Section 1. Sec. 3 of Republic Act No. 7716 is hereby
amended to read as follows:
"Sec. 3. Section 102 of the National Internal Revenue
Code, as amended, is hereby further amended to read as follows:
"Sec. 102. 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.
"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,
resthouses, 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, air, and water relative to their
transport of goods or cargoes; services of franchise grantees of
telephone and telegraph, radio and television broadcasting and all
other franchise grantees except those under Section 117 of this Code;
services of banks, non-bank financial intermediaries and finance
companies; 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 technical advice, assistance or
services rendered in connection with technical management or
administration of any scientific, industrial or commercial undertaking,
venture, project or scheme;
"(7) The lease of motion picture films, films, tapes
and discs and;
"(8) The lease or the use of or the right to use
radio, television, satellite transmission and cable television time.
"Lease of properties shall be subject to the tax herein imposed
irrespective of the place where the contract of lease or licensing
agreement was executed if the property is leased or used in the
Philippines.
"The term 'gross receipts' means the total amount of money or its
equivalent representing the contract price, compensation, service fee,
rental or royalty, including the amount charged for materials supplied
with the services and deposits and advanced payments actually or
constructively received during the taxable quarter for the services
performed or to be performed for another person, excluding 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 the 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 subparagraph, 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 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 vessels engaged exclusively
in international shipping; and
"(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.
"(c) Determination of the Tax. — The tax shall be
computed by multiplying the total amount indicated in the official
receipt by 1/11."
Sec. 2. Sec. 4 of Republic Act No. 7716 is
hereby amended to read as follows:
"Sec. 4. Section 103 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
"Sec. 103. Exempt Transactions. — The following shall
be exempt from the value-added tax:
"(a) Sale of nonfood agricultural products; marine
and forest products in their original state by the primary producer or
the owner of the land where the same are produced;
"(b) Sale of cotton and cotton seeds in their
original state and copra;
"(c) 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 and paragraph (a) 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,
and ordinary salt shall be considered in their original stated;
"(d) 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);
"(e) Sale or importation of coal and natural gas, in
whatever form or state, and petroleum products (Except lubricating oil
processed gas, grease, wax, and petrolatum) subject to excise tax
imposed under Title VI;
"(f) Sale or importation of raw materials to be used
by the buyer or importer himself in the manufacture of petroleum
products subject to excise tax, except lubricating oil, processed gas,
grease, wax, and petrolatum;
"(g) Importation of passenger and/or cargo vessel of
more than five thousand tons, whether coastwise or ocean-going,
including engine and spare parts of said vessel to be used by the
importer himself as operator thereof;
"(h) 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 in the Philippines;
"(i) 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 of Internal Revenue; that such persons are actually coming
to settle in the Philippines and that the change of residence is bona
fide;
"(j) Services subject to percentage tax under Title V;
"(k) Services by agricultural contract growers and
milling for others of palay into rice, corn into grits and sugar case
into raw sugar;
"(l) Medical, dental, hospital and veterinary
services subject to the provisions of Section 17 of Republic Act No.
7716, as amended;
"(m) Educational services rendered by private
educational institutions, duly accredited by the Department of
Education, Culture and Sports (DECS) and the Commission on Higher
Education (CHED), and those rendered by government educational
institutions;
"(n) Sale by the artist himself of his works or art,
literary works, musical compositions and similar creations, or his
services performed for the production of such works;
"(o) Services rendered by individuals pursuant to an
employer-employee relationship;
"(p) 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;
"(q) Transactions which are exempt under
international agreements to which the Philippines is a signatory or
under special laws, except those under Presidential Decree Nos. 66,
529, and 1590;
"(r) Sales by agricultural cooperatives duly
registered with the Cooperative Development Authority to their members
as well as sale or 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;
"(s) Sales by electric cooperatives duly registered
with the Cooperative Development Authority or National Electrification
Administration, relative to the generation and distribution of
electricity as well as their importation of machineries and equipment,
including spare parts, which shall be directly used in the generation
and distribution of electricity;
"(t) Gross receipts from lending activities by credit
or multi-purpose cooperatives duly registered with the Cooperative
Development Authority whose lending operation is limited to their
members;
"(u) Sales by non-agricultural, non-electric and
non-credit cooperatives duly registered with the Cooperative
Development Authority: provided, that the share capital contribution of
each member does not exceed Fifteen thousand pesos (P15,000.00) and
regardless of the aggregate capital and net surplus ratably distributed
among the members;
"(v) Export sales by persons who are not
VAT-registered;
"(w) Sale of real properties not primarily held for
sale to customers or held for lease in the ordinary course of trade or
business or realty 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,
house and lot and other residential dwellings valued at One million
pesos (P1,000,000.00) and below: provided, that not later than January
31st of the calendar year subsequent to the effectivity of this Act and
each calendar year thereafter, the amount of One million pesos
(P1,000,000.00) shall be adjusted to its present value using the
consumer price index, as published by the National Statistics Office
(NSO);
"(x) Lease of a residential unit with a monthly
rental not exceeding Eight thousand pesos (P8,000.00): provided, that
not later than January 31st of the calendar year subsequent to the
effectivity of this Act and each calendar year thereafter, the amount
of Eight thousand pesos (P8,000.00) shall be adjusted to its present
value using the consumer price index, as published by the National
Statistics Office (NSO);
"(y) 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;
"(z) 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 Five hundred fifty thousand pesos (P550,000.00):
provided, that not later than January 31st of the calendar year
subsequent to the effectivity of this Act and each calendar year
thereafter, the amount of Five hundred fifty thousand pesos
(P550,000.00) shall be adjusted to its present value using the consumer
price index, as published by the National Statistics Office (NSO);
"The foregoing exemptions to the contrary notwithstanding any person
whose sale of goods or properties or services which are otherwise not
subject to VAT, but who issues a VAT invoice or receipt therefor shall,
in addition to his liability to other applicable percentage tax, if
any, be liable to the tax imposed in Section 100 or 102 without the
benefit of input tax credit, and such tax shall not also be recognized
as input tax credit to the purchaser under Section 104, all of this
Code."
Sec. 3. Section 105 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
"Sec. 105. 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 as
prescribed by regulations, be allowed input tax on his beginning
inventory of goods, materials and supplies equivalent to eight percent
(8%) 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. — (1) Persons or
firms engaged in the processing of sardines, mackerel, and milk, and in
manufacturing refined sugar and cooking oil, shall be allowed a
presumptive input tax, creditable against the output tax, equivalent to
one and one-half percent (1.5%) 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 paragraph (b), 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.
"(2) Public works contractors shall be allowed a
presumptive input tax equivalent to one and one-half percent (1.5%) of
the contract price with respect to government contracts only in lieu of
actual input taxes therefrom."
Sec. 4. Sec. 7 of Republic Act No. 7716 is
hereby amended to read as follows:
"Sec. 7. Section 107 of the National Internal Revenue
Code, as amended, is hereby further amended to read as follows:
"Sec. 107. Registration of value-added taxpayers. —
(a) In General. — Any person subject to a value-added tax under
Section s 100 and 102 of this Code shall register with the appropriate
Revenue District Officer and pay an annual registration fee in the
amount of One thousand pesos (P1,000.00) for every separate or distinct
establishment or place of business and every year thereafter on or
before the last day of January. Any person just commencing a business
subject to the value-added tax must pay the fee before engaging therein.
"A Person who maintains a head or main office and branches in different
places shall register with the Revenue District Office which has
jurisdiction over the place wherein the main or head office is located.
However, the fee shall be paid to the Revenue district Officer,
collection agent, authorized treasurer of the municipality where each
place of business or branch is situated.
"(b) Persons commencing business. — Any person who
expects to realize gross sales or receipts subject to valued-added tax
in excess of the amount prescribed under Section 103(z) of this Code
for the next 12-month period from the commencement of the business
shall, within thirty (30) days before the start of the said business
register with the Revenue District Officer who has jurisdiction over
his principal place of business and shall pay the annual registration
fee prescribed in the preceding paragraph.
"(c ) Persons becoming liable to the value-added tax.
— Any person whose gross sales or receipts in any 12-month period
exceeds the amount prescribed under Section 103(z) of this Code for
exemption from the value-added tax shall register and pay the annual
registration fee prescribed in paragraph (a) of this section within
thirty (30) days after the end of the last month of that period, and
shall be liable to the valued-added tax commencing from the first day
of the month following his registration.
"(d) Optional registration of exempt person. — Any
person whose transactions are exempt from value-added tax under Section 103(z) of this Code, Section 103(a), (b), (c ), and (d) of this Code
with respect to export sales only, and Section 103(j) with respect to
service of franchise grantees of radio and/or television broadcasting
as defined under Section 117 of this Code, may apply for registration
as a VAT-registered person not later than ten (10) days before the
beginning of the taxable quarter and shall pay the annual registration
fee prescribed in subparagraph (a) of this section.
"In any case, the Commissioner may, for administrative reason, deny any
application for registration.
"For purposes of this Title, any person registered in accordance with
the provisions of this section shall be referred to as a
'VAT-registered person.' Each VAT-registered person shall be assigned
only one taxpayer's identification number.
"(e) Cancellation of registration. — The registration
of any person who ceases to be liable to the valued-added tax shall be
cancelled by the Commissioner upon filing of an application for
cancellation of registration. Any person who opted to be registered
under paragraph (d) of this section may, under regulation of the
Secretary of Finance, apply for cancellation of such registration."
Sec. 5. Sec. 9 of Republic Act No. 7716 is
hereby amended to read as follows:
"Sec. 9. Section 110(c) of the National Internal
Revenue Code, is hereby further amended to read as follows:
"(c ) Withholding of Creditable 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 from sellers and services rendered by contractors which are
subject to the value-added tax imposed in Section 100 and 102 of this
Code, deduct and withhold the value-added tax due at the rate of three
percent (3%) of the gross payment for the purchase of goods and six
percent (6%) on gross receipts for services rendered by contractors on
every sale or installment payment which shall be creditable against the
valued-added tax liability of the seller or contractor: provided,
however, that in the case of government public works contractors, the
withholding rate shall be eight and one-half percent (8.5%): provided,
further, 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 this purpose, the payor of
person in control of the payment shall be considered as the withholding
agent.
'The value-added tax withheld under this section shall be remitted with
ten (10) days following the end of the month the withholding was made.'
Sec. 6. Section 10 of Republic Act No. 7716 is
hereby amended to read as follows:
"Sec. 10. Section 112 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
"Sec. 112. Tax on persons exempt from value-added tax
(VAT). — Any person whose sales or receipts are exempt under Section 103(z) 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 receipt
tax herein imposed."
Sec. 7. Section 11 of Republic Act No. 7716 is
hereby amended to read as follows:
'Sec. 11. Section 115 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
"Sec. 115. Percentage tax on domestic carriers and
keepers of garages. — Cars for rent or hire driven by the lessee,
transportation contractors, including persons who transport passenger
for hire, and other domestic carriers by land, air or water, 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 per centum (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
P2,400.00
"2. Provincial 1,200.00
"Public utility bus —
"Not exceeding 30 passengers P3,600.00
"Exceeding 30 but not exceeding
50 passengers 6,000.00
"Exceeding 50 passengers 7,200.00
"Taxis —
"1. Manila and other cities
P3,600.00
"2. Provincial 3,400.00
"Car for hire (w/chauffeur) 3,000.00
"Car for hire (w/o chauffeur) 1,800.00"
Sec. 8. A new section is hereby added after
Section 115 of the National Internal Revenue Code, as amended, to read
as follows:
"Sec. 115-A. Percentage tax on international
carriers. —
"a) International air carriers doing business in the
Philippines shall pay a tax of three per centum (3%) of their quarterly
gross receipts.
"(b) International shipping carriers doing business
in the Philippines shall pay a tax equivalent to three percent (3%) of
their quarterly gross receipts."
Sec. 9. Section 12 of Republic Act No. 7716 is
hereby amended to read as follows:
"Sec. 12. Section 117 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
"Sec. 117. Tax on franchise. — 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 (P10,000,000.00),
subject to Section 107(d) of this Code, a tax of two three percent (3%)
and on electric, 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 tax payer and pay the tax due
thereon: provided, further, that once the option is exercised, it shall
not be revoked.
"The grantee shall file the return with, and pay the tax due thereon
to, the Commissioner of Internal Revenue or his duly authorized
representative in accordance with the provisions of Section 125 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."
Section 10. Section 15 of Republic Act No. 7716 is
hereby amended to read as follows:
"Sec. 15. Sec. 237 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
"Sec. 237. Registration of Name or Style with the
Revenue District Officer or Collection Agent. — Every person, other
than persons required to be registered under the provisions of Section 107 engaged in any business shall, on or before the commencement of his
business shall, on or before the commencement of his business, or
whenever he transfers to another revenue district, register with the
Revenue District Officer concerned within 10 days from the commencement
of business or transfer and shall pay the annual registration fee in
the amount of Five hundred pesos (P500.00) for every separate or
distinct establishment or place of business and every year thereafter
on or before the last day of January. The fee shall be paid to the
Revenue District Officer, collection agent, authorized treasurer of the
municipality where each place of business or branch is situated. In
cities or municipalities where no Revenue District Officer is
stationed, such person shall register and pay the fee prescribed herein
with the collection agent. The registration shall contain his name or
style, place of where such business is carried on, and such other
information as may be required by the Commissioner in the form
prescribed therefor. In the case of a firm, the names and residences of
the various persons constituting the same shall also be registered. The
Commissioner, after taking into consideration the volume of sales,
financial condition and other relevant factors, may require the
registrant to guarantee the payment of his taxes by way of advance
payment, or the posting or filing of a security, guarantee or
collateral acceptable to the Commissioner: provided, however, that
cooperatives shall not pay the registration fee imposed herein.'
Section 11. Section 17 of Republic Act No. 7716 is
hereby amended to read as follows:
"Sec. 17. Effectivity of the Imposition of VAT on
Certain Goods, Properties and Services. — The value-added tax shall be
levied, assessed and collected on the following transactions, starting
January 1, 1998:
"(a) Services performed in the exercise of profession
or calling subject to the professional tax under the Local Government
Code of Republic Act No. 7160, and professional services performed by
registered general professional partnerships; actors, actresses,
talents, singers and emcees; radio and television broadcasters,
choreographers; musical, radio, movie, television and stage directors;
and professional athletes;
"(b) Services rendered by banks, non-bank financial
intermediaries, finance companies and other financial intermediaries,
not performing quasi-banking functions; and
"(c ) The lease or use of sports facilities and
equipment by amateur players, as provided under Republic Act No. 6847,
except sports facilities and equipment which are exclusively or mainly
for the private use of shareholders or members of the club or
organization which owns or operates such sports facilities and
equipment.
"Prior to their inclusion in the coverage of the valued-added tax the
above services shall continue to pay the applicable tax prescribed
under the present provisions of the National Internal Revenue Code, as
amended.
"However, when public interest so requires, the Congress of the
Republic of the Philippines, taking into account the impact on prices
of goods and services, may, exclude any of the above services from the
coverage of the value-added tax: provided, however, that in the event
of the exclusion of any of the above services the existing applicable
tax under the provisions of the National Internal Revenue Code, as
amended, shall continue to be paid on the service so excluded."
Section 12. Rules and Regulations. — For the
effective implementation of this act, the Secretary of Finance shall,
upon the recommendation of the Commissioner of Internal Revenue,
promulgate the necessary rules and regulations, within sixty (60) days
from effectivity hereof: provided, that other agencies, such as, but
not limited to, the Philippine Information Agency (PIA), Office of the
Press Secretary (OPS), the Bureau of Internal Revenue (BIR) and the
Department of Trade and Industry (DTI), shall develop and implement an
Information, Education and Communication (IEC) campaign program with
the end in view of effectively informing the public on the details of
the expanded valued-added tax implementation.
Section 13. Repealing Clause. — The provisions of
Republic Act No. 6938, otherwise known as the Cooperative Code of the
Philippines, authorizing the exemption of cooperatives from the sales
or value-added tax are hereby repealed. All other laws, orders,
issuances, rules and regulations or parts thereof which are not
consistent with this Act are hereby repealed amended or modified
accordingly.
Section 14. Effectivity. — This Act shall take effect
on January 1, 1997.
Approved: December 20, 1996
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