for a VAT-exempt
transaction, but fails to display prominently on the invoice or receipt
the term "VAT-exempt Sale", the issuer shall be liable to account for
the tax imposed in Section 106 or 108 as if Section 109 did not apply.
"(E) Transitional Period. -
Notwithstanding Subsection (B) hereof, taxpayers may continue to issue
VAT invoices and VAT official receipts for the period July 1, 2005 to
December 31, 2005, in accordance with Bureau of Internal Revenue
administrative practices that existed as of December 31, 2004."
Sec. 12. Section 114 of the same
Code, as amended, is hereby further amended to read as follows:
"Sec.
114. Return and Payment of Value-Added Tax. -
"(A) In General. - Every person
liable to pay the value-added tax imposed under this Title shall file a
quarterly return of the amount of his gross sales or receipts within
twenty-five (25) days following the close of each taxable quarter
prescribed for each taxpayer: Provided, however, That VAT-registered
persons shall pay the value-added tax on a monthly basis.
"Any person, whose registration
has been cancelled in accordance with Section 236, shall file a return
and pay the tax due thereon within twenty-five (25) days from the date
of cancellation of registration: Provided, That only one consolidated
return shall be filed by the taxpayer for his principal place of
business or head office and all branches.
"(B) Where to File the Return
and Pay the Tax. - Except as the Commissioner otherwise permits, the
return shall be filed with and the tax paid to an authorized agent
bank, Reveenue Collection Officer or duly authorized city or municipal
Treasurer in the Philippines located within the revenue district where
the taxpayer is registered or required to register.
"(C) Withholding of Value-Added
Tax. - The Government or any of its political subdivisions,
instrumentalities or agencies, including government-owned or
-controlled corporations (GOCCs) shall, before making payment on
account of each purchase of goods and services which are subject to the
value-added tax imposed in Section s 106 and 108 of this Code, deduct
and withhold a final value-added tax at the rate of five percent (5%)
of the gross payment thereof: Provided, That the payment for lease or
use of properties or property rights to nonresident owners shall be
subject to ten percent (10%) withholding tax at the time of payment.
For purposes of this Section , the payor or person in control of the
payment shall be considered as the withholding agent.
"The value-added tax withheld
under this Section shall be remitted within ten (10) days following the
end of the month the withholding was made."
Sec. 13. Section 116 of the same
Code, as amended, is hereby further amended to read as follows:
"Sec.
116. Tax on Persons Exempt from Value-Added Tax (VAT). - Any person
whose sales or receipts are exempt under Section 109 (V) of this Code
from the payment of value-added tax and who is not a VAT-registered
person shall pay a tax equivalent to three percent (3%) of his gross
quarterly sales or receipts: Provided, That cooperatives shall be
exempt from the three percent (3%) gross receipts tax herein imposed."
Sec. 14. Section 117 of the same Code, as amended, is hereby further
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 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.
"The
gross receipts of common carriers derived from their incoming and
outgoing freight shall not be subjected to the local taxes imposed
under Republic Act No. 7160, otherwise known as the Local Government
Code of 1991.
"In computing the percentage tax
provided in this Section , the following shall be considered the minimum
quarterly gross receipts in each particular case:
"Jeepney for hire -
"1. Manila and other cities - P2,400
"2. Provincial - 1,200
"Public
utility bus -
"Not exceeding 30
passengers - P3,600
"Exceeding 30 but
not exceeding 50 passengers - 6,000
"Exceeding 50
passengers - 7,200
Taxis -
"1. Manila and other cities - P3,600
"2. Provincial - 2,400
Sec. 15. Section 119 of the same
Code, as amended, is hereby further amended to read as follows:
"Sec.
119. Tax on Franchises. - Any provision of general or special law to
the contrary notwithstanding, there shall be levied, assessed and
collected in respect to all franchises on radio and/or television
broadcasting companies whose annual gross receipts of the preceding
year does not exceed Ten million pesos (P10,000,000), subject to
Section 236 of this Code, a tax of three percent (3%) and on gas and
water utilities, a tax of two percent (2%) on the gross receipts
derived from the business covered by the law granting the franchise:
Provided, however, That radio and television broadcasting companies
referred to in this Section shall have an option to be registered as a
value-added taxpayer and pay the tax due thereon: Provided, further,
That once the option is exercised, said option shall be irrevocable.
"The grantee shall file the
return with, and pay the tax due thereon to the Commissioner or his
duly authorized representative, in accordance with the provisions of
Section 128 of this Code, and the return shall be subject to audit by
the Bureau of Internal Revenue, any provision of any existing law to
the contrary notwithstanding."
Sec. 16. Section 121 of the same
Code, as amended, is hereby further amended to read as follows:
"Sec.
121. Tax on Banks and Non-Bank Financial Intermediaries Performing
Quasi-Banking Functions. - There shall be collected a tax on gross
receipts derived from sources within the Philippines by all banks and
non-bank financial intermediaries in accordance with the following
schedule:
"(a)
On interest, commissions and discounts from lending activities as well
as income from financial leasing, on the basis of remaining maturities
of instruments from which such receipts are derived:
Maturity
period is five years or less - 5%
Maturity period is more than five years - 1%
"(b) On dividends and equity
shares and net income of subsidiaries - 0%
"(c) On royalties, rentals of
property, real or personal, profits, from exchange and all other items
treated as gross income under Section 32 of this Code- 7%
"(d) On net trading gains within
the taxable year on foreign currency, debt securities, derivatives, and
other similar financial instruments - 7%
"Provided, however, That in case
the maturity period referred to in paragraph (a) is shortened thru
pre-termination, then the maturity period shall be reckoned to end as
of the date of pre-termination for purposes of classifying the
transaction and the correct rate of tax shall be applied accordingly.
"Provided, finally, That the
generally accepted accounting principles as may be prescribed by the
Bangko Sentral ng Pilipinas for the bank or non-bank financial
intermediary performing quasi-banking functions shall likewise be the
basis for the calculation of gross receipts.
"Nothing in this Code shall
preclude the Commissioner from imposing the same tax herein provided on
persons performing similar banking activities."
Sec. 17. Section 148 of the same Code, as amended, is hereby further
amended to read as follows:
"Sec.
148. Manufactured Oils and Other Fuels. - There shall be collected on
refined and manufactured mineral oils and motor fuels, the following
excise taxes which shall attach to the goods hereunder enumerated as
soon as they are in existence as such:
"(a)
Lubricating oils and greases, including but not limited to, basestock
for lube oils and greases, high vacuum distillates, aromatic extracts
and other similar preparations, and additives for lubricating oils and
greases, whether such additives are petroleum based or not, per liter
and kilogram, respectively, of volume capacity or weight, Four pesos
and fifty centavos (P4.50): Provided, however, That the excise taxes
paid on the purchased feedstock (bunker) used in the manufacture of
excisable articles and forming part thereof shall be credited against
the excise tax due therefrom: Provided, further, That lubricating oils
and greases produced from basestocks and additives on which the excise
tax has already been paid shall no longer be subject to excise tax:
Provided, finally, That locally produced or imported oils previously
taxed as such but are subsequently reprocessed, rerefined or recycled
shall likewise be subject to the tax imposed under this Section .
"(b) Processed gas, per liter of
volume capacity, Five centavos (P0.05);
"(c) Waxes and petroleum, per
kilogram, Three pesos and fifty centavos (P3.50);
"(d) On denatured alcohol to be
used for motive power, per liter of volume capacity, Five centavos
(P0.05); Provided, That unless otherwise provided by special laws, if
the denatured alcohol is mixed with gasoline, the excise tax on which
has already been paid, only the alcohol content shall be subject to the
tax herein prescribed. For purposes of this Subsection, the removal of
denatured alcohol of not less than one hundred eighty degrees (180o)
proof (ninety percent (90%) absolute alcohol) shall be deemed to have
been removed for motive power, unless shown otherwise;
"(e) Naphtha, regular gasoline
and other similar products of distillation, per liter of volume
capacity, Four pesos and thirty-five centavos (P4.35): Provided,
however, That naphtha, when used as a raw material in the production of
petrochemical products or as replacement fuel for natural
gas-fired-combined cycle power plant, in lieu of locally-extracted
natural gas during the non-availability thereof, subject to the rules
and regulations to be promulgated by the Secretary of Energy, in
consultation with the Secretary of Finance, per liter of volume
capacity, Zero (P0.00): Provided, further, That the by-product
including fuel oil, diesel fuel, kerosene, pyrolysis gasoline,
liquefied petroleum gases and similar oils having more or less the same
generating power, which are produced in the processing of naphtha into
petrochemical products shall be subject to the applicable excise tax
specified in this Section , except when such by-products are transferred
to any of the local oil refineries through sale, barter or exchange,
for the purpose of further processing or blending into finished
products which are subject to excise tax under this Section ;
"(f) Leaded premium gasoline,
per liter of volume capacity, Five pesos and thirty-five centavos
(P5.35); unleaded premium gasoline, per liter of volume capacity, Four
pesos and thirty-five centavos (P4.35);
"(g) Aviation turbo jet fuel,
per liter of volume capacity, Three pesos and sixty-seven centavos
(P3.67);
"(h) Kerosene, per liter of
volume capacity, Zero (P0.00): Provided, That kerosene, when used as
aviation fuel, shall be subject to the same tax on aviation turbo jet
fuel under the preceding paragraph (g), such tax to be assessed on the
user thereof;
"(i) Diesel fuel oil, and on
similar fuel oils having more or less the same generating power, per
liter of volume capacity, zero (P0.00);
"(j) Liquefied petroleum gas,
per liter, zero (P0.00): Provided, That liquefied petroleum gas used
for motive power shall be taxed, at the equivalent rate as the excise
tax on diesel fuel oil;
"(k) Asphalts, per kilogram,
Fifty-six centavos (P0.56); and
"(l) Bunker fuel oil, and on
similar fuel oils having more or less the same generating power, per
liter of volume capacity, zero (P0.00)."
Sec. 18. Section 151 of the same
Code, as amended, is hereby amended to read as follows:
"Sec.
151. Mineral Products. -
"(A) Rates of Tax. - There shall
be levied, assessed and collected on minerals, mineral products and
quarry resources, excise tax as follows:
"(1)
On coal and coke, a tax of Ten pesos (P10.00) per metric ton;
"(2) On all nonmetallic minerals
and quarry resources, a tax of two percent (2%) based on the actual
market value of the gross output thereof at the time of removal, in the
case of those locally extracted or produced; or the value used by the
Bureau of Customs in determining tariff and customs duties, net of
excise tax and value-added tax, in the case of importation.
Notwithstanding the provision of
paragraph (4) of subsection (A) of this Section , locally extracted
natural gas and liquefied natural gas shall not be subject to the
excise tax imposed herein.
"(3)
On all metallic minerals, a tax based on the actual market value of the
gross output thereof at the time of removal, in the case of those
locally extracted or produced; or the value used by the Bureau of
Customs in determining tariff and customs duties, net of excise tax and
value-added tax, in the case of importation, in accordance with the
following schedule:
"(a)
Copper and other metallic minerals;
"(i) On the first three (3)
years upon the effectivity of Republic Act No. 7729, one percent (1%);
"(ii) On the fourth and the
fifth years, one and a half percent (1 1/2%); and
"(iii) On the sixth year and
thereafter, two percent (2%);
"(b) Gold and chromite,' two
percent (2%).
"(4). On indigenous petroleum, a
tax of three percent (3%) of the fair international market price
thereof, on the first taxable sale, barter, exchange or such similar
transaction, such tax to be paid by the buyer or purchaser before
removal from the place of production. The phrase 'first taxable sale,
barter, exchange or similar transaction' means the transfer of
indigenous petroleum in its original state to a first taxable
transferee. The fair international market price shall be determined in
consultation with an appropriate government agency.
"For the purpose of this
Subsection, 'indigenous petroleum' shall include locally-extracted
mineral oil, hydrocarbon gas, bitumen, crude asphalt, mineral gas and
all other similar or naturally associated substances with the exception
of coal, peat, bituminous shale and/or stratified mineral deposits.
"(B) For purposes of this
Section , the term -
"(1)
'Gross output' shall be interpreted as the actual market value of
minerals or mineral products, or of bullion from each mine or mineral
land operated as a separate entity, without any deduction from mining,
milling, refining (including all expenses incurred to prepare the said
minerals or mineral products in a marketable state), as well as
transforting, handling, marketing or any other expenses: Provided, That
if the minerals or mineral products are sold or consigned abroad by the
lessee or owner of the mine under C.I.F. terms, the actual cost of
ocean freight and insurance shall be deducted Provided, however, That
in the case of mineral concentrate not traded in commodity exchanges in
the Philippines or abroad, such as copper concentrate, the actual
market value shall be the world price quotations of the refined mineral
products content thereof prevailing in the said commodity exchanges,
after deducting the smelting, refining and other charges incurred in
the process of converting the mineral concentrates into refined metal
traded in those commodity exchanges.
"(2) 'Minerals" shall mean all
naturally occurring inorganic substances (found in nature)whether in
solid, liquid, gaseous or any intermediate state.
"(3) 'Mineral products' shall
mean things produced and prepared in a marketable state by simple
treatment processes such as washing or drying, but without undergoing
any chemical change or process or manufacturing by the lessee,
concessionaire or owner of mineral lands.
"(4) 'Quarry resources' shall
mean any common stone or other common mineral substances as the
Director of the Bureau of Mines and Geo-Sciences may declare to be
quarry resources such as, but not restricted to, marl, marble, granite,
volcanic cinders, basalt, tuff and rock phosphate: Provided, That they
contain no metal or metals or other valuable minerals in economically
workable quantities."
Sec. 19. Section 236 of the same
Code, as amended, is hereby further amended to read as follows:
"Sec.
236. Registration Requirements. -
"(A) Requirements. - Every
person subject to any internal revenue tax shall register once with the
appropriate Revenue District Officer:
"(1)
Within ten (10) days from date of employment, or
"(2) On or before the
commencement of business, or
"(3) Before payment of any tax
due, or
"(4) Upon filing of a return,
statement or declaration as required in this Code.
"The registration shall contain
the taxpayer's name, style, place of residence, business, and such
other information as may be required by the Commissioner in the form
prescribed therefor.
"A person maintaining a head
office, branch or facility shall register with the Revenue District
Officer having jurisdiction over the head office, branch or facility.
For purposes of this Section , the term 'facility' may include but not
be limited to sales outlets, places of production, warehouses or
storage places.
"(B) Annual Registration Fee. -
An annual registration fee in the amount of Five hundred pesos (P500)
for every separate or distinct establishment or place of business,
including facility types where sales transactions occur, shall be paid
upon registration and every year thereafter on or before the last day
of January: Provided, however, That cooperatives, individuals earning
purely compensation income, whether locally or abroad, and overseas
workers are not liable to the registration fee herein imposed.
"The registration fee shall be
paid to an authorized agent bank located within the revenue district,
or to the Revenue Collection Officer, or duly authorized Treasurer of
the city or municipality where each place of business or branch is
registered.
"(C) Registration of Each Type
of Internal Revenue Tax. - Every person who is required to register
with the Bureau of Internal Revenue under Subsection (A) hereof, shall
register each type of internal revenue tax for which he is obligated,
shall file a return and shall pay such taxes, and shall update such
registration of any changes in accordance with Subsection (E) hereof.,
"(D) Transfer of Registration. -
In case a registered person decides to transfer his place of business
or his head office or branches, it shall be his duty to update his
registration status by filing an application for registration
information update in the form prescribed therefor.
"(E) Other Updates. - Any person
registered in accordance with this Section shall, whenever applicable,
update his registration information with the Revenue District Office
where he is registered, specifying therein any change in tax type and
other taxpayer details.
"(F) Cancellation of
Registration. -
"(1)
General Rule. - The registration of any person who ceases to be liable
to a tax type shall be cancelled upon filing with the Revenue District
Office where he is registered, an application for registration
information update in a form prescribed therefor;
"(2) Cancellation of Value-Added
Tax Registration. - A VAT-registered person may cancel his registration
for VAT if:
"(a)
He makes written application and can demonstrate to the Commissioner's
satisfaction that his gross sales or receipts for the following twelve
(12) months, other than those that are exempt under Section 109 (A) TO
(U), will not exceed One million five hundred thousand pesos
(P1,500,000); or
"(b) He has ceased to carry on
his trade or business, and does not expect to recommence any trade or
business within the next twelve (12) months.
"The cancellation of
registration will be effective from the first day of the following
month.
"(G) Persons Required to
Register for Value-added Tax. -
"(1)
Any person who, in the course of trade or business, sells, barters or
exchanges goods or properties, or engages in the sale or exchange of
services, shall be liable to register for Value-added tax if:
"(a)
His gross sales or receipts for the past twelve (12) months, other than
those that are exempt under section 109 (a) to (u), have exceeded One
million five hundred thousand pesos (P1,500,000); or
"(b) There are reasonable
grounds to believe that his gross sales or receipts for the next twelve
(12) months, other than those that are exempt under Section 109 (A) to
(U), will exceed one million five hundred thousand pesos (P1,500,000).
"(2) Every person who becomes
liable to be registered under paragraph (1) of this Subsection shall
register with the Revenue District Office which has jurisdiction over
the head office or branch of that person, and shall pay the annual
registration fee prescribed in Subsection (B) hereof. If he fails to
register, he shall be liable to pay the tax under Title IV as if he
were a VAT-registered person, but without the benefit of input tax
credits for the period in which he was not properly registered.
"(H) Optional Registration for
Value-added Tax of Exempt Person. - (1) Any person who is not required
to register for Value-added tax under Subsection (G) hereof may elect
to register for Value-added tax by registering with the Revenue
District Office that has jurisdiction over the head office of that
person, and paying the annual registration fee in Subsection (B) hereof.
(2)
Any person who elects to register under this Subsection shall not be
entitled to cancel his registration under Subsection (F)(2) for the
next three (3) years.
"For purposes of Title IV of
this Code, any person who has registered value-added tax as a tax type
in accordance with the provisions of Subsection (C) hereof shall be
referred to as a "VAT-registered person" who shall be assigned only one
Taxpayer Identification Number (TIN).
"(I) Supplying of Taxpayer
Identification Number (TIN). - Any person required under the authority
of this Code to make, render or file a return, statement or other
document shall be supplied with or assigned a Taxpayer Identification
Number (TIN) which he shall indicate in such return, statement or
document filed with the Bureau of Internal Revenue for his proper
identification for tax purposes, and which he shall indicate in certain
documents, such as, but not limited to, the following:
"(1)
Sugar quedans, refined sugac release order or similar instruments;
"(2) Domestic bills of lading;
"(3) Documents to be registered
with the Register of Deeds or Assessor's Office;
"(4) Registration certificate of
transportation equipment by land, sea or air;
"(5) Documents to be registered
with the Securities and Exchange Commission;
"(6) Building construction
permits;
"(7) Application for loan with
banks, financial institutions, or other financial intermedieries;
"(8) Application for mayor's
permit;
"(9) Application for business
license with the Department of Trade and Industry; and
"(10) Such other documents which
may hereafter be required under rules and regulations to be promulgated
by the Secretary of Finance, upon recommendation of the Commissioner.
"In cases where a registered
taxpayer dies, the administrator or executor shall register the estate
of the decedent in accordance with Subsection (A) hereof and a new
Taxpayer Identification Number (TIN) shall be supplied in accordance
with the provisions of this Section .
"In the case of a nonresident
decedent, the executor or administrator of the estate shall register
the estate with the Revenue District Office where he is registered:
Provided, however; That in case such executor or administrator is not
registered, registration of the estate shall be made with and the
Taxpayer Identification Number (TIN) supplied by the Revenue District
Office having jurisdiction over his legal residence.
"Only one Taxpayer
Identification Number (TIN) shall be assigned to a taxpayer. Any person
who shall secure more than one Taxpayer Identification Number shall be
criminally liable under the provisions of Section 275 on 'Violation of
Other Provisions of this Code or Regulations in General.'"
Sec. 20. Section 237 of the
Code, as amended, is hereby amended to read as follows:
"Sec.
237. Issuance of Receipts or Sales or Commercial Invoices. - All
persons subject to an internal revenue tax shall, for each sale and
transfer of merchandise or for services rendered valued at Twenty-five
pesos (P25.00) or more, issue duly registered receipts or sale or
commercial invoices, prepared at least in duplicate, showing the date
of transaction, quantity, unit cost and description of merchandise or
nature of service: Provided, however, That where the receipt is issued
to cover payment made as rentals, commissions, compensation or fees,
receipts or invoices shall be issued which shall show the name,
business style, if any, and address of the purchaser, customer or
client.
"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 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.
"The Commissioner may, in
meritorious cases, exempt any person subject to an internal revenue tax
from compliance with the provisions of this Section ."
Sec. 21. Section 288 of the same
Code, as amended, is hereby further amended to read as follows:
"Sec.
288. Disposition of Incremental Revenues. -
"(A) Incremental Revenues from
Republic Act No. 7660. - The incremental revenues from the increase in
the documentary stamp taxes under R.A. No. 7660 shall be set aside for
the following purposes:
"(1)
In 1994 and 1995, twenty-five percent (25%) thereof respectively, shall
accrue to the Unified Home-Lending Program under Executive Order No. 90
particularly for mass-socialized housing program to be allocated as
follows: fifty percent (50%) for mass-socialized housing; thirty
percent (30%) for the community mortgage program; and twenty percent
(20%) for land banking and development to be administered by the
National Housing Authority: Provided, That not more than one percent
(1%) of the respective allocations hereof shall be used for
administrative expenses;
"(2) In 1996, twenty-five
percent (25%) thereof to be utilized for the National Health Insurance
Program that hereafter may be mandated by law;
"(3) In 1994 and every year
thereafter, twenty-five percent (25%) thereof shall accrue to a Special
Education Fund to be administered by the Department of Education,
Culture and Sports for the construction and repair of school
facilities, training of teachers, and procurement or production of
instructional materials and teaching aids; and
"(4) In 1994 and every year
thereafter, fifty percent (50%) thereof shall accrue to a Special
Infrastructure Fund for the construction and repair of roads, bridges,
dams and irrigation, seaports and hydroelectric and other indigenous
power projects: Provided, however, That for the years 1994 and 1995,
thirty percent (30%), and for the years 1996, 1997 and 1998, twenty
percent (20%), of this fund-shall be allocated for depressed provinces
as declared by the President as of the time of the effectivity of R.A.
No. 7660: Provided, further, That availments under this fund shall be
determined by the President on the basis of equity.
"Provided, finally, That in
paragraphs (2), (3) and (4) of this Section , not more than one percent
(1%) of the allocated funds thereof shall be used for administrative
expenses by the implementing agencies.
"(B) Incremental Revenues from
Republic Act No. 8240. - Fifteen percent (15%) of the incremental
revenue collected from the excise tax on tobacco products under R.A.
No. 8240 shall be allocated and divided among the provinces producing
burley and native tobacco in accordance with the vo1ume of tobacco leaf
production. The fund shall be exclusively utilized for programs in
pursuit of the following objectives:
"(1)
Cooperative projects that will enhance better quality of agricultural
products and increase income and productivity of farmers;
"(2) Livelihood projects,
particularly the development of alternative farming system to enhance
farmer's income; and
"(3) Agro-industrial projects
that will enable tobacco farmers to be involved in the management and
subsequent ownership of projects, such as post-harvest and secondary
processing like cigarette manufacturing and by-product utilization.
"The Department of Budget and
Management, in consultation with the Oversight Committee created under
said R.A. No. 8240, shall issue the corresponding rules and regulations
governing the allocation and disbursement of this fund.
"(C) Incremental Revenues from
the Excise Tax on Alcohol and Tobacco Products. -
"(1)
Two and a half percent (2.5%) of the incremental revenue from the
excise tax on alcohol and tobacco products starting January 2005 shall
be remitted directly to the Philippine Health Insurance Corporation for
the purpose of meeting and sustaining the goal of universal coverage of
the National Health Insurance Program; and
"(2) Two and a half percent
(2.5%) of the incremental revenue from the excise tax on alcohol and
tobacco products starting January 2005 shall he credited to the account
of the Department of Health and constituted as a trust fund for its
disease prevention program.
"The earmarking provided under
this provision shall be observed for five (5) years starting from
January 2005."
"(D) Incremental Revenue from
the Value-added Tax. - Fifty percent (50%) of the local government
unit's share from the incremental revenue from the value-added tax
shall be allocated and used exclusively for the following purposes:
"1.
Fifteen percent (15%) for public elementary and secondary education, to
finance the construction of buildings, purchases of school furniture
and in-service teacher trainings;
"2. Ten percent (10%) for health
insurance premiums of enrolled indigents as a counterpart contribution
of the local government to sustain the universal coverage of the
national health insurance program;
"3. Fifteen percent (15%) for
environmental conservation to fully implement a comprehensive national
reforestation program; and
"4. Ten percent (10%) for
agricultural modernization to finance the construction of
farm-to-market roads and irrigation facilities.
"Such allocations shall be
segregated as separate trust funds by the National Treasury and shall
be over and above the annual appropriation for similar purposes.
"(E) The amount of fifteen
million pesos (P15,000,000) shall be allocated for a public information
and education program to be administered by the Bureau of Internal
Revenue, explaining clearly to businesses their registration, invoicing
and reporting requirements under the Value-added tax rules. Such
program should include seminars and visits to taxpayers to familiarize
them with the tax, and the development and publication of easy-to-read
guides on the Value-added Tax."
Sec. 22. Franchises of Domestic
Airlines. - The provisions of P.D. No. 1590 on the franchise tax of
Philippine Airlines, Inc., R.A. No. 7151 on the franchise tax of Cebu
Air, Inc., R.A. No. 7583 on the franchise tax of Aboitiz Air Transport
Corporation, R.A. No. 7909 on the franchise tax of Pacific Airways
Corporation, R.A. No. 8339 on the franchise tax of Air Philippines, or
any other franchise agreement or law pertaining to a domestic airline
to the contrary notwithstanding:
(A)
The franchise tax is abolished;
(B) The franchisee shall be
liable to the corporate income tax;
(C) The franchisee shall
register for value-added tax under Section 236, and to account under
Title IV of the National Internal Revenue Code of 1997, as amended, for
value-added tax on its sale of goods, property or services and its
lease of property; and
(D) The franchisee shall
otherwise remain exempt from any taxes, duties, royalties,
registration, license, and other fees and charges, as may be provided
by their respective franchise agreement.
Sec. 23. Implementing Rules and
Regulations. - The Secretary of Finance shall, upon the recommendation
of the Commissioner of Internal Revenue, promulgate not later than June
30, 2005, the necessary Rules and Regulations for the effective
implementation of this Act. Upon issuance of the said Rules and
Regulations, all former rules and regulations pertaining to value-added
tax shall be deemed revoked.alf-itc
Sec. 24. Repealing Clause. - The following laws or provisions of laws
are hereby repealed and the persons and/or transactions affected herein
are made subject to the value-added tax subject to the provisions of
Title IV of the National Internal Revenue Code of 1997, as amended:
(A)
Section 13 of R.A. No. 6395 on the exemption from value-added tax of
National Power Corporation (NPC);
(B) Section 6, fifth paragraph
of R.A. No. 9136 on the zero VAT rate imposed on the sales of generated
power by generation companies; and
(C) All other laws, acts,
decrees, executive orders, issuances and rules and regulations or parts
thereof which are contrary to and inconsistent with any provisions of
this Act are hereby repealed, amended or modified accordingly.
Sec. 25. Separability Clause. - If any provision of this Act is
subsequently declared unconstitutional, the validity of the remaining
provisions hereof shall remain in full force and effect.
Sec. 26. Effectivity Clause. - This Act shall take effect on July 1,
2005.
Approved: May 24,
2005
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