NOTE: Amended in RR 7-2006
SUBJECT : Amending Certain Provisions of Revenue Regulations No. 6-2005 Resulting from the Amendment of Section 2 of Executive Order No. 399 (EO 399), Directing the Bureau of Internal Revenue (BIR) to Establish the “No Audit Program” (NAP) for the Purpose of Enhancing Tax Compliance and Increasing Tax Collections.
TO : All Internal Revenue Officials, Employees and Others Concerned.
SECTION 1. BACKGROUND
Her Excellency Gloria Macapagal-Arroyo issued on April 26, 2005, Executive Order No. 422 (EO 422), providing for certain enhancement to Executive Order No. 399 (EPO 399) issued on January 17, 2005 Executive Order No. 399 to encourage taxpayers to voluntarily declare and pay higher taxes thereby reducing administrative costs that are entailed from audit and investigations conducted by the Bureau of Internal Revenue (Bureau). Under the “No Audit Program” (NAP), taxpayers who qualify under its terms and conditions shall be exempted from audit and/or investigation for the period for which they qualify. The NAP shall be in force for taxable years 2004, 2005, 2006, 2007 and 2008.
Pursuant to Section 6 and Section 244 of the National Internal Revenue Code of 1997 (Republic Act No. 8424) in relation to Section 1 of EO 422, these regulations are hereby promulgated to amendment certain sections of Revenue Regulations No. 6-2005.
SECTION 2. Section 2(c) of Revenue Regulations No. 6-2005 is hereby amended to read as follow:
“(c) Taxable Year – refers to any 12-month period starting on any date from August 1 of the prior to the indicated year.
Illustration: For taxpayers who are on a fiscal year basis, if his accounting period starts on August 1, 2003, then returns filed for said period are considered returns for taxable year 2004.”
SECTION 3. Section 5 of Revenue Regulations No. 6-2005 is hereby amended to read as follow:
“SECTION 5. CRITERIA FOR QUALIFICATION UNDER THE PROGRAM
For a taxpayer to qualify for the NAP, he must satisfy all of the following:
a. income tax payment for the Current Taxable Year must exceed the income tax payment for the Base Year by at least 20%;
b. ratio of income tax payment to gross sales/receipts for the Current Taxable Year must be at least equal to that of the Base Year;
c. ratio of net value added tax or business tax actually paid to gross sales/receipts for the Current Taxable Year must be at least equal to that of the Base Year, provided, however, that in no case shall be it be less than three percent (3%) for those subject to percentage tax, or thirty percent (30%) of the Value-Added tax rate provided by law for any given period for those subject to value added tax, or the industry benchmark as may be determined from time to time by the Commissioner Internal Revenue.
For purposes of determining the tax payments for the Current Taxable Year, only taxes actually paid in cash as shown in the Income Tax Return, quarterly income tax return, value added tax return and percentage tax return shall be considered. For this purpose, creditable withholding taxes for taxes withheld for the tax year concerned, which are properly supported by a Certificate of Tax Withheld (BIR Form 2307), shall be considered as cash payments. On the other hand, TCCs/TDMs, and tax credit carried over from prior years are considered non-cash items and shall be excluded from determining the tax payments for the Current Taxable Year.
However, for purposes of determining tax payments for the Base Year from which the increase in tax payments and ratio required to qualify for the NAP shall be measured, the total amount of tax due for the Base Year shall be included regardless of the mode of payment, i.e., whether paid in cash, creditable withholding tax, TCCs/TDMs, or tax credit carried over from prior Taxable Years.
In the event the taxpayer was not in operation for the whole period of the Base Year, the tax payments for that period shall be annualized, and such annualized tax payments shall be used as the tax payment of the Base Year from which the growth and ratio required shall be computed.
* * * * *
ILLUSTRATION:
Taxpayer A, who is on calendar year basis of accounting, started his business on July 1, 2003, and paid income tax amounting to P60,000.00. For purposes of computing his tax payment for the Base Year 2003, his total income tax payment shall be divided by the number of month he is in operation and then multiplied by 12 months. In this case, his annualized income tax payment for 2003 is P60,000/6 x 12 months, or P120,000.00.
* * * * *
Provided further, that the growth rate and ratio provided herein shall adjusted to reflect the effect of the increase/decrease of tax rate resulting from said legislative measures.
In the event a taxpayer shall have been issued an assessment that has become final and executory relating to tax payments for a Base Year, the tax payment for the Base Year shall be adjusted in accordance with the assessment.
In case the taxpayer amends his tax and information returns for any Base Year, the higher of the original amount and the amended amount shall be used as the tax payment for the Base Year for purposes of this section.”
SECTION 4. Section 9 of Revenue Regulations No. 6-2005 is hereby amended to read as follow:
“SECTION 9. DEADLINE.
A Taxpayer must file an application form, duly accomplished, together with all its attachment not later than thirty (30) days from the statutory deadline for the filing of the annual income tax return for the year subject of the application, or in the case of those Taxpayers whose statutory deadline for filing their annual income tax returns occurred earlier than the date of the effectivity of these Regulations, their application must be filed within thirty (30) days from the effectivity hereof.
All returns and payment made by a taxpayer who applied to participate in the NAP are deemed final and conclusive, and by applying to participate in the NAP, the taxpayer shall be deemed to have waived all of his rights to claim any refund pertaining thereto. Only taxpayers whose annual income tax returns were not amended may apply to participate in the NAP. In the event the amount of taxes paid shall not be sufficient to qualify a taxpayer for the NAP, he may still qualify by making a voluntary payment in amount not less than the deficiency required for him to qualify.
Provided, that said payment shall be non-refundable nor deductible against his income. Provided, further, that said voluntary payment shall form part of the base of the tax year for which it was for purposes of determining his qualification for NAP in the subsequent tax year.”
SECTION 5. EFFECTIVITY CLAUSE.
These Regulations shall take effect immediately after publication hereof in any newspaper of general circulation.
(Original Signed)
CESAR V. PURISIMA
Secretary of Finance
Recommending Approval:
(Original Signed)
GUILLERMO L. PARAYNO, JR.
Commissioner of Internal Revenue
REVENUE REGULATIONS NO. 9-2005
SUBJECT : Amending Pertinent Provisions of Revenue Regulations (RR) No. 06-04 Relative to the Tax Exemptions and Privileges Granted Under Republic Act No. 9182, Otherwise Known As “The Special Purpose Vehicle (SPV) Act of 2002 (the “Act”)”
TO : All Revenue Officers and Others Concerned
________________________________________________________________________
SECTION 1. Scope – Pursuant to Section 244 of the Tax Code of 1997, in relation to Section 22 of the Act, these Regulations are hereby promulgated in order to revise the applicable period during which transactions must occur to be covered by the tax exempt provisions of the Act.
SECTION 2. Purpose of regulations – The purpose of these Regulations is to clarify the applicable period during which transactions must occur in order to be covered by the tax exempt provisions of the Act. Under the Act, all sales or transfers of Non-Performing Assets (NPAs) from financial institutions (“FI”) 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 tax and fee privileges for a period of not more than two (2) years from the date of effectivity of the Implementing Rules and Regulations (IRR). The IRR, in turn, provides that the tax exemptions and reduction of fees on the foregoing transactions shall apply if the transaction occurred within a period of two (2) years from the date of the effectivity of the said IRR. The IRR was published on 28 March 2003 hence, it became effective on 12 April 2003.
SECTION 3. Tax-exempt transactions – Section 7(c) of RR No. 06-04 is hereby amended to read as follows:
“SEC. 7. Tax-exempt transactions. – xxx
( c) The tax exemptions as provided in paragraph (d) hereof shall apply to the transactions listed in paragraph (a) above only if the following particular requirements, where applicable, are complied, to wit:
1. In the case of transactions (a)(1), (a)(2), (a)(5) and (a)(6) above, the transfer must be in the nature of, and approved by the Appropriate Regulatory Authority as, a “true sale”’ pursuant to the Act and its implementing rules and regulations:
Provided, That, if the NPL/ROPOA is transferred to an SPV/individual for less than an adequate and full consideration in money’s worth the amount by which the fair market value of the NPL/ROPOA exceeded the value of the consideration shall not be considered as a gift under Title III, Chapter 2 of the NIRC of 1997.
2. In the case of transactions (a)(1) to (a)(6) above, the transaction must have occurred within the period from April 17, 2003 to April 12, 2005. Thereafter, the tax exemptions provided in paragraph (d) hereof shall no longer apply.
3. In the case of transactions (a)(7), (a)(8), (a)(11) and (a)(12) above, the NPL/ROPOA must have been acquired by the SPV or Individual from an FI within the period from April 12, 2003 to April 12, 2005, in the nature of, and approved by the Appropriate Regulatory Authority as a “true sale” pursuant to the Act and its implementing rules and regulations; and that the transaction must have occurred within the period of five (5) years from the date of said acquisition. Thereafter, the tax exemptions provided in paragraph (d) hereof shall no longer apply.
4. In the case of transactions (a)(9) and (a)(10) above, the dation in payment must be in settlement of an NPL that has been acquired by the SPV or Individual from an FI within the period from April 12, 2003 to April 12, 2005, in the nature of, and approved by the Appropriate Regulatory Authority as, a “true sale”, pursuant to the Act and its implementing rules and regulations; and the dation in payment must have occurred within the period of five (5) years from the date of said acquisition.
xxx xxx xxx”
SECTION 4. Additonal tax exemptions for an SPV. – Section 8 of RR No. 06-04 is hereby amended to read as follows:
“Sec. 8. Additional tax exemptions for an SPV. – (a) The SPV shall be exempt from income tax on the net interest income arising from new loans in excess of existing loans, which are extended to a borrower with NPL that has been acquired by the said SPV from an FI within two (2) years from April 12, 2003 and which are solely for the purpose of rehabilitating the borrower’s business. The term “net interest income” shall mean gross interest income less allowable deductions attributable thereto; hence, the said allowable deductions shall no longer be allowed as deduction from the SPV’s other taxable gross income.
(b) Any document evidencing the new loans mentioned in paragraph (a) above shall be exempt from DST.
(c) Any document evidencing an SPV’s capital infusion to the business of the borrower with an NPL that has been acquired by the said SPV from an FI within two (2) years from April 12, 2003, shall be exempt from DST.
xxx xxx xxx”
SECTION 5. Privileges of an FI. – Section 9 of RR No. 06-04 is hereby amended to read as follows:
“Sec. 9. Privileges of an FI. – Any loss that is incurred by an FI as a result of transferring its NPA to an SPV within the period of two (2) years from April 12, 2003, excluding accrued interests and penalties receivable, and which had not been previously offset as deduction from gross income, shall be treated as ordinary loss, and may be carried over as a deduction from its taxable gross income for a period of five (5) consecutive taxable years immediately following the year of the transfer that resulted to such loss: Provided, That the “tax savings” derived by the FI from such loss carry-over shall not be made available for dividend declaration, but shall be retained as a form of capital build-up: Provided, further, That the FI cannot enjoy this privilege if its enters into a merger, consolidation or combination with another person, unless, as a result of such merger, consolidation or combination the shareholders of the said FI gains control of at least 75% or more in nominal value of the outstanding issued shares or paid up capital of the surviving/new corporation:
Provided, finally, That the FI shall continue to be subject to the minimum corporate income tax (MCIT) of two percent (2%) of its gross income as of the end of the taxable year pursuant to Sec. 27 or Sec. 28 of the NIRC of 1997, whichever is applicable, notwithstanding the above provisions.
xxx xxx xxx”
SECTION 6. Repealing clause. – The provisions of any revenue regulations, revenue memorandum order, revenue memorandum circular or any other issuances of the Bureau of Internal Revenue inconsistent with these Regulations are hereby amended, repealed or modified accordingly.
SECTION 7. Effectivity – These Regulations shall take effect immediately.
(Original Signed)
CESAR V. PURISIMA
Secretary of Finance
Recommending Approval:
(Original Signed)
GUILLERMO L. PARAYNO, JR.
Commissioner of Internal Revenue
TO : All Revenue Officers and Others Concerned
________________________________________________________________________
SECTION 1. Scope – Pursuant to Section 244 of the Tax Code of 1997, in relation to Section 22 of the Act, these Regulations are hereby promulgated in order to revise the applicable period during which transactions must occur to be covered by the tax exempt provisions of the Act.
SECTION 2. Purpose of regulations – The purpose of these Regulations is to clarify the applicable period during which transactions must occur in order to be covered by the tax exempt provisions of the Act. Under the Act, all sales or transfers of Non-Performing Assets (NPAs) from financial institutions (“FI”) 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 tax and fee privileges for a period of not more than two (2) years from the date of effectivity of the Implementing Rules and Regulations (IRR). The IRR, in turn, provides that the tax exemptions and reduction of fees on the foregoing transactions shall apply if the transaction occurred within a period of two (2) years from the date of the effectivity of the said IRR. The IRR was published on 28 March 2003 hence, it became effective on 12 April 2003.
SECTION 3. Tax-exempt transactions – Section 7(c) of RR No. 06-04 is hereby amended to read as follows:
“SEC. 7. Tax-exempt transactions. – xxx
( c) The tax exemptions as provided in paragraph (d) hereof shall apply to the transactions listed in paragraph (a) above only if the following particular requirements, where applicable, are complied, to wit:
1. In the case of transactions (a)(1), (a)(2), (a)(5) and (a)(6) above, the transfer must be in the nature of, and approved by the Appropriate Regulatory Authority as, a “true sale”’ pursuant to the Act and its implementing rules and regulations:
Provided, That, if the NPL/ROPOA is transferred to an SPV/individual for less than an adequate and full consideration in money’s worth the amount by which the fair market value of the NPL/ROPOA exceeded the value of the consideration shall not be considered as a gift under Title III, Chapter 2 of the NIRC of 1997.
2. In the case of transactions (a)(1) to (a)(6) above, the transaction must have occurred within the period from April 17, 2003 to April 12, 2005. Thereafter, the tax exemptions provided in paragraph (d) hereof shall no longer apply.
3. In the case of transactions (a)(7), (a)(8), (a)(11) and (a)(12) above, the NPL/ROPOA must have been acquired by the SPV or Individual from an FI within the period from April 12, 2003 to April 12, 2005, in the nature of, and approved by the Appropriate Regulatory Authority as a “true sale” pursuant to the Act and its implementing rules and regulations; and that the transaction must have occurred within the period of five (5) years from the date of said acquisition. Thereafter, the tax exemptions provided in paragraph (d) hereof shall no longer apply.
4. In the case of transactions (a)(9) and (a)(10) above, the dation in payment must be in settlement of an NPL that has been acquired by the SPV or Individual from an FI within the period from April 12, 2003 to April 12, 2005, in the nature of, and approved by the Appropriate Regulatory Authority as, a “true sale”, pursuant to the Act and its implementing rules and regulations; and the dation in payment must have occurred within the period of five (5) years from the date of said acquisition.
xxx xxx xxx”
SECTION 4. Additonal tax exemptions for an SPV. – Section 8 of RR No. 06-04 is hereby amended to read as follows:
“Sec. 8. Additional tax exemptions for an SPV. – (a) The SPV shall be exempt from income tax on the net interest income arising from new loans in excess of existing loans, which are extended to a borrower with NPL that has been acquired by the said SPV from an FI within two (2) years from April 12, 2003 and which are solely for the purpose of rehabilitating the borrower’s business. The term “net interest income” shall mean gross interest income less allowable deductions attributable thereto; hence, the said allowable deductions shall no longer be allowed as deduction from the SPV’s other taxable gross income.
(b) Any document evidencing the new loans mentioned in paragraph (a) above shall be exempt from DST.
(c) Any document evidencing an SPV’s capital infusion to the business of the borrower with an NPL that has been acquired by the said SPV from an FI within two (2) years from April 12, 2003, shall be exempt from DST.
xxx xxx xxx”
SECTION 5. Privileges of an FI. – Section 9 of RR No. 06-04 is hereby amended to read as follows:
“Sec. 9. Privileges of an FI. – Any loss that is incurred by an FI as a result of transferring its NPA to an SPV within the period of two (2) years from April 12, 2003, excluding accrued interests and penalties receivable, and which had not been previously offset as deduction from gross income, shall be treated as ordinary loss, and may be carried over as a deduction from its taxable gross income for a period of five (5) consecutive taxable years immediately following the year of the transfer that resulted to such loss: Provided, That the “tax savings” derived by the FI from such loss carry-over shall not be made available for dividend declaration, but shall be retained as a form of capital build-up: Provided, further, That the FI cannot enjoy this privilege if its enters into a merger, consolidation or combination with another person, unless, as a result of such merger, consolidation or combination the shareholders of the said FI gains control of at least 75% or more in nominal value of the outstanding issued shares or paid up capital of the surviving/new corporation:
Provided, finally, That the FI shall continue to be subject to the minimum corporate income tax (MCIT) of two percent (2%) of its gross income as of the end of the taxable year pursuant to Sec. 27 or Sec. 28 of the NIRC of 1997, whichever is applicable, notwithstanding the above provisions.
xxx xxx xxx”
SECTION 6. Repealing clause. – The provisions of any revenue regulations, revenue memorandum order, revenue memorandum circular or any other issuances of the Bureau of Internal Revenue inconsistent with these Regulations are hereby amended, repealed or modified accordingly.
SECTION 7. Effectivity – These Regulations shall take effect immediately.
(Original Signed)
CESAR V. PURISIMA
Secretary of Finance
Recommending Approval:
(Original Signed)
GUILLERMO L. PARAYNO, JR.
Commissioner of Internal Revenue
REVENUE REGULATIONS NO. 8-2005
SUBJECT: Amending further pertinent provisions of Revenue Regulations No.2-98, as last amended by Revenue Regulations 3-2004, as Amended, providing for the inclusion of Income Payments subject to Creditable Withholding Tax under Section 2.57.2(U) on Manila Electric Company (MERALCO) Refund arising from Supreme Court Case G.R. No. 14814 of April 9, 2003 to Customers under Phase IV as approved by Energy Regulatory Commission (ERC).
TO: All Internal Revenue Officers and Others Concerned
_________________________________________________________________
SECTION 1. SCOPE. – Pursuant to the provisions of Section 244 of the National Internal Revenue Code of 1997, in relation to Sections 57(B) of Republic Act No. 8424 and Sections 2.57.2 of Revenue Regulations Nos. 2-98, as amended, these Regulations are hereby promulgated to further amend pertinent provisions, providing for the inclusion of Income payments Subject to Creditable Withholding Tax under Section 2.57.1 (U) on MERALCO Refund arising from Supreme Court Case G.R. No. 14814 of April 9, 2003 to customers under Phase IV as approved by ERC.
SECTION 2. INCOME PAYMENTS SUBJECT TO CREDITABLE WITHHOLDING TAX. - Sec. 2.57.2 of Revenue Regulations No. 2-98, as amended, is hereby further amended to read as follows:
“Sec. 2.57.2. Income payments subject to creditable tax and rates prescribed thereon. – Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines:
xxx xxxx xxxx
(U) MERALCO Refund arising from Supreme Court Case G.R. No.14814 of April 9, 2003 to customers under Phase IV as approved by ERC – On gross amount of refund given by MERALCO to Customers with active contracts as classified by MERALCO – Twenty Five Percent (25%); To Customers with terminated contracts – Thirty Two Percent (32%);
SECTION 3. RETURNS AND PAYMENT OF TAXES WITHHELD AT SOURCE – Sec. 2.58 of Revenue Regulations No. 2-98, as amended, is hereby further amended to read as follows:
“Sec. 2.58. RETURNS AND PAYMENT OF TAXES WITHHELD AT SOURCE. (A.) Monthly return and payment of taxes withheld at source – (1) WHERE TO FILE –
xxx xxx xxx
(2) WHEN TO FILE –
xxx xxx xxx
MERALCO shall submit a Monthly Alphalist of Payees (MAP) Annex “A” for each calendar quarter, which shall be electronically attached to the monthly remittance return of the calendar quarter (e.g. BIR Form 1601-E for the quarter ending March with attached MAP for January, February, March). It shall contain an alphalist of customers from whom taxes have been withheld for the return period and in whose behalf, the taxes were remitted under BIR Form No. 1601-E showing the total amount of income and taxes withheld and remitted.
xxx xxx xxx
xxx xxx xxx
SECTION 4. REPEALING CLAUSE. – The provisions of any revenue regulations, revenue memorandum orders or circulars or any other issuance inconsistent herewith are hereby repealed, amended, or modified accordingly.
SECTION 5. EFFECTIVITY. – These regulations shall take effect fifteen (15) days following publication in a newspaper of general circulation.
(Original Signed)
CESAR V. PURISIMA
Secretary of Finance
Recommending Approval:
(Original Signed)
GUILLERMO L. PARAYNO, JR.
Commissioner of Internal Revenue
3
TO: All Internal Revenue Officers and Others Concerned
_________________________________________________________________
SECTION 1. SCOPE. – Pursuant to the provisions of Section 244 of the National Internal Revenue Code of 1997, in relation to Sections 57(B) of Republic Act No. 8424 and Sections 2.57.2 of Revenue Regulations Nos. 2-98, as amended, these Regulations are hereby promulgated to further amend pertinent provisions, providing for the inclusion of Income payments Subject to Creditable Withholding Tax under Section 2.57.1 (U) on MERALCO Refund arising from Supreme Court Case G.R. No. 14814 of April 9, 2003 to customers under Phase IV as approved by ERC.
SECTION 2. INCOME PAYMENTS SUBJECT TO CREDITABLE WITHHOLDING TAX. - Sec. 2.57.2 of Revenue Regulations No. 2-98, as amended, is hereby further amended to read as follows:
“Sec. 2.57.2. Income payments subject to creditable tax and rates prescribed thereon. – Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines:
xxx xxxx xxxx
(U) MERALCO Refund arising from Supreme Court Case G.R. No.14814 of April 9, 2003 to customers under Phase IV as approved by ERC – On gross amount of refund given by MERALCO to Customers with active contracts as classified by MERALCO – Twenty Five Percent (25%); To Customers with terminated contracts – Thirty Two Percent (32%);
SECTION 3. RETURNS AND PAYMENT OF TAXES WITHHELD AT SOURCE – Sec. 2.58 of Revenue Regulations No. 2-98, as amended, is hereby further amended to read as follows:
“Sec. 2.58. RETURNS AND PAYMENT OF TAXES WITHHELD AT SOURCE. (A.) Monthly return and payment of taxes withheld at source – (1) WHERE TO FILE –
xxx xxx xxx
(2) WHEN TO FILE –
xxx xxx xxx
MERALCO shall submit a Monthly Alphalist of Payees (MAP) Annex “A” for each calendar quarter, which shall be electronically attached to the monthly remittance return of the calendar quarter (e.g. BIR Form 1601-E for the quarter ending March with attached MAP for January, February, March). It shall contain an alphalist of customers from whom taxes have been withheld for the return period and in whose behalf, the taxes were remitted under BIR Form No. 1601-E showing the total amount of income and taxes withheld and remitted.
xxx xxx xxx
xxx xxx xxx
SECTION 4. REPEALING CLAUSE. – The provisions of any revenue regulations, revenue memorandum orders or circulars or any other issuance inconsistent herewith are hereby repealed, amended, or modified accordingly.
SECTION 5. EFFECTIVITY. – These regulations shall take effect fifteen (15) days following publication in a newspaper of general circulation.
(Original Signed)
CESAR V. PURISIMA
Secretary of Finance
Recommending Approval:
(Original Signed)
GUILLERMO L. PARAYNO, JR.
Commissioner of Internal Revenue
3
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