EIGHTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )

First Regular Session )

SENATE

S. No. _______

INTRODUCED BY SENATOR RISA HONTIVEROS

AN ACT
AMENDING SECTIONS 106, 107, 108, 109, AND 112 OF REPUBLIC ACT NO.
8424, OTHERWISE KNOWN AS THE "TAX REFORM ACT OF 1997," AS
AMENDED, AND FOR OTHER PURPOSES

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

Congress assembled:

1 Section 1. Short Title. – This Act shall be known as the “Bawas VAT Act of
2 2019.”
3 Sec. 2. Section 106 (A) of Republic Act No. 8424, otherwise known as the Tax
4 Reform Act of 1997, is hereby amended to read as follows:
5 (A) Rate and Base of Tax. - There shall be levied, assessed and collected
6 on every sale, barter or exchange of goods or properties, value-added
7 tax equivalent to twelve percent (12%) of the gross selling price or gross
8 value in money of the goods or properties sold, bartered or exchanged,
9 such tax to be paid by the seller or transferor: PROVIDED, THAT
10 EFFECTIVE JANUARY 1, 2019, THE RATE OF VALUE ADDED TAX
11 (VAT) SHALL BE REDUCED TO TEN PERCENT (10%); AND
12 PROVIDED, FURTHER, THAT THE PRESIDENT SHALL,
13 EFFECTIVE JANUARY 1, 2022, REDUCE THE RATE OF VAT TO
14 EIGHT PERCENT (8%) SHOULD THE PREVIOUS YEAR'S
15 REALIZED REVENUES FROM VALUE ADDED TAX REPORTED IN
16 THE BUDGET OF EXPENDITURES AND SOURCES OF FINANCING
17 SUBMI'ITED TO CONGRESS EQUAL OR EXCEED FOUR POINT
18 FIVE PERCENT (4-5%) AS A PERCENTAGE OF GROSS DOMESTIC
19 PRODUCT (GDP).
 1 Sec. 3. Section 107 (A) of Republic Act No. 8424, otherwise known as the Tax
2 Reform Act of 1997, is hereby amended to read as follows:
3 (A) In General. - There shall be levied, assessed and collected on every
4 importation of goods value-added tax equivalent to twelve percent (12%)
5 based on the total value used by the Bureau of Customs in determining
6 tariff and customs duties, plus customs duties, excise taxes, if any, and
7 other charges, such tax to be paid by the importer prior to the release of
8 such goods from customs custody: Provided, That where the customs
9 duties are determined on the basis of quantity or volume of the goods,
10 the value-added tax shall be based on the landed cost plus excise taxes,
11 if any; PROVIDED, THAT EFFECTIVE JANUARY 1, 2019, THE RATE
12 OF VALUE ADDED TAX (VAT) SHALL BE REDUCED TO TEN
13 PERCENT (10%); AND PROVIDED, FURTHER, THAT THE
14 PRESIDENT SHALL, EFFECTIVE JANUARY 1, 2022, REDUCE THE
15 RATE OF VAT TO EIGHT PERCENT (8%) SHOULD THE PREVIOUS
16 YEAR'S REALIZED REVENUES FROM VALUE ADDED TAX
17 REPORTED IN THE BUDGET OF EXPENDITURES AND SOURCES
18 OF FINANCING SUBMITTED TO CONGRESS EQUAL OR EXCEED
19 FOUR POINT FIVE PERCENT (4-5%) AS A PERCENTAGE OF
20 GROSS DOMESTIC PRODUCT (GDP).
21 Sec. 4. Section 108 (A) of Republic Act No. 8424, otherwise known as the Tax
22 Reform Act of 1997, is hereby amended to read as follows:
23 (A) Rate and Base of Tax. - There shall be levied, assessed and collected
24 on every sale, barter or exchange of goods or properties, value-added
25 tax equivalent to twelve percent (12%) of gross receipts derived from
26 the sale or exchange of services, including the use or lease of
27 properties[.]:PROVIDED, THAT EFFECTIVE JANUARY 1, 2019, THE
28 RATE OF VALUE ADDED TAX (VAT) SHALL BE REDUCED TO TEN
29 PERCENT (10%); AND PROVIDED, FURTHER, THAT THE
30 PRESIDENT SHALL, EFFECTIVE JANUARY 1, 2022, REDUCE THE
31 RATE OF VAT TO EIGHT PERCENT (8%) SHOULD THE PREVIOUS
32 YEAR'S REALIZED REVENUES FROM VALUE ADDED TAX
33 REPORTED IN THE BUDGET OF EXPENDITURES AND SOURCES
34 OF FINANCING SUBMVITED TO CONGRESS EQUAL OR EXCEED
35 FOUR POINT FIVE PERCENT (4-5%) AS A PERCENTAGE OF
36 GROSS DOMESTIC PRODUCT (GDP).

1
 1 Sec. 5. Section 108 (B) of Republic Act No. 8424, otherwise known as the Tax
2 Reform Act of 1997, is hereby amended to read as follows:
3 (1) xxx
4 [(2) Services other than those mentioned in the preceding paragraph,
5 rendered to a person engaged in business conducted outside the
6 Philippines or to a nonresident person not engaged in business who is
7 outside the Philippines when the services are performed, the
8 consideration for which is paid for in acceptable foreign currency and
9 accounted for in accordance with the rules and regulations of the Bangko
10 Sentral ng Pilipinas (BSP);]
11 (2) [(3)] Services rendered to persons or entities whose exemption
12 under special laws or international agreements to which the Philippines
13 is a signatory effectively subjects the supply of such services to zero
14 percent (0%) rate;
15 (3) Services rendered to persons engaged in international shipping or
16 international air transport operations, including leases of property for use
17 thereof: Provided, That these services shall be exclusive for international
18 shipping or air transport operations;
19 (4) Services performed by subcontractors and/or contractors in
20 processing, converting, of manufacturing goods for an enterprise whose
21 export sales exceed seventy percent (70%) of total annual production;
22 and
23 (5) Transport of passengers and cargo by air or sea vessels from the
24 Philippines to a foreign country.
25 [(7) Sale of power or fuel generated through renewable sources of
26 energy such as, but not limited to, biomass, solar, wind, hydropower,
27 geothermal, ocean energy, and other emerging energy sources using
28 technologies such as fuel cells and hydrogen fuels.
29 (8) Services rendered to:
30 (i) Registered enterprises within a separate customs territory as
31 provided under special law; and
32 (ii) Registered enterprises within tourism enterprise zones as
33 declared by the TIEZA subject to the provisions under Republic Act
34 No. 9593 or the Tourism Act of 2009.
35 Provided, That subparagraphs (b)(l) and (b)(5) hereof shall be subject to

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 1 the twelve percent (12%) value-added tax and no longer be subject to

2 zero percent (0%) vat rate upon satisfaction of the following conditions:

3 (1) The successful establishment and implementation of an

4 enhanced VAT refund system that grants refunds of creditable
5 input tax within ninety (90) days from the filing of the VAT refund
6 application with the Bureau: Provided, that, to determine the
7 effectivity of item no. 1, all applications filed from January 1, 2018
8 20 shall be processed and must be decided within ninety (90) days
9 from the filing of the VAT refund application;
10 (2) All pending VAT refund claims as of December 31, 2017 shall
11 be fully paid in cash by December 31, 2019.

12 Provided, that the Department of Finance shall establish a VAT refund

13 center in the Bureau of Internal Revenue (BIR) and in the Bureau of
14 Customs (BOC) that will handle the processing and granting of cash
15 refunds of creditable input tax.
16 An amount equivalent to five percent (5%) of the total value-added tax
17 collection of the BIR and the BOC from the immediately preceding year
18 shall be automatically appropriated annually and shall be treated as a
19 special account in the General Fund or as trust receipts for the purpose
20 of funding claims for VAT refund: Provided, That any unused fund, at the
21 end of the year shall revert to the General Fund.
22 Provided, further, that the BIR and BOC shall be required to submit to the
23 COCCTRP a quarterly report of all pending claims for refund and any
24 unused fund.]
25 Sec. 6. Section 109 (1) of Republic Act No. 8424, otherwise known as the Tax
26 Reform Act of 1997, is hereby amended to read as follows:

27 (A) xxx

28 xxx

29 (J) SALE OF POWER OR FUEL GENERATED THROUGH

30 RENEWABLE SOURCES OF ENERGY SUCH AS, BUT NOT LIMITED
31 TO, BIOMASS, SOLAR, WIND, HYDROPOWER, GEOTHERMAL,
32 OCEAN ENERGY, AND OTHER EMERGING ENERGY SOURCES
33 USING TECHNOLOGIES SUCH AS FUEL CELLS AND HYDROGEN
34 FUELS;

3
 1 [(J) Services rendered by regional or area headquarters established in
2 the Philippines by multinational corporations which act as supervisory,
3 communications and coordinating centers for their affiliates, subsidiaries
4 or branches in the Asia-Pacific Region and do not earn or derive income
5 from the Philippines;]
6 xxx
7 [(Q) Lease of a residential unit with a monthly rental not exceeding
8 Fifteen thousand pesos (P15,000);]
9 (Q)[(R)] Sale, importation, printing or publication of books and any
10 newspaper, magazine review or bulletin which appears at regular
11 intervals with fixed prices for subscription and sale and which is not
12 devoted principally to the publication of paid advertisements;
13 (R)[(S)] Transport of passengers by international carriers;
14 (S)[(T)] Sale, importation or lease of passenger or cargo vessels and
15 aircraft, including engine, equipment and spare parts thereof for
16 domestic or international transport operations;
17 (T)[(U)] Importation of fuel, goods and supplies by persons engaged in
18 international shipping or air transport operations: Provided, That the fuel,
19 goods, and supplies shall be used for international shipping or air
20 transport operations; Provided, That the fuel, goods, and supplies shall
21 be used for international shipping or air transport operations;
22 (U)[(V)] Services of bank, non-bank financial intermediaries performing
23 quasi-banking functions, and other non-bank financial intermediaries;
24 (V)[(W)] Sale or lease of goods and services to senior citizens and
25 persons with disabilities, as provided under republic act nos. 9994
26 (Expanded Senior Citizens Act of 2010) and 10754 (An Act Expanding the
27 Benefits and Privileges of Persons with Disability), respectively;
28 (W)[(X)] Transfer of property pursuant to Section 40(c)(2) of the NIRC,
29 as amended;
30 (X)[(Y)] Association dues, membership fees, and other assessments and
31 charges collected by homeowners associations and condominium
32 corporations;
33 (Y)[(Z)] Sale of gold to the Bangko Sentral ng Pilipinas;
34 (Z)[(AA)] Sale of drugs and medicines prescribed for diabetes, high
35 cholesterol, and hypertension beginning January 1, 2019; and
36 (AA)[(BB)] Sale or lease of goods or properties or the performance of

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 1 services other than the transactions mentioned in the preceding
2 paragraphs, the gross annual sales and/or receipts do not exceed the
3 amount of [one million five hundred thousand] Three million pesos
4 (P3,ooo,ooo).

5 Sec. 7. Section 112 of Republic Act No. 8424, otherwise known as the Tax
6 Reform Act of 1997, is hereby amended to read as follows:

7 Sec. 112. Refunds or Tax Credits of Input Tax. –

8 (A) xxx
9 (B) xxx
10 (C) xxx
11 ALL PENDING VAT REFUND CLAIMS PURSUANT TO THIS
12 SECTION AS OF DECEMBER 31, 2017 SHALL BE PROCESSED,
13 AND IF MERITORIOUS, SHALL BE REFUNDED IN CASH WHEN
14 APPROVED, ON OR BEFORE DECEMBER 31, 2019.
15 Sec. 8. Implementing Rules and Regulations (IRR). — The Secretary of Finance,
16 upon the recommendation of the Commissioner of Internal Revenue, shall issue the
17 Implementing Rules and Regulations for the effective implementation of this Act, within
18 sixty (60) days from the approval thereof.
19 Sec. 9. Separability Clause. — If any provision of this Act is declared
20 unconstitutional or invalid by a court of competent jurisdiction, the remaining
21 provisions not affected thereby shall continue to be in full force and effect.
22 Sec. 10. Repealing Clause – All laws, decrees, executive orders, department or
23 memorandum orders and other administrative issuances or parts thereof which are
24 inconsistent with the provisions of this Act are hereby modified, superseded or
25 repealed accordingly.
26 The following laws or provisions of laws are hereby expressly repealed and the persons
27 and/or transactions affected herein are made subject to the VAT provisions of Title IV
28 of the National Internal Revenue Code, as amended:
29 a) Section 16(a) and (b), Section 17(a), insofar as VAT exemption and vat
30 payment deferment is concerned, and section 17(b), insofar as VAT tax
31 credits are concerned, of Presidential Decree 972 s. 1976, or the Coal
32 Development Act of 1976;
33 b) Section 10 (2), insofar as VAT exemption is concerned, and (3), insofar
34 as VAT tax credits are concerned, of Republic Act No. 7156, or the Mini-

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 1 Hydro Electric Power Incentives Act;

2 c) Section 15(g), insofar as VAT zero-rating is concerned, and Section 15

3 (j), insofar as VAT tax credits are concerned, and Section 21 (a) (b)
4 and (d) insofar as VAT incentives are concerned, of Republic Act No.
5 9513, or the Renewable Energy Act of 2008;
6 d) Section 13, insofar as VAT exemption is concerned, of Republic Act No.
7 7820, or the Partido Development Administration act of 1994;
8 e) Section 5(c), insofar as VAT exemption is concerned, of Republic Act
9 No. 10072, or the Philippine Red Cross Act of 2009;
10 f) Section 23, insofar as fiscal incentives relating to VAT are concerned,
11 of Republic Act No. 7916, or Special Economic Zones Act of 1995, as
12 amended by Republic Act No. 8748;
13 g) Section 1, insofar as VAT exemption is concerned, of Republic Act no.
14 20 9400, or an Act amending Republic Act No. 7227, as amended,
15 otherwise known as the Bases Conversion and Development Act of
16 1992;
17 h) 3rd paragraph, insofar as VAT exemption is concerned, of Section 2 of
18 Republic Act No. 9400, or an Act Amending Republic Act No. 7227, as
19 amended, otherwise known as the Bases Conversion and Development
20 Act of 1992;
21 i) 2nd paragraph, insofar as VAT exemption is concerned, of Section 3 of
22 Republic Act No. 9400, or an Act Amending Republic Act No. 7227, as
23 amended, otherwise known as the Bases Conversion and Development
24 Act of 1992;
25 j) Section 4, insofar as VAT exemption is concerned, of Republic Act No.
26 2 9400, or an Act Amending Republic Act No. 7227, as amended,
27 otherwise known as the Bases Conversion and Development Act of
28 1992;
29 k) Section 5, insofar as VAT exemption is concerned, of Republic Act No.
30 5 9400, or an Act Amending Republic Act No. 7227, as amended,
31 otherwise known as the Bases Conversion and Development Act of
32 1992;
33 l) Section 4 (f), insofar as VAT exemption is concerned, of Republic Act
34 No. 7903, or the Zamboanga City Special Economic Zone Act of 1995;
35 m) Section 4 (b) (c), insofar as VAT exemption is concerned, Republic Act

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 1 No. 7922, or the Cagayan Special Economic Zone Act of 1995;
2 n) Section 5 (c) (e) (g) (m), insofar as VAT exemption is concerned, of
3 Republic Act No. 9490, or the Aurora Special Economic Zone Act of
4 2007;
5 o) Section 4, insofar as VAT exemption is concerned, of Republic Act No.
6 10083, or an Act Amending Republic Act 9490, the Aurora Special
7 Economic Zone Act of 2007;
8 p) Section 86 (c),(d),(e)(l), insofar as VAT exemption is concerned, and
9 (e)(2) insofar as VAT tax credits are concerned, of Republic Act No.
10 9593, or the Tourism Act of 2009;
11 q) Section 5, insofar as VAT exemption is concerned, of Republic Act No.
12 9728, or the Freeport of Bataan Act of 2009;
13 Sec. 11. Effectivity. – This Act shall take effect fifteen (15) days after its
14 publication in the Official Gazette or 25 in any newspaper of the general circulation.

Approved,