WHEREAS,
certain articles presently classified as ordinary articles should be
considered as essential articles for sales tax purposes;chanroblesvirtualawlibrary
WHEREAS, certain raw material inputs are taxable at higher rates than
the finished article which may result in accumulation of excess tax
credits;chanroblesvirtualawlibrary
WHEREAS, to achieve the effect of placing the raw materials and
finished products at essentially the same rate of tax on finished
articles under the existing tax credit system.
NOW, THEREFORE, I FERDINAND E. MARCOS, President of the Philippines, by
virtue of the powers vested in me by the Constitution, do hereby order
and decree:cralaw:red
Section 1. Paragraph (c) of Section 162 of the
National Internal Revenue Code, as amended, is hereby further amended
to read as follows:cralaw:red
"(c) Imported articles. — When the articles are
imported, the percentage taxes established in Sections 163, 164, and
165(A) of this Code shall be paid in advance by the importer prior to
the release of such articles from customs custody, based on the total
value used by the Bureau of Customs in determining tariff and customs
duties, including customs duties and other charges. On the original
sale, barter, exchange or transfer of such imported articles by the
importer himself, there shall be levied, assessed and collected a sales
tax at the same rate on the gross value in money of the articles so
sold, bartered, exchanged or transferred: Provided, That the tax paid
in advance by the importer shall be credited against the sales tax due
on the original sale. The tax required to be paid herein shall not
apply to articles to be used by the importer himself in the manufacture
or preparation of articles subject to excise tax under Title IV of this
Code: Provided, however, That where the National Economic and
Development Authority certifies to the availability of local raw
materials of sufficient quantity, comparable quality and price to meet
the need of manufacturers subject to excise tax, the importation of
such raw materials shall be subject to the tax herein imposed."
Section 2. Sub-paragraph (2), paragraph (A) of
Section 165 of the National Internal Revenue Code, as amended, is
hereby further amended to read as follows:cralaw:red
"(3) Essential articles. — 10% of the gross selling
price or gross value in money of the following article so sold,
bartered, exchanged, or transferred:cralaw:red
"(a) Processed meat, fruits, vegetables, fish and
other sea foods;chanroblesvirtualawlibrary
"(b) Beverages and concentrates thereof, whether in
liquid, powder or granulated form, intended for consumption as a drink,
including but not limited to processed coffee, cocoa, tea, or ginger;chanroblesvirtualawlibrary
"(c) Processed milk, dairy products, butter and its
substitutes like margarine;chanroblesvirtualawlibrary
"(d) Cooking oil which are not subject to miller's
tax Section 168 of this Code;chanroblesvirtualawlibrary
"(e) Wheat flour;chanroblesvirtualawlibrary
"(f) Bread and ordinary bakery products;chanroblesvirtualawlibrary
"(g) Medicine;chanroblesvirtualawlibrary
"(h) Laundry soap and detergents;chanroblesvirtualawlibrary
"(i) Writing pads, notebooks and ordinary lead
pencils; chanroblesvirtualawlibrary
"(j) Cement, hollow blocks, logs, lumber, plywood,
plyboard, fiberboard, glass, roofing materials, steel bars, nails, sand
and gravel;chanroblesvirtualawlibrary
"(k) Fish, poultry, swine and cattle feeds; and
"(l) Fertilizers."
Section 3. Section 165 of the National Internal
Revenue Code is hereby further amended by adding a new paragraph
thereto to read as follows:cralaw:red
"Any part or accessory of the articles under Subsection (A) shall be
taxed at the same rate as the finished articles."
Section 4. Section 166(c) of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"(c) Excess tax credit. — If at the end of a taxable
year, the total tax paid on the raw material, part, accessory or other
article exceeds the amount of the sales tax due on the finished
product, the manufacturer or producer may elect to:cralaw:red
"1. Carry over such excess or a portion thereof to be
credited against his sales tax liability in the succeeding taxable
quarter or quarters; or
"2. File an application for the issuance of a tax
credit certificate for such excess or a portion thereof which can be
used in payment of any advance sales tax; or
"(3) Deduct such excess of a portion thereof from
gross income for income tax purposes: Provided, That the amount of the
tax on raw material, part, accessory, or other article shall be
indicated as a separate item in the sales invoice: and Provided,
further, That the amount of tax credits opted for and any tax credit
corresponding to the raw materials which are subsequently sold,
transferred, disposed of, or, for any other reason, can no longer be
used in the manufacture of the finished product for sale, shall either
be deducted from any unused tax credit or paid as a part of the tax due
in the quarter following the disposal: and Provided, finally, That in
the case of an importer, if the advance sales tax paid on imported
articles exceeds the sales tax due on the original sale of the imported
articles, in any quarter, the excess shall be credited against the
sales tax liability of the importer in the succeeding taxable quarter
or quarters."
Section 5. Paragraph (a) of Section 168 of the
National Internal Revenue Code, as amended, is hereby further amended
to read as follows:cralaw:red
"(a) Taxable articles. — There shall be imposed upon
the importer of commodities, goods, wares, or merchandise brought into
the Philippines, a compensating tax equivalent to the rates prescribed
in Sections 163, 164 and 165(A) based on the total value used by the
Bureau of Customs in determining tariff and customs duties, including
customs duty and all other charges, such tax to be paid before the
withdrawal of the said commodities, goods, wares or merchandise from
customhouse or the post office."
Section 6. Effectivity. — The options on excess tax
credits can be availed of by the manufacturer or producer on the
balance of deferred tax credits existing as of the end of his taxable
year following the effectivity of this Decree.
All other provisions of this Decree shall take effect on January 1,
1986. chanroblesvirtualawlibrary
Done in the City of Manila,
this 4th day of February, in the year of Our Lord, nineteen hundred and
eighty-six.
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