Republic of the Philippines CONGRESS OF THE PHILIPPINES Metro Manila Twelfth Congress Second Regular Session

Begun and held in Metro Manila, on Monday, the twenty-second day of July, two thousand two. Republic Act No. 9182 December 23, 2002

AN ACT GRANTING TAX EXEMPTIONS AND FEE PRIVILEDGES TO SPECIAL PURPOSE VEHICLES WHICH ACQUIRE OR INVEST IN NON-PERFORMING ASSETS, SETTING THE REGULATORY FRAMEWORK THEREFOR, AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled: ARTICLE 1 GENERAL PROVISIONS SECTION 1. Title. This Act shall be known as "The Special Purpose Vehicle (SPV) Act of 2002". Section 2. Declaration of Policy. It is hereby declared the policy of the state: (a) To develop and maintain a sound financial sector for the country; (b) To address the non-performing asset problems of the financial sector; (c) To encourage private sector investments in non-performing assets; (d) To eliminate existing barriers in the acquisition of non-performing assets (e) To help in the rehabilitation of distressed business with the end in view of contributing to economic value added; and (f) To improve the liquidity of the financial system which can be harnessed to propel economic growth. Section 3. Definition of Terms. For Purpose of this Act, the term: (a) "Approval Certificate" means the certificate of approval or authority issued by the Commission to an application by an SPV to issue Investment Unit Instruments (IUIs), pursuant to the provisions of this Act. (b) "Approved Plan" means an SPV Plan for which an Approval Certificate has been issued by the Commission.

(c) "BSP" refers to the Banko Sentral ng Pilipinas. (d) "Commission" refers to the Securities and Exchange Commission (e) "Financial Institutions or Ifs" means credit-granting institutions which shall be limited to the following: (1) the BSP; (2) a bank as defined under Republic Act No.8791, also known as "The General Banking Law"; (3) a financing company as defined under Republic Act No. 8556, also known as "The Financing Company Act of 1998"; (4) an investment house as defined in Presidential Decree No. 129, also known as "The Investment Houses Law"; (5) government financial institutions (GFIs), which for purposes of this Act, shall be limited to the Philippine Deposit Insurance Corporation (PDIC), Land Bank of the Philippines (LBP), and Development Bank of the Philippines (DBP); (6) government-owned-or-controlled-corporations (GOCCs),which for purposes of this Act, shall be limited to the National Home Mortgage Finance Corporation (NHMFC), Home Guarantee Corporation (HGC), Home Development Mutual Fund (HDMF), Social Security System (SSS), Government Service Insurance System (GSIS), Trade and Investment Development Corporation (TIDCORP), Small Business Guarantee and Finance Corporation (SBGFC), Technology and Livelihood Resource Center (TLRC), Livelihood Corporation (LIVECOR), National Development Corporation (NDC), Quedan and Rural Credit Guarantee Corporation (QUEDANCOR), National Housing Authority (NHA), and Armed Forces of the Philippines- Retirement and Separation Benefits System (AFP-(RSBS); and (7) other institutions licensed by the BSP to perform quasi-banking functions. (f) "Investment Unit Instruments or IUIs" refers to participation certificates, debt instruments or similar instruments issued by the SPV and subscribed by Permitted Investors as provided in Section 11 hereof, pursuant to an Approved Plan: Provided, That these shall not include the instruments to be issued by the SPV to the selling FIs as full or partial settlement of the non-performing assets transferred to the said SPV: Provided, further, That such issuances of the SPV shall not be considered as deposit substitutes: Provided, finally, That these shall not form part of the capital stock of the SPV. (g) "Non-Performing Assets or NPAs" consist of the Non-Performing Loans and Real and Other Properties Owned or Acquired by FIs. (h) "Non-Performing Loans or NPLs" refers to loans and receivables such as mortgage loans, unsecured loans, consumption loans, trade receivables, lease receivables, credit card receivables and all registered and unregistered security and collateral instruments, including but not limited to, real state mortgages, chattel mortgages, pledges and antichresis, whose principal and/or interest have remained unpaid for at least one hundred and eighty (180) days after they have become past due or any of the events of default under the loan agreement has occurred.

(i) "ROPOAs" refers to real and other properties owned or acquired by an FI in settlement of loans and receivables, including real properties, shares of stocks, and chattels formerly constituting collateral's for secured loans which have been acquired by way of dation in payment (dacion en pago) or judicial or extra-judicial foreclosure or execution of judgement. (j) "SPV" means the special Purpose Vehicle created pursuant to the provisions of this Act. (k) "SPV Plan" refers to the plan submitted to and approved by the Commission as pre-requisite to the issuance of an IUI. (l) "True Sale" refers to a sale wherein the selling FI transfers or sells its NPAs without recourse for cash or property to an SPV with the following results: (1) The transferor relinquishes effective control over the transferred NPAs; and (2) The transferred NPAs are legally isolated and put beyond the reach of the transferor and its creditors" Provided, That the transferring FI shall not have direct or indirect management of the transferee SPV: Provided, further, That the selling FI does not posses a claim of beneficial ownership of more than five percent (5%) in the transferee SPV. ARTICLE II Special Purpose Vehicle Section 4. Special Purpose Vehicle. An SPV shall be organized as stock corporation in accordance with Batas Pambansa Blg. 68, otherwise known as "The Corporation Code of the Philippines" and the rules promulgated by the Commission for purposes of registering the SPV: Provided, That if the SPV will acquire land, at least sixty percent (60%) of its outstanding capital stock shall be owned by Philippines nationals pursuant to Republic Act No7042, as amended, otherwise known as "The Foreign Investment Act". Section 5. Powers of an SPV. An SPV shall have the following powers: (a) To invest in, or acquire NPAs of FIs; (b) To engage third parties to manage, operate, collect and dispose of NPAs acquired from an FI; (c) To rent, lease, hire, pledge, mortgage, transfer, sell, exchange, usufruct, secure, securitize, collect rents and profits, and other similar acts concerning its NPAs acquired from an FI; (d) In case of NPLs, to restructure debt, condone debt and undertake other structuring debt, the SPV may reduce the principal, interest, interest rates, and the period for calculating the interest, extend the time for debt repayment or relax the conditions for debt repayment, agree to the conversion of the borrowers debt to equity in the borrower's business, agree to a transfer of assets or claims from the borrower t repay the debtor dispose of some of the borrower's property or claims to third persons; (e) To take, transfer shares or buy shares issued by the borrower for the purpose of business reorganization or rehabilitation of the borrower, subject to the provisions of the Corporation Code in

respect of the rights of the shareholders of the borrower company, and apply any other measures or restructuring techniques with the approval of the Commission; (f) To enter into dation in payment (dation en pago) arrangements, foreclose judicially or extrajudicially and other forms of debt settlement involving NPLs; (g) To spend funds to renovate, improve, complete or alter its NPAs acquired from an FI; (h) To issue equity or participation certificates or other forms of IUIs for the purpose of acquiring, managing, improving and disposing of its NPAs acquired from an FI; (i) To borrow money and issue other instruments of indebtedness for the purpose of paying operational administrative costs; (j) To guarantee credit, accept or intervene for honor the bills of borrowers; (k) To advance funds to borrowers where required by an acquired asset or any debt restructuring agreement pursuant thereto, or under any court order or rehabilitation plan; and (l) To entrust to third parties asset servicing company, the collection and receipt of the debt payments for debts under debt restructuring business reorganization, management and disposition of assets of the SPV in accordance with the rules, procedures and conditions prescribed by the Commission or by the courts. Except in the case of ROPOAs whose redemption periods have already expired, the SPV shall notify the borrower and all persons holding prior encumbrances upon the properties or a part thereof or are actually holding the same adversely to the borrower within fifteen (15) days from the date of the appointment of the said collection agent. Section 6. Period for Filing of Applications. Applications for the establishment and registration of an SPV shall be filed with the Commission not beyond eighteen (18) months from the date of approval of the Implementing Rules and Regulations (IRR) by the Congressional Oversight Committee (COC) created in Section 23 Hereof. Section 7. Authorized, Subscribed and Paid-Up Capital of the SPV. An SPV shall have a minimum authorized capital stock of Five hundred million pesos (P500, 000,000.00), with a minimum subscribed capital stock of One hundred twenty five million pesos (P125, 000.000.00), and a minimum paid-up capital of Thirty-one million two hundred fifty thousand pesos (P31, 250.00). Section 8. Submission of SVP Plan. After the establishment of an SPV pursuant to Section 4 hereof, an SPV Plan shall be submitted to the Commission for approval, which shall include the following: (a) Investment policies of the SPV; (b) Contribution plan including the amounts and draft of subscription documents; (c) Features of the IUIs including the specific amounts issued and/or to be issued; (d) Rights of the holders of the IUIs; (e) Draft agreements for the appointment of trustees and agents with respect to the IUIs and the NPLs acquired from an FI;

(f) Name of the external auditor of the SPV; (g) Roles and responsibilities of the trustees, advisors, loan servicers and property managers; (h) Draft form of financial reports of the SPV; (i) Details of distribution policies; (j) Methods for the increase and decrease of future fund contribution; (k) Methods for the alteration or modification of the approved SPV Plan; (l) Methods for the liquidation and distribution of assets to the holders of IUIs; (m) Details of credit enhancements like guarantees or standby letters of credit or advances that may be extended to the SPV by an entity which shall not be the selling FI, its parent, subsidiaries or affiliates; and (n) Such other documents or information as may be required by the Commission. Section 9. Approval. Upon approval of the SPV Plan, the Commission shall issue an Approval certificate stating that the application has been approved and that the IUIs may be issued. Section 10. Issuances of IUIs. The SPV may be allowed to issue IUIs subject to the rules and regulations the Commission is herein mandated to promulgate. Section 11. Permitted Investors. Any person may acquire or hold IUIs in an SPV in the minimum amount of Ten million pesos (P10, 000.000.00); Provided, That an SPV shall not be authorized to acquire the IUIs of another SPV: Provided, further, That the parent, subsidiaries, affiliates or stockholders, directors, officers or any related interest of the selling FI or the parent's subsidiaries, affiliates or stock-holders, directors, officers or any related interest shall not acquire or hold, directly or indirectly, the IUIs of the SPV that acquired the NPAs of the FI. ARTICLE III Transfer of Assets to SPV Section 12. Notice and manner of Transfer of Assets. (a) No transfer of NPLs to an SPV shall take effect unless the FI concerned shall give prior notice, pursuant to the Rules of Court, thereof to the borrowers of the NPLs and all persons holding prior encumbrances upon the assets mortgaged or pledged. Such notice shall be in writing to the borrower by registered mail at their last known address on file with the FI. The borrower and the FI shall be given a period of at most ninety (90) days upon receipt of notice, pursuant to the Rules of Court, to restructure or renegotiate the loan under such terms and conditions as may be agreed upon by the borrower and the FIs concerned. (b) The transfer of NPAs from an FI to an SPV shall be subject to prior certification of eligibility as NPA by the appropriate regulatory authority having jurisdiction over its operations, which shall issue its ruling within forty-five (45) days from the date of application by the FI for eligibility.

(c) After the sale or transfer of the NPLs, the transferring FI shall inform the borrower in writing at the last known address of the fact of the sale or transfer of the NPLs. Section 13. Nature of Transfer. All sales or transfers of NPAs to an SPV shall be in the nature of a true sale after proper notice in accordance with the procedures as provided for in section 12: Provided, That GFIs and GOCCs shall be subject to existing law on the disposition of assets: Provided, further, That in the transfer of the NPLs, the provisions on subrogation and assignment of credits under the New Civil Code shall apply. Section 14. Assumption of Rights and Obligations. The SPV shall assume all rights and obligations of the transferring FI. ARTICLE IV Incentives and Exemption Privileges Section 15. Tax Exemptions and Fee Privileges. Any existing law to the contrary notwithstanding the transfer of NPAs from the FI to an SPV, and from an SPV to a third party or dation in payment (dacion en pago) by the borrower or by a third party in favor of an FI or in favor of an SPV shall be exempt from the following taxes: (a) Documentary stamp tax on the above mentioned transfer of NPAs and dation in payment (dacion en pago) as may be imposed under Title VII of the National Revenue Code of 1997; (b) Capital gains tax on the transfer of lands and/or other assets treated as capital assets as defined under Section 39 (A)(1) of the National Revenue Code of 1997; (c) Creditable withholding income taxes imposed on the transfer of land and/or buildings treated as ordinary assets pursuant to Revenue Regulation No. 2-98, as amended; (d) Value-added tax on the transfer of NPAs as may be imposed under Title IV of the National Internal Revenue Code of 1997 or gross receipts tax under Title V of the same Code, whichever is applicable. The abovementioned transfers shall also be subject to the following in lieu of the applicable fees: (a) Fifty percent (50%) of the applicable mortgage registration and transfer fees on the transfer of real estate mortgage and chattel mortgage registrations and to form the SPV, as imposed in accordance with the existing circulars of the Land Registration Authority (LRA); (b) Fifty percent (50%) of the filing fees for any foreclosure initiated by the SPV in relation to any NPA acquired from an FI, as prescribed by the Rules of Court; and (c) Fifty percent (50%) of the land registration fees prescribed under the existing circulars of the LRA. All sales or transfers of NPAs from the FIs to an SPV or transfers by way of dation in payment (dacion en pago) by the borrower or by a third party to the FI shall be entitled to the privileges enumerated herein for a period of not more than two (2) years from the date of effectivity of the IRR: Provided, That transfers from an SPV to a third party of NPAs acquired by the SPV within such twoyear period or transfers by way of dation in payment (dacion en pago) by a borrower to the SPV

shall enjoy the privileges enumerated herein for a period of not more than five (5) years from the date of acquisition by the SPV: Provided, further, That properties acquired by an SPV from GFIs or GOCCs which are devoted to socialized or low-cost housing shall not be converted to other uses. The abovementioned tax exemptions, incentives, and fee privileges given to FIs and SPV at the various stages of the transactions under this section shall likewise be extended to any individual in accordance with the IRR: Provided, That: (i) The transaction is limited to a single family residential unit ROPOA or NPL secured by real estate mortgage on a residential unit; (ii) There shall only be one transaction consisting of one residential unit per individual; and (iii) The two-year transfer and the five-year entitlement period granted to NPA shall also apply to said single family residential unit. Section 16. Additional Tax Exemptions and Fee Privileges. To encourage the infusion of capital and/or financial assistance by the SPV for the purpose of rehabilitating the borrower's business, the following additional tax exemptions and privileges shall be enjoyed: (a) The SPV shall be exempt from income tax or net interest income, documentary stamp tax and mortgage registration fees on new loans in excess of existing loans extended to borrowers with NPLs which have been acquired by the SPV. (b) In case of capital infusion by the SPV to the borrower with NPLs, the SPV shall also be exempt from the documentary stamp tax. Provided, That the abovementioned tax exemptions and fee privileges shall apply for a period of not more than five (5) years from he date of acquisition of NPLs by the SPV. Section 17. Privileges of Participation FIs. (a) Any loss that is incurred by the financial institutions as a result of the transfer of NPAs shall be treated as ordinary loss: Provided, That the accrued interest and penalties shall not be included as loss on said loss carry over from operations subject to the provisions of the National Internal Revenue Code of 1997 on net operating loss carry-over (NOLCO), except that the loss incurred by the FI from the transfer of NPAs within the two-year period from the effectivity of the IRR may be carried over for a period of five (5) consecutive taxable years immediately following the year of such loss: Provided, further, That for the purpose of corporate gain or loss the carry-over shall be subject to pertinent laws: Provided, finally, That the tax savings derived by FIs from the NOLCO shall not be made available for dividend declaration but shall be retained as a form of capital build-up. (b) The regulatory authority concerned shall promulgate the necessary rules and regulations governing the treatment of any loss of the FIs in the books of account as a result of the transfer of the NPAs. (c) In the case of non-bank GFIs and GOCCs enumerated in Section 3 hereof, the Department of Finance (DOF), in consultation with the Commission on Audit (COA), shall promulgate the necessary rules and regulations governing the treatment of any loss in their books of account as a result of the transfer of their NPAs.

Section 18. Abuse of Tax Exemptions and Privileges. Any person, natural or judicial, who benefits from the tax exemptions and privileges herein granted, when such person is not entitled thereto, shall be subject to the penalties provided in Section 25 hereof. In addition, the offender shall refund to the government double the amount of the tax exemptions and privileges availed of under this Act, plus interest of twelve percent (12%) per year from the date prescribed for its payment until the full payment thereof. ARTICLE V Enforcement and Protection Provisions Section 19. Redemption Periods. The redemption periods allowed to borrowers under Section 47 of Republic Act No. 8791, also known as "The General Banking Law of 2000", the Rules of Court and/or other laws shall be applicable. ARTICLE VI Reporting Provisions Section 20. Books of Accounts and Records. - The SPV shall set and keep accurate accounts and internal financial controls and shall appoint an external auditor acceptable to the Commissions in this regard. The Commission, the BSP, and the Bureau of Internal Revenue (BIR) may look into the books of accounts and records of the SPV at any time. Section 21. Reports. The Commission, the regulatory authorities, and the BIR shall prescribe the submission of reports from the SPV and the FIs for the proper implementation of this Act. ARTICLE VII Final Provisions Section 22. Implementing Rules and Regulations. Within sixty (60) days from the effectivity of this Act, the Commission, in coordination with the BSP, the DOF, and the BIR shall draft and submit to COC the IRR: Provided, That the Commission, BSP, DOF and BIR may issue separate circulars that will apply exclusively to the institutions under respective jurisdiction, which shall not be inconsistent with the IRR to be issued by the Commission. Said IRR shall be submitted to the COC which shall review, revise and approve the same within a period of sixty (60) days from the date of receipt thereof upon which the Commission, in consultation with the BSP, DOF and BIR shall promulgate the IRR. Section 23. Congressional Oversight Committee. There is hereby created a COC composed of seven (7) members from the Senate and seven (7) members from the House of representatives. The members from the Senate shall be appointed by the Senate President based on the proportional representation of the parties or coalitions therein with at least two (2) Senators representing the Minority. The COC shall have the power to promulgate its own rules issued within sixty (60) days from the promulgation of said Rules. Section 24. Primary Implementing Agency. The Commission shall be the primary implementing agency of this Act and for its effective implementation, it shall have the authority to enlist the assistance of any branch, department, bureau, office, agency or instrumentality of the government,

including GOCCs and GFIs which may include the use and transfer of its personnel, facilities and resources. Section 25. Penalties. Any person who violates any of the provisions of this Act, or any person who, in a registration statement, notice, certification or plan filed under this Act, makes any untruthful statement of a material fact or omits to state any material fact required to be stated therein, shall, upon conviction, suffer a fine of not less than Fifty thousand pesos (P50, 000.00) nor more than One million pesos (P1, 000,000.00) or imprisonment of not less than six (6) years and one (1) day nor more than twelve (12) years, or both, in the discretion of the court, without prejudice to the penalties provided under Section 18 hereof and other applicable laws. If the offender is a corporation, association, partnership or any judicial person, the penalty shall be imposed upon the responsible officers, as the case may be, who participated in the commission of he crime or who shall have knowingly permitted or failed to prevent its commission. If the offender is a judicial person, the court may order the suspension or revocation of license. If the offender is an alien, he shall, in addition to the penalties herein prescribed, be deported without further proceedings after serving the penalties herein prescribed. If the offender is a public official or employee, he shall, in addition to the penalties prescribed herein, suffer absolute or temporary disqualification from government or public office, as the case may be. Section 26. Applicability Clause. The provisions of this Act shall be applicable to assets that have become non-performing as of June 30, 2002. Section 27. Conscience Clause. - Nothing in this Act shall be construed to condone or exempt from any liability any person responsible for acts or omissions constituting unsound business practices or mismanagement. Section 28. Use of Registration Fees. To carry out the purpose of this Act, the Commission shall retain and use all fees paid to it relative to the establishment of an SPV in addition to its annual budget and to what is provided for under Section 75 of the Securities Regulation Code. Section 29. Separability Clause. If any provision of this Act is held unconstitutional or invalid, all other provisions not affected thereby shall remain valid. Section 30. Repealing Clause. All laws, decrees, executive orders, rules and regulations or parts thereof, which are inconsistent with this act, are hereby repealed, amended or modified accordingly. Section 31. Effectivity. This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in two (2) newspapers of general circulation.

Approved, FRANKLIN DRILON President of the Senate JOSE DE VENECIA JR. Speaker of the House of Representatives

This Act, which is a consolidation of House Bill No. 4403 and Senate Bill No. 2116 was finally passed by the House of Representatives and the Senate on December 18, 2002 and December 17, 2002, respectively.

OSCAR G. YABES Secretary of Senate

ROBERTO P. NAZARENO Secretary General House of Represenatives

Approved: December 23, 2002 GLORIA MACAPAGAL-ARROYO President of the Philippines

Republic of the Philippines Congress of the Philippines Metro Manila Twelfth Congress Second Regular Session

Begun and held in Metro Manila, on Monday, the twenty-second day of July, two thousand two. Republic Act No. 9194 March 7, 2003

AN ACT AMENDING REPUBLIC ACT NO. 9160, OTHERWISE KNOWN AS THE "ANTI-MONEY LAUNDERING ACT OF 2001" Be it enacted by the Senate and House of Representative of the Philippines in Congress assembled: SECTION 1. Section 3, paragraph (b) of Republic Act No. 9160 is hereby amended as follows: "(b) 'Covered transaction' is a transaction in cash or other equivalent monetary instrument involving a total amount in excess of Five hundred thousand pesos (PhP 500,000.00) within one (1) banking day. SECTION 2. Section 3 of the same Act is further amended by inserting between paragraphs (b) and (c) a new paragraph designated as (b-1) to read as follows: "(b-1) 'Suspicious transaction' are transactions with covered institutions, regardless of the amounts involved, where any of the following circumstances exist: 1. there is no underlying legal or trade obligation, purpose or economic justification; 2. the client is not properly identified; 3. the amount involved is not commensurate with the business or financial capacity of the client; 4. taking into account all known circumstances, it may be perceived that the client's transaction is structured in order to avoid being the subject of reporting requirements under the Act; 5. any circumstances relating to the transaction which is observed to deviate from the profile of the client and/or the client's past transactions with the covered institution; 6. the transactions is in a way related to an unlawful activity or offense under this Act that is about to be, is being or has been committed; or 7. any transactions that is similar or analogous to any of the foregoing." SECTION 3. Section 3(i) of the same Act is further amended to read as follows:

"(i) 'Unlawful activity' refers to any act or omission or series or combination thereof involving or having direct relation to following: "(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as amended; "(2) Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16 of Republic Act No. 9165, otherwise known as the Comprehensive Dangerous Act of 2002; "(3) Section 3 paragraphs B, C, E, G, H and I of republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act; "(4) Plunder under Republic Act No. 7080, as amended; "(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised Penal Code, as amended; "(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602; "(7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential under the Revised Penal Code, as amended and Presidential Decree No. 532; "(8) Qualified theft under Article 310 of the Revised penal Code, as amended; "(9) Swindling under Article 315 of the Revised Penal Code, as amended; "(10) Smuggling under Republic Act Nos. 455 and 1937; "(11) Violations under Republic Act No. 8792, otherwise known as the Electrinic Commerce Act of 2000; "(12) Hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as defined under the Revised Penal Code, as amended, including those perpetrated by terrorists against non-combatant persons and similar targets; "(13) Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as the Securities Regulation Code of 2000; "(14) Felonies or offenses of a similar nature that are punishable under the penal laws of other countries." SECTION 4. Section 4 of the same Act is hereby amended to read as follows: "SEC. 4. Money Laundering Offense. -- Money laundering is a crime whereby the proceeds of an unlawful activity as herein defined are transacted, theeby making them appear to have originated from legitimate sources. It is committed by the following: (a) Any person knowing that any monetary instrument or property represents, involves, or relates to, the proceeds of any unlawful activity, transacts or attempts to transacts said monetary instrument or property.

(b) Any person knowing that any monetary instrument or property involves the proceeds of any unlawful activity, performs or fails to perform any act as a result of which he falicitates the offense of money laundering referred to in paragraph (a) above. (c) Any person knowing that any monetary instrument or property is required under this Act to be disclosed and filed with the Anti-Money Laundering Council (AMLC), fails to do so." SECTION 5. Section 7 of the same Act is hereby amended as follows: "SEC.7. Creation of Anti-Money Laundering Council (AMLC). -- The Anti-Money Laundering Council is hereby created and shall be composed of the Governor of the Bangko Sentral ng Pilipinas as chairman, the Commissioner of the Insurance Commission and the Chairman of the Securities and Exchange Commission as member. The AMLC shall shall act unanimously in the discharge of its functions as defined hereunder: "(1) to require and receive covered or suspicious transaction reports from covered institutions; "(2) to issue orders addressed to the appropriate Supervising Authority or the covered institutions to determine the true identity of the owner of any monetary instrument or preperty subject of a covered transaction or suspicious transaction report or request for assistance from a foreign State, or believed by the Council, on the basis fo substantial evidence, to be, in whole or in part, wherever located, representing, involving, or related to directly or indirectly, in any manner or by any means, the proceeds of an unlawful activitity. "(3) to institute civil forfeiture proceedings and all other remedial proceedings through the Office of th Solicitor General; "(4) to cause the filing of complaints with the Department of Justice or the Ombudsman for the prosecution of money laundering offenses; "(5) to investigate suspicious transactions and covered transactions deemed suspicious after an investigation by AMLC, money laundering activities and other violations of this Act; "(6) to apply before the Court of Appeals, ex parte, for the freezing of any monetary instrument or property alleged to be the proceeds of any unlawful activity as defined in Section 3(i) hereof; "(7) to implement such measures as may be necessary and justified under this Act to counteract money laundering; "(8) to receive and take action in respect of, any request from foreign states for assistance in their own anti-money laundering operations provided in this Act; "(9) to develop educational programs on the pernicious effects of money laundering, the methods and techniques used in the money laundering, the viable means of preventing money laundering and the effective ways of prosecuting and punishing offenders; "(10) to enlist the assistance of any branch, department, bureau, office, agency, or instrumentality of the government, including government-owned and -controlled corporations, in undertaking any and all anti-money laundering operations, which may include the use of its personnel, facilities and resources for the more resolute prevention, detection, and investigation of money laundering offenses and prosecution of offenders; and

"(11) to impose administrative sanctions for the violation of laws, rules, regulations, and orders and resolutions issued pursuant thereto." SECTION 6. Section 9(c) of the same Act is hereby amended to read as follows: "(c) Reporting of Covered and Suspicious Transactions. -- Covered institutions shall report to the AMLC all covered transactions and suspicious transactions within five(5) working days from occurrences thereof, unless the Supervising Authority prescribes a longer period not exceeding ten (10) working days. "Should a transaction be determined to be both a covered transaction and a suspicious transaction, the covered institution shall be required to report the same as a suspicious transaction. "When reporting covered or suspicious transactions to the AMLC, covered institutions and their officers and employees shall not be deemed to have violated Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791 and other similar laws, but are prohibited from communicating, directly or indirectly, in any manner or by an means, to any person, the fact that a covered or suspicious transaction report was made, the contents thereof, or any other information in relation thereto. In case of violation thereof, the concerned officer and employee of the covered institution shall be criminally liable. However, no administrative, criminal or civil proceedings, shall lie against any person for having made a covered or suspicious transaction report in the regular performance of his duties in good faith, whether or not such reporting results in any criminal prosecution under this Act of any other law. "When reporting covered or suspicious transactions to the AMLC, covered instituting and their officers and employees are prohibited from communicating directly or indirectly, in any manner or by any means, to any person or entity, the media, the fact that a covered or suspicious transaction report was made, the contents thereof, or any other information in relation thereto. Neither may such reporting be published or aired in any manner or form by the mass media, electronic mail, or other similar devices. In case of violation thereof, the concerned officer and employee of the covered institution and media shall be held criminally liable. SECTION 7. Section 10 of the same Act is hereby amended to read as follows: "Sec 10. Freezing of Monetary Instrument or Property. -- The Court of Appeals, upon application ex parte by the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Section 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze order shall be for a period of twenty (20) days unless extended by the court. SECTION 8. Section 11 of the same Act is hereby amended to read as follows: "Sec. 11. Authority to Inquire into Bank Deposits. -- Notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent court in cases of violation of this Act, when it has been established that there is probable cause that the deposits or investments are related to an unlawful activities as defined in Section 3(I) hereof or a money laundering offense under Section 4 hereof, except that no court order shall be required in cases involving unlawful activities defined in Sections 3(I)1, (2) and (12).

"To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or examine any deposit of investment with any banking institution or non-bank financial institution when the examination is made in the course of a periodic or special examination, in accordance with the rules of examination of the BSP. SECTION 9. Section 14, paragraphs (c) and (d) of the same Act is hereby amended to read as follows: "(c) Malicious Reporting. Any person who, with malice, or in bad faith, reports or files a completely unwarranted or false information relative to money laundering transaction against any person shall be subject to a penalty to six (6) months to four (4) years imprisonment and a fine of not less than One hundred thousand Philippine pesos (Php100,000.00) but not more than Five hundred thousand Philippine pesos (Php500,000.00), at the discretion of the court: Provided, That the offender is not entitled to avail the benefits of the Probation Law. "If the offender is a corporation, association, partnership or any juridical person, the penalty shall be imposed upon the responsible officers, as the case may be, who participated in, or allowed by their gross negligence, the commission of the crime. If the offender is a juridical person, the court may suspend or revoke its license. If the offer is an alien, he shall, in addition to the penalties herein prescribed, be deported without further proceedings after serving the penalties herein prescribed. If the offender is a public official or employee, he shall, in addition to the penalties prescribed herein, suffer perpetual or temporary absolute disqualification from office, as the case may be. "Any public official or employee who is called upon to testify and refuses to do the same or purposely fails to testify shall suffer the same penalties prescribed herein. "(d) Breach of Confidentiality. The punishment of imprisonment ranging from three (3) to eight (8) years and a fine of not less than Five hundred thousand Philippine pesos (Php500,000.00) but not more than One million Philippine pesos (Php1,000,000.00) shall be imposed on a person convicted for a violation under Section 9(c). In the case of a breach of confidentiality that is published or reported by media, the responsible reporter, writer, president, publisher, manager and editor-in-chief shall be liable under this Act. SECTION 10. Section 15 of Republic Act No. 9160 is hereby deleted. SECTION 11. Section 23 of the same Act is hereby amended to read as follows: "SEC. 23. Effectivity. -- This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) national newspapers of general circulation. SECTION 12. Transitory Provision. -- Existing freeze orders issued by the AMLC shall remain in force for a period of thirty (30) days after the effectivity of this Act, unless extended by the Court of Appeals. SECTION 13. Effectivity. -- This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) national newspapers of general circulation.

Approved,

FRANKLIN DRILON President of the Senate

JOSE DE VENECIA JR. Speaker of the House of Representatives

This Act which is a consolidation of House Bill No. 5655 and Senate Bill No. 2419 was finally passed by the House of Representatives and the Senate on March 5, 2003. OSCAR G. YABES Secretary of Senate ROBERTO P. NAZARENO Secretary General House of Represenatives

Approved: March 7, 2003 GLORIA MACAPAGAL-ARROYO President of the Philippines

Republic of the Philippines Congress of the Philippines Metro Manila Twelfth Congress Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-second day of July, two thousand three. Republic Act No. 9238 February 05, 2004 (lapsed)

AN ACT AMENDING CERTAIN SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, BY EXCLUDING SEVERAL SERVICES FROM THE COVERAGE OF THE VALUE-ADDED TAX AND RE-IMPOSING THE GROSS RECEIPTS TAX ON BANKS AND NONBANK FINANCIAL INTERMEDIARIES PERFORMING QUASI-BANKING FUNCTIONS AND OTHER NON-BANK FINANCIAL INTERMEDIARIES BEGINNING JANUARY 01, 2004 Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled: Section 1. Section 108 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows: "(A) Rate and Base of Tax. There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of the gross receipts, derived from the sale or exchange of services, including the use or lease of properties. "The phrase 'sale or exchange of services' means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing services; lessors or distributors of cinematographic films; persons engaged in milling, processing, manufacturing or repacking goods for others; proprietors, operators or keepers of hotels, motels, resthouses, pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in securities; lending investors; transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land, air and water relative to their transport of goods or cargoes; services of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 119 of this Code; [services of banks, non-bank financial intermediaries and finance companies;] and non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties. The phrase "sale or exchange of services" shall likewise include: (1) The lease or the use of or the right or privilege to use any copyright, patent, design or model plan, secret formula or process, goodwill, trademark, trade brand or other like property or right;

(2) The lease or the use of, or the right to use of any industrial, commercial or scientific equipment; (3) The supply of scientific, technical, industrial or commercial knowledge or information; (4) The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such property, or right as is mentioned in subparagraph (2) or any such knowledge or information as is mentioned in subparagraph (3); (5) The supply of services by a nonresident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery or other apparatus purchased from such non resident person; (6) The supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture project or scheme; (7) The lease of motion picture films, films, tapes and discs; and (8) The lease or the use of or the right to use radio, television, satellite transmission and cable television time. Lease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of lease or licensing agreement was executed if the property is leased or used in the Philippines. The term "gross receipts" means the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax. (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: (1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (2) Services other than those mentioned in the preceding paragraph, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate; (4) Services rendered to vessels engaged exclusively in international shipping; and

(5) Services performed by subcontractors and/or contractors in processing converting, or manufacturing goods for an enterprises whose export sales exceed seventy percent (70%) of total annual production. (c) Determination of Tax. - The tax shall be computed by multiplying the total amount indicated in the official receipt by one-eleventh (1/11)." Section. 2. Section 109 of the same Code is hereby amended by rewording paragraph (l) and inserting additional paragraphs after (z) which shall now read as follows: "SEC. 109. Exempt Transactions. - The following shall be exempt from the value-added tax. (a) Sale of nonfood agricultural products; marine and forest products in their original state by the primary producer or the owner of the land where the same are produced; (b) Sale of cotton and cotton seeds in their original state; and copra; (c) Sale or important of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor. Products classified under this paragraph and paragraph (a) shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping, Polished and/or husked rice, com grits, raw cane sugar and molasses, and ordinary salt shall be considered in their original state; (d) Sale or importation of fertilizers; seeds, seeding and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aguarium fish, zoo animals and other animals generally considered as pets); (e) Sale or importation of coal and natural gas, in whatever form or state, and petroleum products (except lubricating oil, processed gas, grease, wax and petrolatum) subject to excise tax imposed under title VI; (f) Sale or importation of raw materials to be used by the buyer or importer himself in the manufacture of petroleum products subject to excise tax, except lubricating oil, processed gas, grease, wax and petrolatum; (g) Importation of passenger and/or cargo vessels or more than five thousand tons (5,000), whether coastwise or ocean-going, including engine and spare parts of said vessels to be used by the importer himself as operator thereof; (h) Importation of personal and households effects belonging to the residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines; Provided, That such goods are exemp from customs duties under the Tariff and Customs Code of the Philippines; (i) Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessel, aircraft, machinery, other goods for use in the manufacture and merchandise of any kind in commercial quantity) belonging to person coming to

settle in the Philippines, for their own use and not for sale, barter or exchange, accompanying such persons, or arriving within ninety (90) 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 and that the change of residence is bona fide; (j) Services subject to percentage tax under Title V; (k) Services by agricultural contract growers and milling for others of palay into rice, corn into grits and sugar cane into raw sugar; (l) Medical, dental, hospital and veterinary services except those rendered by professionals; (m) Educational services rendered by private educational institutions, duly accredited by the Department of Education, Culture and Sports (DECS) and the Commission of Higher Education (CHED), and those rendered by government educational institutions; (n) Sale by the artist himself of his works of art, literary works, musical compositions and similar creations, or his services performed for the production of such works; (o) Services rendered by individuals pursuant to an employer-employee relationship; (p) Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines; (q) Transaction which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree Nos. 66, 529 and 1590; (r) Sales by agricultural cooperatives duly registered with the Cooperative Development Authority to their members as well as sale of their produce, whether in its original state or processed form, to non-members; their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce; (s) Sales by electric cooperatives duly registered with the Cooperative Development Authority or National Electrification Administration, relative to the generation and distribution of electricity as well as their importation of machineries and equipment, including spare parts, which shall be directly used in the generation and distribution of electricity; (t) Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered with the Cooperative Development Authority whose lending operation is limited to their members; (u) Sales by non-agricultural, non-electrical and non-credit cooperatives duly registered with the Cooperative Development Authority: Provided, That the share capital contribution of each member does not exceed Fifteen Thousand Pesos (P15,000) and regardless of the aggregate capital and net surplus ratably distributed among the members; (v) Export sales by persons who are not VAT-registered;

(w) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992, and other related laws, house and lot and other residential dwellings valued at One million pesos (P1,000,000.00) and below: Provided, That not latter than January 31st of the calendar year subsequent to the effectivity of this Act and each each calendar thereafter, the amount of One million pesos (P1,000,000) shall be adjusted to its present value using the Costumer Price Index, as published by the National Statistics Office (NSO); (x) Lease of a residential unit with a monthly rental not exceeding Eight thousand pesos (P8,000): Provided, That not latter than January 31st of the calendar year subsequent to the effectivity of Republic Act No. 8241 and each calendar year thereafter, the amount of Eight thousand pesos (P8,000) shall be adjusted to its present value using the Consumer Price Index as published by the National Statistics Office (NSO); (y) Sale, importation, printing or publication of books and any newspaper, magazine, review of bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements; (z) Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding; paragraphs, the gross annual sales and/or receipts do not exceed the amount of Five hundred fifty thousand pesos (P550,000): Provided, That not later than January 31st of the calendar year subsequent to the effectivity of Republic Act No. 8241 and each calendar year thereafter, the amount of Five hundred fifty thousand pesos (P550,000) shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO); (aa) Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries; (bb) services rendered by doctors of medicine duly registered with the professional regulatory commission (PRC); and (cc) services rendered by lawyers duly registered with the Integrated Bar of the Philippines (IBP). The foregoing exemptions to the contrary notwithstanding, any person whose sale of goods or properties or services which are otherwise not subject to VAT, but who issue a VAT invoice or receipt therefor shall, in additional to his liability to other applicable percentage tax, if any, be liable to the tax imposed in Section 106 or 108 without the benefit of input tax credit, and such tax shall also be recognized as input tax credit to the purchaser under Section 110, all of this Code." Section 3. Section 121 of the National Internal Revenue Code of 1997, as amended, is hereby restored with amendments to read as follows: "Sec. 121. Tax on Banks and Non-Bank Financial Intermediaries Performing Quasi-Banking Functions. - There shall be collected a tax on gross receipts derived from sources within the Philippines by all banks and non-bank financial intermediaries in accordance with the following schedule: "(a) On interest, commissions and discounts from lending activities as well as income from financial leasing, on the basis of remaining maturities of instruments from which such receipts are derived:

maturity period is five (5) years or less . . . . 5% maturity period is more than five (5) years. . 1% "(b) on dividends and equity shares in net income of subsidiaries . . . . . . . . . . 0% "(c) on royalties, rentals of property, real or personal, profits from exchange and all other items treated as gross income under section 32 of this code. . . . . 5% "(d) on net trading gains within the taxable year on foreign currency, debt securities, derivatives and other similar financial instruments ..5% "Provided, however, that in case the maturity period referred to in paragraph (a) is shortened thru pretermination, then the maturity period shall be reckoned to end as of the date of pretermination for purposes of classifying the transaction and the correct rate shall be applied accordingly. "Provided, finally, that the generally accepted accounting principles as may be prescribed by the Bangko Sentral ng Pilipinas for the bank or non-bank financial intermediary performing quasibanking functions shall likewise be the basis for the calculation of gross receipts. "Nothing in this code shall preclude the commissioner from imposing the same tax herein provided on persons performing similar banking activities." Section 4. Section 122 of the National Internal Revenue Code of 1997, as amended, is hereby restored with amendments to read as follows: "Sec. 122. Tax on Other Non-Bank Financial Intermediaries. There shall be collected a tax of five percent (5%) on the gross receipts derived by other non-bank financial intermediaries doing business in the Philippines, from interest, commissions, discounts and all other items treated as gross income under this code: Provided, that interests, commissions and discounts from lending activities, as well as income from financial leasing, shall be taxed on the basis of remaining maturities of the instruments from which such receipts are derived, in accordance with the following schedule: maturity period is five (5) years or less. . . 5% maturity period is more than five (5) years. . 1% "Provided, however, that in case the maturity period is shortened thru pretermination, then the maturity period shall be reckoned to end as of the date of pretermination for purposes of classifying the transaction and the correct rate shall be applied accordingly. "Provided, finally, that the generally accepted accounting principles as may be prescribed by the Securities and Exchange Commission for other non-bank financial intermediaries shall likewise be the basis for the calculation of gross receipts. "Nothing in this code shall preclude the Commissioner from imposing the same tax herein provided on persons performing similar financing activities." Section 5. Implementing Rules and Regulations. Within sixty (60) days from the effectivity of this Act, the Secretary of Finance shall, upon the recommendation of the Commissioner of Internal

Revenue, promulgate the necessary rules and regulations for the effective implementation of this Act. Section 6. Repealing Clause. The provisions of Section 17(b) and the third paragraph, first sentence of Republic Act No. 7716; Section 11(b) of Republic Act No. 8241; Section 5, Title XIV of Republic Act No. 8424; Section 1(b) of Republic Act No. 8761 and Section 1(b) of Republic Act No. 9010; and all others laws, decrees, orders, rules and regulations, and issuances or parts thereof inconsistent with this Act are hereby repealed or modified accordingly. Section 7. Effectivity Clause. This Act shall take effect on January 1, 2004.

Approved, FRANKLIN DRILON President of the Senate JOSE DE VENECIA JR. Speaker of the House of Representatives

This Act, which is a consolidation of House Bill No. 5231 and Senate Bill No. 2660 was finally passed by the House of Representatives and the Senate on December 17, 2003 and November 24, 2003, respectively. OSCAR G. YABES Secretary of Senate ROBERTO P. NAZARENO Secretary General House of Represenatives

Approved: GLORIA MACAPAGAL-ARROYO President of the Philippines

Lapsed into law on February 05, 2004 Without the signature of the President, In accordance with Article VI, Section 27 (1) of the Constitution