House Bill 5636 - Package 1

Tax Reform Package 1
(House Bill 5636)

15 June 2017
TRAIN
Tax Reform for Acceleration and Inclusion
House Bill No. 5636

An Act Amending Sections 5, 6, 22, 24, 25, 31, 32, 33, 34, 79, 84, 86, 99,
106, 107, 108, 109, 116, 148, 149, 155, 171, 232, 237, 254, 264 and 288;
Creating new Sections 148-A, 150-A, 237-A, 264-A, 264-B and 265-A;
and Repealing Sections 35 and 62, all under the National Internal
Revenue Code of 1997, as amended
► Certified as urgent by President Rodrigo R. Duterte on

May 29, 2017
► Approved on the third and final reading by the House of

Representatives on May 31, 2017
Page 2 1 January 2014 Presentation title

Income tax rates for individual citizens and
resident aliens
► Current National Internal Revenue Code of 1997, as amended
Not over 10,000 5%
Over 10,000 But not over 500 + 10% of
30,000 excess over
10,000
2,500 + 15% of
Over 30,000 But not over
excess over
70,000
30,000
Over 70,000 But not over 8,500 + 20% of
140,000 excess over
70,000
Over 140,000 But not over 22,500 + 25% of
250,000 excess over
140,000
Page 3 14 June 2017 Tax Reform Package (House Bill 5636)
Income tax rates for individual citizens and
resident aliens
► HB 5636
Effective January 1, 2018, 2019 and 2020: Effective January 1, 2021 onwards:
Not 250,000 0% Not 250,000 0%

over over
Over 250,000 But not over 20% of excess over 250,000 Over 250,000 But not over 15% of excess over 250,000
400,000 400,000
Over 400,000 But not over 30,000 + 25% of excess over Over 400,000 But not over 22,500 + 20% of excess over
800,000 400,000 800,000 400,000
Over 800,000 But not over 130,000 + 30% of excess Over 800,000 But not over 102,500 + 25% of excess
2,000,000 over 800,000 2,000,000 over 800,000
Over 2,000,000 But not over 490,000 + 32% of excess Over 2,000,000 But not over 402,500 + 30% of excess
5,000,000 over 2,000,000 5,000,000 over 2,000,000
Over 5,000,000 1,450,000 + 35% of excess Over 5,000,000 1,302,500 + 35% of excess
over 5,000,000
over 5,000,000
► After 2022, the taxable income levels and base in the above schedule shall be adjusted once every three (3) years
after considering the effect of the same of the three-year cumulative CPI inflation rate rounded off to the nearest
thousandth.

Personal Income Tax Provisions Removed
► Minimum Wage Earners

► Definitions of Statutory Minimum Wage and Statutory Minimum
Wage Earner and the related provision on income tax exemption of
Minimum Wage Earners are removed
► Personal and Additional Exemptions

► Sections 35 on Personal and Additional Exemptions for Individual
Taxpayer and Section 79(D) on the related exemption certificate is
repealed
► 79(F) on the Rule on claiming exemptions for husband and wife is
also repealed
► Premium Payments on Health and/Hospitalization

► Deduction of P2,400.00 per family is removed

Personal Income Tax Provisions Revised
► Fringe Benefits Tax

► FBT shall be 30% from 32%
► The fringe benefit shall form part of the recipient employee’s gross
income beginning 2022 and thereafter, subject to regular income
tax
► 13th Month Pay and Other Benefits Excluded from Gross
Income
► Increased from P82,000.00 to P100,000.00
► Those who are allowed Deductions from Gross Income
► Included are self-employed and/or professionals whose gross
sales or gross receipts exceed the VAT threshold in Section 109
(P3,000,000).

Self-Employed Professionals
► HB 5636 added Section 24(A)(2)(B), (C) and (D) whereby:
► Self-employed and/or Professionals whose gross sales or gross

receipts do not exceed the VAT threshold in Section 109
(P3,000,000) will be subject to 8% income tax on gross sales or
gross revenues in excess of P250,000 in lieu of percentage tax.
► Self-employed and/or Professionals whose gross sales or gross

receipts exceed the VAT threshold in Section 109 (P3,000,000)
shall be taxed in the same manner as corporations as to the
applicable tax rate, minimum income tax and allowable
deductions, as provided in Sections 27(A), 27(E) and 34 of the Tax
Code.

Estate Tax
► Present NIRC - graduated schedule of rates:

If the net estate is:
Over But Not Over The Tax Shall Plus Of the Excess
Be Over
P 200,000 Exempt
P 200,000 500,000 0 5% P 200,000
500,000 2,000,000 P15,000 8% 500,000
2,000,000 5,000,000 135,000 11% 2,000,000
5,000,000 10,000,000 456,000 15% 5,000,000
10,000,000 And Over 1,215,000 20% 10,000,000
► HB 5636 - estate tax shall be 6% of the value of the net

estate.

Donor’s Tax
► Present NIRC - graduated schedule of rates:

If the net gift is:
Over But Not Over The Tax Shall be Plus Of the Excess Over
P 100,000 Exempt
P 100,000 200,000 0 2% P100,000
200,000 500,000 2,000 4% 200,000
500,000 1,000,000 14,000 6% 500,000
1,000,000 3,000,000 44,000 8% 1,000,000
3,000,000 5,000,000 204,000 10% 3,000,000
5,000,000 10,000,000 404,000 12% 5,000,000
10,000,000 1,004,000 15% 10,000,000
► Exception - gift to a stranger taxed at 30% of the net gift

Donor’s Tax
► HB 5636:
► Donor’s tax - 6% to be computed on the basis of the total gifts in
excess of P100,000 exempt gift made during the calendar year.
► The provision in Section 99(B) on a 30% donor’s tax on donations

to a stranger is removed.

VALUE-ADDED TAX (VAT)

VAT Zero-Rated Sales of Goods
► Sale of gold to the Bangko Sentral ng Pilipinas (BSP)

► Removed under the category: Export Sales
► Listed as a separate VAT zero-rated sale of goods [as Section
106(2)(c)];
► Section 106(A)(2)(a)(6) on VAT zero-rated export sale

now reads:
“Sale of goods, supplies, equipment and fuel to persons engaged in
international shipping or international air transport operations;
provided, that the goods, supplies, equipment and fuel shall be
used for international shipping or air transport operations.”

► A paragraph is added under VAT Zero-rated Export Sales to provide that:

► The following items shall be subject to the 12% VAT and no longer be
considered export sales subject to zero-percent (0%) VAT rate upon the
establishment and implementation of an enhanced VAT refund system
which gives the taxpayer the actual refund or denial of his application
within ninety (90) days from filing of the VAT refund application:
► 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 BSP rules and regulations;
► Sale of raw materials or packaging materials to export-oriented enterprise
whose export sales exceed seventy percent (70%) of total annual
production;
► Those considered export sales under Executive Order No. 226, otherwise
known as the "Omnibus Investment Code of 1987", and other special laws;”

► B. Foreign-currency denominated sales:

► Removed from list of VAT zero-rated transactions
► C. Section 106(2)(a)(c) is revised to read as follows:

► “Sales to persons or entities whose exemption under special laws
or international agreements to which the Philippines is a signatory.”
► The phrase “effectively subjects such sales to zero rate” is
removed.

VAT on Sale of Services
Definition of “sale or exchange of services”
► The phrase “sale or exchange of services” shall include

sales of electricity by generation companies, transmission,
and distribution companies, including electric
cooperatives.

VAT Zero-rated Sales of Services
Revisions
The provision below is revised to read as follows:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of

Properties. –
(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. xxx
(4) Services rendered to persons engaged in international shipping or international air

transport operations, including leases of property for use thereof provided, that these
services shall be exclusively for international shipping or air transport operations.
Xxx xxx xxx
(6) Transport of passengers and cargo by domestic air or sea vessels from the
Philippines to a foreign country; and xxx”

VAT Zero-rated Sales of Services
Revisions
The provision below is revised to read as follows:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of

Properties. –
(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. xxx
(5) Services performed by subcontractors and/or contractors in processing,

converting, of manufacturing goods for an enterprise whose export sales
exceed seventy percent (70%) of total annual production.
Xxx xxx xxx
“Provided, that item (B)(5) hereof shall be subject to the twelve percent (12%)
value-added tax and no longer be subject to zero-percent (0%) VAT rate upon
the establishment and implementation of an enhanced VAT refund system
which gives the taxpayer the actual refund or denial of his application within
ninety (90) days from the filing of the VAT refund application.”

VAT- Exempt Transactions
Removed Provision
Item Q below is removed from the list of VAT-Exempt

Transactions:
► Lease of a residential unit with a monthly rental not exceeding Ten

thousand pesos (P10,000) (supposed to be Php12,800.00 under
RR 16-2011).

The following VAT-exempt transaction is revised to read as

follows:
► “(D) Importation of professional instruments and implements, tools of trade,
occupation or employment, wearing apparel, domestic animals, and
personal household effects belonging to persons coming to settle in the
Philippines or Filipinos or their families and descendants who are now
residents or citizens of other countries, such parties hereinafter referred to
as overseas Filipinos, in quantities and of the class suitable to the
profession, rank or position of the persons importing said items, for their
own use and not for barter or sale, accompanying such persons, or arriving
within reasonable time: Provided, that the Bureau of Customs may, upon
the production of satisfactory evidence that such persons are actually
coming to settle in the Philippines and that the goods are brought from
their former place of abode; Provided, further, that vehicles, vessels,
aircrafts, machineries and other similar goods for use in manufacture, shall
not fall within this classification and shall therefore be subject to duties,
taxes and other charges.”

Revisions
► The provision below is revised as follows:
► Section 109 of Present NIRC:
► (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);
► HB 5636:
► “(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 socialized
housing as defined by Republic Act No. 7279, otherwise known as the Urban
Development and Housing Act of 1992, and other related laws.”

Revisions
► The provision below is revised to read as follows:
► Section 109 of Present NIRC:

► (U) Importation of fuel, goods and supplies by persons engaged in
international shipping or air transport operations;
► HB 5636
► “(T) Importation of fuel, goods and supplies by persons engaged in
international shipping or air transport operations; Provided, that the
fuel, goods, and supplies, shall be used for international shipping
or air transport operations.”

Revisions
► The provision below is revised as follows:

► Section 109 of Present NIRC
► (W) 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);”
► HB 5636
► “(W) 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 Three million pesos
(P3,000,000): Provided, That not later than January 31, 2021 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 Philippine Statistics
Authority (PSA).”

Added Provisions
► The provision below is added to the list of VAT exempt

transactions :
► Section 109(V):
“Sale or lease of goods and services to senior citizens and persons with disabilities, as
provided under Republic Act Nos. 9994 (Expanded Senior Citizens Act of 2010) and
10754 (An Act Expanding the Benefits and Privileges of Persons with Disability).”
► The following is added as a last paragraph under Section 109:

► “Provided, that the sale of real property utilized for socialized housing under Item
(P) hereof shall no longer be an exempt transaction upon the establishment of a
housing voucher system which shall benefit buyers of socialized housing.”

Tax on Persons Exempt from VAT
Section 116 is revised as follows:

► Present NIRC
► "SECTION 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.”
► HB 5636
► "SECTION 116. Tax on Persons Exempt from Value-added Tax (VAT). — Any
person whose sales or receipts are exempt under Section 109 (W) 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 self-employed and/or professionals whose gross sales or gross
receipts do not exceed the VAT threshold and cooperatives shall be exempt from
the three percent (3%) gross receipts tax herein imposed.”

Excise Tax

Excise Tax
Rates for Manufactured Oils and Other Fuels
► Lubricating oils and greases
► Increased to P7 from P4.50 (to P9.00 in 1/1/19 and to P10 in 1/1/20);
► Processed gas, per liter of volume capacity
► Increased to P3 from P0.05 (to P 5 in 1/1/19 and to P6 in 1/1/20);
► Denatured alcohol to be used for motive power, per liter of volume capacity
► Increased to P3 from P0.05 (to P5 in 1/1/19 and to P6 in 1/1/20);
► Leaded premium gasoline, per liter of volume capacity
► increased to P7 from P 5.35 (to P9 in 1/1/19 and to P10 in 1/1/20);
► Unleaded premium gasoline, per liter of volume capacity
► increased to P7 from P4.35 (to P9 in 1/1/19 and to P10 in 1/1/20);

Excise Tax
► Aviation turbo jet fuel

► Increased to P7 from P3.67 (to P9 in 1/1/19 and to P10 in 1/1/20);
► For kerosene
► Increased to P3 from P0 (to P5 in 1/1/19 and to P6 in 1/1/20);
► For diesel fuel oil, and on similar fuel oils having more or less the same generating
power
► For liquefied petroleum gas
► Increased to P3 from P0 (to P5 in 1/1/19 and to P6 in 1/1/20),;
► For bunker fuel oil, and on similar fuel oils having more or less the same generating
power
► For the period covering 2018 to 2020, the scheduled increase in the excise tax on fuel as imposed in
this section shall be suspended should the Dubai crude oil price reach eighty dollars (USD 80) per
barrel or more;
► Provided, that, should the said oil price per barrel fall below eighty dollars (USD 80), the scheduled
increase in excise tax shall be implemented: Provided, finally, that any suspension of the increase in
excise tax shall not result in any reduction of the excise tax being imposed at the time of the
suspension.

Mandatory Marking of Petroleum Products

Mandatory Marking of all Petroleum Products
Section 148-A (A) – (B)
► All petroleum products (refined oil and other fuel) that are refined in,
manufactured in, and/or imported into the Philippines, and that are subject to
the payment of taxes and duties, which include but is not limited to gasoline
and diesel, shall be marked with the official marking agent designated by the
Department of Finance (DOF). The marker shall be introduced at the refinery
or at the terminal, before the petroleum product is offloaded or transported to
the domestic market
► The person, entity, or taxpayer who owns or enters the petroleum

products into the country, or the person to whom the petroleum products
are consigned shall cause and accommodate the marking of petroleum
products with the official marking agent.
► A Customs/BIR official shall be on site to administer the declaration of the

tax and duties applied on the petroleum products.

Official Markers
Section 148-A (C)
► Official Markers.
► There shall be a list of chemical additives and corresponding quantitative

ratio for each type of fuel
► The official fuel markers shall be distinct and immune to imitation or
replication.
► Official fuel marker used in the Philippines must not be used in any part of
the world.
► Official markers’ chemical composition and quantitative ratio must persist
for at least three (3) years from their application or administration to the
unmarked fuel.

Absence of Marker; Presumptions
Section 148-A (D)
► Absence of Official Marker or Use of Fraudulent Marker;

Presumptions.
► If no official marker is found, it shall be presumed that the same
were refined, manufactured, and/or imported or withdrawn with the
intention to evade the payment of the taxes and duties due
thereon.
► The absence of the official marker or the use of fraudulent marker
on the petroleum products shall be considered prima facie
evidence that the same have been withdrawn or imported without
the payment of the excise tax.

Prosecution of Offense
Section 148-A (E)
► The failure of any person, entity or the taxpayer

responsible for the marking of the petroleum products as
required in this section shall be prosecuted under Section
265-A of this Code.

Offenses Relating to Fuel Marking
Sec. 265-A
Sec. 265-A. Offenses Relating to Fuel Marking. –

All offenses relating to fuel marking are hereby considered as economic
sabotage, and shall, in addition to the penalties imposed under Title X of this Act,
Section 1401 of Republic Act No. 10863, and other relevant laws, be punishable
as follows:
A. Any person convicted of selling, trading, delivering, distributing or

transporting unmarked fuel in commercial quantity held for domestic use or
merchandise shall suffer the penalties of:
1st offense - Fine P2,500,000.00
2nd offense - Fine of P5,000,000.00
3rd offense - Fine of P10,000,000.00 and revocation of license to
engage in any trade or business

Sec. 265-A (continued..)
B. The same penalty as above shall be imposed on any person who:
► Causes the removal of the official fuel marking agent from marked fuel
► Causes the adulteration or dilution of fuel intended for sale to domestic

market
► Has the knowing possession, storage, transfer or offer for sale of fuel
obtained as a result of such removal, adulteration or dilution
C. Any person convicted of the following acts:

► Making, importing, selling, using or possessing fuel markers without
express authority;
► Making, importing, selling, using or possessing counterfeit fuel markers; or
► Causing another person or entity to commit any of the two preceding acts
Fine - P1,000,000.00 - P5,000,000.00

Imprisonment - 4 years - 8 years

D. Any person convicted of willfully implicating, incriminating or imputing the
commission of any violation of this act by directly or indirectly, overtly or
covertly inserting, placing, adding or attaching whatever quantity of:
► Unmarked fuel
► Counterfeit additive
► Chemical
in the person, house, effects, inventory, or in the immediate vicinity of an

individual
Fine - P1,000,000.00 - P5,000,000.00
Imprisonment - 4 years - 8 years

E. Any person authorized, licensed or accredited to conduct fuel tests, who
knowingly, willfully or through gross negligence issues false or fraudulent fuel
test results
Additional penalty of imprisonment: 1 year and 1 day - 2 years and 6 months
The court may at its instance, impose the additional penalties of:
► Revocation of the license to practice his/her profession in case of a
practitioner
► Closure of the fuel testing facility

Random Field Tests
Section 148-A (F)
F. Random Field Tests –
► shall be conducted on fuels found in the warehouses, gas stations

and other retail outlets and in such other properties or equipment
► to be conducted in the presence of a representative from BIR or
BOC, third party marking provider, and authorized representative
of owner of the fuel to be tested.
► All field tests shall be properly filmed or video-taped, and
documented.
► BOC or BIR shall immediately obtain a sample of the tested fuel
upon discovering that the same is unmarked, adulterated or
diluted.”

Confirmatory Tests
Section 148-A (G)
G. Confirmatory Tests –
► to be conducted on the tested unmarked, adulterated, or diluted fuel
in an accredited ISO 170025 testing facility.
► Confirmatory fuel test certificates issued by fuel testing facilities shall:
► be valid for any legal purpose; and
► constitute admissible and conclusive evidence before any court.

Engagement of Third Party Marking Provider
Section 148-A (J)
Third Party Marking Provider:
► The Public Information Office (PIO) shall engage a third party marking
provider (not more than one), which:
► shall provide an end-to-end solution to the government, i.e.,
providing, monitoring and administering the fuel markers, provide
equipment and devices, conduct field and confirmatory tests and
perform other incidental or necessary acts.
► should not have any customer in the Philippines besides the
government.

Costs
Section 148-A (K)
All related costs in the implementation of the fuel marking

provisions - shall be borne by the refiner, importer or
manufacturer of petroleum products.

Excise Tax on Automobiles
(Section 149, Tax Code)
The ad valorem tax on automobiles based on the net
manufacturer’s or importer’s selling price net of excise and
value added tax is increased as follows:
► “Effective January 1, 2018:
Up to P600,000 Increased to 3%
Over P600,000 to Increased to P18k plus 30% in excess of P 600,000

P1.1 million
Over P1.1 million to Increased to P168k plus 50% in excess of P 1.1 million
P2.1 million
Over P2.1 million to Increased to P668k plus 80% in excess of P2.1 million
P3.1 million
Over P3.1 million P1.468 million plus 90% in excess of P3.1 million

(continued…)
► “Effective January 1, 2019:
Up to P600,000 In Increased to 4%
Over P600,000 to Increased to P24k plus 40% in excess of P 600,000

P1.1 million
Over P1.1 million to Increased to P224k plus 60% in excess of P 1.1 million
P2.1 million
Over P2.1 million to Increased to P824k plus 100% in excess of P2.1 million
P3.1 million
Over P3.1 million P1.824 million plus 120% in excess of P3.1 million

(continued…)
► (a) Automobile shall mean any four (4) or more wheeled motor
vehicle regardless of seating capacity propelled by gasoline, diesel or
any other motive power except purely powered by electricity or by
electricity in combination with gasoline, diesel or any other motive
power: Provided, that for purposes of this Act, buses, trucks, cargo
vans, jeeps/jeepneys/jeepney substitutes, single cab chassis, and
special-purpose vehicles shall not be considered automobiles.
► (b) Truck/cargo van shall mean a motor vehicle of any configuration

that is exclusively designed for the carriage of goods and with any
number of wheels and axles: provided, that pick-ups shall be
considered as trucks.

(continued..)
The definition below is added:
► (g) Hybrid vehicle shall mean a motor vehicle powered by electricity

in combination with gasoline, diesel or any other motive power. Its
drive system consists of an efficient combustion engine and a
powerful electric motor, which can run at least 30 kilometers under
one (1) full charge.”

Sugar- Sweetened Beverages
Section 150-A (A)
A new section on Sugar Sweetened Beverages is added.
Rates and Base of Tax

► On sugar sweetened beverages, excise tax per liter of
volume capacity effective January 1, 2018 shall be:
(1) Beverages containing purely locally produced sugar – P10.00
(2) Others – P20.00
The rates shall be adjusted once every 3 years through rules and
regulations issued by the Secretary of Finance after considering the
effect on the same of the three-year cumulative CPI inflation rate.”

Section 150-A (B)
► Exclusions from the scope:
1. Plain milk and milk drink products without added sugar;
2. All milk products, infant formula and milk alternatives, such as soy milk
or almond milk, including flavored milk, such as chocolate milk;
3. 100% Natural Fruit Juices
4. 100% Natural Vegetable Juices
5. Meal replacement beverages and medically indicated beverages. Any
liquid or powder drink/product for oral nutritional therapy for persons
who cannot absorb or metabolize dietary nutrients from food or
beverages, or as a source of necessary nutrition used due to a
medical condition and an oral electrolyte solution for infants and
children formulated to prevent dehydration due to illness; and
6. Ground coffee; and
7. Unsweetened tea

Section 150-A (B)
Sugar Sweetened Beverages: non-alcoholic beverages of any
constitution (liquid, powder, or concentrates) that are pre-packaged and
sealed in accordance with FDA standards, that contain sugar added by
manufacturers, and shall include the following:
A. Sweetened juice drinks;
B. Sweetened tea and coffee;
C. Other beverages:
C1. All carbonated beverages with added sugar, including those with caloric
and non-caloric sweeteners;
C2. Flavored water;
C3. Energy drinks;
C4. Sports drinks;
C5. Powdered drinks not classified as milk, juice, tea and coffee;
C6. Cereal and grain beverages; and
C7. Other non-alcoholic beverages that contain added sugar

Section 150-A (B)
► Caloric Sweetener - a substance that is sweet and includes sucrose,
fructose, including high fructose corn sweetener, glucose or any
artificial sugar substitute that produces a desired sweetness.
► Artificial sweetener - a substance that is used in place of

sweeteners containing sugar or sugar alcohols, that is alternatively
called sugar substitute, non-nutritive sweetener and non-caloric
sweetener. It provides sweetness to foods and drinks but are non-
caloric. Artificial sweetener is a chemically processed substance
which can be directly added to food or during its preparation, such as,
aspartame, sucralose, saccharin, stevia, acesulfame k, neotame,
monk fruit and cyclamates.

Section 150-A (D)
Penalties shall apply as follows:
► Misdeclaration or misrepresentation in the required sworn
statement - penalty of summary cancellation or withdrawal of
permit to engage in business as manufacturer or importer of SSBs.
► If act or omission is committed by a corporation, association or
partnership – fine of triple the amount of deficiency taxes,
surcharges and interest
► Criminal liability shall attach to any person liable for the prohibited
acts or omissions, and on any person who willfully aids or abets in
the commission of such act or omission.
► If not a citizen of the Philippines, the offender shall be deported
immediately after serving the sentence without further proceedings
for deportation.

Counting or Metering Devices
Section 155
Section 155 on Counting or Metering Devices is amended such that:
► Manufacturers and/or Importers shall provide themselves with Counting

or Metering Devices to determine Volume of Production and
Importation.
► Applies to:
► Manufacturers of cigarettes, alcoholic products, oil products and
other articles subject to excise tax that can be similarly measured
► importers of finished petroleum products
► This requirement shall be complied with before commencement of

operations.

Power of the Commissioner
Section 6
Section 6(A) of the Tax Code is amended to read as follows:
► “Sec. 6. Power of the Commissioner to Make Assessments and
Prescribe Additional Requirements for Tax Administration and
Enforcement. –
(A) Examination of Returns and Determination of Tax Due. — After a

return has been filed as required under the provisions of this
Code, the Commissioner or his duly authorized representative
may authorize the examination of any taxpayer and the
assessment of the correct amount of tax, notwithstanding any law
requiring the prior authorization of any government agency or
instrumentality:
Provided, however, That failure to file a return shall not prevent the
Commissioner from authorizing the examination of any taxpayer.”

Section 6 (continued..)
(F) Authority of the Commissioner to Inquire into and receive information on Bank
Deposit Accounts and Other Related data held by Financial Institutions. -
Notwithstanding any contrary provision of Republic Act No. 1405, otherwise known as
the “Bank Secrecy Law,” Republic Act No. 6426, otherwise known as the “Foreign
Currency Deposit Act,” and other general or special laws, the Commissioner is hereby
authorized to inquire into and receive information on the bank deposits and other
related data held by financial institutions of:
(3) A specific taxpayer or taxpayers upon an obligation to exchange tax information with
a foreign tax authority whether on request or automatic, pursuant to an international
convention or agreement on tax matters to which the Philippines is a signatory or a
party of: Provided, That the information obtained from the banks and other financial
institutions may be used by the Bureau of Internal Revenue for tax assessment,
verification, audit and enforcement purposes.
The exchange of information with a foreign tax authority, whether on request or

automatic, shall be done in a secure manner to ensure confidentiality thereof under
such rules and regulations as may be promulgated by the Secretary of Finance, upon
recommendation of the Commissioner.

In case the exchange of information is upon request from a foreign tax authority, the
Commissioner shall provide the tax information obtained from banks and financial
institutions pursuant to a convention or agreement upon request of the foreign tax
authority when such requesting foreign tax authority has provided the following
information to demonstrate the foreseeable relevance of the information to the request:
(a) xxx
(g) xxx
If the Commissioner is unable to obtain and provide the information within ninety (90)
days from receipt of the request, due to obstacles encountered in furnishing the
information or when the bank or financial institution refuses to furnish the information,
he shall immediately inform the requesting tax authority of the same, explaining the
nature of the obstacles encountered or the reasons for refusal.
In case the exchange of information is automatic, the Commissioner shall provide tax
information obtained from banks and financial institutions in accordance with
international common reporting standards.

(4) Any taxpayer upon order of any competent court in cases involving
offenses covered under Sections 254 of RA No. 8424, as amended, subject to
rules and regulations prescribed by the Secretary of Finance upon
recommendation of the Commissioner of Internal Revenue.”

Issuance of Receipts or Sales or Commercial
Invoices
► “Sec. 237. Electronic Receipts or Electronic Sales or Commercial

Invoices. -
► All persons subject to an internal revenue tax shall, at the point of each sale or
transfer of merchandise or for services rendered valued at P25.00 or more, issue
duly registered electronic receipts or electronic sales or commercial invoices,
showing the date of transaction, quantity, unit cost and description of merchandise
or nature of service
► In the case of sales, receipts or transfers in the amount of P100.00 or more, or
regardless of amount, where the sale or transfer is made by a person liable to
value-added tax to another person also liable to value-added tax; or where the
electronic receipt is issued to cover payment made as rentals, commissions,
compensations or fees, electronic receipts or electronic invoices shall be issued
which shall show the name, business style, if any, and address of the purchaser is
a VAT registered person, in addition to the information herein required, the
electronic invoice or electronic receipt shall further show the Tax Identification
Number (TIN) of the purchaser

Issuance of Receipts or Sales or Commercial
Invoices (continued..)
► Provided, further, that the electronic receipt or sales or commercial invoice
shall be issued either electronically or by tendering a printed copy thereof:
provided, finally, that the digital record or the printed copy of the electronic
receipt or sales or commercial invoice shall be kept by the issuer, purchaser,
customer or client 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.
► The Commissioner may, in meritorious cases, exempt any person subject to

internal revenue tax from compliance with the provisions of this section.”
► Transmission. – The preceding paragraph notwithstanding, an electronic

receipt or electronic invoice, as the case maybe, shall be transmitted directly
to the Bureau of Internal Revenue (BIR) at the same time and date of each
sale transaction.”

Electronic Sales Reporting System
Section 237-A
► New section is added as follows:
► “Sec. 237-A. Electronic Sales Reporting System. - The Bureau shall require taxpayers
electronically report their sales data to the Bureau’s electronic system through the use
of CRM/POS machines, subject to rules and regulations to be issued by the Secretary
of Finance as recommended by the Commissioner of Internal Revenue: Provided, that
the machines and other ancillary devices shall be at the expense of the taxpayers:
Provided, further, that the establishment by the Bureau of the electronic sales reporting
system shall be done within three (3) years from the effectivity of this Act.
Confidentiality of Taxpayer Information and Compliance with the Data Privacy Act – The
provisions of Section 270 of the National Internal Revenue Code of 1997, as amended,
on unlawful divulgence of taxpayer information shall be strictly complied with.
The data processing of sales and purchase data shall also comply with the provisions
of Republic Act No. 10173 or the “Data Privacy Act”.

Attempt to Evade or Defeat Tax
Section 254
► Section 254 is amended to read as follows:

► From: "Sec. 254. Attempt to Evade or Defeat Tax. — Any person who willfully
attempts in any manner to evade or defeat any tax imposed under this Code or the
payment thereof shall, in addition to other penalties provided by law, upon conviction
thereof, be punished by a fine of not less than Thirty thousand pesos (P30,000) but not
more than One hundred thousand pesos (P100,000) and suffer imprisonment of not
less than two (2) years but not more than four (4) years:
Provided, That the conviction or acquittal obtained under this Section shall not be a bar
to the filing of a civil suit for the collection of taxes.”
► To: “Sec. 254. Attempt to Evade or Defeat Tax. - Any person who willfully attempts in
any manner to evade or defeat any tax imposed under this Code or the payment
thereof shall, in addition to other penalties provided by law, upon conviction thereof, be
punished with an administrative fine of not less than five hundred thousand pesos
(P500,000.00) but not more than ten million pesos (P10,000,000.00), and imprisonment
of not less than six (6) years but not more than ten (10) years: Provided, That the
conviction or acquittal obtained under this Section shall not be a bar to the filing of a
civil suit for the collection of taxes.”

Failure of Refusal to Issue Receipts or Sales
Commercial Invoices
► Section 264 is amended to read as follows:

► “(b) Any person who commits any of the acts enumerated hereunder shall
be penalized with a fine of not less than five hundred thousand pesos
(P500,000.00) but not more than ten million pesos (P10,000,000.00) and
imprisonment of not less than six (6) years but not more than ten (10)
years:
► A fourth item is added to Section 264(b) as follows:

“(4) Printing of other fraudulent receipts or sales or commercial invoices.”

Failure to Link CRM/POS to BIR’s Server
Section 264 - A
► Punishable act: Failure to transmit sales data to the Bureau’s

electronic sales reporting system
► Penalty: For each day of violation, pay a penalty amounting to one-

half of one percent (1/2 of 1%) of the annual gross sales as reflected
in the VAT-registered taxpayer’s audited financial statement for the
second year preceding the current taxable year, or P10,000,
whichever is higher.
► Provided, that payment of the penalty shall be made simultaneously with the
payment for VAT on a monthly basis as provided in Section 114(A) of the Tax Code;
► Provided, further, that should the aggregate number of the days of violation
exceeded one-hundred eighty (180) days within a taxable year, an additional
penalty of permanent closure of the VAT-registered taxpayer shall be imposed.”

Automated Sales Suppression Device
Section 264-B
► Punishable act: To purchase, use, possess, sell or offer to sell, install,
transfer, update, upgrade, keep or maintain any software or device designed
for, or is capable of:
► (A) Suppressing the creation of electronic records of sale transactions that a
taxpayer is required to keep under existing tax laws and/or regulations
► (B) Modifying, hiding, or deleting electronic records of sales transactions and
providing a ready means of access to them
► Penalty: Administrative fine of not less than Five Hundred Thousand Pesos
(P500,000.00) but not more than Ten Million Pesos (P10,000,000.00); and
suffer imprisonment of not less than two (2) years but not more than four (4)
years
► Provided, That a cumulative suppression of electronic sales record in excess of the
amount of Fifty Million Pesos (P50,000,000.00) shall be considered as economic
sabotage and shall be punished in the maximum penalty provided for under this
provision.”

Questions?
Atty. Luis Jose P. Ferrer

luis.jose.p.ferrer@ph.ey.com
Thank you.

House Bill 5636 - Package 1

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House Bill 5636 - Package 1

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Tax Reform Package 1

(House Bill 5636)

House Bill No. 5636

► Certified as urgent by President Rodrigo R. Duterte on

► Approved on the third and final reading by the House of

Page 2 1 January 2014 Presentation title

Not 250,000 0% Not 250,000 0%

Page 4 14 June 2017 Tax Reform Package (House Bill 5636)

► Minimum Wage Earners

► Personal and Additional Exemptions

► Premium Payments on Health and/Hospitalization

Page 5 14 June 2017 Tax Reform Package (House Bill 5636)

► Fringe Benefits Tax

Page 7 14 June 2017 Tax Reform Package (House Bill 5636)

► HB 5636 added Section 24(A)(2)(B), (C) and (D) whereby:

► Self-employed and/or Professionals whose gross sales or gross

► Self-employed and/or Professionals whose gross sales or gross

Page 8 14 June 2017 Tax Reform Package (House Bill 5636)

► Present NIRC - graduated schedule of rates:

► HB 5636 - estate tax shall be 6% of the value of the net

Page 9 14 June 2017 Tax Reform Package (House Bill 5636)

► Present NIRC - graduated schedule of rates:

► Exception - gift to a stranger taxed at 30% of the net gift

Page 10 14 June 2017 Tax Reform Package (House Bill 5636)

► The provision in Section 99(B) on a 30% donor’s tax on donations

Page 11 14 June 2017 Tax Reform Package (House Bill 5636)

Page 12 1 January 2014 Presentation title

► Sale of gold to the Bangko Sentral ng Pilipinas (BSP)

► Section 106(A)(2)(a)(6) on VAT zero-rated export sale

Page 13 14 June 2017 Tax Reform Package (House Bill 5636)

► A paragraph is added under VAT Zero-rated Export Sales to provide that:

Page 14 14 June 2017 Tax Reform Package (House Bill 5636)

► B. Foreign-currency denominated sales:

► C. Section 106(2)(a)(c) is revised to read as follows:

Page 15 14 June 2017 Tax Reform Package (House Bill 5636)

► The phrase “sale or exchange of services” shall include

Page 16 14 June 2017 Tax Reform Package (House Bill 5636)

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of

(4) Services rendered to persons engaged in international shipping or international air

Page 17 14 June 2017 Tax Reform Package (House Bill 5636)

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of

(5) Services performed by subcontractors and/or contractors in processing,

Page 18 14 June 2017 Tax Reform Package (House Bill 5636)

Item Q below is removed from the list of VAT-Exempt

► Lease of a residential unit with a monthly rental not exceeding Ten

Page 19 14 June 2017 Tax Reform Package (House Bill 5636)

The following VAT-exempt transaction is revised to read as

Page 20 14 June 2017 Tax Reform Package (House Bill 5636)

Page 21 14 June 2017 Tax Reform Package (House Bill 5636)

► Section 109 of Present NIRC:

Page 22 14 June 2017 Tax Reform Package (House Bill 5636)

► The provision below is revised as follows:

Page 23 14 June 2017 Tax Reform Package (House Bill 5636)

► The provision below is added to the list of VAT exempt

► The following is added as a last paragraph under Section 109:

Page 24 14 June 2017 Tax Reform Package (House Bill 5636)

Section 116 is revised as follows:

Page 25 14 June 2017 Tax Reform Package (House Bill 5636)

Page 26 1 January 2014 Presentation title

Page 27 14 June 2017 Tax Reform Package (House Bill 5636)

► Aviation turbo jet fuel

Page 28 14 June 2017 Tax Reform Package (House Bill 5636)