Tax Alert No.

26
Senate Bill No. 1592

Senate Bill on Tax Reform for Acceleration and Inclusion

In brief

Last 20 September 2017, the Senate Committee on Ways and Means has filed its version of the Tax Reform for Acceleration and
Inclusion bill. Senate Bill No. 1592 proposes amendments on several provisions of the National Internal Revenue Code of 1997 (“Tax
Code”), as amended, specifically on individual income tax, donor’s and estate tax, value added tax (“VAT”), excise tax for automobiles,
petroleum products, sweetened beverages and mineral products, and certain administrative procedures.

Differences between the House and Senate versions will be harmonized in a bicameral conference committee before it will be
transmitted to the Office of the President for signing into law.

www.pwc.com/ph/tax-alerts
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
Commissioner’s Sec. 5 (B) Commissioner’s power to obtain Additional provisions on • With similar provisions as House Bill
power to obtain information from any person other than the a. The establishment of electronic No. 5636.
information, and to person whose internal revenue tax liability interconnectivity by and
summon, examine, is subject to audit or investigation or from among the Bureau of Internal • However, it also mentions that
and take testimony of any office or officer of the national and local Revenue (“BIR”) and other bank account information may
persons governments, government agencies and national government agencies, only be disclosed in line with the
instrumentalities. local government units, and Commissioner’s authority to make
government agencies and assessments and prescribe additional
instrumentalities that will allow requirements for tax administration and
relevant exchange of information; enforcement

b. Compliance with current rules on

disposition of income tax returns
(“ITRs”), publication of lists of
taxpayers and filers in case
data requirements consists of
information found in ITRs; and

c. Submission of a tax incentive

report by Cooperatives
Development Authority to the BIR
and the Department of Finance.
Commissioner’s Sec. 6 (B) The Commissioner is authorized No proposed amendments • The determination of the fair market
authority to prescribe to determine the fair market value of real value of real properties requires public
real property values properties. and private appraisers’ consultation
and prior notice to affected taxpayers.

• No adjustment in zonal valuation shall

be valid unless published or posted.

• There is an automatic adjustment of

the zonal valuation once every three
years through the issuance of Rules
and Regulations by the Secretary of
Finance.

• The basis of valuation, as well as

records of consultation, shall be
available for inquiry of any taxpayer.

2
Tax Particulars Current tax rules
Commissioner’s Sec. 6 (F) Commissioner’s authority to inquire
authority to inquire and receive information on bank deposit
and receive taxpayer’s accounts held by financial institutions over
information held by the following:
financial institutions
a. A decedent to determine his gross estate; a. A specific taxpayer or taxpayers,
b. Any taxpayer who has filed an application
for compromise of his tax liability; and
c. A specific taxpayer or taxpayers,
subject to a request for the supply of tax b. Any taxpayer upon order of
information from a foreign tax authority.
Adjustments in the personal income taxation
Sec. 22 (GG) and (HH) on the definition of
statutory minimum wage and statutory MWE
On minimum wage
earners (“MWEs”) Sec. 24 (A) (2) MWEs are exempt from
provisions income tax on their compensation, holiday
pay, overtime pay, night shift differential pay
and hazard pay.
House Bill No. 5636
Revised/additional coverage of
Commissioner’s authority over the
following:
upon an obligation to exchange
tax information to a foreign tax
authority, whether on request or
automatic; and
any competent court in cases
involving tax evasion offenses.
Deletion of the definitions
Removal of tax exemption provisions
on earnings of MWEs
Senate Bill No. 1592
Revised/additional coverage of
Commissioner’s authority over the
following:
a. A specific taxpayer or taxpayers,
upon an obligation to exchange tax
information to a foreign tax authority,
whether on request or automatic; and
b. Any taxpayer upon order of any
competent court in cases involving
tax evasion offenses, and failure to file
return, supply correct and accurate
information, pay tax, withhold and remit
tax, and refund excess taxes withheld
on compensation.
No proposed amendments
No proposed amendments
3
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
On personal income Sec. 24 (A) (2) Personal income tax table for A. For compensation income A. For compensation income earners
tax table both compensation-income earners, and self- earners
employed and/or professionals:
Effective 1 January 2018 Effective 1 January 2018 to 2020

Not over PHP10,000 5% Not over PHP250,000 0% Not over PHP150,000 0%

Over 10,000 but not PHP500 + 10% of the Over 250,000 but not 20% of the excess Over 150,000 but not over 15% of the excess
over 30,000 excess over 10,000 over 400,000 over 250,000 250,000 over 150,000
Over 30,000 but not 2,500 + 15% of the Over 400,000 but not 30,000 + 25% of Over 250,000 but not over 15,000 + 20% of the
over 70,000 excess over 30,000 over 800,000 the excess over 400,000 excess over 250,000
400,000
Over 70,000 but not 8,500 + 20% of the Over 400,000 but not over 45,000 + 25% of the
over 140,000 excess over 70,000 Over 800,000 but not 130,000 + 30% of 800,000 excess over 400,000
over 2,000,000 the excess over
Over 140,000 but 22,500 + 25% of the Over 800,00 but not over 145,000 + 30% of the
800,000
not over 250,000 excess over 140,000 2,000,000 excess over 800,000
Over 2,000,000 but 490,000 + 32% of
Over 250,000 but 50,000 + 30% of the Over 2,000,000 505,000 + 32% of
not over 5,000,000 the excess over
not over 500,000 excess over 250,000 the excess over
2,000,000
2,000,000
Over 500,000 125,000 + 32% of the
Over 5,000,000 1,450,000 + 35%
excess over 500,000
of the excess over
5,000,000

The taxable income levels and base shall

Effective 1 January 2021 automatically be adjusted every three years
starting 2021.
Not over PHP250,000 0%
Over 250,000 but not 15% of the excess
over 400,000 over 250,000
Over 400,000 but not 22,500 + 20% of
over 800,000 the excess over
400,000
Over 800,000 but not 102,500 + 25% of
over 2,000,000 the excess over
800,000
Over 2,000,000 but 402,500 + 30% of
not over 5,000,000 the excess over
2,000,000
Over 5,000,000 1,302,500 + 35%
of the excess over
5,000,000

4
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
On personal income After 2022, the taxable income
tax table levels and base shall be adjusted
once every 3 years based on the
Rules and Regulations issued by the
Secretary of Finance.

B. For self-employed and/or
professionals • Purely self-employed and/or
professionals engaged in the exercise
Basis Tax of their profession has the option to be
Gross sales or gross 8% income tax
taxed either as compensation income
receipts do not on gross sales earners or at 8% of their gross sales
exceed VAT threshold or gross receipts or receipts and other non-operating
(i.e., PHP3,000,000) in excess of income in excess of PHP150,000.
PHP250,000 (in
lieu of percentage

tax) • Mixed income earners shall be taxed:
Gross sales or gross Shall be taxed
- as compensation income earners
receipts exceed VAT in the same for their compensation income; and
threshold manner as - either as compensation income
corporations as earners or at 8% of gross sales or
to the applicable
tax rate, minimum
receipts and other non-operating
income tax income from self-employment or
and allowable practice of profession in excess of
deductions PHP150,000

Renewal requirement for • By default, an individual taxpayer
professional license is taxable as compensation income
earner unless he signifies in his income
• Professionals shall be required tax return his choice to be taxed at 8%.
to present either a certificate of Such election shall be irrevocable for
tax payment from the BIR or a three taxable years.
certified true copy of their latest
ITR upon application for renewal
of their respective license.

5
Tax Particulars Current tax rules
On passive income Sec. 24 (B) (1)
from interest, • Philippine Charity Sweepstakes Office
royalties, prizes and (“PCSO”) and lotto winnings are exempt
other winnings from the 20% final withholding tax.
• Interest income from a depository bank
under the expanded foreign currency
deposit system is subject to a final tax of
7.5%
On cash and/or Sec. 24 (B) (2) Cash and/or property dividend
property dividends received by an individual from a domestic
corporation is subject to the 10% final tax.
On capital gains from Sec. 24 (C) Capital gains tax of 5% on the
sale of stock not first PHP100,000 and 10% in the excess
traded in the local thereof is imposed on sale of shares not
stock exchange traded in the local stock exchange.
On alien individuals Sec. 25 (C), (D) and (E) A rate of 15% final
and qualified Filipinos withholding tax on the gross compensation
employed by specific income of alien individuals and qualified
employers Filipinos employed by the following
employers:
a. Regional or area headquarters (RHQ) and
regional operating headquarters (ROHQ)
of multinational companies;
b. Offshore banking units (OBU); and
c. Petroleum contractors and
subcontractors.
On definition of Sec. 31 Taxable income means the pertinent
Taxable Income items of gross income specified in the Tax
Code, less the deductions and/or personal
and additional exemptions, if any, authorized
for such types of income by the Tax Code or
other special laws.
On exemption of 13th Sec. 32 (B) (7) Exempt 13th month pay and
month pay and other other benefits amounting to PHP82,000
benefits
House Bill No. 5636
Removal of the tax exemption of
winnings from PCSO and lotto
No proposed amendments
No proposed amendments
Removal of 15% income tax
Taxable income means the pertinent
items of gross income specified in
the Tax Code, less deductions, if any,
authorized for such types of income
by the Tax Code.
Amount of income tax exemption of
13th month pay and other benefits is
increased to PHP100,000.
Senate Bill No. 1592
• PCSO and lotto winnings exceeding
PHP10,000 is subject to the 20% final
tax.
• Interest income from a depository bank
under the expanded foreign currency
deposit system is subject to a final tax
of 20%.
Cash and/or property dividend received by
an individual from a domestic corporation is
subject to the 20% final tax.
Capital gains tax on sale of shares not
traded in the local stock exchange is
increased to a flat rate of 20%
Preferential tax treatment for RHQ, ROHQ,
and OBU employees shall not apply to
individuals employed beginning
1 January 2018.
RHQ, ROHQ, and OBU employees prior
to 1 January 2018 shall enjoy preferential
tax treatment until the end of their current
employment.
Taxable income means the pertinent
items of gross income specified in the Tax
Code, less deductions and/or additional
exemptions, if any, authorized for such
types of income by the Tax Code or other
special laws.
No proposed amendments
6
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
On fringe benefit tax Sec. 33 (A)(1)(a)(i) • Effective 1 January 2018, fringe No proposed amendments
given to non-rank and • Fringe benefits given to non-rank and file benefits given to non-rank and
file employees employees are subject to 32% final tax file employees are subject to
rate. 30% final tax rate.
• The grossed-up monetary value is • The grossed-up monetary value
determined by dividing the actual is determined by dividing the
monetary value by 68%. actual monetary value by 70%.
• In 2022 onwards, the fringe
benefit shall form part of the
gross income of its recipient
employee subject to regular
income tax rates and the actual
monetary value (not the grossed-
up monetary value) of the fringe
benefit will be considered as
allowable deduction.
On optional standard Sec. 34. (L) In lieu of the itemized allowable Deletion of OSD for individuals • OSD shall be fixed in an amount not
deduction (“OSD”) deductions, an individual subject to tax, other exceeding 40% of the gross income,
than a nonresident alien, may elect an OSD of Note however, that self-employed whether for qualified individual or
40% of gross sales or gross receipts. and/or professionals whose gross corporate taxpayers.
sales or gross receipts exceed the
VAT threshold shall be taxed as • The 40% OSD may be availed of only
corporations which are allowed OSD once by either the general professional
of 40% based on gross income. partnership or the partners comprising
such partnership.
On deduction for Sec. 34 (M) Allowed deduction of PHP2,400 Removal of allowed deduction for • Allowed deduction of PHP6,000 per
premium payments per year or PHP200 per month worth premium payments on health and year or PHP500 per month worth of
on health and/ of premium payments on health and/or hospitalization insurance premium payments on health and/or
or hospitalization hospitalization of an individual provided that hospitalization of an individual provided
insurance the family has a gross income not exceeding that the family has a gross income not
PHP250,000 for a taxable year exceeding PHP500,000 for a taxable
year

• Amount of premiums and family gross

income thresholds shall automatically
be adjusted beginning 2021 and every
3 years thereafter.

7
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
On personal and Sec. 35 and 79 (D) Exemptions on the Removal of the exemptions • Removal of the personal exemption of
additional exemptions following: enumerated in the preceding column PHP50,000 but retained the PHP25,000
• PHP50,000 worth of personal exemption annual additional exemption for each
• PHP25,000 worth per qualified dependent not exceeding 4.
dependent child • The amount of additional exemption
• PHP20,000 exemption from income of shall be automatically adjusted
the estate or trust beginning 2021.
• In case of legally separated spouses, • Removal of requirement of legal
additional exemptions may be claimed separation for the additional
only by the spouse who has custody of exemptions to be claimed by the
child/children. spouse who has custody of the child/
children
On filing of individual Sec. 51 (A) (2) (a) An individual whose gross No proposed amendments • An individual subject to 0% tax based
tax return income does not exceed his total personal on the tax table for compensation
and additional exemptions for dependents income earners shall not be required to
are not required to file an income tax return. file an income tax return.
Adjustments in estate taxation
On estate tax rates Sec. 84 Estate tax table: • Removal of the estate tax table • Removal of the estate tax table
• Estate tax rate fixed at 6% based • Estate tax rate fixed at 6% based on
Over But not over This tax Plus Of the on the net estate the net estate.
shall be Excess
Over
PHP200,000 Exempt
200,000 500,000 0 5% 200,000
500,000 2,000,000 15,000 8% 500,000
2,000,000 5,000,000 135,000 11% 2,000,000
5,000,000 10,000,000 465,000 15% 5,000,000
10,000,000 And Over 1,215,000 20% 10,000,000

8
Tax Particulars Current tax rules
On estate tax Sec. 86 (A) Citizens or residents are allowed
deductions the following deductions, among others:
a. Expenses, Losses, Indebtedness, and
taxes (among others, funeral expenses
not to exceed PHP200,000 and judicial
expenses)
b. Property previously taxed
c. Transfers for public use
d. Family home not to exceed
PHP1,000,000
e. Standard deduction of PHP1,000,000
f. Medical expenses not to exceed
Php500,000
Sec. 86 (B) Nonresident estates are allowed
to deduct expenses, losses, indebtedness
and taxes from the value of the gross estate.
On filing a notice of Sec. 89 Written notice of death is required for
death gross estates exceeding PHP20,000
House Bill No. 5636
Increased the ceiling amount of
deductions from family home
allowed for citizens and residents
to PHP3,000,000 with proposed
indexation every 3 years starting
2018.
For nonresident estates, expenses,
losses, indebtedness and taxes are
removed from the list of allowable
deductions from gross estate.
No proposed amendments
Senate Bill No. 1592
• Removed allowance for deductions for
funeral expenses, judicial expenses,
family home, and medical expenses;
• Increased the standard deduction
to PHP5,000,000 (which shall
automatically be adjusted beginning
2023 and every 5 years thereafter);
• Added a family farm deduction equal to
the fair market value of the decedent’s
family farm up to three hectares
of agricultural land, subject to the
following conditions:
a. The land must be owned, occupied,
and used for 3 years prior to the
death of the decedent;
b. The farm must be owned and
actually tilled or directly managed
by the decedent for 3 years prior to
his death;
c. The land must pass to an heir who
must continue to till or directly
manage the land for agricultural
purposes for 3 years from the death
of the decedent;
d. The land must not be sold,
transferred or conveyed except
through hereditary succession or
donation to another heir, or to the
government for a period of 3 years
following the decedent’s death;
e. The land may not be converted to
residential, commercial or industrial
for the same period.
For nonresident estates, expenses, losses,
indebtedness and taxes are removed from
the list of allowable deductions from gross
estate.
Repealed provision
9
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
On estate tax returns Sec. 90 (A) (2) Estate tax returns showing a No proposed amendments Estate tax returns showing a gross value
gross value exceeding PHP2,000,000 must exceeding PHP5,000,000 must be certified
be certified by a CPA. by a CPA.
Sec. 90 (B) The estate tax return must be No proposed amendments The estate tax return must be filed within
filed within 6 months from the death of the one year from the death of the decedent.
decedent
On payment of tax Sec. 97 The administrator of the estate or No proposed amendments The allowed amount to be withdrawn
antecedent to the any one of the heirs may, when authorized absent the certification from the Commis-
transfer of shares, by the Commissioner, withdraw an amount sioner that the estate taxes have been paid
bonds, or rights not exceeding PHP20,000 even without the is increased to PHP500,000
certification from the Commissioner that the
estate taxes have been paid.
Adjustments in donor’s taxation
On donor’s tax rates Sec. 99 (A) and (B) Donor’s tax rates are as • Retention of the tax exemption • Retention of the tax exemption on
follows: on PHP100,000 annual net gifts; PHP100,000 annual net gifts;
• Removal of the donor’s tax table; • Removal of the donor’s tax table;
a. Not stranger • Donor’s tax rate fixed at 6% • Donor’s tax rate fixed at 6% based on
based on total gifts, regardless of total gifts, regardless of whether the
Over But not over This tax Plus Of the whether the donee is a stranger donee is a stranger or not
shall be Excess or not
Over
PHP100,000 Exempt
100,000 200,000 0 2% 100,000
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

b. Stranger – 30% based on net gifts

On transfers for less Sec. 100 The amount by which the fair market No proposed amendments A sale, exchange, or other transfer made in
than adequate and full value exceed the value of the consideration the ordinary course of business (i.e., bona
consideration for a transfer of property shall be deemed a fide, at arm’s length, and free from donative
gift. intent) shall be considered as made for an
adequate and full consideration.
On exemption of Sec. 101 (A) PHP10,000 amount of dowries No proposed amendments Removed the exemption
certain gifts or gifts made on account of marriage are
exempt from donor’s tax.

10
Tax Particulars Current tax rules
Expansion of the VAT base
On zero-rated sale of Sec. 106 (A) (2) Export sales include the
goods following:
1. Sale of gold to the Bangko Sentral ng
Pilipinas (BSP); and
2. Sale of goods, supplies, equipment and
fuel to persons engaged in international
shipping or international air transport
operations.
Other zero-rated sales of goods are as
follows:
a. Foreign currency denominated sale; and
b. Sales to persons or entities exempted
under special laws or international
agreements.
House Bill No. 5636
• Sale of gold to BSP is
reclassified from export sales to
other zero-rated sales.
• Item 2 will qualify as export
sales provided that the goods,
supplies, equipment and fuel
shall be used for international
shipping and air transport
operations.
• Foreign currency denominated
sales are removed from zero-
rated sales.
• Upon the establishment and
implementation of an enhanced
VAT refund system that gives
the taxpayer the actual refund or
denial of his application within 90
days from filing of the VAT refund
application, the following are no
longer considered export sales:
a. Sale of raw or packaging
materials to a nonresident
buyer for delivery to a
resident local export-oriented
enterprise;
b. Sale of raw or packaging
materials to export-oriented
enterprise whose export
sales exceed 70% of total
annual production; and
c. Export sales under Executive
Order No. 226 and other
special laws.
Senate Bill No. 1592
• Sale of gold to BSP is reclassified from
export sales to other zero-rated sales.
• Item 2 will qualify as export sales
provided that the goods, supplies,
equipment and fuel shall be used for
international shipping and air transport
operations.
• Expressly added sales and actual
shipment of goods to special economic
zones and freeport zones as export
sales
• Foreign currency denominated sales
are removed from zero-rated sales.
• Upon the successful establishment and
implementation of an enhanced VAT
refund system that grants refunds of
creditable input tax within 90 days from
filing of the VAT refund application with
the BIR (i.e., all applications filed from
1 January 2018 shall be processed and
must be decided within 90 days from
the filing of the VAT refund application)
and all pending VAT refund claims as of
31 December 2018 shall be fully paid
in cash (provided that the BIR shall be
required to submit a quarterly report
of all pending claims for refund to the
Congressional Oversight Committee
on the comprehensive tax reform
program), the following shall no longer
be subject to 0% VAT:
a. Sale of raw or packaging materials
to a nonresident buyer for delivery
to a resident local export-oriented
enterprise;
b. Sale of raw or packaging materials
to export-oriented enterprise whose
export sales exceed 70% of total
annual production; and
c. Export sales under Executive Order
No. 226 and other special laws. 11
Tax Particulars Current tax rules
On the scope of Sec. 108 (A) provides the definition of sale
sale or exchange of or exchange of services.
services
On zero-rated sales of Sec. 108 (B) Zero-rated sales of services
services include:
1. Services rendered to persons engaged in
international shipping or international air
transport operations;
2. Transport of passengers and cargo by air
or sea vessels from the Philippines to a
foreign country; and
3. Services performed by subcontractors
and/or contractors in processing,
converting, of manufacturing goods for
an enterprise whose export sales exceed
70% of total annual production.
House Bill No. 5636
Inclusion of sale of electricity by
electric cooperatives in the definition
of sale or exchange of services.
• Item 1 will qualify as zero-rated
sale of services if these services
are exclusively for international
shipping and air transport
operations.
• Zero-rating for transport of
passenger and cargo shall apply
for domestic air or sea vessels.
• Item 3 shall be subject to the
12% VAT upon the establishment
and implementation of an
enhanced VAT refund system
that gives the taxpayer the actual
refund or denial of his application
within 90 days from filing of the
VAT refund application.
Senate Bill No. 1592
No proposed amendments
• Expressly provided and added services
rendered to entities registered with the
special economic zones and Freeport
Zones Authority as zero-rated sales.
• Item 1 will qualify as zero-rated sale
of services if these services are
exclusively for international shipping
and air transport operations.
• Zero-rating for transport of passenger
and cargo from the Philippines to a
foreign country shall apply for domestic
air or sea vessels only.
• Item 3 shall be subject to the 12% VAT
upon the successful establishment and
implementation of an enhanced VAT
refund system that grants refunds of
creditable input tax within 90 days from
filing of the VAT refund application with
the BIR (i.e., all applications filed from
1 January 2018 shall be processed and
must be decided within 90 days from
the filing of the VAT refund application)
and all pending VAT refund claims as of
31 December 2018 shall be fully paid
in cash (provided that the BIR shall be
required to submit a quarterly report
of all pending claims for refund to the
Congressional Oversight Committee
on the comprehensive tax reform
program).
12
Tax Particulars Current tax rules
On VAT exemptions Sec. 109 (1) VAT exemptions include the
following transactions:
1. Importation of professional instruments,
etc. belonging to persons coming to
settle in the Philippines, for their personal
use, accompanying such persons or
arriving within 90 days before or after
their arrival;
2. Sale of real property utilized for low-
cost housing, sale of residential lot
valued at PHP1,500,000 (as adjusted
by Revenue Regulations (“RR”) No.
16-2011, PHP1,919,500) and sale of
other residential dwellings valued at
PHP2,500,000 (as adjusted by RR No.
16-2011, PHP3,199,200);
3. Lease of residential unit with monthly
rental of PHP10,000 (as adjusted by RR
No. 16-2011, PHP12,800);
4. Importation of fuel, goods, and supplies
by persons engaged in international
shipping of air transport operations; and
5. Other sale of lease of goods or properties
or the performance of services, the
amount of which does not exceed
PHP1,500,000 (as adjusted by RR No.
16-2011, PHP1,919,500).
On refunds or tax Sec. 112 (C) The Commissioner shall grant
credits of input tax a refund or issue the tax credit certificate for
creditable input taxes within 120 days from
submission of complete documents.
House Bill No. 5636
• Expansion of the importation
exemption on professional
instruments, etc. to include
those belonging to overseas
Filipinos, and their families and
descendants
• Removal of exemption of items
2 and 3
• Exemption of the importation of
fuel, goods and supplies shall
only apply if such are used for
international shipping or air
transport operations
• Additional exemption of sale or
lease of goods and services to
senior citizens and persons with
disabilities
• VAT threshold is increased to
PHP3,000,000 with proposed
indexation every 3 years starting
2021
• Sale of real property utilized
for socialized housing shall
be subject to the 12% VAT
upon establishment of housing
voucher system which shall
benefit buyers of socialized
housing.
No proposed amendments
Senate Bill No. 1592
• Expansion of the importation
exemption on professional instruments,
etc. to include those belonging to
overseas Filipinos, and their families
and descendants who are now
residents or citizens of other countries
• Removal of exemption of item 2
• Exemption of sale of house and lot
and other residential dwellings located
outside Metro Manila with selling
price of not more than PHP2,000,000
(provided that not later than 31 January
2021 and every 3 years thereafter,
amounts shall be adjusted)
• Exemption of the lease of residential
unit with monthly rental not exceeding
PHP12,800 (provided that not later than
31 January 2021 and every 3 years
thereafter, amounts shall be adjusted)
• Exemption of the importation of fuel,
goods and supplies shall only apply if
such are used for international shipping
or air transport operations
• Added the exemption of sale or lease
of goods and services to senior citizens
and persons with disabilities
• Added the exemption for transfers of
property under Section 40 (C)(2) of the
Tax Code
• VAT threshold is increased to
PHP3,000,000 with proposed
indexation every 3 years starting 2021
• Decrease of the period to grant the
refunds to 90 days
• Should the Commissioner find the grant
of refund improper, the Commissioner
shall state in writing the legal and
factual basis for the denial.
• Removal of Tax Credit of Input Taxes
13
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
On VAT returns and No existing provision No proposed amendments Payments for purchase of goods and
payment services arising from Official Development
Assistance funded projects shall not be
subject to final withholding VAT.
Other percentage taxes
Tax on persons Sec. 116 Any person whose sales or receipts Self-employed and/or professionals Self-employed and/or professionals whose
exempt from VAT are exempt under Sec. 109 (V) from the whose gross sales or gross receipts gross sales or gross receipts do not exceed
payment of VAT and who is not a VAT- do not exceed the VAT threshold the VAT threshold and who opt to pay the
registered person shall pay a tax of 3%. shall also be exempt from the 3% 8% tax shall also be exempt from the 3%
Cooperatives are exempt from the 3% gross gross receipt tax. gross receipt tax.
receipt tax.

14
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
Adjustments in excise taxation
On excise tax of Sec. 148 The following items have the The following are the revised excise The following are the revised excise tax
petroleum products corresponding excise tax rates: tax rates effective corresponding rates effective corresponding periods:
periods:

Effective Effective
Manufactured Manufactured
Oils and Other 1 1 1 Oils and Other 1 1 1
Manufactured Oils and Other Excise tax rates Fuels January January January Fuels January January January
Fuels 2018 2019 2020 2018 2019 2020
Lubricating oils and greases PHP4.50 per liter Lubricating oils PHP7.00 PHP9.00 PHP10.00 Lubricating oils PHP6.00 PHP8.00 PHP10.00
and greases (per and greases (per
Processed gas 0.05 per liter
liter) liter)
Waxes and petrolatum 3.50 per kglll
Processed gas 3.00 5.00 6.00 Processed gas 1.75 3.75 6.00
Denatured alcohol 0.05 per liter (per liter) (per liter)
Naphtha, regular gasoline 4.35 per liter Waxes and 7.00 9.00 10.00 Waxes and 6.00 8.00 10.00
and other similar products of petrolatum (per petrolatum (per
distillation kg) kg)
Leaded premium gasoline 5.35 per liter Denatured 3.00 5.00 6.00 Denatured 1.75 3.75 6.00
alcohol (per liter) alcohol (per liter)
Aviation turbo jet fuel 3.67 per liter
Naphtha, regular 7.00 9.00 10.00 Naphtha, regular 6.00 8.00 10.00
Kerosene 0.00 per liter
gasoline and gasoline and
Diesel fuel oil 0.00 per liter other similar other similar
products of products of
Liquefied Petroleum Gas 0.00 per liter
distillation (per distillation and
Asphalt 0.56 per kgll liter) PYROLYSIS
GASOLINE (per
Bunker fuel oil 0.00 per liter Leaded premium 7.00 9.00 10.00
liter)
gasoline (per
liter) UNLEADED 6.00 8.00 10.00
premium
Aviation turbo jet 7.00 9.00 10.00
gasoline (per
fuel (per liter)
liter)
Kerosene (per 3.00 5.00 6.00
Aviation turbo jet 4.00 4.00 4.00
liter)
fuel (per liter)
Diesel fuel oil 3.00 5.00 6.00
Kerosene (per 0.00 0.00 0.00
(per liter)
liter)
Liquefied 3.00 5.00 6.00
Diesel fuel oil 1.75 3.75 6.00
Petroleum Gas
(per liter)
(per liter)
Liquefied 1.00 2.00 3.00
Asphalt (per kg) 3.00 5.00 6.00
Petroleum Gas
Bunker fuel oil 3.00 5.00 6.00 (per liter)
(per liter)
Asphalt (per kg) 1.75 3.75 6.00
Bunker fuel oil 1.75 3.75 6.00
(per liter)

15
Tax Particulars Current tax rules House Bill No. 5636
On excise tax of • Imposition of PHP0 excise tax
petroleum products on LPG & naphtha that is used
as raw material in the production
of petrochemical products or as
a replacement fuel for natural
gas fired-combined cycle power
plant, in lieu of locally-extracted
natural gas during unavailability
thereof.
• Excise taxes paid on the
purchased feedstock (bunker)
used in the manufacture of
excisable articles and forming
part thereof shall be credited
against the excise tax due
therefrom.
• Scheduled increase in the excise
tax on fuel for period covering
2018 to 2020 shall be suspended
if the Dubai Crude Oil price reach
US$80 per barrel or more.
On mandatory No current tax rules on the same All petroleum products shall be
marking of petroleum marked with the official marking
products agent designated by the Department
of Finance.
Senate Bill No. 1592
• Leaded gasoline excise tax was
removed.
• Imposition of Php0 excise tax on LPG
that is used as raw material in the
production of petrochemical products
and on naphtha and pyrolysis gasoline
when used as a replacement fuel for
natural gas fired-combined cycle power
plant, in lieu of locally-extracted natural
gas during unavailability thereof
• Excise taxes paid on the purchased
feedstock (bunker) used in the
manufacture of excisable articles and
forming part thereof shall be credited
against the excise tax due therefrom.
• Scheduled increase in the excise tax on
fuel for period covering 2018 to 2020
shall be suspended if:
a. the average Dubai Crude Oil price
for the first 15 days of the month
based on Mean of Platts Singapore
(MOPS) reach or exceeds USD80
per barrel cost, insurance and
freight; or
b. the inflation rate exceeds the higher
end of the annual inflation target
range set by the Development
Budget and Coordination
Committee and the BSP.
The Secretary of Finance may require the
use of fuel marking or similar technology
on petroleum products before removal from
the place of production or before its release
from customs territory.
16
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
On excise tax on Sec. 149 Excise tax imposed on automobiles Imposition of the following increased Imposition of the following increased
automobiles are as follows: excise taxes: excise taxes:

Effective 1 January 2018 Effective 1 January 2018

Automobiles Automobiles Automobiles

Over Up to Excise tax rate Over Up to Excise tax rate Over Up to Excise tax rate
0 PHP600,000 2% 0 PHP600,000 3% 0 PHP600,000 4%
600,000 1,100,000 12,000 + 20% in 600,000 1,100,000 18,000 + 30% of 600,000 1,100,000 24,000 + 35% of
excess of 600,000 value in excess of value in excess of
600,000 600,000
1,100,000 2,100,000 112,000+ 40%
in excess of 1,100,000 2,100,000 168,000 + 50% of 1,100,000 2,100,000 199,000 + 55% of
1,100,000 value in excess of value in excess of
1,100,000 1,100,000
2,100,000 512,000 + 60%
in excess of 2,100,000 3,100,000 668,000 + 80% of 2,100,000 3,100,000 749,000 + 90% of
2,100,000 value in excess of value in excess of
2,100,000 2,100,000
3,100,000 1,468,000 + 90% 3,100,000 1,649,000 + 100%
of value in excess of value in excess
of 3,100,000 of 3,100,000

Effective 1 January 2019 • Buses, trucks, cargo vans, jeepneys/

jeepney substitutes, single cab chassis,
Automobiles special purpose vehicles, and vehicles
purely powered by electricity or hybrid
Over Up to Excise tax rate vehicles shall not be subject to excise
0 PHP600,000 4% tax.
600,000 1,100,000 24,000 +
40% of value
in excess of
600,000
1,100,000 2,100,000 224,000 +
60% of value
in excess of
1,100,000
2,100,000 3,100,000 824,000 +
100% of value
in excess of
2,100,000
3,100,000 1,824,000 +
120% of value
in excess of
3,100,000

17
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
On excise tax on • Removed provisions for
automobiles indexation
• Automobiles shall also include
motive powered vehicles but not
the following: (1) those purely
powered by electricity and (2)
hybrid vehicles.
• A pick-up shall be considered
a truck, and hence not an
automobile.
On non-essential No current provision on non-essential No proposed amendments Imposes a 20% tax based on gross sales
goods and services services or receipts from cosmetic procedures,
surgeries and body enhancements for
aesthetic reasons.

Cosmetic procedures subject to excise

tax are those entirely focused on altering
and enhancing a patient’s appearance,
improving aesthetic appeal, symmetry, and
proportion.

Reconstructive surgery or the repair,

reconstruction, and restoration of facial
and bodily functions due to congenital
disorders, trauma, burns, infections,
disease, and those intended to correct
dysfunctional areas of the body are exempt
from excise tax.

18
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
On excise taxes on No current tax rules on the same Effective 1 January 2018
sweetened beverages Basis Tax (Per Liter of
Volume Capacity) Basis January 2018 January 2020
Beverage containing purely PHP10.00 Sweetened beverages using PHP5.00 per PHP0.05 per
locally produced sugar purely caloric sweeteners liter of volume gram of sugar
capacity
Other sugar sweetened 20.00
beverages Sweetened beverages using 10.00 per 10.00 per
purely high fructose corn liter of volume liter of volume
syrup or in combination with capacity capacity
Rate of tax shall be adjusted once any caloric or non-caloric
every 3 years. sweetener
Sweetened beverages using 3.00 per 3.00 per
purely non-caloric or a mix liter of volume liter of volume
of caloric and non-caloric capacity capacity
sweetener

Sweetened beverages using purely coconut

sap sugar and purely steviol glycosides
shall be exempt from excise tax.
On excise tax on Sec. 151 (A) (1) Excise tax of PHP10 per No proposed amendments Excise tax on coal and coke is increased to
mineral products metric ton on coal and coke PHP20.00 per metric ton.
On having mandatory Sec. 155 Manufacturers of excisable products Importers of finished petroleum Importers of finished petroleum products
counting devices for are required to have suitable counting or products are also required to provide are also required to provide themselves
importers of excisable metering devices for determining volume, themselves with metering devices with Bureau accredited metering devices
products quantity or number of such articles. to accurately measure the volume of to accurately measure the volume of such
such articles imported by them. articles imported by them.
On authority of BIR Sec. 171 BIR may enter any house, building, The BIR Commissioner or his The BIR Commissioner or his authorized
in searching for or place where articles subject to excise tax authorized representative may representative may conduct periodic
and testing taxable are produced or kept. conduct periodic random field tests random field tests on fuels required to be
articles on fuels required to be marked found marked found in warehouses, gas stations
in warehouses, gas stations and and other retail outlets, and in such other
other retail outlets, and in such other properties of persons engaged in the
properties of persons engaged in the sale, delivery, trading, transportation,
sale, delivery, trading, transportation, distribution, or importation of fuel intended
distribution, or importation of fuel for domestic market.
intended for domestic market.

19
Tax Particulars Current tax rules
Adjustments in documentary stamp tax
On stamp tax on Sec. 196 Sale and conveyance of real
deeds of sale and property is subject to 1.5% DST
conveyances of real
property
Administrative provisions
Keeping of Books of Sec. 232(A)
Accounts
• Those whose quarterly sales, earnings,
receipts, or output do not exceed
PHP50,000 shall keep and use simplified
set of bookkeeping records.
• Those whose gross quarterly sales,
earnings, receipts or output exceed
PHP150,000 shall have their books of
accounts audited and examined yearly by
independent Certified Public Accountants
(CPAs) and their ITRs accompanied with
a duly accomplished Account Information
Form (AIF).
House Bill No. 5636
No proposed adjustments
• Those whose quarterly sales,
earnings, receipts, or output do
not exceed PHP250,000 shall
keep and use simplified set of
bookkeeping records.
• Those whose gross quarterly
sales, earnings, receipts or
output exceed PHP750,000 shall
have their books of accounts
audited and examined yearly
by independent CPAs and their
ITRs accompanied with a duly
accomplished AIF.
Senate Bill No. 1592
Donations of real property shall also
be subject to the 1.5% DST. However,
donations made to or for the use of the
government and gifts in favor of education
and/or charitable, religious, cultural or
social welfare corporation, among others,
shall be exempt from DST.
• Those whose quarterly sales, earnings,
receipts, or output do not exceed
Php250,000 shall keep and use
simplified set of bookkeeping records.
• Those whose gross quarterly sales,
earnings, receipts or output exceed
PHP750,000 shall have their books of
accounts audited and examined yearly
by independent CPAs and their ITRs
accompanied with a duly accomplished
AIF.
20
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
Electronic Receipts Sec. 237
(e-receipts) or
electronic sales or • For each sale of merchandise or service • E-receipts shall be required and • For each sale of merchandise or service
commercial invoices rendered valued at PHP25 or more, shall contain the following: rendered valued at Php100 or more,
(e-invoices) a receipt or invoice shall be issued, duly registered receipts or invoices
prepared at least in duplicate. For each sale of E-receipts shall shall be issued containing the date of
merchandise or service contain the date of the the transaction, quantity, unit cost and
rendered valued at transaction, quantity, unit description of merchandise or nature of
PHP25 or more cost and description of
merchandise or nature
service.
of service • Within 5 years after the effectivity
For sales, receipts or
of this Act, and upon establishment
transfers in the amount of a capable system of successfully
of PHP100 or more; or E-receipts shall also storing and processing the required
contain the name,
Regardless of amount, business style, address,
data, e-receipts or e-invoices shall be
where the sale or and the Taxpayer required in lieu of manual receipts or
transfer is made by a Identification Number of invoices.
person liable to VAT to the purchaser
another person also
• The Commissioner of Internal
liable to VAT Revenue shall pilot test the issuance
Where the e-receipt
of electronic receipts or invoices on
is issued to cover such business or industries, which in
payment made as the Commissioner’s discretion, have
rentals, commissions, the financial capacity to adopt this
compensations or fees,
e-receipts or e-invoices
electronic system.
shall be issued • A digital record or the printed copy of
the e-receipt or e-invoice shall be kept
• The issuance to the buyer by the issuer, purchaser, customer
of an e-receipt or e-invoice or client in his place of business for
shall be accomplished either a period of 3 years from close of the
electronically or by tendering a taxable year in which the same invoice
printed copy thereof. was issued.
• A digital record or the printed
copy of the e-receipt or e-invoice
shall be kept by the issuer,
purchaser, customer or client in
his place of business for a period
of 3 years from close of the
taxable year in which the same
invoice was issued.
• The e-receipt or e-invoice shall
be transmitted directly to the BIR
at the same time and same date
of each transaction.

21
Tax Particulars Current tax rules House Bill No. 5636
Electronic Sales No current tax rules on the same • Taxpayers are required to
Reporting System electronically report their sales
data to the BIR’s electronic
system through CRM/POS
machines.
• The BIR shall establish the
system within 3 years from
effectivity of the Act.
Penalties
Interest Sec. 249 Interest of 20% per annum on any No proposed amendment
unpaid amount of tax.
Senate Bill No. 1592
• Taxpayers are required to electronically
report their sales data to the BIR’s
electronic system through CRM/POS
machines.
• The system shall undergo a pilot test to
be applied to selected taxpayers within
3 years from effectivity of the Act.
• Interest imposed shall be twice the
legal rate as set by the BSP.

Deficiency interest is due from the date • Deficiency interest is due from the
prescribed for its payment until full payment date prescribed for its payment
thereof. until full payment thereof, or upon
issuance of a notice and demand by
the Commissioner, whichever comes
earlier.

22
Tax Particulars Current tax rules House Bill No. 5636
Penalties Sec. 254 on attempt to evade or defeat tax. Increase in penalty for attempt to
evade or defeat tax and failure or
refusal to issue receipts or sales or
commercial invoices
Sec. 264 on failure or refusal to issue receipts • Printing of other fraudulent
or sales or commercial invoices, etc. receipts or sales or commercial
invoices as an additional violation
to the Tax Code
• Introduction of new penal
provisions for the following:
a. Failure to transmit sales
data entered on CRM/
POS machines to the BIR’s
electronic sales reporting
system (for each day of
violation, penalty of 1/2 of
1% of annual gross sales
reflected in the audited
financial statements for the
2nd year preceding the
current taxable year or
PHP10,000, whichever is
higher);
b. Purchase, use, possession,
sale or offer to sell,
installment, transfer,
update, upgrade, keeping
or maintaining of sales
suppression devices; and
c. Offenses relating to fuel
marking.
Senate Bill No. 1592
No proposed amendments
Introduction of new penal provisions for the
following:
a. Failure to transmit sales data
entered on CRM/POS machines to
the BIR’s electronic sales reporting
system (for each day of violation,
penalty of 1/10 of 1% of annual
net income reflected in the audited
financial statements for the 2nd
year preceding the current taxable
year or PHP10,000, whichever is
higher), except if failure to transmit
is due to force majeure or causes
beyond the control of the taxpayer;
b. Purchase, use, possession, sale or
offer to sell, installment, transfer,
update, upgrade, keeping or
maintaining of sales suppression
devices; and
c. Offenses relating to fuel marking.
23
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
Earmarking of No current tax rules on the same Petroleum fund Petroleum fund
incremental revenues
• For 4 years from the effectivity • For 5 years from the effectivity of this
of this Act, 40% of the yearly Act, annual incremental revenues
incremental revenues generated shall be allocated to fund social
from the proposed petroleum mitigating measures and investments
excise tax shall be allocated to in education, health, social protection,
fund a social benefit program employment, housing, and flagship
(e.g., poorest 50% to receive infrastructure that prioritize and directly
targeted cash transfers, benefit both the poor and near-poor
discounts on public utility vehicle households.
fares and medicines, etc.) and
grant fuel vouchers to qualified
transport franchise holders.
• For the same period and
succeeding years, the remaining
yearly incremental revenues shall
be allocated to infrastructure,
health, education and social
protection expenditures.

Health promotion fund

• 85% of the tax collection shall be

allocated for government priority
programs
• 15% of the tax collection shall
fund programs for the welfare
and benefit of sugar planters/
farmers

24
Tax Particulars Current tax rules House Bill No. 5636 Senate Bill No. 1592
Repealing Clauses Not applicable All laws, including special laws List of laws or provisions of laws that are
covering VAT exemptions, VAT repealed are expressly provided.
zero-rating and personal income
tax exemption, acts, presidential
decrees, executive orders, issuances,
presidential proclamations, rules
and regulations or parts thereof,
which are contrary to or inconsistent
with any provision of this Act are
repealed, amended or modified
accordingly.

The persons and/or transactions The persons and/or transactions affected

affected are fully made subject are made subject to the VAT provisions of
to VAT or personal income tax Title IV of the Tax Code.
provisions of the Tax Code.

25
Let’s talk
For a discussion on how these proposed changes may affect you and your business, please contact:

Alexander B. Cabrera Malou P. Lim

Chairman & Senior Partner, Tax Managing Partner
concurrent Tax Partner T: +63 (2) 459 2016
T: +63 (2) 459 2002 malou.p.lim@ph.pwc.com
alex.cabrera@ph.pwc.com

Fedna B. Parallag Lawrence C. Biscocho Carlos T. Carado II

Tax Partner Tax Partner Tax Partner
T: +63 (2) 459 3109 T: +63 (2) 459 2007 T: +63 (2) 459 2020
fedna.parallag lawrence.biscocho carlos.carado
@ph.pwc.com @ph.pwc.com @ph.pwc.com

Roselle Y. Caraig Harold S. Ocampo Geraldine E. Longa

Tax Partner Tax Principal Tax Partner
T: +63 (2) 459 2023 T: +63 (2) 459 2029 T: +63 (2) 459 2038
roselle.y.caraig harold.s.ocampo geraldine.c.esguerra-longa
@ph.pwc.com @ph.pwc.com @ph.pwc.com