AMENDING CERTAIN SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE TO PROVIDE FOR SALES TAX ON SUBSEQUENT SALES AND TO SIMPLIFY TAX ADMINISTRATION.

WHEREAS, it is
necessary to reduce the tax imposed
on second sale and to make the tax burden more equitably distributed at
every stage of subsequent sale;

WHEREAS, a tax on subsequent sale
will simplify tax administration and insure voluntary tax compliance;
and

WHEREAS, there is a need to
alleviate the tax burden
on the agricultural sector in order to hasten the economic development
of the country.

NOW, THEREFORE, I, FERDINAND E. MARCOS,
President of
the Republic of the Philippines, by virtue of the powers vested in me
by the Constitution, do hereby order and decree:

SECTION 1. Section 162 of the Tax
Code, as amended, is hereby further amended to read as
follows:

“SEC. 162. Returns and
payment of sales and other taxes, (a) Return
of gross sales, receipts, etc. and payment of taxes. (1) Persons liable
to pay miller’s sales tax on original sales and other percentage
taxes.—Every
person liable to pay any percentage tax imposed under this Title, other
than the sales tax on subsequent sale, shall file a quarterly return of
the amount of his gross sales, receipts or earnings or gross value of
output actually removed from the factory or mill warehouses and pay the
tax due thereon within twenty days after the end of each taxable
quarter.

“(2) Persons liable to sales tax on subsequent
sale.
—Every person liable to pay sales tax on subsequent sale shall file a
monthly return of his gross sales and pay the tax due thereon within ten
days after the end of each month.”

“(3) Persons retiring from business.—
Any person retiring
from a business subject to percentage tax shall notify the nearest
internal revenue officer, file his return and pay the tax due thereon
within twenty days after closing his business.

“(4) Exception. —The Commissioner may,
by regulations prescribe:

“(i) The time for filing the return at intervals other than
the
time prescribed in the preceding paragraphs for a particular class or
classes of taxpayer after considering such factors as volume of sales,
financial condition, adequate measures of security, and such other
relevant information required to be submitted under the pertinent
provisions of this Code; and

“(ii) The manner and time of payment of sales and other
percentage taxes other than as hereinabove prescribed, including a
scheme of tax prepayment.”

“(5) Presumption of sales.— (i) Sales on
consignment. —For
purposes of this Section, sales on consignment shall be considered
actually sold on the day of sale or sixty days after the date consigned,
whichever is earlier.

“(ii) Determination of correct sales or
receipt. —When
it is found that a person has failed to issue receipts or invoices, or
when no return is filed, or when there is reason to believe that the
books of accounts or other records do not correctly reflect the
declarations made or to be made in a return required to be filed under
the provisions of this Code, the commissioner, after taking into account
the sales, receipt or other taxable base of other persons engaged in
similar businesses under similar situations or circumstances, or after
considering other relevant information may prescribe a minimum amount of
such gross receipts, sales and taxable base and such amount so
prescribed shall be prima facie correct for purposes of determining the
correct sales tax liabilities of such person.

“(b) Where to file. —(1) Persons
subject to miller’s or
sales tax on original sale. —Every miller, manufacturer, producer or
importer shall file the required return with the Revenue District
Officer, Collection Agent or duly authorized Treasurer of the city or
municipality where such taxpayer has his principal place of
business.

“(2) Persons subject to sales tax on subsequent
sale.—
Every person subject to sales tax on subsequent sale shall file a
separate return with the Revenue District Officer, Collection Agent or
duly authorized Treasurer of the city or municipality where each and
every separate branch or distinct place of business is located:
Provided,
That a taxpayer may elect to file a consolidated return for all the
branches or places of business located within the same revenue district
with the Revenue District Officer concerned.

“(3) Persons subject to other percentage
taxes.— Any
person other than those mentioned in paragraphs (a) and (b) above who is
required to file a percentage tax return under this Title shall, at his
option, file either a separate return with the Revenue District
Officer, Collection Agent or duly authorized Treasurer of the city or
municipality where each separate or distinct place of business is
located, or a consolidated return with the same officers mentioned
herein where such taxpayer has his principal place of
business.

“The foregoing provisions notwithstanding, the Commissioner
may
in a meritorious case and upon request of the taxpayer, allow the filing
of the return, with any other authorized revenue officer.

“(c) Imported articles. — When the
articles are
imported, the percentage taxes established in Sections 163, 164 AND 165
(a) (1) (2) (3) of this Code shall be paid in advance by the importer
prior to the release of such articles from customs custody, based on the
total value used by the Bureau of Customs in determining tariff and
customs duties, including customs duties and other charges. On the
original sale, barter, exchange or transfer of such imported articles by
the importer himself, there shall be levied, assessed and collected a
sales tax at the same rate on the gross value in money of the articles
so sold, bartered, exchanged or transferred:
Provided, That the
tax paid in advance by the importer shall be credited against the sales
tax due on the original sale. The tax required to be paid herein shall
not apply to articles to be used by the importer himself in the
manufacture or preparation of articles subject to excise tax under Title
IV of this Code: Provided, however, That where the
National
Economic and Development Authority certifies to the availability of
local raw materials of sufficient quantity, comparable quality and price
to meet the needs of manufacturers subject to excise tax, the
importation of such raw materials shall be subject to the tax herein
imposed.”

SEC. 2. Section 165(A) (3) of the
Tax Code, as amended, is hereby further amended to read as
follows:

“(3) Essential articles.—10% of the
gross selling price or gross value in money of the following articles so
sold, bartered, exchanged, or transferred:

“(a) Processed meat, beverages, vegetables, milk and dairy
products, fish and other sea foods;

“(b) Wheat flour; 121

” (c) Bread and ordinary bakery products;

“(d) Medicine;

“(e) Laundry soap and detergents;

“(f) Writing pads, notebooks and ordinary lead
pencils;

“(g) Cement, hollow blocks, lumber, roofing materials,
steel bars, sand and gravel;

” (h) Fish, poultry, swine and cattle feeds; and “(i)
Fertilizer.”

SEC. 3. Section 165(A) (4) of the
Tax Code, is
hereby amended by reducing the one percent (1 %) sales tax on
agricultural products to zero percent (0%).

SEC. 4. Section 165(B) of the Tax
Code, as amended, is hereby further amended to read as
follows:

“(B) On every subsequent sale of
articles.— Except as provided
in Section 167 of the Tax Code, there shall be levied, assessed and
collected on every subsequent sale, barter, exchange or similar
transaction for nominal or valuable consideration intended to transfer
ownership of or title to any article a tax equivalent to 1.5% of the
gross selling price or gross value in money of the article so sold,
bartered, exchanged or transferred, such tax to be paid by the seller or
transferor thereof: Provided, however, That the
subsequent sale of agricultural products in their original state shall
be subject to 0% rate.

“Unless the tax under this subsection is billed to the
purchaser as
a separate item in the invoice, the amount intended to cover the sales
tax shall be considered as part of the gross selling price of the
article.”

SEC. 5. Section 166(a) of the Tax
Code is hereby further amended to read as follows:

“SEC. 166. Credits
against sales tax.-(a) Creditable taxes.—
Any excise, sales or miller’s tax paid under Title IV and Title V of
this Code, on domestically manufactured, processed, produced or imported
raw materials, part, accessory or other article locally purchased or
imported by the manufacturer for conversion into or intended to form
part of any finished product for sale shall be credited against the
sales tax due on the original sale of the finished product, except
agricultural products: Provided, however, That the
amount of
sales tax on domestically purchased raw materials, part or accessory, is
separately indicated in the sales invoice.

“In the case of purchase of raw materials, parts and
accessories by
a manufacturer from a duly registered and accredited dealer, the amount
of tax passed on to the dealer as well as the tax on subsequent sale,
if indicated as separate items in dealers or sales invoice shall be
allowed as credits against the sales tax due on the finished product.
Any advance sales tax paid on imported articles shall be allowed as
credits against the sales tax due on the original sale of such imported
articles.

SEC. 6. Section 167 of the Tax
Code, as amended, is hereby further amended to read as
follows:

“SEC. 167. Articles
and transactions not subject to sales tax. —The following
shall be exempt from the sales tax imposed in Sections 163, 164 and
165.

“(a) Original sale of a manufacturer, producer or importer of

articles subject to excise tax imposed under Title IV and miller’s tax
under Section 168 of this Code;

“(b) Subsequent sale of manufactured oils and other fuels,
except lubricating oil, processed gas, grease, wax and petrolatum;

“(c) Subsequent sale of any newspaper magazine review or
bulletin
which appears as regular intervals, with a fixed prices for subscription
and sale and which is not devoted principally to publication of
advertisements:

“(d) .22 caliber firearms and cartridges as well as other
forms of
ammunition sold ordelivered directly to the Armed forces of the
Phiippines or any government instrumentality or agency engaged in
maintaining peace and order for their use of issue:

“e. Articles, shipped or exported by the
manufacturer, producer, or trader, irrespective of any shipping
arrangement that may be agreed upon which may influence or determine the
transfer of ownership of the articles so exported. Any excise, sales or
advance sales tax paid under this Title or Title IV on domestically
manufactured or imported raw materials used in the manufacture and
forming part of the finished products subject to tax under Sections 163,
164 and 165IA) (1) (2) and (3) of the Tax Code shall be allowed as a
tax credit against any internal revenue tax liability directly due from
the manufacturer exporting said products: Provided,
That the
amount of the tax on locally purchased raw material, part, or accessory,
or other article is indicated as a separate item in the sales invoice
of the supplier from whom it was last purchased: and Provided,
further, That
the direct exporter shall file an application for tax credit within one
year from the close of the taxable year in which the export was
effected. In case finished products are exported by an export trader
other than the manufacturer, the entire amount of sales and excise taxes
separately indicated in the sales invoice of the immediate seller of
the finished products exported shall be allowed to be credited against
other tax liabilities of the export trader subject to the filing of an
application as herein prescribed;

“(f) Sales by ‘registered export producers’ to (1) other
‘export
producers’, (2) ‘registered export traders’ or (3) foreign tourists or
travelers, which are considered as ‘export sales’;

“(g) Sales by manufacturers, producers or traders direct to
foreign
tourists and paid for in convertible foreign currency if the articles
so sold are actually brought out of the Philippines by the buyers upon
their departure; and

“(h) Those that may be granted by the President upon
recommendation
of the National Economic Development Authority in the interest of
economic development.”

SEC. 7. Sec. 181 of the Tax Code,
as amended, is hereby further amended to read as follows:

“SEC. 181. Persons subject to
tax to issue
receipts or sales or commercial invoices; contents of receipts or
invoices.—All persons subject to an internal revenue tax shall, for each
sale or transfer of merchandise or for services rendered valued at
twenty-five pesos or more, issue receipts or sales or commercial
invoices, prepared at least in duplicate, showing the date of
transaction, quantity, unit cost and description of merchandise or
nature of service: Provided, That in the case of
sales,
receipts or transfers in the amount of one hundred pesos or more, or
regardless of amount, where the sale or transfer is made by producers,
manufacturers, importers and persons subject to percentage tax on
subsequent sales; or, where the receipt is issued to cover payment made
as rentals, commissions, compensations or fees, receipts or irvoices
shall be issued which shall show the name, business style, if any, and
address of the purchaser, customer, or client. The original of each
receipt or invoice shall be issued to the purchaser, customer or client
at the time the transaction is effected, who, if engaged in business or
in the exercise of profession, shall keep and preserve the same in his
place of business for a period of three years from the date of the
invoice or receipt, while the duplicate shall be kept and preserved by
the issuer, also in his place of business, for a like period.

“The Commissioner of Internal Revenue may, in meritorious
cases,
exempt any person subject to internal revenue tax from compliance with
the provisions of this section.”

SEC. 8. Paragraph (2) (a) of
Section 241 as amended, is hereby further amended to read as
follows:

“SEC. 241. Flexibility
clause.

“(2) Specific limitations on the exercise of authority to
make adjustments in all internal revenue taxes.

“(a) The existing tax rates may be increased or decreased by
not more than 50%: Provided, however, That
in the case of the sales tax on agricultural products sold in their
original state or where such agricultural products have undergone simple
processes, the existing rates may be increased to not more than 3
%.”

SEC. 9. Section 3l9(c) of the Tax
Code, as amended, is hereby further amended to read as
follows:

“(c) Five percent (5 %) of the total tax collected on
subsequent
sale under Section 165(B) of this Code shall accrue to the city or
municipality in which the tax is collected, and mother five percent (5%)
of the total annual tax collected on said subsequent sales shall also
accrue to te Ministry of Education, Culture and Sports.”

SEC. 10. The Bureau of Internal
Revenue shall update
the data and information of persons liable to the sales tax on original
and subsequent sale. For purposes of this Section, all persons liable
to the sales tax on original and subsequent sales who have not yet
registered then-businesses in accordance with P.D. 1991 shall
re-register their business in a manner and form within a period to be
prescribed by the Commissioner after the effectivity of this
Decree.

SEC. 11. The Minister of Finance
shall, upon
recommendation of the Commissioner of Internal Revenue, issue the
necessary regulations for the implementation of this Decree.

SEC. 12. All laws, decrees,
executive orders, and
regulations and other issuances or parts thereof which are inconsistent
with this Decree are hereby repealed, amended or modified
accordingly.

SEC. 13.
Effectivity.—The provisions of this
Decree shall take effect on January 1, 1986.

DONE in the City of Manila, this 31st day of December, in the
year of Our Lord, nineteen hundred and eighty-five.

			(Sgd.) FERDINAND E. MARCOS President of the Philippines
	By the President:
	(Sgd.) JUAN C. TUVERA
		Presidential Executive Assistant