Differentiated Value-added Tax Rates Act

"Olate of the 9515 TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session 26 FEB 12 P2:20 SENATE RECEIVED BY: S. No. 1851 Introduced by Senator Loren Legarda AN ACT REDUCING THE GENERAL VALUE-ADDED TAX RATE TO TEN PERCENT (10%), RETAINING THE TWELVE PERCENT (12%) RATE FOR CERTAIN NON-ESSENTIAL, PREMIUM, AND ENVIRONMENTALLY SENSITIVE GOODS AND SERVICES, AND AMENDING FOR THE PURPOSE SECTIONS 106, 107, 108, 113, 114, AND 115 OF REPUBLIC ACT 8424, OR THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED EXPLANATORY NOTE The Value Added Tax (VAT) is one of the country's largest and most reliable revenue sources, and any reform to the VAT structure must therefore reconcile social protection objectives with fiscal sustainability. The current uniform 12% VAT on both basic and luxury consumption is inherently regressive, as poorer households devote a much higher share of their limited budgets to food, basic household items, and essential services than richer households. Poor and low income Filipino households are particularly vulnerable: studies based on the Family Income and Expenditure Survey' show that the poorest households spend over 63.7% of their total budget on food, leaving very little for housing, health, and education, while official poverty metrics indicate that around 70% of the minimum income needed to stay above the poverty line is absorbed by basic food requirements. In this context, a uniform 12% VAT on basic goods directly erodes 1 https://www.dlsu.edu.ph/wp-content/uploads/2022/10/3Dumagan-100322.pdf

purchasing power and aggravates food insecurity, often forcing households to reduce meal quantity and quality or resort to borrowing just to eat. Even with the exhaustive VAT exempt list under Section 109 of the National Internal Revenue Code (NIRC), many basic goods and commodities still bear the full 12% VAT, and the burden is ultimately passed on to end consumers through higher retail prices. At the same time, a blanket reduction of the VAT rate would, on its own, generate substantial revenue losses that grow as the VAT base expands. To address this, this bill reduces the general VAT rate to 10% while preserving the 12% VAT rate for a targeted set of non essential and luxury transactions, including high value or premium goods and services, sin products already subject to excise tax, environmentally harmful products, luxury and premium residential real property, and other clearly delineated non basic items. By concentrating the higher rate on luxury and non essential consumption and maintaining a lower 10% rate for standard taxable transactions, the bill aligns the VAT burden more closely with ability to pay and recovers part of the revenue that would otherwise be lost from a uniform rate cut. Taken together, these changes transform the VAT into a more progressive and better targeted instrument. The 10% general rate lightens the load on everyday consumption and helps protect the purchasing power of ordinary Filipinos, while the retained 12% rate for luxury and non essential transactions preserves revenue and reinforces the principle that those who can afford premium and high value consumption should contribute more. In view of these objectives and the urgent need to cushion households from the rising cost of living while maintaining a robust revenue base, the immediate passage of the measure is earnestly sought. LOREN LEGARDA

Offate of lise TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session FEB 12 P2-21 SENATE RECEIVED BY. S. No. 1851 Introduced by Senator Loren Legarda AN ACT REDUCING THE GENERAL VALUE-ADDED TAX RATE TO TEN PERCENT (10%), RETAINING THE TWELVE PERCENT (12%) RATE FOR CERTAIN NON-ESSENTIAL, PREMIUM, AND ENVIRONMENTALLY SENSITIVE GOODS AND SERVICES, AND AMENDING FOR THE PURPOSE SECTIONS 106, 107, 108, 113, 114, AND 115 OF REPUBLIC ACT 8424, OR THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED Be it enacted by the Senate and House of Representatives of the Philippines in the Congress assembled:

Section 1. Short Title. - This Act shall be known as the " Differentiated

2 Value-Added Tax Rates Act".

Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State

to promote fairness and equity in the system of consumption taxation by ensuring 5 that the burden of the value-added tax is aligned with the essentiality of goods 6 and services consumed. The State shall protect basic consumption and household welfare by reducing the tax burden on ordinary and necessary goods and services, while maintaining fiscal responsibility through the retention of higher tax rates on non-essential, premium, and environmentally sensitive consumption. In pursuing this policy, the State likewise affirms the principle that taxation may be used as a tool to support sustainable development and environmental accountability, without undermining revenue stability or the efficient administration of the tax system.

Sec. 3. Amendment of Section 106 of the National Internal Revenue Code

(Sale of Goods or Properties). - Section 106 of the National Internal Revenue Code 3 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, value-added tax equivalent to twelve percent (12%) TEN PERCENT (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor. (1) "Goods or Properties." The term "goods" or "properties" shall mean all tangible and intangible objects which are capable of pecuniary estimation and shall include: (a) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business; (b) The right or the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right; (c) The right or the privilege to use in the Philippines of any industrial, commercial or scientific equipment; (d) The right or the privilege to use motion picture films, tapes and discs; and (e) Radio, television, satellite transmission and cable television time. The term "gross selling price" means the total amount of money or its equivalent which the purchase pays or is obliged to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value- added tax. The excise tax, if any, on such goods or properties shall form part of the gross selling price. (2) SPECIAL TWELVE PERCENT (12%) RATE ON CERTAIN GOODS OR PROPERTIES. -

NOTWITHSTANDING THE FIRST PARAGRAPH OF THIS SUBSECTION, THERE SHALL BE LEVIED, ASSESSED AND COLLECTED ON EVERY SALE, BARTER OR EXCHANGE OF GOODS OR PROPERTIES CLASSIFIED AS NON-ESSENTIAL OR NON-BASIC, A VALUE-ADDED TAX EQUIVALENT TO TWELVE PERCENT (12%) OF THE GROSS SALES OF THE GOODS OR PROPERTIES SOLD, BARTERED OR EXCHANGED, SUCH TAX TO BE PAID BY THE SELLER OR TRANSFEROR. FOR PURPOSES OF THIS PARAGRAPH, NON- ESSENTIAL OR NON-BASIC GOODS OR PROPERTIES SHALL INCLUDE, BUT SHALL NOT BE LIMITED TO THE FOLLOWING: (A) LUXURY ITEMS, INCLUDING DESIGNER GOODS, PREMIUM FRAGRANCES AND COSMETICS, JEWELRY, WATCHES, AND SIMILAR ITEMS; (B) FINE ART, ANTIQUES, COLLECTIBLES, AND HIGH- VALUE ARTIFACTS INCLUDING PAINTINGS, SCULPTURES, AND RARE ARTIFACTS; (C) HIGH-VALUE MOTOR VEHICLES, LUXURY WATERCRAFT, PRIVATE AIRCRAFT, AND PREMIUM TRANSPORTATION EQUIPMENT; (D) LUXURY AND PREMIUM RESIDENTIAL REAL PROPERTY, INCLUDING RESIDENTIAL UNITS WITH SELLING PRICES EXCEEDING OBJECTIVE VALUATION THRESHOLDS, LUXURY CONDOMINIUM UNITS, PENTHOUSE SUITES, AND MEMBERSHIP INTERESTS IN EXCLUSIVE RESIDENTIAL CLUBS AND GATED SUBDIVISIONS; (E) SIN PRODUCTS AND OTHER GOODS SUBJECT TO EXCISE TAX UNDER TITLE VI OF THIS CODE,

INCLUDING ALCOHOL PRODUCTS, VAPE, E- CIGARETTES, AND TOBACCO PRODUCTS; (F) ENVIRONMENTALLY HAZARDOUS PRODUCTS, INCLUDING GOODS IDENTIFIED OR CLASSIFIED AS HAZARDOUS, HARMFUL, OR REGULATED PURSUANT TO APPLICABLE ENVIRONMENTAL, HEALTH, AND PRODUCT SAFETY LAWS AND REGULATIONS; (G) PREMIUM VARIANTS OF GOODS, AS MAY BE DETERMINED IN ACCORDANCE WITH CLASSIFICATIONS TO BE ISSUED BY THE DEPARTMENT OF TRADE AND INDUSTRY AND THE BUREAU OF INTERNAL REVENUE, CONSISTENT WITH OBJECTIVE AND TRANSPARENT STANDARDS; AND (H) OTHER NON-ESSENTIAL OR NON-BASIC ITEMS AS MAY BE CLASSIFIED BY THE SECRETARY OF FINANCE, IN COORDINATION WITH THE COMMISSIONER OF INTERNAL REVENUE, THE COMMISSIONER OF CUSTOMS, AND THE DEPARTMENT OF TRADE AND INDUSTRY, SUBJECT TO OBJECTIVE STANDARDS SUCH AS PRICE THRESHOLDS, PRODUCT CLASSIFICATIONS, AND HARMONIZED SYSTEM (HS) TARIFF HEADINGS. THE SECRETARY OF FINANCE, IN COORDINATION WITH THE COMMISSIONER OF INTERNAL REVENUE, THE COMMISSIONER OF CUSTOMS, THE DEPARTMENT OF TRADE AND INDUSTRY, AND OTHER RELEVANT AGENCIES, SHALL PROMULGATE THE IMPLEMENTING RULES AND REGULATIONS TO OPERATIONALIZE THIS PARAGRAPH, INCLUDING THE DETAILED ENUMERATION OF GOODS OR PROPERTIES COVERED HEREIN THROUGH HARMONIZED SYSTEM (HS) TARIFF CODES AND THE

SPECIFICATION OF APPLICABLE PRICE THRESHOLDS AND ADMINISTRATIVE CLASSIFICATION STANDARDS, WITHIN THE PERIOD PROVIDED UNDER THIS ACT. (2) The following sales by VAT registered persons shall be -to- subject zero percent— - (0%)- -rate: (3) THE FOLLOWING SALES BY VAT-REGISTERED PERSONS SHALL BE SUBJECT TO ZERO PERCENT (0%) RATE: (a) Export Sales. - The term "export sales" means: (1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); xxxX

Sec. 4. Amendment of Section 107 of the National Internal Revenue Code

(Value-Added Tax on Importation of Goods). - 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 twelve percent (12%) TEN PERCENT (10%) 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. xxxxx SPECIAL TWELVE PERCENT (12%) RATE ON CERTAIN IMPORTED GOODS. - NOTWITHSTANDING THE FOREGOING PARAGRAPH, THERE SHALL BE LEVIED, ASSESSED AND COLLECTED ON THE IMPORTATION OF GOODS CLASSIFIED AS NON-ESSENTIAL OR NON- BASIC, A VALUE-ADDED TAX EQUIVALENT TO 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. FOR PURPOSES OF THIS PARAGRAPH, NON- ESSENTIAL OR NON-BASIC IMPORTED GOODS SHALL INCLUDE, BUT SHALL NOT BE LIMITED TO, THE FOLLOWING: (A) LUXURY ITEMS, INCLUDING DESIGNER GOODS, PREMIUM FRAGRANCES AND COSMETICS, JEWELRY, WATCHES, AND SIMILAR ITEMS; (B) FINE ART, ANTIQUES, COLLECTIBLES, AND HIGH- VALUE ARTIFACTS INCLUDING PAINTINGS, SCULPTURES, AND RARE ARTIFACTS; (C) HIGH-VALUE MOTOR VEHICLES, LUXURY WATERCRAFT, PRIVATE AIRCRAFT, AND PREMIUM TRANSPORTATION EQUIPMENT; (D) SIN PRODUCTS AND OTHER GOODS SUBJECT TO EXCISE TAX UNDER TITLE VI OF THIS CODE,

INCLUDING ALCOHOL PRODUCTS, VAPE, E- CIGARETTES, AND TOBACCO PRODUCTS; (F) ENVIRONMENTALLY HAZARDOUS PRODUCTS, INCLUDING GOODS IDENTIFIED OR CLASSIFIED AS HAZARDOUS, HARMFUL, OR REGULATED PURSUANT TO APPLICABLE ENVIRONMENTAL, HEALTH, AND PRODUCT SAFETY LAWS AND REGULATIONS; (G) PREMIUM VARIANTS OF GOODS, AS MAY BE DETERMINED IN ACCORDANCE WITH CLASSIFICATIONS TO BE ISSUED BY THE DEPARTMENT OF TRADE AND INDUSTRY AND THE BUREAU OF INTERNAL REVENUE, CONSISTENT WITH OBJECTIVE AND TRANSPARENT STANDARDS; AND (H) OTHER NON-ESSENTIAL OR NON-BASIC ITEMS AS MAY BE CLASSIFIED BY THE SECRETARY OF FINANCE, IN COORDINATION WITH THE COMMISSIONER OF INTERNAL REVENUE, THE COMMISSIONER OF CUSTOMS, AND THE DEPARTMENT OF TRADE AND INDUSTRY, SUBJECT TO OBJECTIVE STANDARDS SUCH AS PRICE THRESHOLDS, PRODUCT CLASSIFICATIONS, AND HARMONIZED SYSTEM (HS) TARIFF HEADINGS. THE SECRETARY OF FINANCE, IN COORDINATION WITH THE COMMISSIONER OF INTERNAL REVENUE, THE COMMISSIONER OF CUSTOMS, AND THE DEPARTMENT OF TRADE AND INDUSTRY, SHALL PROMULGATE THE IMPLEMENTING RULES AND REGULATIONS TO OPERATIONALIZE THIS PARAGRAPH, INCLUDING THE DETAILED ENUMERATION OF GOODS OR PROPERTIES COVERED HEREIN THROUGH HARMONIZED SYSTEM (HS) TARIFF CODES AND THE SPECIFICATION OF

APPLICABLE PRICE THRESHOLDS AND ADMINISTRATIVE CLASSIFICATION STANDARDS, WITHIN THE PERIOD PROVIDED UNDER THIS ACT. (B) Transfer of Goods by Tax-exempt Persons. - In the case of tax-free importation of goods into the Philippines by persons, entities or agencies exempt from tax where such goods are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers, transferees or recipients shall be considered the importers thereof, who shall be liable for any internal revenue tax on such importation. The tax due on such importation shall constitute a lien on the goods superior to all charges or liens on the goods, irrespective of the possessor thereof.

Sec. 5. Amendment of Section 108 of the National Internal Revenue Code

(Value-Added Tax on the Sale of Services, Including Digital Services, and the Use or Lease of Properties). - 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 the Sale of Services, Including

Digital Services, and the Use or Lease of Properties. - (A) Rate and Base of Tax. - There shall be levied, assessed and collected, a value-added tax equivalent to tweive percent (12%) TEN PERCENT (10%) of the gross receipts derived from the sale or exchange of services, including digital services, and the use or lease of properties. xxXX SPECIAL TWELVE PERCENT (12%) RATE ON CERTAIN SERVICES AND LEASES. - NOTWITHSTANDING THE FIRST PARAGRAPH OF THIS SUBSECTION, THERE SHALL BE LEVIED, ASSESSED AND COLLECTED A VALUE-ADDED TAX EQUIVALENT TO TWELVE

PERCENT (12%) OF THE GROSS SALES DERIVED FROM THE SALE OR EXCHANGE OF SERVICES, INCLUDING DIGITAL SERVICES, AND THE USE OR LEASE OF PROPERTIES, WHICH ARE CLASSIFIED AS NON-ESSENTIAL OR NON-BASIC, SUCH TAX TO BE PAID BY THE SELLER, LESSOR, OR SERVICE PROVIDER. FOR PURPOSES OF THIS PARAGRAPH, NON- ESSENTIAL OR NON-BASIC SERVICES AND LEASES SHALL INCLUDE, BUT SHALL NOT BE LIMITED TO, THE FOLLOWING: (A) PREMIUM OR LUXURY SERVICES, INCLUDING HIGH-END PROFESSIONAL, RECREATIONAL, ENTERTAINMENT, OR LEISURE SERVICES, SUBJECT TO OBJECTIVE PRICE THRESHOLDS AND SERVICE CLASSIFICATIONS; (B) SERVICES SUBJECT TO EXCISE TAX OR ANALOGOUS REGULATORY LEVIES UNDER THIS CODE OR SPECIAL LAWS; (C) PREMIUM VARIANTS OF SERVICES, AS MAY BE DETERMINED IN ACCORDANCE WITH CLASSIFICATIONS TO BE ISSUED BY THE DEPARTMENT OF TRADE AND INDUSTRY AND THE BUREAU OF INTERNAL REVENUE, CONSISTENT WITH OBJECTIVE AND TRANSPARENT STANDARDS; (D) ENVIRONMENTALLY HAZARDOUS OR ENVIRONMENTALLY DETRIMENTAL SERVICES, INCLUDING THOSE IDENTIFIED OR REGULATED

UNDER APPLICABLE ENVIRONMENTAL AND SAFETY LAWS; AND (E) OTHER NON-ESSENTIAL OR NON-BASIC SERVICES OR LEASES, SUBJECT TO OBJECTIVE STANDARDS SUCH AS PRICE THRESHOLDS, SERVICE CLASSIFICATIONS, AND REGULATORY CATEGORIES. THE SECRETARY OF FINANCE, IN COORDINATION WITH THE COMMISSIONER OF INTERNAL REVENUE, THE COMMISSIONER OF CUSTOMS, AND THE DEPARTMENT OF TRADE AND INDUSTRY, SHALL PROMULGATE THE IMPLEMENTING RULES AND REGULATIONS TO OPERATIONALIZE THIS PARAGRAPH, INCLUDING THE DETAILED ENUMERATION OF SERVICES AND LEASES COVERED HEREIN AND THE SPECIFICATION OF APPLICABLE PRICE THRESHOLDS AND ADMINISTRATIVE CLASSIFICATION STANDARDS, WITHIN THE PERIOD PROVIDED UNDER THIS ACT.

Sec. 6. Amendment of Section 113 of the National Internal Revenue Code

(Invoicing and Accounting Requirements for VAT-Registered Persons). - Section 113 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

SEC. 113. Invoicing and Accounting Requirements for VAT-

Registered Persons. - (B) Information Contained in the VAT Invoice. - The following information shall be indicated in the VAT invoice: XXXX (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That:

(d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero rated or VAT exempt DIFFERENT VALUE-ADDED TAX RATES, INCLUDING BUT NOT LIMITED TO TEN PERCENT (10%) AND TWELVE PERCENT (12%), OR ARE VAT ZERO-RATED OR VAT-EXEMPT, the invoice shall clearly indicate the break-down of the sale price between its TAXABLE COMPONENTS SUBJECT TO EACH APPLICABLE VALUE-ADDED TAX RATE, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be shown on the invoice or receipt: Provided, That the seller may issue separate invoices or receipts for the TEN PERCENT (10%) TAXABLE COMPONENT, THE TWELVE PERCENT (12%) TAXABLE and zero-rated COMPONENT, exempt, components of the sale. XXXX (5) The digital sales or commercial invoice issued by a VAT-registered nonresident digital service provider shall indicate the following information in lieu of the requirements under Subsection (B), paragraphs (1) to (4): (a) Date of the transaction; (b) Transaction reference number; (c) Identification of the consumer; (d) Brief description of the transaction; and (e) The total amount with the indication that such amount includes the value-added tax:

Provided, That if the sale of digital services includes some services which are subject to DIFFERENT VALUE-ADDED TAX RATES, or are VAT zero-rated or VAT-exempt, the invoice shall clearly indicate the breakdown of the sale price by its TEN PERCENT (10%) TAXABLE COMPONENT, TWELVE PERCENT (12%) TAXABLE COMPONENT, VAT-exempt, and VAT zero-rated components: Provided, further, That the calculation of the value-added tax on each portion of the sale shall be shown on the invoice. xXXX (D) Consequence of Issuing Erroneous VAT Invoice or VAT Official Receipt. - (1) If a person who is not a VAT-registered person issues an invoice showing the person's Taxpayer Identification Number, followed by the word "VAT": (a) The issuer shall, in addition to any liability to other percentage taxes, be liable to: (i) The tax imposed in Section 106 or 108 without the benefit of any input tax credit; and (ii) A fifty percent (50%) surcharge under Section 248(B) of this Code; (b) The VAT shall, if the other requisite information required under Subsection (B) hereof is shown on the invoice, be recognized as an input tax credit to the purchaser under Section 110 of this Code. (2) If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt transaction, but fails to display prominently on the invoice or receipt the term 'VAT exempt sale', the issuer shall be liable

to account for the tax imposed in section 106 or 108 as if Section 109 did not apply. IN CASE OF A SALE INVOLVING TAXABLE GOODS, PROPERTIES OR SERVICES SUBJECT TO DIFFERENT VALUE-ADDED TAX RATES, INCLUDING BUT NOT LIMITED TO TEN PERCENT (10%) AND TWELVE PERCENT (12%), WHERE THE VAT-REGISTERED PERSON FAILS TO CLEARLY PROVIDE A BREAKDOWN OF THE CONSIDERATION BETWEEN THE COMPONENTS SUBJECT TO EACH APPLICABLE VALUE-ADDED TAX RATE, THE ISSUER SHALL BE LIABLE TO ACCOUNT FOR THE VALUE-ADDED TAX ON THE TAXABLE PORTION OF THE SALE AT THE HIGHEST APPLICABLE VALUE-ADDED TAX RATE, WITHOUT PREJUDICE TO THE IMPOSITION OF THE CORRESPONDING ADMINISTRATIVE PENALTIES UNDER THIS CODE. xxxx

Sec. 7. Amendment of Section 114 of the National Internal Revenue Code

(Return and Payment of Value-Added Tax). - 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. - Every person liable to pay the value- added tax imposed under this Title shall file, either electronically or manually, a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons shall pay, either electronically or manually, the value-added tax on a monthly basis:

Provided, finally, That beginning January 1, 2023, the filing and payment required under this Subsection shall be done within twenty-five (25) days following the close of each taxable quarter. THE VALUE-ADDED TAX RETURN SHALL REQUIRE THE SEPARATE DECLARATION OF GROSS SALES, OUTPUT TAX, AND INPUT TAX ATTRIBUTABLE TO TAXABLE TRANSACTIONS SUBJECT TO TEN PERCENT (10%) AND TWELVE PERCENT (12%) VALUE-ADDED TAX RATES, AS MAY BE APPLICABLE. XXXX (C) Withholding of 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 and services which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a final value-added tax at the rate of five percent (5%) of the gross payment thereof: Provided, That beginning January 1, 2021, the VAT withholding system under this Subsection shall shift from final to creditable system: Provided, further, That the payment for lease or use of properties or property rights to nonresident owners and payments for services to nonresident suppliers who are not registered under

Section 236 shall be subject to twelve percent (12%)

THE APPLICABLE VALUE-ADDED TAX RATE

UNDER SECTIONS 106 AND 108 withholding tax at the time of payment. Provided, finally, That payments for purchases of goods and services arising from projects funded by Official Development Assistance (ODA) as defined under Republic Act No. 8182, otherwise known as the Official Development Assistance Act of 1996, as amended, shall not be subject to the final withholding tax system as imposed in this Subsection. For purposes of this Section, the payor or person in control of the payment shall be considered as the withholding agent. XXXX (E) SYSTEMS, FORMS, AND ELECTRONIC FILING ADJUSTMENTS. - WITHIN NINETY (90) DAYS FROM THE EFFECTIVITY OF THIS ACT, THE BUREAU OF INTERNAL REVENUE, IN COORDINATION WITH THE BUREAU OF CUSTOMS AND THE DEPARTMENT OF FINANCE, SHALL UPDATE ALL VAT RETURNS, PAYMENT FORMS, ELECTRONIC FILING PLATFORMS, AND VALIDATION RULES TO FULLY IMPLEMENT THE SEPARATE REPORTING, COMPUTATION, AND PAYMENT OF VALUE-ADDED TAX AT THE TEN PERCENT (10%) AND TWELVE PERCENT (12%) RATES. FAILURE TO TIMELY IMPLEMENT SUCH UPDATES SHALL NOT PREJUDICE THE TAXPAYER'S RIGHT TO CORRECTLY DECLARE AND PAY THE PROPER VALUE-ADDED TAX DUE IN ACCORDANCE WITH THIS ACT.

Sec. 8. Amendment of Section 115 of the National Internal Revenue Code (Power

of the Commissioner to Suspend the Business Operations of a Taxpayer). - Section 115

STANDARDS SET UNDER SECTIONS 106, 107, 108, 110, 113, AND 114 OF THIS CODE, PENDING THE ISSUANCE OR UPDATING OF IMPLEMENTING RULES, FORMS, OR ELECTRONIC SYSTEMS. The power of the Commissioner to suspend shall include the blocking of digital services performed or rendered in the Philippines by a digital service provider. This shall be implemented by the Department of Information and Communications Technology (DICT), through the National Telecommunications Commission (NTC). XXXX

Sec. 9. Implementing Rules and Regulations. - Within ninety (90) days from the

effectivity of this Act, the Secretary of Finance, in coordination with the Bureau of Internal Revenue, the Bureau of Customs, the Department of Trade and Industry, and other relevant government agencies, shall promulgate the necessary rules and regulations for the effective implementation of this Act. The implementing rules and regulations shall set forth the administrative, technical, and procedural measures required for the application of the differentiated value-added tax rates provided under this Act, consistent with the standards and classifications established herein. For this purpose, the rules and regulations may provide for the identification, enumeration, and technical codification of goods, properties, services, and leases subject to the special twelve percent (12%) value-added tax rate under Sections 106, 107, and 108 of the National Internal Revenue Code, as amended by this Act, including the use of price thresholds, product or service descriptions, and Harmonized System (HS) tariff codes, as applicable. Goods, properties, services, and leases not identified pursuant to the preceding paragraph shall be subject to the ten percent (10%) value-added tax rate in accordance with this Act.

STANDARDS SET UNDER SECTIONS 106, 107, 108, 110, 113, AND 114 OF THIS CODE, PENDING THE ISSUANCE OR UPDATING OF OR IMPLEMENTING RULES, FORMS, ELECTRONIC SYSTEMS. The power of the Commissioner to suspend shall include the blocking of digital services performed or rendered in the Philippines by a digital service provider. This shall be implemented by the Department of Information and Communications Technology (DICT), through the National Telecommunications Commission (NTC). XXXX

Sec. 9. Implementing Rules and Regulations. - Within ninety (90) days from the

effectivity of this Act, the Secretary of Finance, in coordination with the Bureau of Internal Revenue, the Bureau of Customs, the Department of Trade and Industry, and other relevant government agencies, shall promulgate the necessary rules and regulations for the effective implementation of this Act. The implementing rules and regulations shall set forth the administrative, technical, and procedural measures required for the application of the differentiated value-added tax rates provided under this Act, consistent with the standards and classifications established herein. For this purpose, the rules and regulations may provide for the identification, enumeration, and technical codification of goods, properties, services, and leases subject to the special twelve percent (12%) value-added tax rate under Sections 106, 107, and 108 of the National Internal Revenue Code, as amended by this Act, including the use of price thresholds, product or service descriptions, and Harmonized System (HS) tariff codes, as applicable. Goods, properties, services, and leases not identified pursuant to the preceding paragraph shall be subject to the ten percent (10%) value-added tax rate in accordance with this Act.

The implementing rules and regulations shall likewise provide for the 2 corresponding computation, collection, accounting, invoicing, reporting, withholding, and 3 filing requirements necessary for the proper administration of the value-added tax 4 system, including the allocation and crediting of input taxes under Section 110, and the 5 updating of tax returns, forms, and electronic filing systems under Sections 113 and 114.

Sec. 10. Congressional Oversight and Review. - Within six (6) months from the

7 effectivity of this Act, and annually thereafter for a period of three (3) years, the Secretary 8 of Finance shall submit to the appropriate committees of the Senate and the House of 9 Representatives a report on the implementation of this Act. The report shall include, at a minimum: (a) the list of goods, properties, services, and leases identified as subject to the special twelve percent (12%) value-added tax rate, including the corresponding price thresholds, product or service descriptions, and Harmonized System (HS) tariff codes, where applicable; (b) a summary of administrative issuances, circulars, and guidelines issued to implement the differentiated value-added tax rates; (c) an assessment of revenue performance and administrative compliance arising from the implementation of this Act; and (d) any implementation issues encountered and recommendations, if any, for legislative consideration.

Sec. 11. Separability Clause. - If any provision of this Act is declared

unconstitutional or invalid, the remaining provisions not affected thereby shall remain in full force and effect.

Sec. 12. Repealing Clause. - All laws, decrees, executive orders, rules and

regulations, and other issuances or parts thereof inconsistent with the provisions of this Act are hereby repealed or modified accordingly.

Sec. 13. Effectivity. - This Act shall take effect fifteen (15) days after its complete

28 publication in the Official Gazette or in a newspaper of general circulation. Approved,