Publishing the Amendments Effected by Presidential Decree No. 69 to Title V of the National Internal Revenue Code

January 9, 1973 REVENUE MEMORANDUM CIRCULAR NO. 05-73 SUBJECT : Publishing the Amendments Effected by Presidential Decree No. 69 to Title V of the National Internal Revenue Code TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, there is published below certain sections of Title V of the National Internal Revenue Code, as amended by Presidential Decree No. 69, viz: TITLE V. PRIVILEGE TAXES ON BUSINESS AND OCCUPATION SEC. 180. Time for payment of fixed taxes . All fixed taxes shall be payable annually, on or before the thirty-first day of January. Any person first beginning a business or occupation must pay the tax before engaging therein. If the privilege tax is not paid within the time specified, the amount of the tax shall be increased by twenty-five per centum , the increment to be part of the tax. SEC. 180-A. Interest on delinquency . Where the amount of the tax imposed under Section one hundred and eighty-two or any part of such amount, is not paid on the due date of the tax, there shall be collected, as part of the tax, interest upon such unpaid amount at the rate of fourteen per centum per annum from the due date until it is paid. SEC. 181. Reckoning of tax for business first begun or abandoned during year . This section is hereby repealed. SEC. 182. Fixed taxes . (A) On business . (1) Persons subject to percentage tax . Unless otherwise provided, every person engaging in business on which the percentage tax is imposed shall pay a fixed annual tax of fifty pesos. (2) Persons not subject to percentage tax . Every person who is not required to pay the percentage tax prescribed under this Title shall pay for each calendar year in which the person shall engage in business a fixed annual tax based upon his gross annual sales during the preceding calendar year, as follows: Ten pesos, if the amount of the gross annual sales does not exceed two thousand four hundred pesos; Twenty pesos, if the amount of the gross annual sales exceeds two thousand four hundred pesos but does not exceed ten thousand pesos; Forty pesos, if the amount of the gross annual sales exceed ten thousand pesos but does not exceed thirty thousand pesos; Eighty pesos, if the amount of the gross annual sales exceeds thirty thousand pesos but does not exceed fifty thousand pesos; One hundred thirty pesos, if the amount of the gross annual sales exceeds fifty thousand pesos but does not exceed seventy-five thousand pesos; One hundred seventy-five pesos, if the amount of the gross annual sales exceeds seventy-five thousand pesos but does not exceed one hundred thousand pesos; Two hundred fifty pesos, if the amount of the gross annual sales exceeds one hundred thousand pesos but does not exceed one hundred fifty thousand pesos; Four hundred fifty pesos, if the amount of the gross annual sales exceeds one hundred fifty thousand pesos but does not exceed three hundred thousand pesos; Eight hundred pesos, if the amount of the gross annual sales exceeds three hundred thousand pesos but does not exceed five hundred thousand pesos; One thousand five hundred pesos, if the amount of the gross annual sales exceeds five hundred thousand pesos but does not exceed one million pesos; Two thousand six hundred twenty-five pesos, if the amount of the gross annual sales exceeds one million pesos but does not exceed one million five hundred thousand pesos; Three thousand six hundred seventy-five pesos, if the amount of the gross annual sales exceeds one million five hundred thousand pesos but does not exceed two million pesos; Five thousand one hundred seventy-five pesos, if the amount of the gross annual sales exceeds two million pesos but does not exceed two million five hundred thousand pesos; Six thousand six hundred pesos, if the amount of the gross annual sales exceeds two million five hundred thousand but does not exceed three million pesos; Eight thousand one hundred twenty-five pesos, if the amount of the gross annual sales exceeds three million pesos; If a merchant is engaged in two or more businesses, one or more of which is subject to and the others exempt from the percentage tax, he shall pay the graduated fixed annual tax provided above, based on the individual sales of his business not subject to the percentage tax under this Title. The initial graduated fixed annual tax to be paid by the person first engaging in business subject to the said tax shall be ten pesos. (3) Other fixed taxes . The following fixed taxes shall be collected as follows: the amount stated being for the whole year, when not otherwise specified: (a) Brewers, five thousand pesos; (b) Distillers of spirits, one thousand pesos, if the annual production does not exceed one hundred thousand gauge liters; two thousand pesos, if the annual production exceeds one hundred thousand gauge liters but does not exceed two hundred thousand gauge liters; three thousand pesos, if the annual production exceeds two hundred thousand gauge liters but does not exceed three hundred thousand gauge liters; four thousand pesos, if the annual production exceeds three hundred thousand gauge liters but does not exceed five hundred thousand gauge liters; and five thousand pesos, if the annual production exceeds five hundred thousand gauge liters: Provided , That if the annual production does not exceed ten thousand gauge liters only one hundred pesos shall be collected. (c) Rectifiers of distilled spirits, compounders, and repackers of wines or distilled spirits, one thousand pesos; producers of wines, one hundred pesos. (d) Wholesale dealers of distilled spirits and wines 1. In the City of Manila, one thousand pesos; 2. In chartered cities other than Manila, six hundred pesos; 3. In any other place, two hundred pesos. (e) Wholesale dealers in fermented liquors, except basi, tuba and tapuy, two hundred pesos. (f) Wholesale peddlers of distilled spirits and wines, two hundred pesos. (g) Wholesale peddlers of fermented liquors, two hundred pesos. (h) Retail liquor dealers, two hundred pesos. (i) Retail vino dealers, twenty pesos. (j) Retail dealers in fermented liquors, fifty pesos. (k) Retail peddlers of distilled spirits, wine, and fermented liquors, fifty pesos. (l) Wholesale leaf tobacco dealers, four hundred pesos. (m) Wholesale dealers of cigars, cigarettes and other manufactured tobacco products, one hundred pesos. (n) Wholesale peddlers of manufactured tobacco products, one hundred pesos. (o) Retail leaf tobacco dealers, thirty pesos. (p) Retail dealers of cigars, cigarettes and other manufactured tobacco products, twenty pesos. (q) Retail peddlers of cigar, cigarettes and other manufactured tobacco products, twenty pesos. (r) Manufacturers, importers or exporters of cigars, cigarettes and other manufactured tobacco products 1. In the cities of Manila, Quezon, Pasay and Caloocan and in the Province of Rizal, one thousand pesos 2. In any other place, five hundred pesos. (s) Importers or exporters of leaf tobacco, scrap tobacco and other partially manufactured tobacco products, one thousand pesos. (t) Manufacturers or importers of cigarette paper in bobbins or rolls, cigarette tipping papers or cigarette filter tips, one thousand pesos. (u) Manufacturers or importers of playing cards, saccharine or sodium saccharinate or any of its other derivatives and salts and other artificial sweetening agents, lighter fluid in liquid or gaseous form, matches, firecrackers, denatured alcohol for motive power, five hundred pesos. (v) Manufacturers, importers or exporters of petroleum or other manufactured oils and fuels and fuels from petroleum two thousand pesos. (w) Manufacturers, producers, or importers of soft drinks or mineral waters, four hundred pesos. (x) Wholesale dealers of soft drinks or other mineral waters, fifty pesos. (y) Wholesale peddlers of soft drinks, or other mineral waters, fifty pesos. (z) Dealers in securities, one hundred and fifty pesos. (aa) Real estate dealers, one hundred and fifty pesos, if the annual income from buying, selling, exchanging, leasing or renting property (whether on their own accounts as principals or as owners of rental property or properties) in over four thousand pesos but not exceeding ten thousand pesos. Three hundred pesos, if the annual income exceeds ten thousand pesos but does not exceed thirty thousand pesos. Five hundred pesos, if the annual income exceeds thirty thousand pesos but does not exceed fifty thousand pesos; and One thousand pesos, if the annual income exceeds fifty thousand pesos. (bb) Stock brokers, real estate brokers, commercial brokers, custom brokers and immigration brokers, three hundred pesos. (cc) Owners of race tracks for each day on which races are run on any track, one thousand pesos. (dd) Lending investors 1. In chartered cities and first class municipalities five hundred pesos; 2. In second and third class municipalities, two hundred and fifty pesos; 3In fourth and fifth class municipalities and municipal districts, one hundred and twenty-five pesos: Provided , That lending investors who do business as such in more than one province shall pay a tax of five hundred pesos. (ee) Cinematographic film owners, lessors or distributors, three hundred pesos. (ff) Pawnshops, five hundred pesos. (gg) Banks, insurance companies, finance and investment companies doing business in the Philippines and franchise grantees, five hundred pesos. (hh) Operators, proprietors or lessees of theaters and cinema houses: first run, five hundred pesos; second run, two hundred pesos. (ii) Operators, proprietors or lessees of boxing arenas, swimming pools, resorts, skating rinks, golf links and other places of amusement, one hundred pesos. (jj) Night clubs and day clubs, one thousand pesos. (kk) Cabarets, five hundred pesos. (ll) Jai-Alai , for each day on which games are played, two hundred and fifty pesos. (mm) Operators or owners of rice or corn mills shall be subject to an annual graduated fixed tax based upon total capacity per machine in accordance with the following schedule: Corn mill, not exceeding one hundred cavans per twelve hour capacity P30.00 Corn mill, exceeding one hundred cavans per twelve hour capacity 45.00 Kiskisan type, not exceeding one hundred cavanes of palay per twelve hour capacity 50.00 Kiskisan type, exceeding one hundred cavanes of palay per twelve hour capacity 75.00 Cono, of not exceeding one hundred cavanes of palay per twelve hour capacity 200.00 Cono, of not exceeding two hundred cavanes of palay per twelve hour capacity 400.00 Cono, of not exceeding three hundred cavanes of palay per twelve hour capacity 600.00 Cono, of not exceeding four hundred cavanes of palay per twelve hour capacity 900.00 Cono, of not exceeding five hundred cavanes of palay per twelve hour capacity 1,300.00 Cono, of not exceeding six hundred cavanes of palay per twelve hour capacity 1,800.00 Cono, of not exceeding seven hundred cavanes of palay per twelve hour capacity 2,500.00 Cono, of not exceeding eight hundred cavanes of palay per twelve hour capacity 3,200.00 Cono, of not exceeding nine hundred cavanes of palay per twelve hour capacity 4,000.00 Cono, of not exceeding one thousand cavanes of palay per twelve hour capacity 4,800.00 Cono, of over one thousand cavanes of palay per twelve hour capacity 5,600.00 (nn) Proprietors, operators or lessees of cockpits 1. In Chartered cities and municipalities in the Greater Manila Area 1,500.00 2. In first and second class municipalities 1,000.00 3. In third and fourth class municipalities 500.00 4. In fifth, sixth and seventh class municipalities 100.00 (B) On occupation . Annual taxes on occupation shall be collected as follows: (1) Seventy-five pesos : (a) Lawyers, medical practitioners, architects, interior decorators, certified public accountants, civil, electrical, chemical, mechanical, mining or sanitary engineers, pharmacists, insurance agents and sub-agents, customs brokers, marine surveyors, actuaries, registered master plumbers, registered electricians, veterinarians, dentists, optometrists, opticians, commercial aviators, professional appraisers or connoisseurs of tobacco and other domestic or foreign products, licensed ship masters and marine chief engineers; (b) Mechanical plant engineers, junior mechanical engineers and certified plant mechanics, unless he or she is a professional mechanical engineer and has paid the corresponding fixed tax for mechanical engineers. The term mechanical engineers, as used herein, means professional mechanical engineers, as defined in Commonwealth Act Numbered two hundred and ninety-four. (2) Fifty pesos : (a) Land surveyors, chief mates, marine second engineers, registered nurses, chiropodists, tattooers, masseurs, pelotaris, jockeys, professional actors and actresses, stage performers, hostesses, statisticians, dietitians, commercial stewards and stewardesses, flight attendants, insurance adjusters and embalmers; The Secretary of Finance may, upon recommendation of the Commissioner of Internal Revenue, include within the purview of the occupation tax other professions not hereinabove enumerated which in the light of prevailing circumstances should properly be included therein. The tax imposed on such professions shall take effect six months after publication in a newspaper of general circulation. SEC. 183. Payment of percentage taxes . (a) In general . Unless otherwise specifically provided, it shall be the duty of every person conducting a business on which a percentage tax is imposed under this Title, to make a true and complete return of the amount of his, her or its gross quarterly sales, receipts or earnings or gross value of output actually removed from the factory or mill warehouse and within twenty days after the end of each quarter pay the tax due thereon: Provided , That any person retiring from a business subject to the percentage tax shall notify the nearest internal revenue officer thereof, file his return or declaration, and pay the tax due thereon within twenty days after closing his business. 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. If the percentage tax in any business is not paid within the time specified above, the amount of the tax shall be increased by twenty-five per centum the increment to be a part of the tax and the entire unpaid amount shall be subject to interest at the rate of fourteen per cent per annum. In case of willful neglect to file the return within the period prescribed herein, or in case a false or fraudulent return is willfully made, there shall be added to the tax or to the deficiency tax in case any payment has been made on the basis of such return before the discovery of the falsity or fraud, a surcharge of fifty per centum of its amount and the entire unpaid amount shall be subject to interest at the rate of fourteen per cent per annum. The amount so added to any tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the falsity or fraud, in which case, the amount so added shall be collected in the same manner as the tax. (b) Sales tax on imported articles . When the articles are imported, the percentage taxes established in sections one hundred eighty-four, one hundred eighty-four-A, one hundred eighty-five, one hundred eighty-five-A, one hundred eighty-five-B, one hundred eighty-six and one hundred eighty-six-B of this Code shall be paid in advance by the importer, in accordance with the regulations promulgated by the Secretary of Finance and prior to the release of such articles from customs' custody, based on the import invoice value thereof, certified to as correct under penalties of perjury by the Philippine Consul at the port of origin if there is any, including freight, postage, insurance, commission, customs duty and all similar charges, plus one hundred per centum of such total value in the case of articles enumerated in Section one hundred eighty-four; one hundred and eighty-four A; fifty per centum of such total value in the case of articles enumerated in sections one hundred eighty-five, one hundred eighty-five-A and one hundred eighty-five-B; and twenty-five per centum in the case of articles enumerated in Section one hundred eighty-six and one hundred eighty-six-B. The tax imposed in this section shall not apply to articles to be used by the importer himself in the manufacture or preparation of articles subject to specific tax. The tax herein imposed shall be collected in all cases where the original importer sold, transferred, or negotiated the imported articles to third persons before release thereof from custom custody, regardless of the tax status of the original importer and the indorsee or transferee, the same to be paid by the transferee and/or indorsee. The provisions of this Act shall not be construed as nullifying whatever interpretation the government has given to the word "importer" heretofore. In the case of tax-free articles brought or imported into the Philippines by persons, entities or agencies exempt from the tax which are subsequently sold, transferred, or exchanged in the Philippines to non-exempt private persons or entities, the purchasers shall be considered the importers thereof. The tax due on such articles shall constitute a lien on the articles itself superior to all other charges or liens, irrespective of the possessor thereof. Any percentage tax paid under Section 184, 184-A, 185, 185-A, 185-B, 186, 186-B on domestically manufactured or on imported raw materials used in the manufacture of finished products exported shall be allowed to be credited against other tax liabilities of the manufactured-exporter: Provided , however , That said percentage taxes paid are indicated as a separate item in the invoices. SEC. 184. Percentage tax on sales of jewelry, toilet preparation and others . 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 hereinbelow enumerated a tax equivalent to seventy per centum of the gross value in money of the articles so sold, bartered, exchanged, transferred, such tax to be paid by the manufacturer or producer; Provided , further , That where the articles enumerated hereinbelow are manufactured out of materials subject to tax under this section, the total cost of such materials, as duly established, shall be deductible from the gross selling price or gross value in money of such manufactured 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 instruments, silver-plated wares, frames or mountings for spectacles or eyeglasses, and dental gold or gold alleys and other precious metals used in filling, 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 including platings and alloys of such metals. (b) Perfumes, essences, extracts, toilet waters, cosmetics petroleum jellies, hair oils, pomades, hair dressings, hair restoratives, hair dyes, aromatic cachous, toilet powders, and any similar substance, article, or preparations, by whatsoever name known or distinguished; and any of the above which are used or applied or intended to be used or applied for toilet purposes; except tooth and mouth washes, dentifrices, tooth paste; and talcum or medicated toilet powders. (c) Dice, mahjong sets and playing cards, except those locally manufactured; (d) Beauty parlor equipment and accessories; and (e) Polo mallets and balls, golf bags, clubs and balls, and chess and checker boards and pieces. Any part or accessory of the above-mentioned articles shall be taxed at the same rate as the finished articles. SEC. 184-A. Percentage tax on sales of automobiles . 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, automobiles, a percentage tax, on the gross selling price or gross value in money of the automobiles so sold, bartered, exchanged, or transferred, the tax to be paid by the manufacturer or importer, determined in accordance with the following schedule: (A) For locally manufactured automobiles If the gross selling price does not exceed P20,000, the tax shall be 10% of such selling price; if it exceeds P20,000 but does not exceed P25,000, the tax shall be P2,000 plus 15% of the excess over P20,000; If it exceeds P25,000 but does not exceed P30,000, the tax shall be P2,750 plus 25% of the excess over P25,000; If it exceeds P30,000 but does not exceed P35,000, the tax shall be P4,000 plus 35% of the excess over P30,000; If it exceeds P35,000 but does not exceed P40,000, the tax shall be P5,750 plus 50% of the excess over P35,000; and If it exceeds P40,000, the tax shall be P8,250 plus 70% of the excess over P40,000. (B) For imported automobiles if the landed cost plus mark-up as established by section 183(b) of this Code does not exceed P20,000, the tax shall be 100% of such landed cost plus mark-up; If it exceeds P20,000 but does not exceed P25,000, the tax shall be P20,000 plus 125% of the excess over P20,000; If it exceeds P25,000 but does not exceed P30,000, the tax shall be P26,250 plus 150% of the excess over P25,000; If it exceeds P30,000 but does not exceed P35,000, the tax shall be P33,750 plus 175% of the excess over P30,000; If it exceeds P35,000 the tax shall be P42,500 plus 200% of the excess over P35,000. Any percentage tax paid under sections one hundred and eighty-four, one hundred and eighty-four-A, one hundred and eighty-five, one hundred and eighty-five-A, one hundred and eighty-five-B, one hundred and eighty-six and one hundred and eighty-nine during the preceding taxable quarter on domestically manufactured or produced, or imported raw materials, parts, accessories or other articles forming parts of the finished product or will form part thereof shall be credited against the gross sales tax due on the finished product. In case the tax paid on the raw materials, accessories or other articles exceeds the gross sales tax due an the finished products, the excess shall be credited against the gross sales tax due on the finished products for the succeeding taxable quarter: Provided , however , That the amount of the tax on these raw materials, parts, accessories or other articles are indicated as a separate item in the invoices. A sale of an automobile shall, for the purpose of this section, be considered to be a sale of the chassis and of the body together with parts and accessories with which the same are usually equipped: Provided , however , That parts and accessories of automobiles imported as completely knocked down parts by assemblers registered under the progressive car manufacturing program of the Board of Investments, or as replacement as well as locally manufactured parts and accessories for the assembly of automobiles shall be subject to tax under Section one hundred and eighty-six. The term "automobiles" used herein shall not include motor vehicles classified as trucks and jeeps. SEC. 185-A. Percentage tax on sales of refrigerators, air-conditioners, beverage coolers, ice cream cabinets, and others . There shall be levied, assessed and collected once only on every original sale, barter, exchange, or similar transaction intended to transfer ownership of, or title to, the articles hereinbelow enumerated a tax equivalent to forty per centum of the gross selling price or gross value in money such the articles so sold, bartered, exchanged or transferred such tax to be paid by the manufacturer or producer: Provided , however , That where the articles hereinbelow enumerated are locally manufactured and come under the classification of non-integrated manufactured products as hereinafter defined, the tax shall be fifteen per centum : Provided , further , That where the articles hereinbelow enumerated are locally manufactured products and come under the classification of non-integrated manufactured products as hereinafter defined, the tax shall be seven per centum : Provided , still further .: That where the articles enumerated hereinbelow are manufactured out of materials subject to tax under this section, the total cost of such materials, as duly established, shall be deductible from the gross selling price or gross value in money of such manufactured articles. (a) Refrigerators of all types; (b) Beverage coolers, ice cream cabinets, water coolers, food and beverage storage cabinets, ice-making machine, and mild cooler cabinets, each such articles having, or being primarily designated for use with, mechanical refrigerating unit operated by electricity, gas, kerosene, or other means; and (c) Air-conditioning units. Any part of accessory of the above-mentioned articles shall be taxed at the same rate as finished articles. The words "integrated manufactured products" mean articles manufactured in a manufacturing enterprise which undertake the operations of processing and/or physically converting raw materials such as metal sheets, plastic pellets, wires, rods, extrusion tubings, castings, forgings, and chemical compounds into various intermediate components and parts, and subsequently assembling or fitting them together into completed and finished articles: Provided , however , That not less than eighty per centum of the components and parts of each main assembly of the products are manufactured domestically: Provided , further , That not less than sixty per centum of the components and parts of each main assembly of the products are manufactured by the said manufacturing enterprise. The words "non-integrated manufactured products" mean articles manufactured in a manufacturing enterprise which undertakes the operations of a manufacturing plant as defined in the preceding paragraph: Provided , however , That not less than fifty per centum of the components and parts of each main assembly of the products are manufactured domestically: Provided , further , That not less than thirty per centum of the components and parts of each main assembly of the products are manufactured by the said manufacturing enterprise. The number of main assemblies which shall comprise a product and the intermediate components and parts of each said main assembly shall determined by the Board of Investments. SEC. 186. Percentage tax on sales of other articles . There shall be levied assessed and collected once only on every original sale, barter, exchange, and similar transaction either for nominal or valuable consideration, intended to transfer ownership of, or title to, the articles not enumerated in sections one hundred and eighty-four, one hundred eight-four-A, one hundred eighty-five, one hundred and eighty-five-A, one hundred eighty-five-B, and one hundred eighty-six-B, a tax equivalent to seven per centum of 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 or producer: Provided , That where the articles subject to tax under this section are manufactured out of materials likewise subject to tax under this section and section one hundred eighty-nine, the total cost of such materials, as duly established, shall be deductible from the gross selling price or gross value in money of such manufactured articles. SEC. 186-B. Percentage tax on sales of processed meat, milk, fruits and vegetables, fish and other sea foods, wheat flour and feeds . There shall be levied, assessed and collected once only on every original sale, barter, exchange and similar transaction either for nominal or valuable consideration, intended to transfer ownership of, or title to, the articles enumerated hereinbelow, a tax equivalent to five per centum of the gross selling price or gross value in money of the articles to sold, bartered, exchanged, or transferred, such tax to be paid by the manufacturer or producer. (a) Processed meat, milk, fruits and vegetables; fish and other sea foods; (b) Wheat flour; and (c) Poultry and animal feeds. Provided , however , That where the articles are manufactured out of materials subject to tax under this section, Section 186, or Section 189, the total cost of such materials, as duly established, shall be deductible from the gross selling price or gross value in money of the manufactured articles. For purposes of this section, processed meat, milk, fruits and vegetables, fish and other sea foods, include such food products which have undergone the process of curing, canning, bottling or similar processes, but exclude such food products which have undergone only simple preserving processes such as freezing, drying, salting or smoking. SEC. 188. Transaction and "persons" not subject to percentage tax . In computing the tax imposed in sections one hundred eighty-four, one hundred eighty-four-A, one hundred eighty-five, one hundred eighty-five-A, one hundred eighty-five-B, and one hundred eighty-six and one hundred eighty-six-B, transactions in the following commodities shall be excluded. (a) Articles subject to tax under Title IV of this Code, (b) Agricultural food products, ordinary salt and all kinds of fish and its by-products, whether in their original state or not, except those enumerated under Section 186-B. Agricultural non-food products, whether in their original state or not when sold, bartered or exchanged by the producer or owner of the land where produced. The phrase "whether in their original state or not" means the transformation of said products by the application of simple processes to preserve or otherwise to prepare said products for the market such as freezing, drying, salting, smoking and stripping. (c) Minerals and mineral products whether in their original state or not when sold, bartered or exchanged by the lessee, concessionaire or owner of the mineral land from which removed. (d) Articles subject to tax under section one hundred eighty-nine of this Code. (e) Articles shipped or exported by the manufacturer or producer, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the articles so exported: Provided , however , That sales to tourists, which are paid for in the foreign currency and on which sales tax had been previously paid, shall be considered export sales, if the articles purchased are actually removed by them from the Philippines upon their departure. Provided Further , That if the seller is other than the manufacturer or importer, he may credit the amount corresponding to the sales tax on the articles sold, against his other tax liabilities. The following shall be exempt from the percentage taxes imposed in sections one hundred eighty-four, one hundred eighty-five, and one hundred eighty-six; (a) Persons whose gross monthly sales or receipts do not exceed two hundred pesos. (b) All Filipinos in public marked places selling at retail all forms or kinds of food products, meat, fruits, vegetables, game, poultry, fish and other raw and/or cooked food products. (c) Peddlers and sellers at fixed stands and other similar selling places engaged exclusively in the sale at retail of domestic meat, fruits, vegetables, game, poultry, fish, and similar domestic food products, whose total stock in trade in any one day does not reach a retail value of one hundred pesos. (d) Producers of commodities of all classes working in their own homes, consisting of parents and children living as one family, when the value of each day's production by each person capable of working is not in excess of five pesos. (e) Persons importing articles under contract for the exclusive use of the Armed Forces of the Philippines. SEC. 189. Percentage tax upon proprietors or operators of rope factories, sugar central and mills, coconut oil mills, cassava mills, and desiccated coconut factories . Proprietors or operators of rope factories, sugar centrals and mills, coconut oil mills, cassava mills, and desiccated coconut factories, shall pay a tax equivalent to two per centum of the gross value in money of all the rope, sugar, coconut oil, cassava, flour or starch, desiccated coconut, manufactured, processed or milled by them, including the by-products of the raw materials from which said articles are produced, processed, or manufactured, such tax to be based on the actual selling price or market value of these articles at the time they leave the factory or mill warehouse: Provided , however , That this tax shall not apply to rope, coconut oil, and the by-product of copra from which it is produced or manufactured, and desiccated coconuts, if such rope, coconut oil, copra by-products and desiccated coconuts shall be removed for exportation and are actually exported without returning to the Philippines, whether so exported in their original state, or as an ingredient or part of any manufactured article or product. In case the raw materials are processed, manufactured or milled in pursuance of a contract where the factory, central or mill receives a share of the finished products, the tax on the share pertaining to the planter or owner of the raw materials shall be charged to the planter or owner and withheld by the proprietor or operator of the factory, central or mill and paid by him to the Commissioner of Internal Revenue. A proprietor or operator of a refined sugar factory shall be subject to the tax imposed by this section but shall be permitted to deduct from the actual selling price or market value of the refined sugar the total cost, as duly established, of the raw sugar upon which the tax under this section has been previously paid. Where articles are manufactured out of materials subject to tax under this section, the total cost, as duly established of the said materials shall be deductible from the gross selling price or gross value in money of the manufactured articles. SEC. 190. Compensating tax . On the commodities, goods, wares or merchandise purchased or received by persons residing or doing business in the Philippines, there shall be paid a compensating tax on the total value thereof, including freight, postage, insurance, commission and similar charges, equivalent to the percentage taxes imposed under this Title on original transaction effected by merchants, importers, or manufacturers, such tax to be paid before the withdrawal or removal of said commodities, goods, wares or merchandise from the customs house or the post office, except as follows: (a) Articles subject to the specific taxes under Title IV of this Code and articles to be used by the importer himself in the manufacture or preparation of articles subject to specific taxes; (b) Commodities, goods, wares or merchandise purchased or received by merchants, importers and manufacturers who are subject to tax under Sections one hundred eighty-four, one hundred eighty-four-A, one hundred eighty-five, one hundred eighty-five-A, one hundred eighty-five-B, one hundred eighty-six, one hundred eighty-six-B, or one hundred eighty-nine of this Title, where such importations are to be sold, resold, bartered or exchanged or are to be used in the manufacture or preparation of articles for sale, barter or exchange and are to form part thereof; (c) Articles to be used by the importer himself in the manufacture or preparation of articles for export; (d) Articles to be used by the importer himself as passenger and/or cargo vessel of more than ten thousand tons, whether coastwise or ocean-going, including engine and spare parts of said vessel; (e) Articles brought in by residents, including non-resident-citizens coming to resettle in the Philippines, and accompanying them upon their return or arriving within ninety days before or after their arrival. (f) Professional instruments and implements, tools of trade, occupation or employment, wearing apparel, domestic animals, and personal and household effects belonging to persons coming to settle for the first time in the Philippines, for their own use and not for barter, sale or exchange, accompanying such persons, or arriving within ninety days before or after their arrival, upon the production of evidence satisfactory to the Commissioner that such persons are actually coming to settle in the Philippines, that the articles were brought from their former place of abode, that change of residence is bona fide : Provided , That no vehicle, vessel, aircraft or merchandise of any kind, machinery or other articles for use in manufacture shall be classified under this subsection. If any article withdrawn from the customhouse or the post office without the payment of the compensating tax is subsequently used by the importer for other purposes, corresponding entry should be made in the books of accounts, if any are kept or a written notice thereof sent to the Commissioner of Internal Revenue and payment of the corresponding compensating tax made within ten days from the date of such entry or notice. If the tax is not paid within such period, the amount of tax shall be increased by twenty-five per centum the increment to form part of the tax. In the case of tax free articles brought or imported into the Philippines by persons, entities or agencies, exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt private persons or entities, the purchasers or recipients shall be considered the importers thereof. The tax due on each article shall constitute a lien on the article itself superior to all other charges or liens, irrespective of the possessor thereof. The provisions of existing laws to the contrary notwithstanding exemptions from this tax shall be limited to the following: 1. Those enumerated in this section; 2. Those granted under Republic Act No. 5186, as amended, Republic Act No. 6135, as amended, and Republic Act No. 5490; 3. Those granted in pursuance of or in compliance with international treaties or commitments, such as the ADB-RP Host Agreement (1966), the 1947 Convention on Privileges and Immunities of the United Nations and its Specialized Agencies; the United States Agency for International Development-RP Agreement; the 1947 Military Bases Agreement; and other similar treaties or commitments; and 4. Those that may be granted by the President upon recommendation of the NEDA in the interest of economic development. SEC. 191. Contractors, proprietors or operators of dockyards and others . A contractor's tax of three per centum of the gross receipts is hereby imposed on the following: (1) General engineering, general building, and specialty contractors as defined in Republic Act Numbered Four thousand five hundred sixty-six; (2) Filling, demolition and salvage work contractors and proprietors or operators of mine drilling apparatus; (3) Proprietors or operators of dockyards; (4) Persons engaged in the installation of water system, and gas or electric light, heat, or power; (5) Proprietors or operators of smelting plants, engraving plants, plating establishments and plastic lamination establishments; (6) Proprietors or operators of establishments for upholstering, washing or greasing of motor vehicles, vulcanizing, recapping and battery charging; (7) Proprietors on operators of establishments for planing or surfacing and recutting of lumber, and sawmills under contract to saw or cut logs belonging to others; (8) Proprietors or operators of dry-cleaning or dyeing establishments, steam laundries, and laundries using washing machines; (9) Proprietors or owners of shops for the repair of any kind of bicycles or vehicles, mechanical and electrical devices, instruments apparatus, or furniture and show repairing by machine or any mechanical contrivance; (10) Proprietors or operators of establishments or lots for parking purposes; (11) Proprietors or operators of tailorshops, dress-shops, milliners and hatters, beauty parlors, barbershops, massage clinics, sauna, turkish, and swedish baths, slenderizing and body building saloons and similar establishments, photographic studios, and funeral parlors; (12) Proprietors or operators of hotels, motels and lodging houses; (13) Proprietors or operators of arrastre and stevedoring, warehousing or forwarding establishments; (14) Registered master plumbers, smiths and house or sign painters; (15) Printers, bookbinders, lithographers and publishers except those engaged in the publication or printing and publication 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 the publication of advertisements; (16) Business agents and other independent contractors except person, associations and corporations under contract for embroidery and apparel for export, as well as their agents and contractors and except gross receipts of or from a pioneer industry registered with the Board of Investments under the provisions of Republic Act Numbered Five thousand one hundred and eighty-six; (17) Lessors of personal property. The term "independent contractors" include persons (juridical or natural) not enumerated above (but not including individuals subject to the occupation tax under Section 182(b) of this Code) whose activity consists essentially of the sale of all kinds of services for a fee regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties of such contractors or their employees. SEC. 204. Persons subject to tax, to issue sales invoices or receipts . All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at two pesos or more, prepare and issue sales or commercial invoices or receipts serially numbered in duplicate showing, among other things, their names, or styles, if any, and business addresses: Provided , That in case of sales, receipts or transfers in the amount of fifty pesos or more, or, regardless of amount, where the sale is made for the purpose of resale, the invoices or receipts shall further show the name, or style, if any, and business address of the purchaser, customer or client. The original of each sales invoice or receipts shall be issued to the purchaser, customer, or client who, if engaged in any taxable business, shall keep and preserve the same in his place of business for a period five years from the date of the invoice or receipt, the duplicate to be kept and preserved by the persons subject to tax, also in his place of business for a like period: Provided , That persons subject to tax whose gross sales, earnings or receipts during the last preceding year exceed twenty thousand pesos shall, for each sale or transaction, issue an invoice or receipt, irrespective of the value of the article sold or service rendered. The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax, from compliance with the provisions of this section. In any event, public market vendors selling exclusively domestic meat, fruits, vegetables, game, poultry, fish and other domestic food products are hereby exempted from the provisions of this section. FEATURES OF THE AMENDMENTS Amendment to Section 180 : Time for payment of fixed taxes . The amendment made the fixed taxes payable annually on or before January 31. All fixed taxes are now, therefore, payable in full and once only for the taxable year. New section 180-A : Interest on delinquency . This new section provides for the payment of interest at 14% per annum on fixed taxes not paid on time. This interest is in addition to the 25% surcharge for late payment imposed by Section 180. Amendment to Section 181 . Reckoning of tax for business first begun and abandoned during year . The provisions of this section were repealed in line with the amendment to Section 180 which made the fixed taxes payable annually and no longer semi-annually. Amendment to Section 182 : Fixed taxes . The exemption from the fixed tax of those subject to the graduated fixed tax whose gross sales during the preceding year does not exceed P2400 was removed, and they are now made subject to the tax at the rate of P10 per annum. The first bracket of the graduated fixed tax before the amendment now becomes the second bracket and the rate of tax was increased from P10 to P20 per annum. There are no changes in rates of tax payable by those whose gross sales fall within the bracket of over P10,000 to not exceeding P1,000,000; and new brackets of fixed taxes were established on those whose gross sales exceed P1,000,000 to over P3,000,000. Under the amendments to paragraph (3) of subsection (A) of this section, producers of wines were made subject to a fixed tax of P100 under subparagraph (c) of this paragraph. By the amendment to subparagraph (kk), cockpits were removed from the coverage thereof and placed under new subparagraph (nn). Instead of a straight fixed tax of P500, regardless of class, cockpits are now subject to a graduated rate at the minimum of P100 to a maximum of P1500 depending on the class of the political subdivision where they are located. The amendment to subparagraph (mm) inserted between the last two categories of rice mills, "Cono", having a milling capacity not exceeding 1000 cavanes and given a fixed tax rate of P4,800; and the rate of tax on "Cono" with a milling capacity of more than 1000 cavanes was increased from P4,800 to P5,600. Under the amendment to subsection (B), pharmacists were transferred from the P50 category to the P75 category; and registered electricians and optometrists included under the P75 category as new taxable occupations. The profession denominated as "dental surgeons" under the P75 category was changed to "dentists", the purpose being purely to avoid misunderstanding as to the comprehension of the profession of Doctor of Dentistry. A new paragraph constituting the last paragraph of this section was added which authorizes the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, to include within the coverage of the occupation tax by mere administrative declaration other professions which in his opinion considered in the light of prevailing circumstances should properly be subject to the tax. Such administration declaration shall take effect six months after publication thereof in a newspaper of general circulation. Amendments to Section 183 : Payment of percentage taxes . Under the amendment to subsection (a) of this section, the percentage taxes are now payable quarterly. The amendment also made final the tax treatment of sales on consignment, that is they are considered actually sold on the day of sale or sixty days after the date consigned, whichever is earlier. The provision allowing adjustment in case of returned goods was repealed. The amendment furthermore provides for the payment of interest at the rate of 14% per annum, in addition to the corresponding surcharges incident to delinquency and neglect to file return or for filing false or fraudulent return. The 14% interest shall apply to the amount corresponding to the tax proper and the surcharges added thereto. The amendment to subsection (b) of this section consists merely of the incorporation therein of new sections of the sales tax law that were created after its enactment as referral bases for the applicable rates of tax and percentages of mark-up. The exemption of raw materials to be used in manufacture for export was repealed. However, under the amendment consisting of the now last paragraph of subsection (b), the manufacturer-exporter is given a tax credit for the advance sales tax paid in the imported raw materials and the sales tax paid on local raw materials used in his manufacture of export products if the sales taxes paid are indicated as a separate item in the invoices. Amendment to Section 184 : Percentage tax on sales of jewelry, toilet preparation and others . Automobiles were removed from the purview of this section and placed under a special tax treatment under new Section 184-A. The only other amendment to this section is the inclusion of playing cards in subsection (c) and subjecting the articles under this subsection to only 7% tax when locally manufactured. In line with this amendment, section 147 was repealed. New Section 184-A : Percentage tax on sales of automobiles . Before the amendment, both locally manufactured and imported automobiles are placed under the same tax basis. As now amended, locally manufactured automobiles are subjected to lower rates of tax than imported ones. The amendment furthermore introduced a new method of computation of the sales tax. In computing the quarterly sales tax payable on each sale, the gross selling price without deduction for cost of raw materials is multiplied by the applicable rate of tax to arrive at the gross sales tax. From the total of the gross sales tax thus computed for the taxable quarter, there is credited against it or deducted the total amount of sales tax paid during the preceding quarter on raw materials, whether locally manufactured or imported and regardless of the rate of sales tax applied, including the 2% tax prescribed by section 189 if paid on any raw materials used or to be used in manufacture to arrive at the net sales tax. This net sales tax is actually the amount due and payable by the automobile manufacturer for the quarter. If the total of the sales and processing taxes on raw materials paid during the preceding quarter exceeds the gross sales tax for the taxable quarter, the excess shall be applied against the gross sales tax for the succeeding quarter. The computation of the tax on imported automobiles was also altered. Under the amendment, the applicable rate of tax is no longer applied to the entire landed cost plus mark-up but only to that portion covered within the tax bracket. In other words, the progressive system of tax computation was adopted. Car assemblers are now entitled to the reduced rate of tax on the importation of CKD units and of replacement parts only when they are duly registered under the progressive car manufacturing program of the Board of Investments. Locally manufactured parts and accessories remain subject to 7% tax. Amendment to Section 185-A : Percentage tax on sales of refrigerators, air-conditioners, beverage coolers, ice-cream cabinets, and others . The amendment to this section consists solely of the modification of the definition of "integrated" and "non-integrated" manufactured products. To qualify as "integrated manufactured products", it is no longer necessary that the compressor unit be also manufactured by the manufacturing enterprise; and instead of the enterprise manufacturing at least 80% of the total intermediate components and parts of each product, including the compressor unit, it is enough that 80% of the components and parts of each main assembly of the products are manufactured domestically, and the manufacturing enterprise need only to manufacture 60% of the components and parts of each main assembly of the products manufactured by it. As regards "non-integrated manufactured products", instead also for the enterprise to manufacture as previously required at least 50% of the components and parts of each product, it is enough that 50% of the components and parts of each main assembly of the products are locally manufactured and the manufacturing enterprise need only to manufacture 30% of the components and parts of each main assembly of the products manufactured by it. The determination of the main assemblies and the intermediate components and parts thereof is new expressly reposed with the Board of Investments. Amendment to Section 186 : Percentage tax on sales of other articles . The amendment to this section consists purely of the inclusion within its coverage of articles not enumerated in Sections 184-A and 186-B. New Section 186-B : Percentage tax on sales of processed meat, milk, fruits and vegetables, fish and other sea foods, wheat flour and feeds . This new section placed under a lower tax treatment the articles enumerated in the title thereof. These articles are subject to a tax rate of only 5%. The products covered by this new section are actually manufactured agricultural products. Being manufactured, they are not exempt under Section 188(b). Agricultural products which have undergone such processes as freezing, drying, salting, smoking or stripping remain exempt under Section 188(b) as still agricultural products "whether in their original state or not". Amendment to Section 188 : The first paragraph of this section was amended to include sections 184-A and 186-B. The other amended provisions are only subparagraphs (b) and (e) of the first paragraph thereof. Under the amendment to subparagraph (b) agricultural food products, whether in their original state or not, are now exempt from sales tax even if sold by persons other than the producer of said products or the owner of the land where produced. Therefore, a person who buys agricultural food products from producers who applies certain processes thereon as freezing, drying, salting, smoking or stripping is now exempt from the sales tax on his sales of the processed food products. Agricultural non-food products, however, remain exempt from tax only when they are sold by the producer or owner of the land where produced. Under the amendment to subparagraph (e), sales to tourists are exempted from the sales tax if paid for in foreign exchange and if actually removed upon their departure from the Philippines. The exemption applies even on sales by dealers, in which event, the dealer is given a tax credit corresponding to the sales tax paid on the articles sold. Amendment to Section 189 : Percentage tax upon proprietors or operators of rope factories, sugar centrals, etc . Processors of pineapple were removed from the purview of this section. They are now subject to tax under new section 186-B. The only other amendment is the inclusion of sugar mills within the scope of the section. Amendments to section 190 : Compensating tax . The amendment to subsection (b) merely included within the scope of the exemption articles imported by persons subject to tax under sections 184-A, 185-A, 185-B and 186-B. Under the amendment to subsection (c), the words 'consignment abroad' was changed to "export' the latter term being more appropriate. The exemption of passenger and/or cargo vessels under subsection (d) was modified to embrace only those of more than 10,000 tons. The provisions of subsections (e) and (g) were repealed. Articles brought in by returning residents which include officials and employees of the Government assigned abroad and non-resident citizens coming to resettle in the Philippines are now exempt outright from the compensating tax, the tax imposed on such articles under the amended Tariff and Customs Code being considered sufficient. The outright exemption of these articles are provided for by the other amendment to subsection (e). Subsection (f) has been amended by expressly excepting vehicles, vessels, and aircrafts from the purview of exempt articles to be brought in by persons coming to settle in the Philippines for the first time. The most important amendment to this section is the repeal of exemptions provided for under existing laws. Only the exemptions enumerated in this section and those expressly specified are now to be recognized. Another important amendment is the power given to the President to grant exemption upon recommendation of the NEDA in the interest of economic development. Amendments to Section 191 : Contractors, etc . Persons selling water, light, heat or power and proprietors or operators of telephone or telegraph lines or exchanges, or wireless station, regardless of whether or not they are paying the franchise tax were removed from the purview of this section. On the other hand, sauna, turkish and swedish baths, slenderizing and body building saloons and similar establishments are now expressly included within the purview of paragraph 13 (now paragraph 11) of this section. Even before the amendment, however, these establishments were subject to tax under this section as independent contractors. Lessors of personal property are now also made subject to tax under this section. By virtue of this amendment, such lessors are now invariably subject to 3% tax on their gross rental receipts regardless of the terms and conditions of the lease contract. Before this amendment, said lessors were considered contractors only when, under the terms and conditions of the lease, they retain control of the possession, use and operations of the leased property. The term "independent contractors" is now also expressly defined to make clear the scope thereof. Any person who, without being contained in the enumeration, renders physical or mental service for a fee is now indubitably considered an independent contractor. Amendment to Section 204 : Persons subject to tax to issue sales invoices or receipts . The amendment to this section provides that in all sales for the purpose of resale, the invoice should show the name, or style, if any, and business address of the purchaser, regardless of the amount of the sale. Under the amendment, all sales to retailers even if the amount thereof is less than P50 should now contain the information required by this section on sales of P50 or more. EFFECTIVITY All of the amendments to Title V of the National Internal Revenue Code take effect on January 1, 1973. ENFORCEMENT All internal revenue officers and others concerned are enjoined to be guided accordingly and to give this Circular as wide a publicity as possible. aisa dc MISAEL P. VERA Commissioner of Internal Revenue APPROVED: CESAR VIRATA Secretary of Finance ANNEX May 14, 1973 MEMORANDUM TO: The Assistant to the Commissioner of Internal Revenue Manila Attached herewith is Revenue Memo Circular No. 5-73, duly approved by the Secretary of Finance, with the instruction that the same be caused to be circularized for the information and guidance of all internal revenue officers and others concerned. CONRADO P. DIAZ Acting Commissioner of Internal Revenue