Section 6Sec./Art. 6

Section 106 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 106. Value-Added Tax on Sale of Goods or Properties. -

(A) Rate and Base of Tax. - x x x.

(1) 'Goods or Properties.' The term 'goods' or 'properties' x x x;

(2) The following sales by VAT-registered persons shall be subject to zero percent (5%) rate:

(a) Export Sales. - The term 'export sales' means:

(1) x x x;

(2) Sale of raw materials or packaging materials to a non-resident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);

(3) Sale of goods to an export-oriental enterprise whose export sales is at least seventy percent (70%) of the total annual production of the preceding taxable year: Provided, further, That the Export Marketing Bureau of the Department of Trade and Industry (DTI) shall determine compliance with the aforementioned threshold. Any export-oriented enterprise that fails to meet the threshold shall be disqualified from availing of VAT zero-rating on local purchases in the immediately succeeding year: Provided, finally, That input tax otherwise due on VAT-exempt sales shall be paid and deductible from the gross income of the taxpayer.

For this purpose, directly attributable shall refer to goods and services that are incidental to and reasonably necessary for the export activity of the export-oriented enterprise, including janitorial, security, financial, consultancy, marketing and promotion services, and services rendered for administrative operations such as human resources, legal, and accounting:

(4) The sale of goods, supplies, equipment, and fuel to persons engaged in international shipping or international air transport operations: Provided, That the goods, supplies, equipment, and fuel shall be used for international shipping or air transport operations; and

(5) Sales to bonded manufacturing warehouses of export-oriented enterprises.

The Department of Finance (DOF) shall establish a VAT refund center in the Bureau of Internal Revenue (BIR) and in the Bureau of Customs (BOC) that will handle the electronic processing and granting of cash refunds of creditable input tax.

An amount equivalent to five percent (5%) of the total VAT collection of the BIR and the BOC from the immediately preceding year shall be automatically appropriated annually and shall be treated as a special account in the General Fund or as trust receipts for the purpose of funding claims for VAT refund: Provided, That any unused fund, at the end of the year shall revert to the General Fund: Provided, further, That the BIR and the BOC shall be required to submit to the Congressional Oversight Committee on the Comprehensive Tax Reform Program (COCCTTP) a quarterly report of all pending claims for refund and any unused fund.

(b) x x x

(c) x x x

(d) Those sales subject to zero percent (9%) VAT under special laws.

x x x."