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REPUBLIC OF THE PHILIPPINES
CONGRESS OF THE PHILIPPINES H. No. 5479
Second Regular Session } S. No. 1550 REPUBLIC ACT NO. 8241
AN ACT AMENDING REPUBLIC ACT NO. 7716, OTHERWISE
KNOWN AS THE EXPANDED VALUE-ADDED TAX LAW
AND OTHER PERTINENT PROVISIONS OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED
Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:
SECTION 1. Section 3 of Republic Act No. 7716 is hereby
amended to read as follows:
"SEC. 3. Section 102 of the National Internal Revenue
Code, as amended, is hereby further amended to read as follows:
"SEC. 102. Value-added tax on sale of services and use or
lease of properties. – (a) Rate and base of tax. – There shall be
levied, assessed and collected, a value-added tax equivalent to ten
percent (10%) of gross receipts derived from the sale or exchange
of services, including the use or lease of properties.
"The phrase 'sale or exchange of services' means the
performance of all kinds of services in the Philippines for others
for a fee, remuneration or consideration, including those performed
or rendered by construction and service contractors; stock, real
estate, commercial, customs and immigration brokers; lessors of
property, whether personal or real; warehousing services; lessors
or distributors of cinematographic films; persons engaged in
milling, processing, manufacturing or repacking goods for others;
proprietors, operators or keepers of hotels, motels, resthouses,
pension houses, inns, resorts; proprietors or operators of
restaurants, refreshment parlors, cafes and other eating places,
including clubs and caterers; dealers in securities; lending
investors; transportation contractors on their transport of goods
or cargoes, including persons who transport goods or cargoes for
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hire and other domestic common carriers by land, air, and water
relative to their transport of goods or cargoes; services of franchise
grantees of telephone and telegraph, radio and television
broadcasting and all other franchise grantees except those under
Section 117 of this Code; services of banks, non-bank financial
intermediaries and finance companies; and non-life insurance
companies (except their crop insurances) including surety, fidelity,
indemnity and bonding companies; and similar services regardless
of whether or not the performance thereof calls for the exercise or
use of the physical or mental faculties. The phrase 'sale or
exchange of services' shall likewise include:
"(1) The lease or the use of or the right or privilege to use
any copyright, patent, design or model, plan, secret formula or
process, goodwill, trademark, trade brand or other like property
or right;
"(2) The lease or the use of, or the right to use of any
industrial, commercial or scientific equipment;
"(3) The supply of scientific, technical, industrial or
commercial knowledge or information;
"(4) The supply of any assistance that is ancillary and
subsidiary to and is furnished as a means of enabling the
application or enjoyment of any such property, or right as is
mentioned in subparagraph (2) or any such knowledge or
information as is mentioned in subparagraph (3);
"(5) The supply of services by a nonresident person or his
employee in connection with the use of property or rights belonging
to, or the installation or operation of any brand, machinery, or
other apparatus purchased from such nonresident person;
"(6) The supply of technical advice, assistance or services
rendered in connection with technical management or
administration of any scientific, industrial or commercial
undertaking, venture, project or scheme;
"(7) The lease of motion picture films, films, tapes and
discs; and
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"(8) The lease or the use of or the right to use radio,
television, satellite transmission and cable television time.
"Lease of properties shall be subject to the tax herein
imposed irrespective of the place where the contract of lease or
licensing agreement was executed if the property is leased or used
in the Philippines.
"The term 'gross receipts' means the total amount of money
or its equivalent representing the contract price, compensation,
service fee, rental or royalty, including the amount charged for
materials supplied with the services and deposits and advanced
payments actually or constructively received during the taxable
quarter for the services performed or to be performed for another
person, excluding value-added tax.
"(b) Transactions subject to zero percent (0%) rate. – The
following services performed in the Philippines by VAT-registered
persons shall be subject to zero percent (0%) rate:
"(1) Processing, manufacturing or repacking goods for other
persons doing business outside the Philippines which goods are
subsequently exported, where the services are paid for in
acceptable foreign currency and accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
"(2) Services other than those mentioned in the preceding
subparagraph, the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with the rules
and regulations of the Bangko Sentral ng Pilipinas (BSP);
"(3) Services rendered to persons or entities whose
exemption under special laws or international agreements to which
the Philippines is a signatory effectively subjects the supply of
such services to zero percent (0%) rate;
"(4) Services rendered to vessels engaged exclusively in
international shipping; and
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"(5) Services performed by subcontractors and/or
contractors in processing, converting, or manufacturing goods
for an enterprise whose export sales exceed seventy percent (70%)
of total annual production.
"(c) Determination of the tax. – The tax shall be computed
by multiplying the total amount indicated in the official receipt
by 1/11."
SEC. 2. Section 4 of Republic Act No. 7716 is hereby
amended to read as follows:
"SEC. 4. Section 103 of the National Internal Revenue Code,
as amended, is hereby further amended to read as follows:
"SEC. 103. Exempt Transactions. – The following shall be
exempt from the value-added tax:
"(a) Sale of nonfood agricultural products; marine and
forest products in their original state by the primary producer or
the owner of the land where the same are produced;
"(b) Sale of cotton and cotton seeds in their original state;
and copra;
"(c) Sale or importation of agricultural and marine food
products in their original state, livestock and poultry of a kind
generally used as, or yielding or producing foods for human
consumption; and breeding stock and genetic materials therefor.
"Products classified under this paragraph and paragraph
(a) shall be considered in their original state even if they have
undergone the simple processes of preparation or preservation for
the market, such as freezing, drying, salting, broiling, roasting,
smoking or stripping. Polished and/or husked rice, corn grits,
raw cane sugar and molasses, and ordinary salt shall be considered
in their original state;
"(d) Sale or importation of fertilizers; seeds, seedlings and
fingerlings; fish, prawn, livestock and poultry feeds, including
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ingredients, whether locally produced or imported, used in the
manufacture of finished feeds (except specialty feeds for race
horses, fighting cocks, aquarium fish, zoo animals and other
animals generally considered as pets);
"(e) Sale or importation of coal and natural gas, in
whatever form or state, and petroleum products (except lubricating
oil, processed gas, grease, wax, and petrolatum) subject to excise
tax imposed under Title VI;
"(f) Sale or importation of raw materials to be used by the
buyer or importer himself in the manufacture of petroleum
products subject to excise tax, except lubricating oil, processed
gas, grease, wax, and petrolatum;
"(g) Importation of passenger and/or cargo vessel of more
than five thousand tons, whether coastwise or ocean-going,
including engine and spare parts of said vessel to be used by the
importer himself as operator thereof;
"(h) Importation of personal and household effects
belonging to the residents of the Philippines returning from abroad
and nonresident citizens coming to resettle in the Philippines:
Provided, That such goods are exempt from customs duties under
the Tariff and Customs Code of the Philippines;
"(i) Importation of professional instruments and
implements, wearing apparel, domestic animals, and personal
household effects (except any vehicle, vessel, aircraft, machinery,
other goods for use in the manufacture and merchandise of any
kind in commercial quantity) belonging to persons coming to settle
in the Philippines, for their own use and not for sale, barter or
exchange, accompanying such persons, or arriving within ninety
(90) days before or after their arrival, upon the production of
evidence satisfactory to the Commissioner of Internal Revenue,
that such persons are actually coming to settle in the Philippines
and that the change of residence is bona fide;
"(j) Services subject to percentage tax under Title V;
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"(k) Services by agricultural contract growers and milling
for others of palay into rice, corn into grits and sugar cane into
raw sugar;
"(l) Medical, dental, hospital and veterinary services
subject to the provisions of Section 17 of Republic Act No. 7716,
as amended;
"(m) Educational services rendered by private educational
institutions, duly accredited by the Department of Education,
Culture and Sports (DECS) and the Commission on Higher
Education (CHED), and those rendered by government educational
institutions;
"(n) Sale by the artist himself of his works of art, literary
works, musical compositions and similar creations, or his services
performed for the production of such works;
"(o) Services rendered by individuals pursuant to an
employer-employee relationship;
"(p) Services rendered by regional or area headquarters
established in the Philippines by multinational corporations which
act as supervisory, communications and coordinating centers for
their affiliates, subsidiaries or branches in the Asia-Pacific Region
and do not earn or derive income from the Philippines;
"(q) Transactions which are exempt under international
agreements to which the Philippines is a signatory or under special
laws, except those under Presidential Decree Nos. 66, 529, and
1590;
"(r) Sales by agricultural cooperatives duly registered with
the Cooperative Development Authority to their members as well
as sale of their produce, whether in its original state or processed
form, to non-members; their importation of direct farm inputs,
machineries and equipment, including spare parts thereof, to be
used directly and exclusively in the production and/or processing
of their produce;
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"(s) Sales by electric cooperatives duly registered with the
Cooperative Development Authority or National Electrification
Administration, relative to the generation and distribution of
electricity as well as their importation of machineries and
equipment, including spare parts, which shall be directly used in
the generation and distribution of electricity;
"(t) Gross receipts from lending activities by credit or
multi-purpose cooperatives duly registered with the Cooperative
Development Authority whose lending operation is limited to their
members;
"(u) Sales by non-agricultural, non-electric and non-credit
cooperatives duly registered with the Cooperative Development
Authority: Provided, That the share capital contribution of each
member does not exceed Fifteen thousand pesos (P15,000) and
regardless of the aggregate capital and net surplus ratably
distributed among the members;
"(v) Export sales by persons who are not VAT-registered;
"(w) Sale of real properties not primarily held for sale to
customers or held for lease in the ordinary course of trade or
business or 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, house and lot and other residential dwellings valued at One
million pesos (P1,000,000) and below: Provided, That not later
than January 31st of the calendar year subsequent to the
effectivity of this Act and each calendar year thereafter, the
amount of One million pesos (P1,000,000) shall be adjusted to its
present value using the consumer price index, as published by
the National Statistics Office (NSO);
"(x) Lease of a residential unit with a monthly rental not
exceeding Eight thousand pesos (P8,000): Provided, That not
later than January 31st of the calendar year subsequent to the
effectivity of this Act and each calendar year thereafter, the
amount of Eight thousand pesos (P8,000) shall be adjusted to its
present value using the consumer price index, as published by
the National Statistics Office (NSO);
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"(y) Sale, importation, printing or publication of books and
any newspaper, magazine, review, or bulletin which appears at
regular intervals with fixed prices for subscription and sale and
which is not devoted principally to the publication of paid
advertisements;
"(z) Sale or lease of goods or properties or the performance
of services other than the transactions mentioned in the preceding
paragraphs, the gross annual sales and/or receipts do not exceed
the amount of Five hundred fifty thousand pesos (P550,000):
Provided, That not later than January 31st of the calendar year
subsequent to the effectivity of this Act and each calendar year
thereafter, the amount of Five hundred fifty thousand pesos
(P550,000) shall be adjusted to its present value using the
consumer price index, as published by the National Statistics
Office (NSO);
"The foregoing exemptions to the contrary notwithstanding,
any person whose sale of goods or properties or services which are
otherwise not subject to VAT, but who issues a VAT invoice or
receipt therefor shall, in addition to his liability to other applicable
percentage tax, if any, be liable to the tax imposed in Section 100
or 102 without the benefit of input tax credit, and such tax shall
not also be recognized as input tax credit to the purchaser under
Section 104, all of this Code."
SEC. 3. Section 105 of the National Internal Revenue Code,
as amended, is hereby further amended to read as follows:
"SEC. 105. Transitional/Presumptive Input Tax Credits.
– (a) Transitional Input Tax Credits. – A person who becomes
liable to value-added tax or any person who elects to be a VAT-
registered person shall, subject to the filing of an inventory as
prescribed by regulations, be allowed input tax on his beginning
inventory of goods, materials and supplies equivalent to eight
percent (8%) of the value of such inventory or the actual value-
added tax paid on such goods, materials and supplies, whichever
is higher, which shall be creditable against the output tax.
"(b) Presumptive input tax credits. – (1) Persons or firms
engaged in the processing of sardines, mackerel, and milk, and
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in manufacturing refined sugar and cooking oil, shall be allowed
a presumptive input tax, creditable against the output tax,
equivalent to one and one-half percent (1.5%) of the gross value in
money of their purchases of primary agricultural products which
are used as inputs to their production.
"As used in this paragraph (b), the term 'processing' shall
mean pasteurization, canning and activities which through
physical or chemical process alter the exterior texture or form or
inner substance of a product in such manner as to prepare it for
special use to which it could not have been put in its original
form or condition.
"(2) Public works contractors shall be allowed a
presumptive input tax equivalent to one and one-half percent
(1.5%) of the contract price with respect to government contracts
only in lieu of actual input taxes therefrom."
SEC. 4. Section 7 of Republic Act No. 7716 is hereby
amended to read as follows:
"SEC. 7. Section 107 of the National Internal Revenue
Code, as amended, is hereby further amended to read as follows:
"SEC. 107. Registration of value-added taxpayers. – (a)
In General. – Any person subject to a value-added tax under
Sections 100 and 102 of this Code shall register with the appropriate
Revenue District Officer and pay an annual registration fee in
the amount of One thousand pesos (P1,000) for every separate or
distinct establishment or place of business and every year
thereafter on or before the last day of January. Any person just
commencing a business subject to the value-added tax must pay
the fee before engaging therein.
"A person who maintains a head or main office and branches
in different places shall register with the Revenue District Office
which has jurisdiction over the place wherein the main or head
office is located. However, the fee shall be paid to the Revenue
District Officer, collection agent, authorized treasurer of the
municipality where each place of business or branch is situated.
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"(b) Persons commencing business. – Any person who
expects to realize gross sales or receipts subject to value-added
tax in excess of the amount prescribed under Section 103(z) of
this Code for the next 12-month period from the commencement
of the business shall, within thirty (30) days before the start of
the said business register with the Revenue District Officer who
has jurisdiction over his principal place of business and shall pay
the annual registration fee prescribed in the preceding paragraph.
"(c) Persons becoming liable to the value-added tax. –
Any person whose gross sales or receipts in any 12-month period
exceeds the amount prescribed under Section 103(z) of this Code
for exemption from the value-added tax shall register and pay the
annual registration fee prescribed in paragraph (a) of this section
within thirty (30) days after the end of the last month of that
period, and shall be liable to the value-added tax commencing
from the first day of the month following his registration.
"(d) Optional registration of exempt person. – Any person
whose transactions are exempt from value-added tax under Section
103(z) of this Code, Section 103(a), (b), (c), and (d) of this Code
with respect to export sales only, and Section 103(j) with respect
to services of franchise grantees of radio and/or television
broadcasting as defined under Section 117 of this Code, may apply
for registration as a VAT-registered person not later than ten
(10) days before the beginning of the taxable quarter and shall
pay the annual registration fee prescribed in subparagraph (a) of
this section.
"In any case, the Commissioner may, for administrative
reason, deny any application for registration.
"For purposes of this Title, any person registered in
accordance with the provisions of this section shall be referred to
as a 'VAT-registered person.' Each VAT-registered person shall
be assigned only one taxpayer's identification number.
"(e) Cancellation of registration. – The registration of any
person who ceases to be liable to the value-added tax shall be
cancelled by the Commissioner upon filing of an application for
cancellation of registration. Any person who opted to be registered
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under paragraph (d) of this section may, under regulation of the
Secretary of Finance, apply for cancellation of such registration."
SEC. 5. Section 9 of Republic Act No. 7716 is hereby
amended to read as follows:
"SEC. 9. Section 110(c) of the National Internal Revenue
Code, is hereby further amended to read as follows:
"(c) Withholding of Creditable Value-Added Tax. – The
government or any of its political subdivisions, instrumentalities
or agencies, including government-owned or -controlled
corporations (GOCCs) shall, before making payment on account
of each purchase of goods from sellers and services rendered by
contractors which are subject to the value-added tax imposed in
Sections 100 and 102 of this Code, deduct and withhold the value-
added tax due at the rate of three percent (3%) of the gross payment
for the purchase of goods and six percent (6%) on gross receipts
for services rendered by contractors on every sale or installment
payment which shall be creditable against the value-added tax
liability of the seller or contractor: Provided, however, That in
the case of government public works contractors, the withholding
rate shall be eight and one-half percent (8.5%): Provided, further,
That the payment for lease or use of properties or property rights
to nonresident owners shall be subject to ten percent (10%)
withholding tax at the time of payment. For this purpose, the
payor 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. Section 10 of Republic Act No. 7716 is hereby
amended to read as follows:
"SEC. 10. Section 112 of the National Internal Revenue
Code, as amended, is hereby further amended to read as follows:
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"SEC. 112. Tax on persons exempt from value-added tax
(VAT). – Any person whose sales or receipts are exempt under
Section 103(z) of this Code from the payment of value-added tax
and who is not a VAT-registered person shall pay a tax equivalent
to three percent (3%) of his gross quarterly sales or receipts:
Provided, That cooperatives shall be exempt from the three
percent (3%) gross receipts tax herein imposed."
SEC. 7. Section 11 of Republic Act No. 7716 is hereby
amended to read as follows:
"SEC. 11. Section 115 of the National Internal Revenue
Code, as amended, is hereby further amended to read as follows:
"SEC. 115. Percentage tax on domestic carriers and
keepers of garages. – Cars for rent or hire driven by the lessee,
transportation contractors, including persons who transport
passenger for hire, and other domestic carriers by land, air or
water, for the transport of passengers, except owners of bancas,
and owners of animal-drawn two-wheeled vehicle, and keepers of
garages shall pay a tax equivalent to three per centum (3%) of
their quarterly gross receipts.
"The gross receipts of common carriers derived from their
incoming and outgoing freight shall not be subjected to the local
taxes imposed under Republic Act No. 7160, otherwise known as
the Local Government Code of 1991.
"In computing the percentage tax provided in this section,
the following shall be considered the minimum quarterly gross
receipts in each particular case:
"Jeepney for hire –
"1. Manila and other cities P2,400
"2. Provincial 1,200
"Public utility bus –
"Not exceeding 30 passengers P3,600
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"Exceeding 30 but not exceeding
50 passengers 6,000
"Exceeding 50 passengers 7,200
"Taxis –
"1. Manila and other cities P3,600
"2. Provincial 2,400
"Car for hire (w/ chauffeur) 3,000
"Car for hire (w/o chauffeur) 1,800"
SEC. 8. A new section is hereby added after Section 115 of
the National Internal Revenue Code, as amended, to read as
follows:
"SEC. 115-A. Percentage tax on international carriers.
"(a) International air carriers doing business in the
Philippines shall pay a tax of three per centum (3%) of their
quarterly gross receipts.
"(b) International shipping carriers doing business in the
Philippines shall pay a tax equivalent to three per centum (3%) of
their quarterly gross receipts."
SEC. 9. Section 12 of Republic Act No. 7716 is hereby
amended to read as follows:
"SEC. 12. Section 117 of the National Internal Revenue
Code, as amended, is hereby further amended to read as follows:
"SEC. 117. Tax on franchises. – Any provision of general
or special law to the contrary, notwithstanding, there shall be
levied, assessed and collected in respect to all franchises on radio
and/or television broadcasting companies whose annual gross
receipts of the preceding year does not exceed Ten million pesos
(P10,000,000), subject to Section 107(d) of this Code, a tax of three
percent (3%) and on electric, gas and water utilities, a tax of two
percent (2%) on the gross receipts derived from the business
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covered by the law granting the franchise: Provided, however,
That radio and television broadcasting companies referred to in
this section, shall have an option to be registered as a value-
added tax payer and pay the tax due thereon: Provided, further,
That once the option is exercised, it shall not be revoked.
"The grantee shall file the return with, and pay the tax
due thereon to, the Commissioner of Internal Revenue or his duly
authorized representative in accordance with the provisions of
Section 125 of this Code and the return shall be subject to audit
by the Bureau of Internal Revenue, any provision of any existing
law to the contrary notwithstanding."
SEC. 10. Section 15 of Republic Act No. 7716 is hereby
amended to read as follows:
"SEC. 15. Section 237 of the National Internal Revenue
Code, as amended, is hereby further amended to read as follows:
"SEC. 237. Registration of Name or Style with the
Revenue District Officer or Collection Agent. – Every person,
other than persons required to be registered under the provisions
of Section 107 engaged in any business shall, on or before the
commencement of his business, or whenever he transfers to
another revenue district, register with the Revenue District Officer
concerned within 10 days from the commencement of business or
transfer and shall pay the annual registration fee in the amount
of Five hundred pesos (P500) for every separate or distinct
establishment or place of business and every year thereafter on
or before the last day of January. The fee shall be paid to the
Revenue District Officer, collection agent, authorized treasurer
of the municipality where each place of business or branch is
situated. In cities or municipalities where no Revenue District
Officer is stationed, such person shall register and pay the fee
prescribed herein with the collection agent. The registration shall
contain his name or style, place of residence, business, the place
where such business is carried on, and such other information as
may be required by the Commissioner in the form prescribed
therefor. In the case of a firm, the names and residences of the
various persons constituting the same shall also be registered.
The Commissioner, after taking into consideration the volume of
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sales, financial condition and other relevant factors, may require
the registrant to guarantee the payment of his taxes by way of
advance payment, or the posting or filing of a security, guarantee
or collateral acceptable to the Commissioner: Provided, however,
That cooperatives shall not pay the registration fee imposed
herein."
SEC. 11. Section 17 of Republic Act No. 7716 is hereby
amended to read as follows:
"SEC. 17. Effectivity of the Imposition of VAT on Certain
Goods, Properties and Services. – The value-added tax shall be
levied, assessed and collected on the following transactions,
starting January 1, 1998:
"(a) Services performed in the exercise of profession or
calling subject to the professional tax under the Local Government
Code or Republic Act No. 7160, and professional services performed
by registered general professional partnerships; actors, actresses,
talents, singers and emcees; radio and television broadcasters,
choreographers; musical, radio, movie, television and stage
directors; and professional athletes;
"(b) Services rendered by banks, non-bank financial
intermediaries, finance companies and other financial
intermediaries not performing quasi-banking functions; and
"(c) The lease or use of sports facilities and equipment by
amateur players, as provided under Republic Act No. 6847, except
sports facilities and equipment which are exclusively or mainly
for the private use of shareholders or members of the club or
organization which owns or operates such sports facilities and
equipment.
"Prior to their inclusion in the coverage of the value-added
tax, the above services shall continue to pay the applicable tax
prescribed under the present provisions of the National Internal
Revenue Code, as amended.
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"However, when public interest so requires, the Congress
of the Republic of the Philippines, taking into account the impact
on prices of goods and services, may, exclude any of the above
services from the coverage of the value-added tax: Provided,
however, That in the event of the exclusion of any of the above
services the existing applicable tax under the provisions of the
National Internal Revenue Code, as amended, shall continue to
be paid on the service so excluded."
SEC. 12. Rules and Regulations. – For the effective
implementation of this Act, the Secretary of Finance shall, upon
the recommendation of the Commissioner of Internal Revenue,
promulgate the necessary rules and regulations, within sixty (60)
days from effectivity hereof: Provided, That other agencies, such
as, but not limited to, the Philippine Information Agency (PIA),
Office of the Press Secretary (OPS), the Bureau of Internal
Revenue (BIR) and the Department of Trade and Industry (DTI),
shall develop and implement an Information, Education and
Communication (IEC) campaign program with the end in view of
effectively informing the public on the details of the expanded
value-added tax implementation.
SEC. 13. Repealing Clause. – The provisions of Republic
Act No. 6938, otherwise known as the Cooperative Code of the
Philippines, authorizing the exemption of cooperatives from the
sales or value-added tax are hereby repealed. All other laws,
orders, issuances, rules and regulations or parts thereof which
are not consistent with this Act are hereby repealed, amended or
modified accordingly.
SEC. 14. Effectivity. – This Act shall take effect on January
1, 1997.
Approved, December 20, 1996.