Republic of the Philippines

HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila
THIRTEENTH CONGRESS
FIRST REGULAR SESSION
House Bill No. 3555
Introduced by Reps. Eric D. Singson, Jesli A. Lapus, Herminio G. Teves, Exequiel B. Javier,
Antonino P. Roman, Iggy T. Arroyo, Teodoro L. Locsin, Jr., Junie E. Cua, Alipio tikbong V.
Badelles, Ernesto Ernie C. Pablo, Catalino V. Figueroa, Joey D. Hizon, Corazon H.
Malanyaon, Augusto H. Baculio, Arrel R. Olano, Herminia D. Ramiro, Eduardo B. Ziacita,
Salacnib F. Baterina, Jose Carlos V. Lacson, Eileen Ermita-Buhain, Glenda B. Ecleo, Federico S.
Sandoval II, Jesus Crispin C. Remulla, Edcel C. Lagman, Rolando G. Andaya, Jr., Edgar DL
Valdez, Luis R. Villafuerte, Roilo S. Golez, Roque R. Ablan, Jr., Joey S. Salceda, Victor R.
Sumulon, Generoso DC, Tulagan, Aurelio M. Umali, Gerardo J. Espina, Jr., Nanette Castelo
Daza, Consuelo A. Dy, Matias V. Defensor, Jr., Henedina R. Abad, Nereus O. Acosta, Jr., Felix r.
Alfelor, Jr., Teodoro A. Casino, Munir M. Arbison, Mikey M. Arroyo, Leovigildo B. Banaag,
Roseller L. Barinaga, Claude P. Baustista, Danton Q. Bueser, Elias C. Bulut, Jr., Belma A.
Cabilao, Douglas RA Cagas, Roberto C. Cajes, Carmen L. Cari, Edgar M. Chatto, Erwin L.
Chiongbian, Eufrocimo M. Codilla, Mark O. Cojuangco, Rodriguez A. Dadivas, Abdullah D.
Dimaporo, Mauricio G. Domogan, Faysah RPM, Dumarpa, Faustino DG. Dy III, Edgar T.
Espinosa, Conrado M. Estrella III, Vincent DJ. Garcia, Gregorio T. Ipong, Eladio Boy M. Jala,
Uliran T. Joaquin, Josefina M. Joson, Benasing O. Macarambon, Jr., Emilio C. Macias II,
Alfredo D. Maranon III, Rodante D. Marcoleta, Liza L. Maza, Abraham Kahlil B. Mitra, Rafael
P. Nantes, Francis Blueboy L. Nepomuceno, Reylina G. Nicolas, Manuel C. Ortega, Arthur Y.
Pingoy, Jr., Monico O. Punentevella, Edmundo O. Reyes, Jr., Isidro S. Rodriguez, Jr., Jurdin
JesusM. Romualdo, Lorna C. Silverio, Nerissa Corazon Soon-Ruiz, Edwin C. Uy, Eduardo K.
Veloso, Romualdo T. Vicencio, Antonio P. Yapha, Jr., Leonila V. Chavez, Joseph A. Santiago,
Ruy Elias C. Lopez, Renato Ka Rene B. Magtubo, Benjamin C. Agarao, Jr., Florencio Bem
G. Noel, Luis A. Asistio, Juan Edgardo M. Angara, Erico Basilio A. Fabian, Rodolfo Q.
Agbayani, Teofisto L. Guingona III, Ronaldo B. Zamora, Dr. Janette L. Garin, Roger G.
Mercado, Raul V. Del Mar, Gerry A. Salappudin, Benigno S. Aquino III, Eulogio Amang R.
Magsaysay, Arthur C. Defensor, Del R. de Guzman, Harlin Cast. Abayon, Arnulfo P. Fuentebella,
Fredenil H. Castro, Hussin U. Amin, Eduardo P. Gullas, Antonio H. Cerilles, Antonio R.
Floirendo, Jr., Francis Joseph G. Escudero, Alan Peter S. Cayetano, Vincent Bingbong P.
Crisologo, Rolex T. Suplico, Rodolfo Umpong G. Plaza, Emmanuel Joel J. Villanueva,
Darlene R. Antonino-Custodio, Oscar G. Malapitan, Antonio M. Serapin and Robert Ace S.
Barbers

AN ACT RESTRUCTURING THE VALUE-ADDED TAX, AMENDING FOR THE

PURPOSE SECTIONS 106, 107, 108, 110, AND 114 OF THE NATIONAL INTERNAL
REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES
Be it enacted by the Senate an the House of Representatives of the Congress of the Philippines in
session assembled:
Section 1. Section 106 of the National Internal Revenue Code of 1997, as amended, is hereby
further amended to read as follows:
SEC. 106. Value-Added Tax on Sale of Goods or Properties.
(A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter
or exchange of goods or properties, a value-added tax equivalent to [ten percent (10%)]
TWELVE PERCENT (12%) of the gross selling price or gross value in money of the goods or
properties sold, bartered or exchange, such tax to be paid by the seller or transferor.
x

(B) Transactions Deemed Sale. -

(C) Changes in or Cessation of Status of a VAT-registered Person

(D) Determination of the Tax. (1) The tax shall be computed by [multiplying] DIVIDING the
total amount indicated in the invoice by [one-eleventh (1/11)] NINE AND ONE THIRD (9 1/3).
x

Sec. 2. Section 107 of the National Internal Revenue Code of 1997, as amended, is hereby
further amended to read as follows:
SEC. 107. Value-Added Tax on Importation of Goods.
(A) In General. There shall be levied, assessed and collected on every importation of goods a
value-added tax equivalent to [ten percent (10%)] TWELVE PERCENT (12%) based on the total
value used by the Bureau of Customs in determining tariff and customs duties plus customs
duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the
release of such goods from customs custody: Provided, That where the customs duties are
determined on the basis of the quantity or volume of the goods, the value-added tax shall be
based on the landed cost plus excise taxes, if any.
Sec. 3. Section 108 of the National Internal Revenue Code of 1997, as amended is hereby further
amended to read as follows:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties

(A) Rate and Base of Tax There shall be levied, assessed and collected, a value-added tax
equivalent to [ten percent (10%)] TWELVE PERCENT (12%) of gross receipts derived from the
sale or exchange of services, including the use or lease of properties.

(B) Transactions Subject to Zero Percent (0%) Rate. xxx

(C) Determination of the Tax. The tax shall be computed by [multiplying] DIVIDING the
total amount indicated in the official receipt by [one-eleventh (1/11)] NINE AND ONE THIRD
(9 1/3).
x

Sec. 4. Section 110 (A) of the National Internal Revenue Code of 1997, as amended, is hereby
further amended to read as follows:
Sec 110 Tax Credits
(A) Creditable Input Tax Credits.
(1)

(a)

(i)

(ii)

(iii)

(iv)

(v)

(b)

(2)

(a)

(b)

(3)

(a)

(b)

(4) THE CLAIM FOR INPUT TAX CREDIT ALLOWED UNDER THIS SECTION SHALL
BE SUBJECT TO THE FOLLOWING LIMITATIONS:
(A) THE INPUT TAX CREDIT FOR CAPITAL GOODS ON WHICH A VAT HAS BEEN
PAID BY A VAT-REGISTERED PERSON SHALL BE EQUALLY DISTRIBUTED OVER THE
DEPRECIABLE LIFE OF SUCH CAPITAL GOODS, AND
(B) THE INPUT TAX CREDIT FOR GOODS AND SERVICES, OTHER THAN CAPITAL
GOODS, ON WHICH A VAT HAS BEEN PAID BY A VAT-REGISTERED PERSON SHALL
NOT EXCEED FIVE PERCENT (5%) OF THE TOTAL AMOUNT OF SUCH GOODS AND
SERVICES.
PROVIDED, HOWEVER, THAT IN THE CASE OF PERSONS ENGAGED IN RETAIL
TRADING OF GOODS SUBJECT TO VAT, THE ALLOWABLE INPUT TAX CREDIT
SHALL NOT EXCEED ELEVEN PERCENT (11%) OF THE TOTAL AMOUNT OF GOODS
PURCHASED.
x

Sec. 5 Section 114 of the National Internal Revenue Code of 1997, as amended, is hereby further
amended to read as follows:
Sec. 114. Return and Payment of Value-Added Tax.
(A) In General . -

(B) Where to File the Return and Pay the Tax.

(C) Withholding of Creditable Value-Added Tax. The government or any of its political
subdivisions, instrumentalities or agencies, including government-owned-and-controlled
corporations (GOCCs) shall, before making any 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 Sections 106 and 108 of this Cod, deduct and withhold the value-added tax due at the
rate of [three percent (3%)] FIVE PERCENT (5%) of the gross payment for the purchase of
goods and [six percent (6%)] EIGHT PERCENT(8%) on gross receipts for services rendered by
contractors on every sale or instalment payment which shall be creditable against the valueadded tax liability of the seller or contractor. Provided, however, That in case of government
public works contractors, the withholding tax rate shall be [eight and one-half percent (8.5)] TEN
AND ONE-HALF PERCENT (10.5%). Provided, further, That the payment for lease or use of
properties or property rights to non-resident owners shall be subject to [ten percent (10%)]
TWELVE PERCENT (12%) withholding tax at the time of payment. For this purpose, the payor
or person in control of the payment shall be considered as the withholding agent.

The value-added tax withheld under this Section shall be remitted within ten (10) days
following the end of the month the withholding was made.
Sec. 6. Implementing Rules and Regulations. The Secretary of Finance shall, upon the
recommendation of the Commissioner of Internal Revenue, promulgate the necessary rules and
regulations for the effective implementation of this Act.
Sec. 7. Separability Clause. If any provisions of this Act is subsequently declared
unconstitutional, the validity of the remaining provisions hereof shall remain in full force and
effect
Sec. 8. Repealing Clause. All laws, decrees, executive orders, rules and regulations or parts
thereof which are contrary to or inconsistent with this Act are hereby repealed, amended or
modified accordingly.
Sec. 9. Effectivity. This Act shall take effect fifteen (15) days after its publication in the
Official Gazette or in any two newspapers of general circulation whichever comes earlier.
Approved,

COMMITTEE ON WAYS AND MEANS

FACT SHEET
RESTRUCTURING THE VALUE ADDED TAX (VAT) SYSTEM
HOUSE BILL NO. 3555
I. BENEFIT
The upward adjustment in the rate of the value-added tax and the prescribed restrictions on
the availment of input tax credits will translate to substantial revenues to finance the operations
of the government.
II. SALIENT FEATURES
1. The bill increases the rate of the value-added tax from ten percent (10%) to twelve
percent (12%)
2. It introduces limitations on the manner of claiming input tax credit, as follows:
a. On purchases and importation of capital goods, the amount of input tax credit
attributable to such purchases and importation shall be spread over the depreciable
life of capital goods;
b. On purchases and importation of goods and services other than capital goods, a
maximum input tax credit equivalent to five percent (5%) of such purchases and
importation shall be allowed; and
c. Entities engaged in retail trading shall be allowed to claim input tax credits of up to
eleven percent (11%) of the amount of their purchases of VATable goods.
3. The bill correspondingly adjusts the withholding VAT rates by two percentage points,
Thus, withholding tax rates of 6% and 10.5% shall be deducted from government
purchases of goods and services, respectively.
III. RELATED LEGISLATIONS
Sections 106, 107, 108, 110 and 114 NIRC, as amended.