EXECUTIVE ORDER NO. 36
EXECUTIVE ORDER NO. 36 - FURTHER
AMENDING CERTAIN SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED
WHEREAS, there is a need to
simplify the sales tax structure to effect better compliance and
administration;
WHEREAS, to recoup the differential arising from the simplification of
the sales tax structure with respect to automobiles, there is a need to
impose an additional excise tax on certain automobiles.
NOW THEREFORE, I, CORAZON C. AQUINO, President of the Philippines, do
hereby order:
Section 1. Section 162, subparagraph (c), of the
National Internal Revenue Code, as amended, is hereby further amended
to read as follows:
“(c)
Imported Articles. — When the articles are imported, the percentage
taxes established in Section 163 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 hold, 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 (except automobiles) under Title IV of this Code:
Provided, further, 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 exercise tax, the importation of such raw
materials shall be subject to the tax herein imposed.”
Sec. 2. Section 163 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
“Sec.
163. Percentage tax on original sales of articles. —
There shall be levied, assessed and collected, once only on every
original sale, barter, exchange, or similar transaction for nominal or
valuable consideration intended to transfer ownership of, or title to,
the articles herein below enumerated a tax based on the gross selling
price or gross value in money of the articles so sold, bartered,
exchanged, or transferred, such tax to be paid by the manufacturer,
producer or importer:
(1)
Thirty per cent (30%, on the following non-essential articles:
(a)
All articles commonly or commercially known as jewelry, whether real or
imitation, pearls, precious and semi-precious stones and imitations
thereof; articles made of, or ornamented, mounted or fitted with,
precious metals or imitations thereof or ivory (not including surgical
and dental instruments, silver-plated wares, frames or mountings for
spectacles or eyeglasses, and dental gold or gold alloys and other
precious metal used in filing, mounting or fitting of the teeth); opera
glasses and lorgnettes. The term ‘precious metals’ shall include
platinum, gold, silver, and other metals of similar or greater value.
The term ‘imitations thereof’ shall include platings and alloys of such
metal.
(b) Perfumes,
essence, extracts, toilet waters, cosmetics, hair dressing, hair dyes,
hair restoratives, aromatic cachous, toilet powders, (except tooth and
mouth washes, dentifrice, talcum and medicated toilet powders, hair
oils and pomades).
(c) Dice,
mahjong sets and playing cards.
(d) Jukeboxes.
(e)
Automobiles (except motor vehicles classified as trucks, jeeps and
utility vehicles). A sale of an automobile shall, for purposes of this
section, be considered as a sale of the chassis and of the body,
together with parts and accessories with which the same is usually
equipped, including the other parts and accessories permanently
attached thereto at the time of the original sale.
(f) Parts and
accessories of automobiles which are primarily for ornamentation or
embellishment.
(g) Yachts and
other vessels intended for pleasure or sports.
(h)
Harpsichords, accordions, pianos and electric or electronic musical
organs.
(i) Firearms
and cartridges or other forms of ammunition.
(j)
Household-type electric vacuum cleaners or polishers.
(k) Washing
machines, clothes dryers and combination washing machine and clothes
dryers of all types.
(l) Textiles
wholly or in chief value of silk, wool, or linen nylon or other
synthetic and/or chemical fabrics not intended for clothing; wool and
silk hats; and furs and manufacturers thereof.
(m)
Electricity and/or battery operated beauty equipment and accessories.
(n)
Electricity and/or battery operated toys.
(o) Television
sets, phonographs or gramophones, combination radio-phonograph sets,
tape recorders, video tape recorders, tape decks, car stereos, cassette
radios, and similar articles for reproducing and/or recording music,
sound and images and any combination thereof.
(p)
Air-conditioning units.
(q) Similar or
analogous articles, substances or preparations to those enumerated
above as determined by the Commissioner of Internal Revenue based on
the essentiality of the articles.
Any material, part of accessory
of the abovementioned articles shall be taxed under this section.
(2)
Ten per cent (10%), on the following essential articles:
(a)
Processed meat, fruits, vegetables, fish and other sea foods and other
processed food products for human consumption.
(b) Processed
milk, creamers, dairy products, butter and its substitutes like
margarine.
(c) Bread and
bakery products.
(d) Lard,
shortening and cooking oil.
(e) Beverages
and concentrates thereof, whether in liquid, powder or granulated form,
intended for consumption as a drink, including but not limited to,
processed coffee, cocoa, tea or ginger.
(f) Wheat
flour
(g) Clothes
and textiles intended for clothing.
(h) Medicines
and articles primarily intended for the administration thereof.
(i) Soaps,
detergent, toothbrushes and toothpastes.
(j) Writing
pads, notebooks, ordinary lead pencils and disposable ballpens.
(k) Cement,
hollow blocks, logs, lumber, plywood, plyboard, fibreboard, glass,
roofing materials, steel bars, nails, sand and gravel, woven bamboo
splits (sawali), nipa shingles, bamboo, basic sanitary and plumbing
fixtures and fittings.
(l) Fish,
poultry, swine and cattle feeds.
(m)
Fertilizers, pesticides and technical materials for use in the
formulation of pesticides.
(n) Spare
parts and accessories of motor vehicles, except tires.
For
purposes of sub-paragraphs (a) and (b) above, the term “processed” as
applied to the food products mentioned therein means that such products
have undergone the process of curing, canning, bottling or other
manufacturing process. It does not include those which have merely
undergone the simple process of preservation such as freezing,
refrigeration, dying, salting or smoking.
Any article subject to the
original sales tax, when used as a raw material in the manufacture or
preparation of the above essential articles, shall be taxed at the same
rate as the finished product, except when such material is taxed under
sub-section (3) hereof or under Title IV of this Code: Provided, (1)
the purchaser of such material inputs shall certify to the domestic
supplier-importer or manufacturer, in the case of local purchase, or to
the Bureau, in the case of direct importation, that the articles shall
be used exclusively in the manufacture or preparation of any of the
essential articles above enumerated, for resale in the case of a
manufacturer, or direct use in the case of an agricultural producer;
and (2) the supplier-manufacturer/importer shall maintain accounting
records in a manner prescribed in the regulations to be issued by the
Bureau whereby the sales can be classified according to different rates
of tax.
(3) Zero per
cent (0%), on the following agricultural products:
(a)
Agricultural food products, including ordinary salt and all kinds of
fish and it by-products in their original state.
(b)
Agricultural non-food products in their original state.
Agricultural
products shall still be considered in their original state even if they
have undergone the simple processes of preservation such as freezing,
drying, salting, smoking or stripping. Rice and corn shall be
considered in their original state event when milled.
(4) Twenty per
cent (20%), on other articles not covered by subsections (1), (2) and
(3) of this section.”
Sec. 3. The provisions of Section 164 of the
National Internal Revenue Code, as amended, are hereby superseded by
new provisions to read as follows:
“Sec.
164. Percentage tax on every subsequent sale of
articles. — Except as provided in Section 167 of this 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 one and one-half per cent (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 the
transferor thereof: Provided, however, That the subsequent sale of
agricultural products in their original states shall be subject to zero
per cent (0%) rate.
Unless the tax under this section 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 of the article.”
Sec. 4. Section of the National Internal Revenue
Code, as amended, is hereby repealed.
Sec. 5. Section 166 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
“Sec.
166. Tax, Credit. — (a) Creditable Taxes. — Any
excise, sales or miller’s tax paid under this Title and Title IV 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 on the original sale of the finished product, except
agricultural products: Provided, however, That the amount of sales tax
on domestically purchased raw material, 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 sales tax on subsequent sale, if indicated as
separate items in the dealer’s 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.
(b) Tax credit
on articles exported. — Any excise, sales, miller’s or advance sale tax
paid under this Title of Title IV of this Code on domestically
manufactured or imported raw materials used in the manufacture and
forming part of the finished products subject to tax under Section 163
(1), (2) and (4) hereof 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, 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 affected. In case
finished products are exported by an export trader other than the
manufacturer or producer, 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 prescribed by the Bureau.
(c) Excess tax
credit. — If at the end of a taxable year, the total tax paid on the
raw material, part, accessory or other articles exceeds the amount of
the sales tax due on the finished products, the manufacturer or
producer may elect to:
1.
Carry over such excess or a portion thereof to be credited against his
sales tax liability in the succeeding taxable quarter or quarters;
and/or
2. File an
application for the issuance of a tax credit for such excess or a
portion thereof which can be used in payment of any advance sales tax;
and/or
3. Deduct such
excess or a portion thereof from gross income for income tax purposes:
Provided, That the amount of the tax on raw material, part, accessory,
or other article shall be indicated as a separate item in the sales
invoice: Provided, further, That the amount of tax credits opted for
and any tax credit corresponding to the raw materials which are
subsequently sold, transferred, disposed of, or for any other reason,
can no longer be used in the manufacture of the finished product for
sale, shall either be deducted from any unused tax credit or paid as a
part of the tax due in the quarter following the disposal: and
Provided, finally, That in the case of an importer, if the advance
sales tax paid on imported articles exceeds the sales tax due on the
original sale of the imported articles in any quarter, the excess shall
be credited against the sales tax liability of the importer in the
succeeding taxable quarter or quarters.”
Sec. 6. Section 167 of the National Internal
Revenue 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
Section 163 hereof:
(a)
Original sale by a manufacturer, producer or importer of articles
subject to excise tax (except automobiles) imposed under Title IV and
to the 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 at
regular intervals with fixed prices for subscription and sale and which
is not devoted principally to publication of advertisements.
(d) 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.
(e) Sales by a
registered export producer to another export producer or to a
registered export trader.”
Sec. 7. Section 169, paragraph (a) and
sub-paragraphs (1) and (2) of paragraph (b) of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
“(a)
Taxable articles. — There shall be imposed upon the importer of
commodities, goods, wares, or merchandise brought into the Philippines,
a compensating tax equivalent to the rates prescribed in Section 163
based on the total value used by the Bureau of Customs in determining
tariff and customs duties, including customs duty and all other
charges, such tax to be paid before the withdrawal of the said
commodities, goods, wares or merchandise from the customs house or the
post office.”
“(1)
Articles subject to tax under Section 163 of this Code;
“(2) Articles
subject to the excise tax under Title IV of this Code (except
automobiles) and articles to be used by the importer himself in the
manufacture or preparation of articles subject to excise tax (except
automobiles).”
Sec. 8. A new section, to be known as Section 135-A, is hereby added to Chapter VI of Title IV of the National
Internal Revenue Code, as amended, to read as follows:
“Sec.
135-A. Automobiles. — There shall be levied, assessed
and collected an ad valorem tax on automobiles based on the
manufacture’s or importer’s selling price, net of excise and sales
taxes, in accordance with the following schedule:
Engine
Displacement
Tax Gasoline Diesel
5% 1201
to 1600cc 1851 to 2050cc
10% 1601 to
1800cc 2051 to 2250cc
20% 1801cc or
over 2251cc or over
Provided,
That in the case of imported automobiles not for resale, the tax
imposed herein shall be based on the total value used by the Bureau of
Customs in determining tariff and customs duties, including customs
duty and all other charges, plus ten per cent (10% of the total
thereof.”
Sec. 9. All laws, orders, issuances, rules and
regulations or parts thereof, inconsistent with this Executive Order
are hereby repealed or modified accordingly.
Sec. 10. This Executive Order shall take effect on
August 1, 1986.
DONE in the City of Manila,
this 30th day of July, in the year of Our Lord, nineteen hundred and
eighty-six.
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