REVENUE REGULATIONS No. 12 – 2006

SUBJECT: Rules and Regulations Implementing the Tax Subsidy Granted by the Fiscal Incentives Review Board (FIRB) to the Philippine National Police Service Store System (PNPSSS)

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. – These Regulations are hereby promulgated to implement the tax subsidy granted by the FIRB to the PNPSSS with respect to its purchases from local manufacturers, producers or suppliers of articles or commodities subject to excise tax and value-added tax (VAT), and the sale thereof to persons entitled to store privileges. As to other tax liabilities of the PNPSSS, the provisions of the Rules, Guidelines and Procedures Implementing the Tax Expenditure Subsidy Section under the General Provisions of the Annual General Appropriations Act of 2005 shall apply.

SECTION 2. Coverage/Limitations – The privileges granted herein shall be limited to the products/goods, amount of tax subsidy, scope and period of tax subsidy as provided for in the FIRB Resolution and Certificate of Entitlement to Subsidy (CES) issued by the Department of Finance (DOF).

SECTION 3. General Guidelines – No purchase order (PO) for articles or commodities originating from the PNPSSS, for which payment of the corresponding tax shall be made through the application of its government-granted subsidy, shall be honored or filled by any manufacturer, producer or supplier unless the same is approved by the authorized official of the PNPSSS indicated therein. The name of the approving official, together with his specimen signature, shall be submitted to the Commissioner of Internal Revenue (CIR) or his duly authorized officers.

The PNPSSS shall file an application with the Department of Budget and Management (DBM) for availment of entitlement to subsidy for the payment of excise tax and/or VAT on its purchases of goods for subsequent sale to its intended beneficiaries. Upon approval of the application, the DBM shall issue a Special Allotment Release Order (SARO) in favor of the Bureau of Treasury (BTr) to cover the payment of the aforesaid taxes payable to the Bureau of Internal Revenue (BIR). The PNPSSS shall furnish the Revenue District Office (RDO) having jurisdiction over the PNPSSS’ principal office and the BTr a copy of the SARO.

Upon receipt of the SARO, the RDO having jurisdiction over the PNPSSS’s principal office shall furnish the Revenue Accounting Division (RAD) under the Collection Service of the BIR a copy of the same. The RAD shall record the corresponding revenue collection upon receipt of the BTr’s Journal Entry Voucher (JEV).

The PNPSSS shall submit to the CIR, through the RDO having jurisdiction over the PNPSSS’s principal office, a Quarterly Summary List of Purchases and Input Tax in diskette form in accordance with the provisions of Revenue Regulations No. 8-2002. In addition to the information required in the said regulations, the following shall be indicated in the list:

1. PO Number issued by the PNPSSS;

2. Sales invoice issued by the manufacturer, producer or supplier; and

3. Delivery receipts issued by the manufacturer, producer or supplier.

The manufacturers, producers or suppliers referred to herein, as well as the PNPSSS, shall each have a registry book, duly registered with the BIR. All sales made to PNPSSS by the manufacturers, producers or suppliers shall likewise be entered in the said registry book not later than the day immediately following the date of the transaction. The books of the manufacturer, purchaser or supplier and PNPSSS shall be kept and maintained like any by any duly authorized internal revenue officer.

SECTION 4. Procedural Guidelines

A. On Items Subject to Value-Added Tax (VAT)

(1) PNPSSS shall apply for the Tax Subsidy Availment Certificate (TSAC) representing payment of VAT on purchases of goods for subsequent sale to its intended beneficiaries with the CIR through the RDO having jurisdiction over PNPSSS’s principal or head office. The application for the issuance of a TSAC shall be signed by the duly authorized official of the PNPSSS. For VAT purposes, PNPSSS shall attach to the application a copy of the PO and two (2) copies of the supplier’s invoice/official receipt covering the transaction. The aforesaid transaction shall be billed VAT inclusive.

(2) Upon determination that the application is complete and in order, the CIR, through the RDO, shall issue the TSAC to the effect that taxes for the said purchase have been paid. This certificate shall be made in four (4) copies to be distributed as follows:

Original - PNPSSS
Duplicate - Seller of the Goods
Triplicate - Revenue Accounting Division
Quadruplicate - File copy-RDO

(3) Before the release of the TSAC, each and every availment of the subsidy shall be properly recorder by the RDO in order to determine and update the balance of the released allotment.

(4) The RDO shall submit a Monthly Report of Tax Subsidy Availment Certificates Issued, with the triplicate copies of the TSAC, to the RAD within fifteen (15) days after the end of each month.

(5) The amount appearing in the TSAC shall be used as payment of the VAT input tax on purchases of goods made by PNPSSS from its local manufacturers, producers or suppliers.

(6) In filing his/its Quarterly Value-Added Tax Return, the manufacturer, producer or supplier shall include the sales covered by the availment of tax subsidy in his/its total gross sales subject to VAT. The issued duplicate copy of the TSAC shall be used by the manufacturer, producer or supplier as payment of his/its VAT liability on his/its sales to PNPSSS. For this purpose, the issued duplicate copy of the certificate shall be attached to his/its VAT return.

B. On Articles Subject to Excise Tax

(1) For goods subject to excise tax, PNPSSS shall prepare POs indicating therein the tax base, amount of excise tax due and total amount. The PO shall be coursed through the concerned RDO for proper evaluation of the accuracy of the amount of excise tax indicated therein. The PO shall then be used to support the preparation and issuance of a TSAC equivalent to the amount of the excise tax as computed therein by the concerned district office. However, purchases of petroleum products from dealers shall be covered by the tax subsidy only if the same are purchased by dealers directly from local refiners. In addition to the PO, a copy of the Supply Agreement between the dealer and local refiner shall also be submitted together with the Application for Tax Subsidy Availment Certificate for Excise Tax. It should be stated in the agreement that the supply is being purchased exclusively for PNPSSS. To ensure that the excise tax thereon has been paid, the documents pertaining to said transaction shall be subject to proper verification by the BIR prior to the release of the TSAC.

(2) Prior to the issuance of the TSAC, the issuing unit shall update its book to indicate the availment balance for future utilization, after deducting the latest application for TSAC utilization for excise tax purposes. For purchases from petroleum dealers, the name of the dealer and local refiner from whom the petroleum product was purchased shall be indicated in the TSAC to be issued as follows:

(Name of the Dealer) for the Account of (Name of Supplier/Local Refiner) The amount appearing in the said TSAC shall be deducted from the total amount payable by the petroleum dealer to the supplier/local refiner. This TSAC shall be used by the latter as payment of its excise tax liability with the BIR, without the necessity of applying for transfer/utilization.

(3) All invoices issued by the PNPSSS covering sales of motor fuel and lubricants shall indicate legibly, among others, the name of the purchaser who is the user of the vehicle, if government-issued, or of the owner of the vehicle, make of vehicle, plate number, and kind/description and quantity of petroleum products to be sold.

(4) Upon full and actual receipt of its purchased articles, PNPSSS shall immediately submit to the concerned RDO the copies of the sales invoices/official receipts and delivery receipts (DR), duly acknowledged by PNPSSS’s authorized representative, corresponding to the POs covered by the TSAC issued in its favor. The following information shall be indicated in the DR:

1. Full name of authorized employee;
2. Signature;
3. Date;
4. Time; and
5. Place of actual delivery/unloading of purchased articles.

The RDO shall not process any subsequent application for TSAC on excise tax unless a previously issued TSAC in favor of PNPSSS has been fully liquidated as herein required.

(5) The same procedure for recording the issuance of the TSAC as stated in Section 4(A)(3) and (4) hereof shall apply to articles subject to excise tax.

Section 5. Repealing Clause – Any existing regulations, order or instructions or portions thereof that are inconsistent with these regulations are hereby repealed, amended or modified accordingly.

Section 6. Effectivity Clause – These regulations shall take effect after fifteen (15) days from the date of publication in a newspaper of general circulation.

(Original Signed)
MARGARITO B. TEVES
Secretary
Department of Finance
Recommending Approval:
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue

REVENUE REGULATIONS NO. 11 - 2006

SUBJECT : Consolidated Regulations on the Accreditation of Tax Practitioners/Agents As A Prerequisite to Their Practice or Representation Before the Bureau of Internal Revenue and Further Simplifying and Superseding Revenue Regulations No. 15-99.

TO : All Internal Revenue Officers and Others Concerned
_______________________________________________________________________
Pursuant to Section 244 of the Tax Code of 1997, as last amended by Republic Act No. 9337, these Regulations are hereby promulgated to implement the provisions of Section 6(G) of the same Tax Code authorizing the Commissioner of Internal Revenue to accredit and register tax agents with respect to their tax practice and representation before the BIR and to further prescribe the following:

A. The creation of the Revenue National Accreditation Board in the National Office and the Revenue Regional Accreditation Board in each Revenue Region and to define the functions and composition of said Boards;

B. The guidelines and procedures to be observed in the accreditation and suspension of tax practitioners recognized to practice before the Bureau of Internal Revenue; and

C. The duties, restrictions and norms of conduct relating to such practice.

SECTION 1. Objective – To prescribe administrative mechanisms in the accreditation and registration of tax agents and practitioners, thereby bestowing them official recognition relative to their tax practice/representation before the BIR, and setting the minimum standards therefor.

SECTION 2. Definition of Terms –

a. BOA – shall refer to the Board of Accountancy under the Professional Regulations Commission (PRC).

b. SEC – shall refer to the Securities and Exchange Commission.

c. Revenue National Accreditation Board (RNAB) – As first constituted under Revenue Regulations (RR) No. 15-99, RNAB refers to the body in the BIR National Office constituted to accredit tax practitioners/agents who are regularly engaged in making representation for or on behalf of a client/s before any BIR Office. It is composed of an Assistant Commissioner from either the Operations Group, Legal & Inspection Group or Large Taxpayers Service chosen by the Commissioner of Internal Revenue as Chairman, one (1) representative from the private sector to be chosen by the Commissioner of Internal Revenue from the nominees submitted by the Philippine Chamber of Commerce and Industry (PCCI), or by the Philippine Institute of Certified Public Accountants (PICPA), or by the Tax Management Association of the Philippines (TMAP); and three (3) senior internal revenue officials in the National Office with the rank of at least Division Chief, coming from the aforementioned Group/Service, to be designated by the Commissioner. This Board reviews and approves/disapproves the recommendation of the RRAB of every BIR Regional Office.

d. Revenue Regional Accreditation Board (RRAB) – Also constituted under RR 15-99, the RRAB is the body in the BIR Regional Office constituted to accredit tax practitioners/agents who are regularly engaged in making representation for or on behalf of a client/s before any BIR Office. It is composed of the BIR Assistant Regional Director as Chairman, one (1) representative from the private sector to be chosen by the Commissioner of Internal Revenue from the nominees of the local PICPA chapter; and three (3) senior internal revenue officials in the Regional Office with the rank of Assistant Division Chief or higher to be designated by the Commissioner. In the absence of the Assistant Regional Director, the Regional Director shall act as the Chairman. This Board submits its recommendation to the RNAB of the BIR National Office.

e. Tax Practitioners/Agents – Those who are engaged in the regular preparation, certification, audit and filing of tax returns, information returns or other statements or reports required by the Code or Regulations; those who are engaged in the regular preparation of requests for ruling, petitions for reinvestigation, protests, requests for refund or tax credit certificates, compromise settlement and/or abatement of tax liabilities and other official papers and correspondence with the Bureau of Internal Revenue, and other similar or related activities; or those who regularly appear in meetings, conferences, and hearings before any office of the Bureau of Internal Revenue officially on behalf of a taxpayer or client in all matters relating to a client's rights, privileges, or liabilities under laws or regulations administered by the Bureau of Internal Revenue, shall be deemed to be engaged in tax practice and are required to apply for accreditation.

SECTION 3. The Accreditation Boards

A. Powers and Functions - It shall be the duty of the Accreditation Boards to act upon all applications to practice before the Bureau of Internal Revenue, to institute and provide for the conduct of accreditation, suspension or dis-accreditation proceedings and to perform such other duties as are necessary or appropriate to carry out their functions as prescribed by the Secretary of Finance. Provided, however, that any action or decision of the Revenue Regional Accreditation Board (RRAB) shall only become final upon affirmation by the Revenue National Accreditation Board (RNAB) and/or by the Commissioner.

B. Jurisdiction - The RRAB and RNAB shall have jurisdiction over and shall require accreditation with the BIR of the following persons:

a) Individual tax practitioners engaged in private practice who are Certified Public Accountants (CPAs); CPA-Lawyers who issue/sign auditor's certificates or otherwise perform functions exclusively pertaining to a CPA; and individuals other than CPAs who meet the qualifications prescribed in these Regulations;

b) Partners of a General Professional Partnership (GPP) engaged in the practice of taxation, accountancy, and/or auditing; their duly authorized officers or representatives who regularly appear or otherwise engage in tax practice before the BIR.

c) General Professional Partnership engaged in the practice of taxation, accountancy and auditing who regularly appears or otherwise engaged in tax practice before the BIR.

d) Officers or duly authorized representatives of incorporated business entities engaged in accounting, auditing or tax consultancy services. Individual applicants, GPPs and partners of GPPs who were already accredited with the BOA and SEC shall no longer be required to undergo the various processes for accreditation under these Regulations but shall automatically be accredited and issued a BIR Certificate of Accreditation upon payment of the processing fee.

B.1. Exceptions. – The following individuals are allowed to appear and practice before the BIR without undergoing accreditation proceedings:

a) Individual-taxpayers acting on their own behalf, provided they present satisfactory identification;

b) Members of the Philippine Bar not suffering from suspension/disbarment.

However, they may at their option, apply for accreditation;

c) Other individuals presenting satisfactory proof of identification or authority in any one of the following circumstances of limited practice or special appearances:

(i) An individual representing a member of his or her immediate family;

(ii) A regular full-time employee representing an individual employer;

(iii) A bona fide officer or a regular full-time employee in representation of his employer-corporation, association or organized group;

(iv) A trustee, receiver, guardian, administrator, executor or regular full-time employee in representation of a trust, receivership, guardianship or estate;

(v) An officer or a regular employee of a government unit, agency, or instrumentality representing said unit, agency or instrumentality in the course of his or her official duties.

C. Term of Office of the Chairmen and Members of the RNAB and RRAB – The Chairmen and members of either Board shall serve for a maximum term of three (3) years from the date of their nomination. Thereafter, the Commissioner of Internal Revenue shall reconstitute the same through a Revenue Special Order for that purpose with the end view that no chairman or member of either Board shall serve therein for a term in excess of three consecutive years. Provided, however, that any vacancy occurring prior to the end of said term shall be filled up by any qualified senior officer as may be assigned by the Commissioner.

SECTION 4. Minimum Qualifications of Applicants - In general, the grant of accreditation shall be based on the applicant's professional competence, integrity and moral fitness. Along these lines, the following minimum qualifications are hereby prescribed:

A. For Individual Tax Agents (other than a member of the Philippine Bar):

1. He must be a Certified Public Accountant (CPA) with current professional license from the Professional Regulations Commission (PRC);

2. If he is not a Certified Public Accountant, he must have obtained at least a degree in Law, Juris Doctor (JD) or its equivalent, or a Bachelor's degree in Arts, Commerce, or Business Administration with at least eighteen (18) units in accounting and/or taxation in a college or university recognized by the Department of Education, Culture and Sports (DECS)/Department of Education (DepEd)/Commission on Higher Education (CHED) or in a foreign school of known repute or one duly recognized by its government.

In addition, he must be able to demonstrate or present convincing proof of special competence in tax matters or tax practice, e.g., previously acquired experience; at least eighteen (18) credit hours of special training, seminars, short-term courses, etc., in taxation obtained not more than one (1) year prior to the application for accreditation, subject to evaluation and approval by the Board;

3. He must be of good moral character as certified to under oath by at least two (2) disinterested persons who are either members of the Philippine Bar or Certified Public Accountants in good standing;

4. He must not have been charged with and convicted by final judgment of a crime involving moral turpitude, or found guilty of any act or omission penalized under the Tax Code, or found guilty of aiding or abetting or causing the commission of any such offense by another; and

5. He must be a citizen of the Philippines.

B. For General Professional Partnerships – In cases of GPPs engaged in the exercise of professional accountancy, auditing or tax consultancy services (other than general professional partnerships engaged in the practice of law), the application for accreditation filed by the partners and/or the duly authorized officers and representatives thereof shall conform with the following:

1. The partners and duly authorized officers or representatives thereof must meet all the qualifications of an individual tax agent as prescribed in Section 4(A) hereof. In lieu of the submission of documents or proof thereof, said qualifications may be certified to under oath by the managing partner of the firm; and

2. The partnership is one registered with the Securities and Exchange Commission.

C. In the case of incorporated entities engaged in accounting and tax consultancy other than general professional partnerships:

1. The firm must be registered with the Securities & Exchange Commission; and

2. The applicant-officers or duly authorized representatives thereof must meet all the qualifications of an individual as prescribed under Section 4(A) hereof.

SECTION 5. Accreditation Procedures -

A. Where to File - All applicants shall accomplish their application for accreditation in the form to be prescribed by the Commissioner of Internal Revenue. The duly accomplished application form shall be submitted, together with all documentary requirements prescribed in Item (B)(1) or (2) of this Section, whichever is applicable with the RRAB of the place where the individual applicant or general professional partnership has his/its residence or principal place of business.

Individual applicants and GPPs who are duly accredited by the BOA and SEC, however, shall submit their duly accomplished application form together with the documentary requirements prescribed in item (B)(3) of this Section with the RNAB.

B. Documentary Requirements - Applicants shall submit, together with their duly accomplished application forms, the following documents:

1. For Individual Applicants:

a. Certificate of registration and current license with the Professional Regulations Commission, if a CPA;

b. Certificate of membership with PICPA or ACCPA, if a CPA;

c. Certificate of Good Moral Character issued by two (2) disinterested persons, who are either member of the Bar or Certified Public Accountant in good standing; and

d. If non-CPA, certified copy of transcript of records from the university or college showing compliance with the required units in accounting or taxation as prescribed in Section 4(A)(2) hereof; or in lieu thereof, proof of special competence in tax matters or tax practice, e.g., previously acquired experience; at least eighteen (18) credit hours of special training, seminars, short courses, etc., in taxation, obtained not more than one (1) year prior to the application for accreditation, for the appreciation and approval by the concerned Board.

2. For Partners, Directors, Officers or duly authorized representatives of General Professional Partnerships and incorporated entities engaged in accounting and tax consultancy:

a. Certificate of good moral character issued by two (2) disinterested persons who may either be member of the Bar or Certified Public Accountant in good standing;

b. Other applicable requirements for an individual applicant, or in lieu thereof, certification under oath by the managing partner(s) that the applicant acting for the firm possesses all the qualifications prescribed under Section 4(A) of these Regulations.

c. For those Partners, Directors, Officers or duly authorized representatives of General Professional Partnerships duly registered with the SEC, in addition to the above documentary requirements, a certification from the BOA if the said Partner, Director, Officer or duly authorized representative is a CPA. Provided, however, that the requirements under letters a, b, and c of Section 5(B)(1) hereof need not be submitted if the Professional Partnership can submit a certified true copy of its SEC Certificate of Accreditation as well as the SEC Certificates of Accreditation and BOA Certificates of Registration of all the partners, officers and representatives of the Professional Partnership of CPAs.

d. List of all current partners, directors, officers, associates or representatives duly authorized by the GPP to act on its behalf in representing its client before the BIR.

3. For Individuals and GPPs accredited by BOA and SEC:

a. Certified true copy of BOA Certificate of Registration.

b. Certified true copy of SEC Certificate of Accreditation.

C. Processing Fee - Each applicant shall pay a non-refundable processing fee of Five hundred pesos (P500.00) upon filing of his application for accreditation. If the applicant is a general professional partnership, the fee shall be paid by each partner and authorized representative thereof. In the case of incorporated entities engaged in accounting and tax consultancy services, the fee shall be paid by each of the applicant officers or designated representatives thereof.

D. Additional Requirements - Accredited tax agents shall likewise be required to submit the following documents as an attachment to the initial filing of reports, protests, request for ruling, official correspondence and other statements, papers or documents filed on behalf of a particular taxpayer as proof of their authority to represent the concerned taxpayer:

a. Copy of current Engagement Letter with clients.

b. Special Power of Attorney executed by the client authorizing the practitioner to represent him before the BIR.

SECTION 6. Processing of Application for Accreditation -

A. The RRAB shall act upon all applications for accreditation by verifying the qualifications of an applicant, and the completeness of the required documentation.

B. If an application is determined to be complete, that is, all necessary supporting documentations have been submitted, and the applicant's qualifications found to be in conformity with the provisions of Section 4 of these Regulations, the application shall be stamped "RECEIVED" bearing the date the completed application was received by the RRAB. Thereafter, the RRAB shall, within thirty (30) days from receipt thereof, evaluate the application and forward its recommendation thereon to the RNAB.

C. The RNAB shall act upon all applications for accreditation recommended to it by the RRAB. In all cases, the RNAB shall have the exclusive authority to approve/disapprove applications for accreditation which shall be acted upon within thirty (30) days from receipt of the recommendation of the RRAB.

D. Application for accreditation of practitioners who are duly accredited by the BOA and SEC, as evidenced by a copy of the BOA Certificate of Registration and SEC Certificate of Accreditation shall, upon payment of the processing fee, be automatically issued a BIR Certificate of Accreditation by the RNAB.

E. Applicants whose applications for accreditation have been approved by the RNAB shall be issued a Certificate of Accreditation signed by its Chairman. Such Certificate shall be valid for a period of three (3) years from the date of issue, unless sooner revoked for cause. For purposes of easy identification, the Commissioner of Internal Revenue shall issue an identification card to each accredited tax agent or practitioner.

F. Application for accreditation which has been disapproved by the RRAB shall be appealable to the RNAB. Any application disapproved by the RNAB may be appealed to the Commissioner. An adverse decision by the Commissioner may be appealed to the Secretary of Finance, who shall rule on the appeal within sixty (60) days from receipt of such appeal. Failure of the Secretary of Finance to rule on the appeal within the prescribed period shall be deemed as approval of the application for accreditation of the appellant.

G. The resignation, retirement, death or incapacity of any partner of a general professional partnership who has been accredited by the RNAB shall not result in the cancellation of the partnership's accreditation but only that of the concerned partner's accreditation. The partnership, however, must notify the RNAB, and the RRAB having jurisdiction over the partnership's principal place of business, of such occurrence and shall surrender to the RNAB the concerned partner's Certificate of Registration or Identification Card for cancellation.

SECTION 7. Acceptable Norms of Conduct of a Tax Practitioner - The following norms of conduct are hereby defined as a guide for the observance of tax practitioners. Willful or reckless violation of any of them may be subject of disciplinary action before the Boards:

A. No tax practitioner shall represent conflicting interests in his practice before the Bureau of Internal Revenue, except by express consent of all directly interested parties after full disclosure has been made.

B. The practitioner must make inquiry as to all relevant facts of the tax case, be satisfied that the material facts are accurately and completely described, and assure that any representation contains no falsehood.

C. The practitioner must relate the law to the actual facts and, when addressing issues based on future assumptions, must clearly identify what facts are assumed.

D. The practitioner must ascertain that all material tax issues have been fairly addressed and fully considered.

E. Where possible, the practitioner must provide an opinion consonant with existing laws and regulations. He shall not present as true those matters or issues which he knows to have been voided, superseded or otherwise invalidated.

F. The practitioner advising a client on matters of tax liability must inform the client of the penalties which may likely apply to him in case of failure or omission to pay the tax in relation to the position advised, prepared or reported.

G. The practitioner advising a client on tax matters must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent or incomplete and to the extent possible, examine the proof or relevant documents in support of his client's representations.

SECTION 8. Suspension or Cancellation of Certificate of Accreditation -

A. Causes for Suspension, Cancellation or Revocation - The accreditation certificate may be suspended, cancelled or revoked as the case may be, upon petition by a taxpayer or by the PICPA or by the TMAP and other similar professional organization, or upon petition by any internal revenue officer, or upon motu propio action by the RRAB or RNAB, after due notice and hearing set for the purpose, based on any of the following grounds:

1. Conviction of any criminal offense under the National Internal Revenue Code, or of any offense involving dishonesty, or breach of trust;

2. Giving false or misleading information, or participating in any way in the giving of false or misleading information to the Bureau of Internal Revenue or to any officer or employee thereof, in connection with any matter pending before them, knowing such information to be false or misleading;

3. The use of false or misleading representations with intent to deceive a client or prospective client in order to procure employment, or representing that he can ably obtain special consideration or action from the Bureau of Internal Revenue or officer or employee thereof by improper or unlawful means;

4. Willfully failing to make a tax return in violation of the NIRC, or evading, attempting to evade, or participating in any way in evading or attempting to evade any national internal revenue tax or payment thereof;

5. Knowingly counseling or suggesting to a client or prospective client of an illegal plan to evade taxes or payment thereof, or concealing assets to evade taxes or payment thereof;

6. Misappropriating or failing to remit, funds received from a client for the purpose of payment of taxes;

7. Directly or indirectly attempting to influence, or offering or agreeing to attempt to influence the official action of any officer or employee of the BIR by the use of threats, false accusations, duress or coercion, or by offering any special inducement or promise of advantage or by bestowing any gift, favor or thing of substantial value;

8. Disbarment or suspension from the practice as an attorney or as a certified public accountant;

9. Contemptuous conduct in connection with practice before the BIR, including use of abusive language, making false accusations and statements, knowing them to be false, or circulating or publishing malicious or libelous matter;

10. Giving a false opinion, knowingly, recklessly or through gross incompetence, including an opinion which is intentionally or recklessly misleading, or a pattern of providing incompetent opinions on questions arising under the Tax Code. False opinion includes those which reflect or result from a known misstatement of fact or law from an assertion of a position known to be unwarranted under existing laws or regulations; from advising or assisting in conduct known to be illegal or fraudulent; from concealment of matters required by law or regulations to be revealed. For purposes of this paragraph, "reckless conduct" is a highly unreasonable omission or misrepresentation involving an extreme departure from the standards of ordinary care that a practitioner should observe under the circumstances. A pattern of conduct is a factor that will be taken into account in determining whether a practitioner acted knowingly, recklessly, or through gross incompetence;

11. Upon administrative finding by the concerned Board that the holder of an accreditation certificate has committed any of the following offenses penalized under the Tax Code of 1997:

a. Willfully falsifying any report or statement bearing on any examination or audit, or rendering a report, including exhibits, statements, schedules or other forms of accountancy work which have not been verified by him personally or under his supervision or by a member of his firm or by a member of his staff in accordance with generally accepted accounting and auditing practices;

b. Certifying financial statements containing essential misstatements of facts or omission of which he has personal knowledge with respect to the transactions, taxable income, deduction and exemption of his client;

c. Signing and certifying financial statements without conducting an actual audit;

d. Assisting/Aiding any taxpayer in the use of accounting/bookkeeping records for internal revenue purposes not in conformity with the requirements prescribed in the Tax Code or rules and regulations promulgated thereunder;

e. Knowingly making any false entry or entering any false or fictitious name in the books of accounts or records of a taxpayer;

f. Aiding or keeping in behalf of a taxpayer two or more sets of such records or books of accounts;

g. Willfully attempting in any manner to evade or defeat any tax imposed under the Tax Code;

h. Willfully using fake or falsified Revenue Official Receipts (RORs), Letters of Authority (LAs), Certificates Authorizing Registration (CARs), Tax Credit Certificates (TCCs), Tax Debit Memoranda (TDMs) and other accountable forms of the Bureau of Internal Revenue;

i. Corrupting/Bribing or attempting to corrupt/bribe any internal revenue official or employee through any of the modes of corruption as defined by the Anti-Graft and Corrupt Practices Act;

j. Such other acts or omissions similar to the foregoing, including all other offenses punishable under the Tax Code or other laws.

B. Filing of Petitions for Disaccreditation/Suspension -

1. A Petition for Disaccreditation/Suspension of an Accredited Tax Agent may be filed with the RRAB having jurisdiction over the residence or principal place of business of the accredited tax agent against whom the Petition is being filed.

2. All Petitions must be filed together with appropriate documents to support the premises upon which the Petition is anchored.

3. Petitions filed by PICPA, TMAP or any other similar professional or non-governmental organization must be signed by the incumbent President of the organization concerned.

4. Petitions found to have been filed by fictitious persons or organizations, upon verification by the RRAB concerned, shall be dismissed for lack of factual or legal bases.

C. Administrative Proceedings -

1. No Accredited Tax Agent shall be suspended or disaccredited without a prior hearing set for the purpose.

2. The RRAB with whom a Petition for Disaccreditation/Suspension was filed shall conduct hearing(s) on such Petition, to allow both the Petitioner and the Accredited Tax Agent concerned to present their side of the case.

3. In the conduct of hearings, a quorum is sufficient to convene the RRAB.

All such proceedings shall be presided over by the Assistant Regional Director, in his capacity as Chairman, or in his absence, by the designated Vice-Chairman of the RRAB.

4. Upon termination of the hearing, the RRAB shall submit the entire docket of the proceedings for a Petition for Disaccreditation/Suspension, together with its recommendation thereon, to the RNAB, for final action.

5. The disaccreditation or suspension of an Accredited Tax Agent must be reached by a majority vote of the members of the RNAB present and voting.

6. In cases of disaccreditation or suspension, the RNAB shall issue to the Tax Agent concerned a Notice of Disaccreditation/Suspension signed by its Chairman. A copy of such Notice shall be sent to the Petitioner.

7. In the event that a Petition for Disaccreditation/Suspension is not upheld, the RNAB shall inform both parties of such decision, in an official communication signed by its Chairman.

D. Appeal -

1. In the event that accreditation previously granted to a Tax Agent is cancelled, suspended or revoked, the applicant or Tax Agent concerned may appeal such disaccreditation/suspension to the Commissioner of Internal Revenue within fifteen (15) days from the date of receipt of the official notice of denial or Notice of Disaccreditation/Suspension.

2. The decision of the Commissioner of Internal Revenue shall be immediately executory.

3. The decision of the Commissioner of Internal Revenue may, in turn, be appealed by the applicant/Tax Agent concerned to the Secretary of Finance, through a Petition for Reconsideration, within fifteen (15) days from the date of receipt of such decision. . The Secretary of Finance shall act on a Petition for Reconsideration within sixty (60) days from the date of filing of such Petition. In the event that the Secretary of Finance should be unable to act on such Petition within the specified period, the decision of the Commissioner shall be deemed sustained.

SECTION 9. Effects of Accreditation - Only those Tax Agents/Practitioners, Partners or Officers of General Professional Partnerships, or Officers or Directors of corporate entities engaged in tax practice who have been issued Certificate of Accreditation or ID card shall be allowed to represent a taxpayer or transact business with the Bureau of Internal Revenue in representation of a taxpayer for the purpose(s) defined in these Regulations. The BIR can refuse to transact official business with tax practitioners who are not accredited before it and shall require that certain official statements such as returns, financial statements, reports, protests, requests for ruling, official correspondence and other statements, papers or documents filed on behalf of a taxpayer be signed or certified to by accredited persons which shall bear the following information below the signature of the latter:

A. For Individuals (CPA's, Members of GPPs, and others)

a. 1. Taxpayer Identification Number (TIN); and
a. 2. Certificate of Accreditation Number, Date of Issuance, and Date of Expiry.

B. For members of the Philippine Bar:

b. 1. Taxpayer Identification Number (TIN); and
b. 2. Attorney's Roll number or Accreditation Number, if any.

None of the provisions of these Regulations shall be construed to authorize non-CPAs who are granted ‘accredited tax agent’ status by virtue of these Regulations to sign the financial statements’ Auditor’s Certificate even if the same were for BIR purposes only.

All accredited Tax Agents/Practitioners shall be included in a Master List of Accredited Tax Agents/Practitioners which shall be kept up-to-date by the RNAB.

SECTION 10. Effectivity - These Regulations which supersede Revenue Regulations No. 15-99 shall take effect after fifteen (15) days following publication in a newspaper of general circulation.

(Original Signed)
MARGARITO B. TEVES
Secretary of Finance
Recommending Approval:
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue

REVENUE REGULATIONS NO. 10-2006

SUBJECT : Prescribing the Guidelines and Conditions for the Tax Treatment of Securities Borrowing and Lending Transactions Involving Shares of Stock or Securities Listed in the Philippine Stock Exchange

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. - Pursuant to the provisions of Sections 244 and 245 of the Tax Code of 1997 (Tax Code), Section 9(C) of Republic Act (RA) 9243, and the Memorandum of Agreement dated September 30,1998 between the Philippine Stock Exchange (PSE), and the Securities and Exchange Commission (SEC), the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR), these Regulations are hereby promulgated to prescribe the guidelines and conditions for the tax treatment of Securities Borrowing and Lending (SBL) transactions involving shares of stock or securities listed in PSE with the end in view of institutionalizing the SBL facility in the Philippine capital market. (SBL of securities administered by other Exchanges shall be covered by a separate regulation).

SECTION 2. Concept of Securities Borrowing and Lending (SBL). - Securities Borrowing and Lending (SBL) is an important element in securities trading and capital market development among emerging markets. It is a vital facility behind the efficient trading settlements and growth of derivatives and options market. SBL exists for both equity and debt securities. For purposes of these Regulations, however, SBL shall be limited to borrowing and lending of shares of stock or securities listed in the PSE unless declared by the Securities and Exchange Commission to be ineligible for borrowing and lending under an SBL Program. SBL Program for other securities listed and traded in other Exchanges shall be covered by a separate Regulation.

SBL involves the lending of shares of stocks or securities by the Lender, who owns or controls them, to the Borrower who needs the shares of stocks/ securities borrowed to support trading strategies or settlement obligations, in exchange for a collateral and the promise to return the equivalent shares of stocks/ securities at the end of the borrowing period. The borrowing period in any agreement cannot be more than two (2) years.

Typically, the Borrower will use or dispose of the shares of stocks/ securities borrowed strictly in connection with a particular purpose or purposes as herein mentioned. Being fungible in nature, the borrowed shares of stocks/securities are transferred from the Lender to the Borrower. For the duration of the borrowing and lending period under the agreement, the Lender temporarily loses ownership of the shares of stock/securities lent but acquires a contractual right to receive all benefits accruing to the shares of stock/securities. The objective is to put the Lender into the same economic position as the Lender would have been had the securities not been lent. This means that in case of corporate actions like stock rights, dividend declarations, and other benefits accruing to the shares of stock, the Borrower would have to "manufacture" the corresponding benefits thereon and return the same to the Lender as if the shares of stock/securities "never left his hands".

Upon demand of the Lender or at the end of the stipulated borrowing period, the Borrower is then obligated to return the equivalent shares of stock/securities and the Lender, in turn, returns the collateral put up by the Borrower. In effect, SBL is similar to a simple collateralized cash loan transaction. However, instead of cash, what is borrowed are listed shares of stock/securities and what is provided as collateral is either cash, government or equity securities, or guaranteed letter of credit.

SECTION 3. Definition of Terms.

a. Borrowing Period. The period agreed upon by the parties during which an SBL transaction should be outstanding, which period, shall in no case exceed two (2) years from the date of execution of the SBL Confirmation Notice. At the end of this period, the Borrower must return to the Lender the equivalent shares of stock borrowed.

b. Collateral. Cash, government or equity securities or letters of credit guaranteed by a bank, provided to the Lender as security in accordance with the rules prescribed by the SEC and/or PSE until the borrowed share/security is returned.

c. Equivalent Shares of Stock/Securities. Shares of stock/securities of the same type or class of issue and of equivalent number to the shares/securities borrowed. The term shall also refer to conversion, subdivision or consolidation, a take-over, or a rights issue where it is not possible to return such borrowed shares of stock/securities because of a corporate re-structuring or similar event subsequent to the date of the SBL.

d. Lender/Lending Agent. Any person or entity who lends shares of stock/securities from his pool of assets as principal or from the assets of his client in case of a Lending Agent.

e. Failed Settlement. In the case of regular stock/securities transaction, failed settlement means the failure of the seller to deliver to the buyer the shares subject of the transaction within the required period.

f. Manufactured Dividend or Benefits. The amount of dividend or other benefits that accrue on the shares of stock/securities that are lent out which the Borrower is obliged to pass on to the Lender in accordance with the terms of the agreement.

g. Mark-to-Market. The practice of periodically re-pricing the shares on loan against the value of the Collateral based on current market prices of the shares of stock and the Collateral.

h. Master Securities Lending Agreement (MSLA). A written contract between the Borrower and the Lender or the Lending Agent embodying the general terms and conditions for the conduct of SBL transactions.

i. Securities Borrowing and Lending (SBL). The lending (borrowing) of shares of stock/securities listed in the Philippine Stock Exchange from an investor's portfolio or investment account to support trading strategies of the borrower or for purposes specified under these Regulations with the commitment by the borrower to return or deliver the equivalent shares/securities to the lender at the end of the borrowing period.

j. Short Sale or Short Selling. Any sale of shares of stock/securities not yet in the possession of the seller.

k. SBL Confirmation Notice. A notice in a format prescribed by the PSE which is sent by the Lender/Lending Agent to the Borrower to indicate the details of the SBL transaction including, but not limited to, the type of securities borrowed and terms of borrowing.

SECTION 4. Parties to an SBL transaction. - The parties to an SBL transaction are as follows:

a. Borrower. - A Borrower is any person, whether natural or juridical, who obtains shares of stock/securities from a Lender's portfolio or investment account under a MSLA strictly for purposes specified under Section 6 (f) hereof. There are no restrictions on the status and qualifications of a person who enters into an MSLA as a Borrower.

Consequently, a Borrower is not necessarily one who is registered or accredited by the PSE.

b. Lender. - A Lender is any person, whether natural or juridical, who lends shares of stock/securities from his/its pool of assets or the assets of his clients (in the case of Lending Agents). There are no restrictions on the status and qualifications of a person who enters into an MSLA as a Lender. A foreign lender is contemplated within the definition of a Lender for the purpose of these Regulations.

c. Agent. - An authorized Agent is any person, whether natural or juridical, who acts on behalf of a client, who may be the Lender or the Borrower or both, in respect of SBL transactions.

SECTION 5. Tax Treatment of Securities Borrowing and Lending (SBL). - For purposes of these Regulations, the borrowing and lending transactions of shares of stock/securities listed in the PSE, as well as the delivery to the Lender of collateral appurtenant thereto, shall not be subject to the stock transaction tax under Section 127 or capital gains tax imposed under Section 24(C), 25(A)(3), 28(A)(7)(c), and 28(B)(5)(c) of the Tax Code, and documentary stamp tax under Section 176 of the Tax Code, as amended by RA 9243, provided, that, a valid MSLA is executed by the parties and registered with and approved by the BIR, the SBL Program is in accordance with the rules and regulations of the SEC, and such SBL Program is under the administration and supervision of the PSE. However, all other applicable taxes prescribed by the Tax Code and special laws shall continue to apply.

Unless the terms and conditions of these Regulations are complied with, the borrowing (lending) of shares of stock/securities shall be treated as a disposal (an acquisition) by the lender (Borrower), and the return of borrowed shares/securities an acquisition (disposal) by the Lender (Borrower), in which case, the applicable taxes on the transaction shall be imposed.

SECTION 6. Master Securities Lending Agreement; Basic Requirements. – Prior to the borrowing of shares of stock/securities by the Borrower and negotiating the terms of an SBL, the parties must have entered into an MSLA. A valid MSLA contains the following features:

a. Entitlement of Lender to Certain Stock Rights/Interest - While there is transfer of the shares of stock/securities to the Borrower, the Lender retains certain rights accruing to the shares of stock/securities lent, such as the right to receive cash, stock dividends or interest which the Borrower is obliged to manufacture or reimburse to the Lender during the borrowing period. These cash, stock dividends or interest which the Borrower is required to manufacture or reimburse to the Lender are otherwise referred to as "Manufactured Dividends or Benefits". The Lender may likewise retain voting rights over the loaned shares of stock/securities while in the possession of the Borrower, if mutually agreed upon by the parties in the MSLA.

Receipt of the Manufactured Dividends or Benefits shall not be a taxable income of the Lender since it just represents dividends/other benefits that the lender would have received had the share not been loaned pursuant to SBL. However, the payment of such amount by the Borrower shall not be a tax deductible expense. On the other hand, the receipt of cash dividend from the issuing company by the Borrower or Buyer shall be subject to the provisions of existing laws.

b. Stock return. - The Lender is entitled to recall the loaned shares of stock/securities in whole or in part. Upon demand or at the end of the Borrowing Period, the Borrower has the corresponding obligation to return the Equivalent Shares of Stock/Securities, i.e, equivalent number of the same class or type of shares of stock/securities, carrying the same rights, and issued by the same company as that of the borrowed shares of stock/securities.

c. Collateral requirement. - There is no consideration involved in the same manner as a regular buy and sell transaction. Instead, the Borrower merely puts up a collateral in accordance with the rules prescribed by the SEC and/or PSE in order to guarantee his obligations under the MSLA, which collateral may not be necessarily in the form of cash but may also be in the form of government or equity securities or letters of credit.

d. Borrowing period. - The period agreed upon by the parties during which the specific SBL transaction under the MSLA is made effective and upon the termination of which, the specific SBL transaction is likewise ended.

However, this period shall in no case exceed two (2) years from the date of execution of SBL Confirmation Notice.

e. Stock and collateral return. - Upon the expiration of the Borrowing Period, the Borrower is bound to return the Equivalent Shares/Securities as the term is defined herein. Concomitantly, the Lender is required to return the collateral put up by the Borrower.

f. Specified purpose(s). - The purpose or purposes for which the borrowed shares of stock/securities will be used are specified in and accordingly limited by the MSLA, which must be any of the following:

1. Settlement of sale of Philippine shares of stock/securities effected in the Philippines. Shares of stock/securities may be borrowed to avoid failure to deliver for the settlement of a sale.

This happens when the seller cannot deliver what he owns on time (failed settlement) and therefore would need to borrow in order to fulfill his settlement obligations. The corresponding transaction taxes relative to the sale of shares/securities shall apply to the actual sale of shares/securities.

2. Settlement of a future sale whether agreed or not at the time the borrowing is effected. Shares of stock/securities may be borrowed in advance of a sale if it is anticipated that the borrowed shares of stock/securities will be required for settlement of the said future sale. The corresponding transaction taxes relative to the sale of shares of stock shall apply to the actual sale of shares/securities.

3. Replacement in whole or in part of shares of stock/securities obtained by the Borrower under another SBL agreement.

Where a Lender demands the early return of borrowed shares of stock/securities, a Borrower without a sufficient quantity on hand of the shares of stock/securities demanded to be returned can borrow equivalent shares of stock/securities from a third party to repay the first Lender. The replacement borrowing may be for the whole, or part only, of the previously borrowed shares of stock/securities. A condition applying to such an arrangement is that the initial borrowing must itself be an SBL within the meaning of these Regulations. Moreover, the second borrowing must also be under an SBL governed by these Regulations.

4. On-lending of borrowed shares of stock/securities to another Borrower who has effected another SBL agreement. This occurs when an SBL is made by an Agent for on-lending to another Borrower who also effects an SBL. However, the subsequent Borrower must use the Borrowed shares of stock/securities for any of the Specified Purposes specified herein.

Because of the practical difficulties an intermediary could face in determining how the subsequent Borrower had used the shares of stock/securities, the BIR shall look at an intermediary's borrowings and on- lendings separately. Thus, provided an intermediary borrows for the purpose of on-lending, his borrowing transaction will qualify under a conditional tax-free status.

Furthermore, as shares of stock/securities carrying the same rights are fungible, it is not necessary to match each of an intermediary's SBL with each of his on- lendings on a case-by-case basis.

5. Securities Financing and Collateral Pledging. Shares of stocks/securities may be used by the Borrower as collateral for obtaining loans. The borrowed shares of stock may, in turn, be used by the Borrower as a commodity to lend to participants in securities market so that the participants can carry out their investments and financing efforts.

6. Other Authorized Purposes. Other purposes similar or analogous to the foregoing, or consistent with the objectives of the SBL program as may be determined by the BIR upon favorable recommendation of the SEC and the PSE.

SECTION 7. Guidelines in the Execution of the MSLA.

a. The Borrower must obtain the shares of stock/securities for one or more of the Specified Purposes as defined in Section 6(f) of these Regulations.

In this regard, the MSLA may refer to the Specified Purposes within the meaning of these Regulations. However, an MSLA which permits shares of stock/securities to be borrowed for the Specified Purposes as herein defined and some other purposes not defined or authorized by these Regulations shall not qualify as a valid MSLA.

b. A single MSLA may provide for the borrowing and lending of more than one type of shares of stock/securities. However, only shares of stock/securities, the sale and purchase of which are subject to the rules of PSE, are eligible for SBL transaction.

Shares of stock/securities in private companies not listed and traded through the PSE do not fall within the scope of an SBL transaction subject of these Regulations.

c. Every MSLA entered into by a Borrower and a Lender or by their duly authorized agents must be registered with the BIR upon payment of the prescribed registration fee pursuant to Section 8(a) hereof. An MSLA should be entered into by the Borrower for every Lender counterparty.

However, of the parties to the MSLA, only the Borrower is required to register the MSLA to avoid duplication.

d. Where an MSLA does not comply with the requirements herein set forth, the BIR shall consider the requirements fulfilled if a copy of the MSLA is accompanied by an executed copy of an addendum duly complying with the deficiency requirement. In such cases, the addendum should be attached to a copy of the MSLA. Only transactions entered into subsequent to the execution of the addendum will be eligible for a conditional tax-free status.

SECTION 8. Registration of the MSLA. - The following guidelines shall govern the registration of every MSLA:

a. Requirements. Prior to entering into the first SBL transaction, the Borrower must provide the BIR with the following:

1. Three original or certified true copies of a duly completed MSLA Registration Form (Appendix A);

2. Three original or certified true copies of the duly-notarized MSLA (and its addendum if applicable);

3. The prescribed registration fee of Five Thousand Pesos (Php5,000.00);

4. Three original or certified true copies of Lender's Notification of Execution of MSLA (Appendix B); and

5. Other documents and information that the BIR may require.

The Borrower's copy of the MSLA and its addendum (if applicable), endorsed with a registration number and stamped to acknowledge payment of registration fee, will be returned to the Borrower endorsed with the approval or denial of the BIR, as the case may be, within ten (10) working days from receipt thereof.

b. Place and Time of Registration. The MSLA shall be registered at the Law Division of the BIR National Office or in such other office which the Commissioner may hereafter direct, upon filing of Registration Form and payment of the registration fee with the General Services Division at the BIR National Office. Registration of the MSLA should be made within two (2) weeks if executed in the Philippines and within one (1) month if executed outside the Philippines.

In case parties have valid existing MSLAs executed outside the Philippines prior to the effectivity of these Regulations, the borrower must register the MSLA before entering into the first SBL transaction involving Philippine equity securities.

c. Approval of MSLA. Only SBL transactions under an MSLA duly registered and approved by the BIR shall be entitled to the conditional tax-free status of the said transactions.

d. Failure to Register. Failure to register the MSLA will make the SBL transaction a sale and purchase of the borrowed shares of stock/securities outside the PSE thus, the SBL transaction shall be subject to the corresponding capital gains tax and documentary stamp tax.

e. Duty of the Lender and Borrower. A Lender under an MSLA must take reasonable care to ensure that the Borrower registers the MSLA or is aware of the requirement to register the MSLA as soon as practicable.

Due notice to the borrower may be effected, for example, by stipulating in the MSLA or in the addendum (if applicable), that the Borrower shall register the agreement and its addendum with the BIR or by otherwise informing the Borrower of such registration requirement.

In order not to be assessed the corresponding taxes on the transaction, a Lender must also advise the BIR in writing that he has entered into an MSLA by filling-in the Notification of Execution of MSLA Form (Appendix B). The advice should include particulars of the agreement similar to those shown on the MSLA Registration Form.

Said notification shall be submitted upon the registration of the MSLA by the Borrower.

f. Duty of the BIR. It shall be the duty of the Law Division of the BIR National Office to determine whether the registered MSLA conforms to the requirements herein imposed, to recommend the signature of the Commissioner or his duly-authorized representative for the approval or denial of the MSLA registration, to monitor compliance of the parties to the conditions herein prescribed, and to recommend, where appropriate, assessment of the taxes against the parties found to have entered into an SBL transaction in violation of these Regulations.

SECTION 9. SBL Deemed Sale –An SBL is deemed a sale and purchase of the borrowed shares of stock/securities (or part of it, as the case may be) when any of the following circumstances is present:

a. There is no Stock Return in whole or in part of the borrowed shares of stock/securities at the end of the borrowing period. A partial stock return is permissible; however, the balance of any borrowed shares of stock/securities that has not been returned at the end of the borrowing period is deemed to have been bought (sold) by the Borrower (Lender);

b. The borrowed shares of stock/securities, or part of it, have been used other than that for the Specified Purposes herein enumerated;

c. The borrower is in default in accordance with the terms provided for in the MSLA for the return of the whole or part of the borrowed shares of stock/securities;

d. There is failure to comply with the essential features of a valid MSLA;

e. There is failure to register or there is delayed registration of the MSLA; or

f. SBL transactions were entered into by the parties outside the borrowing period.

SECTION 10. Tax-Treatment of SBL Deemed Sale. Where an SBL is deemed a sale and purchase of the borrowed shares of stock/securities (either in whole or in part), as determined by the BIR and upon due notice to the parties concerned, such transaction shall be subject to applicable taxes as if a sale and purchase of those shares of stock/securities had been effected in the Philippines. In such a case, the following shall be the tax consequences:

a. If the purported SBL transaction is deemed a sale, such sale is necessarily consummated outside the PSE. Hence, the transaction shall be subject to capital gains tax imposed under either Sections 24(C) or 25(A)(3) or 28(A)(7)(c) or 28(B)(5)(c), as the case may be, and shall be subject to the following rules:

1. The net capital gains tax shall accrue within 30 days following each sale or other disposition of shares of stock, upon the filing in duplicate of a capital gains tax return (BIR Form No. 1707) with the Authorized Agent Banks located within the Revenue District Office (RDO) having jurisdiction over the residence or principal place of business of the deemed seller showing, among others, the name of seller and buyer; amount realized (selling price or fair market value of other property received) and contract price or closing price of the securities sold on the day preceding the Specified Day as defined in Section 11 hereof; cost or adjusted basis; date of acquisition; sale or disposition.

2. A final consolidated return or an adjustment return covering all stock transactions during the taxable year shall be filed on or before the fifteenth day of the fourth month following the close of the taxable year.

3. The return shall include all stock transactions resulting in capital gains or capital losses for the whole year. The tax shown on the final or adjustment return after deducting therefrom the taxes paid during the taxable year shall be paid upon filing or refunded, as the case may be.

4. The tax base shall be determined on a consideration based on the closing price of the shares of stock on the day preceding the Specified Day as defined in Section 11 hereof or the actual amount realized, whichever is higher, less the carrying cost or adjusted basis of the sold securities, for capital gains tax, and without any deduction, for the computation of the documentary stamp tax. The closing price should be determined in accordance with the Rules and practices of the PSE.

b. The deemed sale transaction as stated above shall likewise be subject to the documentary stamp tax under Section 175 of the Tax Code, as amended by RA 9243.

c. Any gain derived from the transaction deemed sale as provided herein shall be exempt from the regular individual or corporate income tax. The tax paid thereon shall not be deductible for income tax purposes.

d. The deemed sale and purchase transaction may expose the Borrower to penalty for late payment of DST and Capital Gains Tax if the applicable time limits set out in the Tax Code of 1997 are not complied with.

SECTION 11. Specified Day. – The term Specified Day as used above is defined as follows:

a. Where no Stock Return is made - The day following the expiration of the borrowing period;

b. Where the borrowed shares of stock is used for other purposes not specified by the MSLA - The day on which the borrowed shares of stock/securities were given to the Borrower by the Lender as indicated in the transaction documents.

c. Where the borrower fails to comply with a Lender's demand for a return of borrowed shares of stock/securities - The day after that failure to comply with the demand.

SECTION 12. Compliance Requirements.

a. Record Keeping and Reporting - The Borrower is required to:

1. Keep SBL ledgers and other books of account in the form prescribed by the Commissioner of Internal Revenue;

2. Enter required particulars of SBL transactions and Stock Return into that ledger;

3. Prepare and keep an SBL Transaction Report for each specific SBL transaction in accordance with Appendix C or substantially equivalent form;

4. Provide BIR copies of the SBL Transaction Report and the accompanying SBL Confirmation Notice.

b. Recording Format - The SBL ledgers shall be kept in a written form, as per sample format hereto attached as Appendix D, or recorded on a computer where the relevant information can be supplied in a legible hard copy format. The ledger shall contain the following particulars with respect to each SBL transaction and related Stock Return:

1. Date of borrowing or lending and date of return;

2. Name of Borrower and Lender;

3. Reference numbers to identify the SBL transaction, the Stock Return and the MSLA;

4. Description of the shares of stock/securities borrowed or loaned (name, code and type);

5. Quantity of the shares of stock/securities borrowed or loaned (number of shares and value);

6. Purpose for which the shares of stock/securities were borrowed; and

7. Form of collateral, value and other pertinent information about the collateral.

c. Filing of Bi-Annual Summary Reports of Outstanding and Liquidated SBL Transactions and Stock Returns. Bi-annual summary reports of outstanding and liquidated SBL Transactions and Stock Returns, in the format prescribed by the BIR (Appendices E and F, respectively), must be prepared every six months and filed with the Law Division of the BIR National Office within one (1) month after the end of the covered period. The said reports must be accompanied by copies of the SBL Transactions Report and SBL Confirmation Notice evidencing specific SBL transactions entered into by the parties during the six-month period.

SECTION 13. Penalties. - In addition to the civil and criminal liabilities of the taxpayer for violation of the provision of Sec. 127 (A) and Sec. 175 of the Tax Code of 1997, the following administrative penalties incident to the delinquency or deficiency prescribed under Secs. 248 and 249 of the same Code shall be imposed which shall be collected at the same time, in the same manner and as part of the tax.

a. Surcharges

1. 25% surcharge - In case of any failure to make and file a return and pay the tax due thereon as required by these Regulations on the date prescribed; or unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other than those with whom the return is required to be filed; or failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of the Code or of these Regulations, or full amount of the tax due for which no return is required to be filed on or before the date prescribed for its payment, there shall be imposed, in addition to the tax required to be paid, a surcharge equivalent to twenty - five percent (25%) of the amount due.

2. 50 % surcharge - In case of willful neglect to file the return within the period prescribed by the Code or these Regulations, or in case a false or fraudulent return is willfully made, the penalty to be imposed shall be fifty percent (50 %) of the tax or of the deficiency tax, in case any payment has been made on the basis of such return before the discovery of the falsity or fraud.

b. Interest - There shall be assessed and collected on any unpaid amount of tax, interest at the rate of twenty percent (20 %) per annum, or such higher rate as maybe prescribed by the rules and regulations, from the date prescribed for its payment until the full payment thereof.

1. Deficiency interest - Any deficiency in the tax due shall be subjected to interest at the rate of twenty percent (20%) per annum, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof.

2. Delinquency interest - In case of failure to pay the amount of the tax due on the return required to be filed, or a deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner of Internal Revenue, there shall be assessed and collected on the unpaid amount, interest at the rate of twenty percent (20%) per annum until the amount is fully paid, which interest shall form part of the tax.

c. Failure to File Certain Information Returns - In case of each failure to file an information return, statement or list, or keep any record, or supply any information required by these Regulations on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall upon notice and demand by the Commissioner, be paid by the person failing to file, keep or supply the same, One Thousand Pesos (Php1,000) for each such failure: Provided, however, that the aggregate amount to be imposed for all such failures during a calendar year shall not exceed Twenty Five Thousand Pesos (Php25,000).

For purposes of these Regulations, the following Appendices are the sample formats for the documents and ledgers to be submitted to the BIR and maintained by the parties:

Appendix A - MSLA Registration Form
Appendix B - Notification of Execution of MSLA by Lender
Appendix C - SBL Transactions Report
Appendix D1 - Securities Lending Ledger
Appendix D2 – Securities Borrowing Ledger
Appendix E – Bi-Annual Summary Report of Outstanding SBL Transactions
Appendix F – Report of Liquidated SBL Transactions

SECTION 14. Effectivity - These Regulations shall take effect after fifteen (15) days from publication in the Official Gazette or in any newspaper of general circulation.

(Original Signed)
MARGARITO B. TEVES
Secretary of Finance
Recommending Approval:
(Original Signed)
JOSE MARIO C. BUÒAG
Commissioner of Internal Revenue

REVENUE REGULATIONS NO. 9-2006

Subject : Amending Further Certain Provisions of Revenue Regulations (RR) No. 6-2005, as Amended, Implementing the Provisions of Executive Order No. (EO) No. 399, as Amended by EO No. 422, Otherwise Known as the “No Audit Program (NAP)”.

To : All Internal Revenue Officials, Employees and Others Concerned.

SECTION 1. SCOPE. Pursuant to Section 244 of the National Internal Revenue Code of 1997 in relation to EO 399, as amended by EO 422, these Regulations are hereby promulgated to further amend certain provisions of RR No. 6-2005, as amended.

SECTION 2. DEFINITION OF TERMS. Section 2(d) of RR No. 6-2005 is hereby amended to read as follows:

“SECTION 2. DEFINITIONS

xxx xxx xxx.

(d) Taxpayer – refers to any person whether individual or corporation earning business income.”

SECTION 3. CRITERIA FOR QUALIFICATION. Section 5 of RR No. 6-2005, as amended, is hereby further amended to read as follows:

“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.

For taxpayers earning mixed income (business income and employment income), the computation of the 20% increase in the income tax payment and the ratio of income tax payment to gross sales must be based on the total tax paid and total income by the taxpayer from his business and employment. Provided, however, that increase/decrease in the compensation and its corresponding effect on the tax due for the current taxable year shall be excluded for purposes of computing the compliance with the required increase in income tax payment and the ratio of tax payment to gross sales/receipts.

Taxpayers who paid or are paying the Minimum Corporate Income Tax (MCIT) can still avail of the NAP provided that the required increase in the income tax payment and the ratio of tax payment to gross sales/receipts shall be based on the MCIT payment in the base year and the MCIT due in the current year. Further, excess MCIT shall not be credited from the succeeding year’s tax due, even if the normal income tax becomes higher than the MCIT. Deferred Charges-MCIT for the current year must be closed to retained earnings account.

Taxpayers enjoying the benefit of the preferential tax rates (not subject to the Normal Income Tax Rate) can still avail of the program provided that the required increase in the income tax payment and the ratio of income tax payment to gross sales/receipts as stated in letters (a) and (b) hereof are complied and shall be based on the tax due computed applying the preferential tax rate for the base year and the current year. The same rule applies, even if the taxpayer’s current year is no longer entitled to the application of the preferential tax rate.

c. ratio of net value added tax (VAT) 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 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 of Internal Revenue (Commissioner).

VAT zero-rated transactions and VAT exempt transactions, not subject to percentage tax, shall not be considered for purposes of determining compliance with the required VAT or percentage tax ratio. Provided, however, that the gross sales/receipts from the aforesaid transactions are included for purposes of qualifying with the requirements of letters (a) and( b) of this section.

Taxpayers having purely VAT zero-rated transactions or VAT exempt transactions, not subject to percentage tax, shall not be required to comply with letter (c) and shall be deemed qualified for said exemption provided that the requirements of letters (a) and (b) of this section are complied with. Provided, further, that photocopies of the required documents included in the NAP Participation Form (April 2006 Version) shall be presented for validation of their business tax type/s.

For purposes of determining the tax payments for the Current Taxable Year, only taxes actually paid in cash as shown in the Annual Income Tax Return, Quarterly Income Tax Return, Quarterly Value-added Tax Return, Monthly VAT Declaration and Quarterly/Monthly Percentage Tax Return shall be considered. For this purpose, creditable withholding taxes for the tax year concerned, which are properly supported by a Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307)/Certificate of Compensation Payment/Tax Withheld (BIR Form No. 2316), shall be considered as cash payment. 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.

Xxx xxx xxx.

Provided, further, that the growth rate and ratio provided herein shall be adjusted to reflect the effect of the increase/decrease of the tax rate resulting from legislative measures. These growth rate and ratio shall be determined by the Commissioner for every NAP participation year which shall be released through a Revenue Memorandum Circular to be issued before the deadline for filing of NAP Participation Form on a yearly basis.”

Xxx xxx xxx.”

SECTION 4. TAXPAYERS NOT QUALIFIED FOR THE PROGRAM.

Section 6 of RR 6-2005 is hereby amended to read as follows:

“SECTION 6. TAXPAYERS NOT QUALIFIED FOR THE PROGRAM

Taxpayers who are reporting net loss or have a Net Operating Loss Carry-over without MCIT due shall be disqualified from participating in the NAP. This includes taxpayers having net income but having no tax payable due to their deduction of personal and additional exemptions.”

SECTION 5. DEADLINE. Section 9 of RR No. 6-2005, as amended, is hereby further amended to read as follows:

“SECTION 9. DEADLINE

A taxpayer must file a duly accomplished NAP Participation Form, together with the required attachmets, not later than thirty (30) days from the statutory deadline for the filing of Annual Income Tax Return for the year subject of the Participation, or in the case of taxpayers whose statutory deadline for the filing of 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 thereof.

However, for taxpayers whose taxab;e uear ends December 31, 2005 and fiscal year ending on January, February or March, 2006, the NAP Participation Form must be filed together with the required attachments, on or before July 31, 2006.

Xxx xxx xxx

Taxpayers who failed to avail and qualify for 2004 NAP availment can still avail of the Program under these regulations by complying with the requirements herein provided; Provided, however, that no Final Assessment Notice pursuant to a Letter of Authority, Tax Verification Notice or Letter Notice has yet been issued for the taxable year 2004. Additional payments, if any, must be made using BIR Form 06015-101 and NAP Participation Form must be filed not later than July 31, 2006.”

SECTION 6. ISSUANCE OF CERTIFICATE OF EXEMPTION FROM

AUDIT/INVESTIGATION OR NOTICE OF DISQUALIFICATION. Section 10 of RR No. 6-2005 is hereby amended to read as follows:

“SECTION 10. ISSUANCE OF CERTIFICATE OF EXEMPTION FROM AUDIT/INVESTIGATION OR NOTICE OF DISQUALIFICATION.

The application and the required attachments shall be reviewed by the NAP Review Committee composed of the following:

A. Regional Level
Head : Assistant Regional Director
Members:
1. Revenue District Officer where taxpayer is registered
2. Chief, Assessment Division
3. Chief, Legal Division

B. Large Taxpayers
Head : HREA (Regular/Excise)
Members:
1. Chief, LTAID I / LTAID II /, LTDO where taxpayer is registered
2. Chief, LTCED
3. Head, Review Team

The NAP Review Committee shall recommend the issuance of a Certificate of Exemption from Audit/Investigation or Notice of Disqualification which shall be signed by the Regional Director, for regional office cases, or the Assistant Commissioner, Large Taxpayers Service, for large taxpayers’ cases.

Any unpaid amount found after review by the NAP Review Committee shall be paid within thirty (30) days from receipt by the taxpayer of the written notification from the RDO or Chief of concerned Large Taxpayers Office; otherwise, the taxpayer’s availment shall be invalidated.”

SECTION 7. APPEAL. Taxpayers who received a Notice of Disqualification may file an appeal to the NAP Committee- National Office Level within 30 (thirty) days from receipt thereof. The composition, functions, duties and responsibilities of NAP Committee- National Office Level shall be provided through a Revenue Special Order to be issued by the Commissioner for that purpose.

SECTION 8. EFFECTIVITY. These Regulations shall take effect immediately after publication in any newspaper of general circulation.

(Original Signed)
MARGARITO B. TEVES
Secretary of Finance
Recommending Approval:
(Original Signed)
JOSE MARIO C. BUNAG
Commissioner of Internal Revenue

REVENUE REGULATIONS NO. 8 – 2006

SUBJECT : Prescribing the Implementing Guidelines on the Taxation and Monitoring of the Raw Materials Used and the Bioethanol-Blended Gasoline (E-Gasoline) Produced under the Fuel Bioethanol Program of the Department of Energy (DOE)

TO : All Internal Revenue Officials and Others Concerned

SECTION 1. SCOPE. – Pursuant to the provisions of Section 244 in relation to Section 245 of the National Internal Reven4ue Code of 1997 (Tax Code), as amended, these Regulations are hereby promulgated, for excise tax purposes, to prescribe the implementing guidelines on the taxation and monitoring of E-gasoline and the imported or locally manufactured fuel bioethanol used as raw material or blending component in the production thereof, pursuant to the Fuel Bioethanol Program of the DOE.

SEC. 2. DEFINITION OF TERMS. – For purposes of these Regulations, the following terms and phrases shall have the following meaning:

(a) BIOETHANOL – shall refer to ethanol (C2H5OH) produced from biomass resources;

(b) FUEL BIOETHANOL – shall refer to the suitably denatured bioethanol, for use as blending component to unleaded gasoline to produce E-gasoline;

(c) E-GASOLINE – shall refer to an unleaded gasoline blended with fuel bioethanol;

(d) OIL INDUSTRY-PARTICIPANT - shall refer to an Oil Company duly authorized and accredited by the DOE pursuant to its Fuel Bioethanol Program;

(e) CERTIFICATE OF PRODUCT QUALITY/ANALYSIS – shall refer to the certification issued by the supplier, either local or foreign, or by an independent or third- party surveyor on the quality of the goods transported and consigned in favor of the Oil Industry-Participant for use in the Fuel Bioethanol Program; and

(f) DEHYDRATION – shall refer to the process of removing water to produce anhydrous or dehydrated bioethanol containing more than ninety-nine percent (99%) by volume of ethanol (C2H5OH).

SEC. 3. PERSONS QUALIFIED TO PRODUCE E-GASOLINE. – Any person, whether natural or juridical, who intends to engage in the business of blending unleaded gasoline with fuel bioethanol, must be a holder of an accreditation certificate as “Oil Industry-Participant” in the Fuel Bioethanol Program duly issued by the DOE. The said Oil Industry-Participant must, likewise, be a valid holder of a Permit to Operate duly issued by the appropriate office in the Bureau of Internal Revenue (BIR) where such person is required to be registered as an excise taxpayer, in accordance with the administrative provisions prescribed under these Regulations. Accordingly, only Oil Industry-Participants, duly accredited by the DOE under its Fuel Bioethanol Program and registered for excise tax purposes with the BIR, are authorized to import and/or purchase locally manufactured fuel bioethanol specifically intended for the manufacture of Egasoline, subject to the provisions of these Regulations.

SEC. 4. MINIMUM PHYSICAL PROPERTIES OF BIOETHANOL AND IMPOSITION OF THE APPLICABLE EXCISE TAX RATE. – For purposes of the Fuel Bioethanol Program, only pure anhydrous bioethanol containing an alcoholic strength of more than ninety-nine percent (99%) bioethanol shall be used, as a blending component, in the production of E-gasoline, subject to the provisions of the immediately succeeding paragraph hereof.

For purposes of the imposition of the excise tax rate of P0.05 per liter under Section 148 (d) of the Tax Code, as amended, the bioethanol product shall have been denatured before the release thereof from the customs custody, in case of importation; or, before removal thereof from the place of production, in case of locally manufactured bioethanol, subject to the succeeding provisions of these Regulations.

In case the bioethanol/fuel bioethanol fails to satisfy the foregoing requirements, the same shall be subject to the applicable excise tax rates prescribed under Section 141 of the Tax Code.

SEC. 5. USE OF TAX-PAID UNLEADED GASOLINE. – For purposes of the said Program, only tax-paid unleaded gasoline, whether imported or locally manufactured, shall be used in the production of the E-gasoline, or when the same is used as a denaturant to produce fuel bioethanol.

SEC. 6. IMPORTATION OF BIOETHANOL. – In case of importation of bioethanol, the following rules and procedures shall be strictly observed:

(a) Prior to each and every importation of bioethanol, an application for a Permit to Import shall be filed with the BIR Office where the applicant/Oil Industry-Participant is registered as an excise taxpayer. The application shall be accompanied by a certified true copy of Acknowledgement of Notice of Bioethanol Importation issued by the DOE covering the entire shipment and such other documents that may be prescribed by the BIR;

(b) Upon arrival of the shipment in the port of entry, the same shall be unloaded from the foreign vessel and transported directly to and stored in customs bonded storage tank designated for the purpose;

(c) Samples of unleaded gasoline to be used as denaturant as well as the imported bioethanol shall be taken from the respective storage tanks. A laboratory test thereof shall be conducted in the presence of the authorized representatives of the Oil Industry-Participant, DOE, BIR and Bureau of Customs (BOC) in order to determine whether or not the same conform to the prescribed standard specifications; otherwise, the conduct of the denaturing of the imported bioethanol shall not be allowed.

In the absence of the laboratory facilities within the blending premises of the Oil Industry-Participant, a sufficient volume of samples duly sealed and identified by all concerned parties shall be sent to any government or independent testing facility for laboratory analysis before the conduct of the prescribed denaturing. The cost of the said laboratory test shall be shouldered by the Oil Industry-Participant.

In case the sample of bioethanol conforms to the prescribed standard specifications, the denaturing of the imported bioethanol may be allowed to proceed. Otherwise, the denaturing of the imported bioethanol shall not be allowed and the applicable excise tax rates imposed under Section 141 of the Tax Code, shall be assessed and collected from the Oil-Participant before removal thereof from the customs bonded storage tank;

(d) The denaturing of the said bioethanol shall be conducted in the presence of the authorized representatives of the Oil Industry-Participant, DOE, BIR and BOC, within forty eight (48) hours immediately after completion of the unloading of the bioethanol from the foreign vessel and transfer thereof to the customs bonded storage tank:

Provided, That a written prior notice therefor shall be transmitted by the Oil Industry-Participant to the said government offices at least three (3) working days before the actual date of the conduct of denaturing; Provided, further, That the bioethanol shall be denatured using only unleaded gasoline, as denaturant, in accordance with the formula prescribed under these Regulations.

A joint denaturing report duly signed by all the authorized representatives of the Oil Industry-Participant and concerned government agencies shall be issued immediately after the conduct of the denaturing of the imported bioethanol;

(e) Before the release of the fuel bioethanol from the said customs bonded storage tank, an application for Authority to Release Imported Goods (ATRIG) shall be filed with the appropriate BIR Office, together with copies of commercial invoice, packing list, bill of lading, material safety data sheet, certificate of product quality/analysis from the foreign supplier, certificate of material source of bioethanol (i.e. sugarcane, petrochemicals, etc.), third-party surveryor’s report issued at the foreign port of loading, and such other documents that may be prescribed by the BIR.

No subsequent importation of bioethanol, the denaturing thereof and the release of the fuel bioethanol from the customs bonded storage tank for the exclusive use in the production of E-gasoline shall be allowed unless the liquidation reports required by these Regulations are fully complied with;

(f) The fuel bioethanol shall, at all times, contain the markings/marker dye as herein prescribed; and

(g) In case the customs bonded storage tank is located within the blending premises of the Oil Industry-Participant, an Official Delivery Invoice (ODI) or any other prescribed BIR form shall be issued by the assigned representative(s) of the BIR to cover the tax-paid removal of fuel bioethanol.

However, with respect to those located outside the blending premises of the Oil Industry-Participant, the monitoring of each removal of the fuel bioethanol therefrom shall be covered by a separate guideline to be issued in coordination with the BOC.

The volume of fuel bioethanol removed from the customs bonded storage tank shall be directly transported and unloaded only to the designated BIRapproved storage tank of the blending facilities of the Oil Industry-Participant.

SEC. 7. FORMULAS FOR FUEL BIOETHANOL. - The following are the prescribed formulas for fuel bioethanol:

(1) To every 100 liters of bioethanol: add 1.96% to 2.44% unleaded gasoline; and

(2) For other formulas, the same shall be subject to the favorable indorsement of the DOE and subsequent approval by the BIR.

However, until the domestic production and sale of bioethanol for exclusive use in the Program shall have been available as may be determined by the DOE, the importation of fuel bioethanol using the formula:

To every 100 liters of bioethanol: add 0.4 grams of denatonium benzoate (Bitrex), or four (4) parts per million (ppm) may be allowed, provided that the same shall still be subject to further denaturing using unleaded gasoline as denaturant, in accordance with Formula No. 1.

SEC. 8. IMPORTATION OF BIOETHANOL CONTAINING BITREX. – In case of importation of bioethanol containing Bitrex , the following rules and procedures shall be strictly observed:

(a) Prior to each and every importation of bioethanol containing Bitrex, an application for Permit to Import shall be filed with BIR Office where the applicant/Oil Industry-Participant is registered as an excise taxpayer. The application shall be accompanied by a duly certified true copy of Acknowledgement of Notice of Bioethanol Importation issued by the DOE covering the entire shipment and such other documents that may be prescribed by the BIR. In addition to the said document, a separate importer’s bond in an amount equivalent to the applicable excise tax rate under Section 141(a) of the Tax Code, applied on the average transactional volume of the bioethanol containing Bitrex imported during the year, conditioned upon faithful compliance with existing laws, rules and regulations relating to the importations thereof and for the satisfaction of all fines and penalties imposed under the Tax Code during the time such business is being conducted.

No subsequent importation of bioethanol containing Bitrex, the denaturing thereof and the release of the fuel bio ethanol for the exclusive use in the production of E-gasoline shall be allowed unless the liquidation reports required by these Regulations are fully complied with;

(b) Before the release of the imported bioethanol containing Bitrex from the customs custody, an application for ATRIG shall be filed with the appropriate BIR Office, together with copies of commercial invoice, packing list, bill of lading, material safety data sheet, certificate of product quality/analysis from the foreign supplier, certificate of material source of bioethanol (i.e. sugarcane, petrochemicals, etc.), third-party surveyor’s report issued at the foreign port of loading, and such other documents that may be prescribed by the BIR;

(c) The total volume of shipment of imported bioethanol containing Bitrex for the denaturing thereof and exclusive use in the production of E-gasoline shall be directly transported from the carrying vessel and unloaded into the BIR-approved storage tanks of the Oil Industry-Participant upon release thereof from customs custody;

(d) In the event that the imported bioethanol containing Bitrex fails to meet the standard specifications under the Fuel Bioethanol Program, the same shall not be released from the customs custody unless the applicable excise tax rates imposed under Section 141 of the Tax Code, as amended, have been duly paid to the BOC. However, if the same has been released from BOC without payment of the said applicable excise tax rates, the importer or possessor thereof, whether or not duly accredited by the DOE as an Oil Industry-Participant, shall be held liable thereon without the benefit of deduction of the excise tax rate of P0.05 per liter that may have been paid to the BOC, inclusive of penalties. The said deficiency excise tax shall be paid by the said person to the BIR immediately upon discovery thereof even without any demand from the BIR. Any subsequent importation or local purchase of fuel bioethanol by the Oil Industry-Participant under the excise tax rate of P0.05 per liter shall not be allowed unless the said deficiency excise tax has been duly paid;

(e) Denaturing of imported bioethanol containing Bitrex (1) Prior to the conduct of the denaturing, samples of unleaded gasoline to be used as denaturant as well as the bioethanol containing Bitrex shall be taken from the respective storage tanks. A laboratory test thereof shall be conducted in the presence of the authorized representatives of the Oil Industry-Participant, DOE and BIR in order to determine whether or not the same conforms to the prescribed standard specifications; otherwise, the conduct of the denaturing of the imported bioethanol containing Bitrex shall not be allowed.

In the absence of the laboratory facilities within the blending premises of the Oil Industry-Participant, a sufficient volume of samples duly sealed and identified by all concerned parties shall be sent to any government or independent testing facility for laboratory analysis before the conduct of the prescribed denaturing. The cost of the said laboratory test shall be shouldered by the Oil Industry-Participant.

In case the samples thereof conform to the prescribed standard specifications, the denaturing of the imported bioethanol containing Bitrex may be allowed to proceed. Otherwise, the applicable excise tax rates imposed under Section 141 of the Tax Code, as amended, shall be assessed and collected on the bioethanol containing Bitrex from the Oil-Participant without the benefit of deduction of the excise tax rate of P0.05 per liter previously paid to the BOC. The said deficiency excise tax shall be paid by the Oil Industry-Participant to the BIR immediately upon discovery thereof even without any demand from the BIR;

(2) Within forty eight (48) hours immediately after completion of unloading of the said imported bioethanol containing Bitrex from the carrying vessel to the BIR-approved storage tank of the Oil Industry-Participant, the subsequent denaturing thereof shall be conducted in the presence of the authorized representatives of the Oil Industry-Participant, DOE and BIR, Provided, That a written prior notice therefor shall be transmitted by the Oil Industry-Participant to the said government offices at least three (3)days before the actual date of the conduct of denaturing; Provided, further, That the imported bioethanol containing Bitrex shall be denatured using only unleaded gasoline, as denaturant, in accordance with the formula for fuel bioethanol prescribed under these Regulations;

(f) The fuel bioethanol shall, at all times, contain the markings/marker dye as herein prescribed; and

(g) For each and every removal of the fuel bioethanol from the BIR-approved storage tank, an ODI or any other prescribed BIR form shall be issued by the duly authorized representatives of the BIR assigned thereat.

SEC. 9. IMPORTATION OF FUEL BIOETHANOL. – In case of importation of fuel bioethanol, the following rules and procedures shall be strictly observed:

(a) Prior to each and every importation of fuel bioethanol, an application for Permit to Import shall be filed with BIR Office where the applicant/Oil Industry-Participant is registered as an excise taxpayer together with applicable supporting documents.

No subsequent importation of fuel bioethanol for the exclusive use in the production of E-gasoline shall be allowed unless the liquidation reports required by these Regulations are fully complied with;

(b) Before the release of the imported fuel bioethanol from the customs custody, an application for ATRIG shall be filed with the appropriate BIR Office, together with copies of commercial invoice, packing list, bill of lading, material safety data sheet, certificate of product quality/analysis from the foreign supplier, certificate of material source of bioethanol (i.e. sugarcane, petrochemicals, etc.), third-party surveyor’s report issued at the foreign port of loading, and such other documents that may be prescribed by the BIR;

(c) The imported fuel bioethanol shall, at all times, contain the markings/marker dye as herein prescribed;

(d) The total volume of shipment of imported fuel bioethanol for exclusive use in the production of E-gasoline shall be directly transported from the carrying vessel and unloaded into the BIR-approved storage tanks of the Oil Industry-Participant upon release thereof from customs custody;

(e) In the event that the imported fuel bioethanol fails to meet the standard specifications under the Fuel Bioethanol Program, the same shall not be released from the customs custody unless the applicable excise tax rates imposed under Section 141 of the Tax Code, as amended, shall have been duly paid to the BOC. However, if the same has been released from BOC without payment of the said applicable excise tax rates, the importer or possessor thereof, whether or not duly accredited by the DOE as an Oil Industry-Participant, shall be held liable thereon without the benefit of deduction of the excise tax rate of P0.05 per liter that may have been paid to the BOC, inclusive of penalties. The said deficiency excise tax shall be paid by the said person to the BIR immediately upon discovery thereof even without any demand from the BIR. Any subsequent importation or local purchase of fuel bioethanol by the Oil Industry-Participant under the excise tax rate of P0.05 per liter shall not be allowed unless the said deficiency excise tax has been duly paid. The subsequent importation or local purchase, if ever, shall, of course, be subject to the same laboratory test to verify whether or not the said fuel bioethanol, imported or locally purchased, meets the standard specification under the Fuel Bioethanol Program;

(f) Prior to the blending of the imported fuel bioethanol with unleaded gasoline in order to produce E-gasoline, a sample thereof shall be taken from the BIRapproved storage tank. A laboratory test thereof shall be conducted within the blending premises of the Oil Industry-Participant in the presence of the its authorized representatives, DOE and the BIR in order to determine whether or not the same conforms to the prescribed standard specifications: Provided, That a written prior notice therefor shall be transmitted by the Oil Industry-Participant to the said government offices at least three (3) days before the conduct of the laboratory test.

In case the sample does not conform with the standard specifications, the blending of the imported fuel bioethanol with unleaded gasoline in order to produce E-gasoline shall not be allowed and the applicable excise tax rates imposed under Section 141 of the Tax Code, as amended, shall be assessed and collected from the Oil-Participant without the benefit of deduction of the excise tax rate of P0.05 per liter previously paid to the BOC. The said deficiency excise tax shall be paid by the Oil Industry-Participant to the BIR immediately upon discovery thereof even without any demand from the BIR.

In the absence of the laboratory facilities within the blending premises of the Oil Industry-Participant, a sufficient volume of the sample of the fuel bioethanol duly sealed and identified by all concerned parties shall be sent to any government or independent testing facility for laboratory analysis before the blending thereof with unleaded gasoline in order to produce E-gasoline may proceed. The cost of the said laboratory test shall be shouldered by the Oil Industry-Participant. In case the sample thereof does not conform to the prescribed standard specifications, the applicable excise tax rates imposed under Section 141 of the Tax Code, as amended, shall be assessed and collected from the Oil-Participant without the benefit of deduction of the excise tax rate of P0.05 per liter previously paid to the BOC. The said deficiency excise tax shall be paid by the Oil Industry-Participant to the BIR immediately upon discovery thereof even without any demand from the BIR; and

(g) For each and every removal of the fuel bioethanol from the BIR-approved storage tank, an ODI or any other prescribed BIR form shall be issued by the duly authorized representatives of the BIR assigned thereat.

SEC. 10. IMPORTATION OF BIOETHANOL/FUEL BIOETHANOL THROUGH ECONOMIC AND FREEPORT ZONES. – The importation of bioethanol/fuel bioethanol through the economic and freeport zones shall be covered by a separate implementing regulations to be issued in consultation with the appropriate administrative offices of the said zones.

SEC. 11. SALE OF DOMESTIC FUEL BIOETHANOL. - The provisions of existing rules, procedures and regulations pertaining to denaturing of locally manufactured bioethanol, removal of fuel bioethanol, including the recording and reporting requirements, shall still govern and shall be strictly observed by the local distilleries with respect to the sale of fuel bioethanol intended for the production of Egasoline.

In addition, the local manufacturers of bioethanol and the participants in the Fuel Bioethanol Program duly accredited by the DOE shall also be subject to the following requirements:

(a) Local distilleries who intend to supply fuel bioethanol to Oil Industry-Participants under the said Program shall be a valid holder of an Accreditation Certificate duly issued by the DOE;

(b) The sale of domestic fuel bioethanol for purposes of the Program shall not be allowed except to DOE-accredited Oil Industry-Participants subject to the provisions of Sections 12 and 13 of these Regulations;

(c) All locally manufactured bioethanol shall be denatured within the distillery premises using only unleaded gasoline as denaturant in accordance with the formula prescribed by these Regulations, subject to the provisions of Section 12 hereof;

(d) The excise tax rate of P0.05 per liter of the fuel bioethanol shall be paid by the distiller-denaturer to the BIR before removal of the fuel bioethanol from the place of production of the distiller-denaturer. In the event that the bioethanol has been denatured, sold and delivered to a buyer who is not duly accredited by the DOE under the Program, the distiller-denaturer shall be liable to pay the corresponding excise tax rate under Section 141 (a) of the Tax Code, as amended, on the total volume sold, inclusive of all applicable penalties, without the benefit of deduction of the P0.05 per liter previously paid;

(e) The fuel bioethanol shall be directly transported from the local distillery and unloaded into the BIR-approved storage tank of the Oil Industry-Participant that is dedicated for the storage of fuel bioethanol intended to be used exclusively for the Fuel Bioethanol Program;

(f) No subsequent denaturing shall be allowed unless the liquidation reports on the previously delivered fuel bioethanol as required by these Regulations are fully complied with; and

(g) A separate surety bond shall be posted by the local distiller in an amount equivalent to the applicable excise tax rate under Section 141 (a) of the Tax Code, as amended, applied on the average transactional volume of fuel bioethanol locally sold during the year.

SEC. 12. SALE OF DOMESTIC BIOETHANOL FOR PURPOSES OF DEHYDRATION. – In case of sale of domestic bioethanol by a local distiller to an Oil Industry-Participant that shall be subjected to dehydration before the same shall be denatured and blended with unleaded gasoline, the following rules and procedures shall be strictly observed:

(a) The owner or operator of the dehydration plant shall be a valid holder of a Permit to Operate issued by the appropriate BIR Office where the owner or operator is required to be registered as an excise taxpayer;

(b) A separate permit shall be secured respectively by the local distiller and the Oil Industry-Participant for the conditional removal from the distillery premises of bioethanol without the prepayment of the excise. For this purpose, the local distiller and Oil Industry-Participant shall submit a joint bond in the amount equivalent to the applicable excise tax rate under Section 141 (a) of the Tax Code, as amended, applied on the average transactional volume of bioethanol removed from the local distillery premises and delivered to the dehydration plant during the year of operation;

(c) Each and every shipment of bioethanol shall be directly transported from the local distillery premises and unloaded on the BIR-approved storage tank of the dehydration plant;

(d) All in-transit losses incurred including that sustained from storage, handling and dehydration of bioethanol shall be assessed and paid by the Oil Industry-Participant, applying the excise tax rate imposed under Section 141 (a) of the Tax Code, as amended.

For in-transit losses, the corresponding excise tax due thereon shall be paid immediately upon receipt of the shipment on the premises of the dehydration plant and/or the blending plant of the Oil Industry-Participant. On the other hand, the excise tax due on losses incurred during storage, handling and dehydration process shall be paid on or before the eighth (8th) day of the immediately succeeding month;

(e) Immediately after dehydration, the resulting anhydrous bioethanol shall be transferred to the BIR-approved storage tank at the dehydration plant and the denaturing thereof shall be conducted using unleaded gasoline in accordance with the formula prescribed by these Regulations.

The said denaturing shall be conducted in the presence of the authorized representatives of the Oil Industry-Participant, DOE and BIR: Provided, That a written prior notice therefor shall be transmitted by the Oil Industry-Participant to the said government offices at least three (3) working days before the actual date of the conduct of denaturing;

(f) The corresponding excise tax of P0.05 per liter shall be paid by the Oil Industry-Participant to the appropriate BIR Office immediately after completion of the denaturing of the bioethanol;

(g) An ODI shall cover each removal of bioethanol from the local distillery premises as well as that of the fuel bioethanol from the dehydration plant; and

(h) Each and every shipment of fuel bioethanol shall be directly transported from the dehydration plant premises and unloaded into the BIR-approved storage tank of the Oil Industry-Participant.

SEC. 13. SALE OR TRANSFER OF FUEL BIOETHANOL BY AN OIL INDUSTRY-PARTICIPANT. – The Oil Industry-Participant may, for meritorious reasons, be allowed to sell or transfer any volume of fuel bioethanol to another Oil Industry-Participant: Provided, That each sale or transfer of fuel bioethanol shall be covered by a prior written permit issued by the BIR and the DOE. For this purpose, the regular trading of fuel bioethanol among Oil Industry-Participants shall not be allowed.

All transfers of fuel bioethanol from one storage facility to another storage facility which are both owned and operated by the same Oil Industry-Participant shall, likewise, be covered by a prior permit from the BIR. An ODI shall be issued by the authorized BIR personnel for each and every removal thereof from the BIR-approved storage tank.

SEC. 14. BLENDING OF FUEL BIOETHANOL AND UNLEADED GASOLINE. – Subject to the provisions of Section 18 B and C (3) of these Regulations, the blending of fuel bioethanol with unleaded gasoline shall be conducted only within the BIR-approved blending tanks of the Oil Industry-Participant. The E-gasoline shall no longer be subject to the imposition of the applicable excise taxes under Section 148 (f) of the Tax Code, as amended: Provided, That the corresponding excise taxes on fuel bioethanol and unleaded gasoline have been duly paid. Otherwise, the Oil Industry-Participant shall be liable, upon demand, on the excise taxes that are otherwise due thereon applying the applicable excise tax rates on distilled spirits and unleaded gasoline, inclusive of all interest and penalties as well as the applicable sanctions provided under the Tax Code, as amended.

SEC. 15. NON-COMPLIANCE WITH DOE SPECIFICATIONS ON EGASOLINE. - In case the DOE shall determine, through its monitoring functions, that the E-gasoline being sold by any Oil Industry-Participant has failed to meet the DOEprescribed specification standards, the same shall be considered a prima facie evidence of underpayment of excise taxes by such Oil Industry-Participant and, therefore, liable, upon demand, on the excise taxes that are otherwise due thereon applying the applicable excise tax rates on distilled spirits and unleaded gasoline, inclusive of all interest and penalties as well as the applicable sanctions provided under the Tax Code, as amended. If the circumstances so warrant, the said violation may be a ground for the revocation of the Oil Industry-Participant’s BIR-Permit to Operate and for the issuance of a written endorsement to the DOE recommending for the cancellation of the Oil Industry-Participant’s Certificate of Accreditation under the Fuel Bioethanol Program.

SEC. 16. GAINS/LOSSES OF FUEL BIOETHANOL AND E-GASOLINE. – On the importation of fuel bioethanol, in case the volume actually received by the Oil Industry-Participant is more than the volume declared in the importation documents, the excess shall be subject to the excise tax rate of P0.05 per liter. The deficiency excise tax shall be paid to the BIR where the Oil Industry-Participant is registered as an excise taxpayer on the date of the actual receipt of the said imported articles in the production premises.

The rules prescribed in the immediately preceding paragraph shall, likewise, apply on the purchase, delivery and receipt of fuel bioethanol from any authorized local distillery.

With respect to gains realized on the E-gasoline resulting from the storage and intransit delivery thereof to the retailers/dealers, the same shall be subject to the corresponding excise tax rate of P4.35 per liter provided for under Section 148 (f) of the Tax Code, as amended. The deficiency excise tax shall be paid to the BIR where the Oil Industry-Participant is registered as an excise taxpayer, within five (5) days immediately succeeding the month of operation.

Gains derived and losses incurred from the storage, denaturing or blending of fuel bioethanol, including that of the E-gasoline, shall be accounted and separately recorded in the Official Register Books (ORB) prescribed by these Regulations.

In case of failure by the Oil Industry Participant to fully account its claimed fuel bioethanol losses that are beyond the reasonable industry levels, as well as to submit convincing evidence to justify that the losses sustained were not due to his fault or negligence, the same shall be considered as prima facie proof of diversion thereof, subject to the payment of the applicable excise tax rates under Section 141 of the Tax Code, as amended, inclusive of all penalties and sanctions imposed under the same Code, without the benefit of deduction of the P0.05 excise tax per liter that have been previously paid.

SEC. 17. MARKER DYE REQUIREMENTS. – For purposes of ensuring that all fuel bioethanol intended for exclusive use as blending component in the production of E-gasoline are actually utilized pursuant to the Fuel Bioethanol Program, and in order to preclude any diversion thereof to any other purpose, a marker dye shall be blended with the said product. For imported fuel bioethanol, the marker dye may be blended either in the country of the foreign supplier particularly identified or indicated in the importation documents or within the customs premises prior to its release therefrom.

For locally purchased fuel bioethanol, the same shall be blended at the authorized local distillery/denaturing premises. The actual blending of the marker dye shall be conducted personally by an independent person/entity duly accredited by the BIR, in case of locallysourced fuel bioethanol; or by an independent person/entity duly accredited in the country of origin of the shipment, in case of imported fuel bioethanol.

The description of the marker dye shall be prescribed according to the specific requirements as may be determined by the BIR. For this purpose, the BIR and the BOC shall be provided with the necessary tool kit in order to determine the authenticity of the marker dye actually blended in the fuel bioethanol.

Absence of the marker dye or the use of fraudulent marker dye on the fuel bioethanol already used or still to be used as blending component shall be considered prima facie evidence that the fuel bioethanol has been imported or locally purchased without the prepayment of the excise tax prescribed by these Regulations and for purposes other than pursuant to the Fuel Bioethanol Program. The Oil Industry-Participant shall be liable for the payment of the excise tax rate on distilled spirits which is otherwise due thereon, inclusive of interest and penalties, as well as the imposition of sanctions prescribed under the provisions of the Tax Code, as amended. If the circumstances so warrant, the said violation may also be a ground for the revocation of its BIR-Permit to Operate as well as basis for recommendation to the DOE for the cancellation of the accreditation certificate issued under the Fuel Bioethanol Program.

The specific guidelines and procedures in the implementation of these marker dye requirements shall be covered by a separate revenue issuance.

SEC. 18. ADMINISTRATIVE PROVISIONS. – For the effective implementation of the provisions of these Regulations, the following administrative provisions shall be strictly observed:

A. Registration Requirements.

Any person, whether natural or juridical, who intends to engage in business as producer of E-gasoline shall file an application for a Permit to Operate with the BIR where such person is required to be registered as an excise taxpayer. The application shall be accompanied by the following documents:

(1) Accreditation Certificate duly issued by the DOE;

(2) Certificate of Registration from the Department of Trade and Industry (DTI), in case of individuals;

(3) Certificate of Registration from the Securities and Exchange Commission (SEC) together with Articles of Incorporation and By-laws, in case of partnership or corporation;

(4) Certificate of Registration duly issued by the BIR;

(5) Plat and plan of the production/blending plant;

(6) Location map of the production/blending plant; and

(7) Bond prescribed under Section 160 of the Tax Code, as amended.

However, in case the applicant is already a duly-registered excise taxpayer, the following documents shall be submitted:

(1) Accreditation Certificate duly issued by the DOE;

(2) Amended Certificate of Registration from DTI or SEC, as the case may be, together with Articles of Incorporation and By-laws;

(3) Amended plat and plan, in case of changes in or additional manufacturing and storage facilities shall be installed dedicated for the production of Egasoline; and

(4) Application for the conversion of the content of existing storage tanks, as the case may be.

B. Installation, Calibration and Maintenance of Storage Tanks.

The duly registered Oil Industry-Participant shall install or maintain at least three (3) storage tanks within the place of production, described as follows:

(1) One tank for the storage of unleaded gasoline;

(2) One tank for the storage of fuel bioethanol; and

(3) One tank for the storage of E-gasoline.

Provided, however, That, with respect to on-line blending operations wherein the blending of fuel bioethanol and unleaded gasoline is being conducted at the lorry or delivery tank truck immediately before the transport of the E-gasoline to the retailer/dealer, the Oil Industry-Participant may be allowed to install and maintain one tank for the storage of unleaded gasoline and one tank for the storage of fuel bioethanol.

The said storage tanks, whether existing or newly constructed, shall be calibrated or re-calibrated, as the case may be, by the Industrial Technology and Development Institute (ITDI) of the Department of Science and Technology (DOST) or by a licensed engineer acceptable to the BIR, under the supervision of the representatives of the BIR. Each tank shall bear identification marks pertaining to its tank number, product content and volume capacity. The said tanks shall be equipped with metering devices duly calibrated by independent persons, whether individual or juridical, acceptable to the BIR. Accordingly, a certificate of calibration of the storage tanks and metering devices shall be duly issued for the purpose. Thereafter, a periodic calibration of the storage tanks and metering devices shall be conducted once every six months in the presence of the authorized BIR representatives with a certificate of calibration issued for the purpose.

C. Monitoring and Supervision of Operations.

For excise tax purposes, the premises where the fuel bioethanol/E-gasoline
is being produced shall be under the joint supervision of the representatives of
the BIR and Oil Industry-Participant. A revenue officer on-premise (ROOP)
shall be assigned on the place of manufacture of the said products to monitor
and supervise the operations of the establishment. Accordingly, the following guidelines and procedures are hereby prescribed:

(1) All receipts of regulated raw materials (i.e., fuel bioethanol and unleaded gasoline) shall be properly supported by documents. With respect to imported fuel bioethanol and unleaded gasoline, the same shall be accompanied by Import Entry and Revenue Declarations and Official Receipts evidencing payment of excise tax issued by the BOC or any authorized accredited banks, together with other import documents such as, but not limited to, Bills of Lading, Commercial Invoices, Packing Lists, Material Safety Data Sheets and Certificates of Product Quality/Analysis, Certificate of material source of bioethanol, and third-party surveyor’s report issued at the foreign port of loading. On the other hand, the locally purchased fuel bioethanol shall be accompanied by ODIs, duly attested by the ROOP assigned at the distillery-denaturing premises, while on locally purchased unleaded gasoline, the same shall be accompanied by Withdrawal Certificates (WCs), duly attested to by the revenue officers assigned at the local oil refineries/traders;

(2) For each transfer of fuel bioethanol from the denaturing tank to the blending/storage tank for E-gasoline, an ODI shall be issued by the duly authorized representative of the blender and duly attested to by the ROOP;

(3) With respect to an Oil Industry-Participant using the on-line blending process, the issuance of the prescribed WC on every removal of E-gasoline shall no longer be required. However, with respect to the issuance of the ODI, it shall be sufficient that a single ODI shall be issued covering all removals of fuel bioethanol from the BIR-approved storage tank during the day. For this purpose, a daily summary report shall be prepared in triplicate copies by the authorized representative of the Oil Industry-Participant duly attested to by the ROOP, with the following information:

(i) Date of Removal and ODI Number

(ii) Plate number of the lorry or delivery tank truck

(iii) Name and address of the operator of the lorry or delivery tank truck

(iv) Name and address of the consignee/retailer/dealer

(v) Volume of the fuel bioethanol removed from the storage tank to the lorry or delivery tank truck

(vi) Volume of unleaded gasoline removed from the storage tank to the lorry or delivery tank truck

(vii) Resulting volume of E-gasoline received by the lorry or delivery tank truck

(viii) Loss/Gain

(ix) The respective total volume of fuel bioethanol, unleaded gasoline and E-gasoline removed during the day

The daily summary report shall be submitted to the ROOP within twentyfour (24) hours after the close of the preceding day of operation and shall be distributed as follows:

Original Copy - Attachment to the ODI
Duplicate Copy - ROOP
Triplicate - Oil Industry-Participant

(4) All receipts and removals of fuel bioethanol and E-gasoline shall be accounted for on a First-In, First-Out (FIFO) basis;

(5) A WC shall be issued for each volume of removal of E-gasoline from the production/blending premises for purposes of delivery to the retailers/dealers, sale/transfer to other duly Oil Industry-Participant of Egasoline, or transfer to another depots/storage facility owned and operated by the Oil Industry-Participant;

(6) An Official Register Book (ORB) shall be installed and maintained where each movement (i.e., receipt, transfer or removal) of fuel bioethanol and Egasoline, as well as all gains derived and/or losses incurred therefrom shall be recorded daily by the Oil Industry-Participant. In the meantime that the prescribed BIR-printed ORB and transcript form thereof are not yet available, a computer-generated copy using a suitable computer spreadsheet software program, such as the Microsoft Excel, shall be used by the Oil Industry-Participant following strictly the column headings and design formats provided in Annexes “A-1”, “A-2” and “A-3” of these Regulations. The said record shall be kept at all times in the place of production premises, and shall be immediately produced and presented, upon demand, for inspection by duly authorized representatives of the BIR.

For this purpose, a separate ORB shall be installed and maintained on each depot/storage facility owned and operated by the same Oil Industry-Participant where the blending operations shall be conducted; and

(7) The BIR, through its authorized representatives, shall conduct every six months or at any time the BIR deems necessary, a physical inventory or stocktaking of all stocks on-hand in the production/blending/storage premises to check and verify the correctness of the stock balances reflected in the ORB. Any overage or shortage found upon the reconciliation of the results of stocktaking with the balances reflected in the ORB shall be debited or credited, as the case may be, on the proper column of the ORB and signed by the revenue officer who conducted the stocktaking. The corresponding assessment for the deficiency excise tax, inclusive of penalties, on any shortage or overage shall be issued by the BIR and shall be paid, upon demand, by the Oil Industry-Participant.

D. Reporting Requirements.

The Oil Industry-Participant shall submit the prescribed reports, on a regular basis, as follows:

(1) Liquidation Statement

A monthly liquidation statement containing all the batches of fuel bioethanol, whether imported or locally purchased, handled during the month of operation by the Oil Industry-Participant within its production premises, shall be prepared, and submitted to the BIR Office where the Oil Industry-Participant is registered as an excise taxpayer within eight (8) days immediately succeeding the month of operation.

The liquidation statement shall consist of the following information for each batch:

1. Beginning inventory
2. Receipt of Denatured Bioethanol
(a) Date of Receipt
(b) Volume received
(c) Name and address of the supplier
(d) Assessment Number of the supplier, if applicable
(e) ODI number, if applicable
(f) Amount of excise tax paid
(g) Reference/Official Receipt Number on the proof of payment of the excise tax
3. Total available
4. Total volume sold/transferred for blending
(a) Date of Removal
(b) Volume removed
(c) Name of and address of the Oil Industry-Participant, if applicable
(d) Assessment Number of the Oil Industry-Participant, if applicable
(e) ODI Number
(f) Location of the receiving storage facility, in case of intracompany transfer
5. Ending balance
6. Volume of gain or loss

A separate liquidation statement shall, likewise, be prepared on the total volume of E-gasoline produced and subsequent removal thereof from the production/blending facility for purposes of delivery to retailers/dealers, sale/transfer to other duly Oil Industry-Participant, or transfer to other depots/storage facilities owned and operated by the same blender.

(2) Monthly Transcript of ORB

A transcript of the ORB containing all the monthly information prescribed in Annex “A-1”, “A-2” and “A-3” hereof shall be submitted to the appropriate BIR Office where the Oil Industry-Participant is registered as an excise taxpayer on or before the eighth (8th) day immediately succeeding the month of operation and every month thereafter.

(3) DOE Monthly Reports

Copies of the following monthly reports submitted to the DOE shall be furnished the Chief, LTFOD, within five (5) days from the date of receipt thereof by the DOE:

(a) Schedule II – Imports
(b) Schedule IV C – Local Purchases Report/Receiving Reports
(c) Schedule IV D- Sales Reports/Removal Reports
(d) Schedule V – Inventory Summary Reports

SEC. 19. PENALTIES. – Violations of these Regulations shall be subject to the corresponding penalties under the pertinent provisions of the Tax Code and applicable regulations.

SEC. 20. SEPARABILITY CLAUSE. - If any provision of these Regulations is declared invalid by a competent court, the remainder of these Regulations or any provision not affected by such declaration of invalidity shall remain in force and effect.

SEC. 21. REPEALING CLAUSE. – All regulations, rulings or orders, or portions thereof which are inconsistent with the provisions of these Regulations are hereby revoked, repealed or amended accordingly.

SEC. 22. EFFECTIVITY. – These Regulations shall take effect after fifteen (15) days following publications in newspapers of general circulation.

(Original Signed)
MARGARITO B. TEVES
Secretary of Finance
Recommending Approval:
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue