Be it enacted by the Senate and House of Representative of the Philippines in assembled:

SECTION 1. Section 110(B) of the National Internal Revenue Code of the 1997, as amended, is hereby further amended to read as follows:

“(B) Excess Output or Input Tax. – If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters: Provided, however, That any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112.”

SEC. 2. Implementing Rules and Regulations. – 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.

SEC. 3. Repealing Clause. – All laws, decrees, executive orders, rules and regulations or parts thereof which are contrary to or inconsistent with this Act are hereby repealed, amended or modified accordingly.

SEC. 4. Effectivity. – This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in any two newspapers of general circulation, whichever comes earlier.

Approved,

(Sgd.) JOSE DE VENECIA JR.	(Sgd.) MANNY VILLAR
Speaker of the House of Representatives	President of the Senate

This Act which originated in the House of Representatives was finally passed by the House of Representatives and the Senate on September 26, 2006 and October 9, 2006, respectively.

(Sgd.) ROBERTO P. NAZARENO	(Sgd.) OSCAR G. YABES
Secretary General House of Representatives	Secretary of the Senate

Approved: Nov. 21, 2006