Presidential Decree No. 2006 (PD 2006) — 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:
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."
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
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
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.
Effectivity.
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
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.''
Source: Supreme Court E-Library, Republic of the Philippines. Philippine laws are public documents (works of the government).
