SUBJECT: Directive for the Strict Implementation of the Imposable Sanctions With Regard to the Tax Code Provision and its Implementing Regulations on Punishable Acts of Erring Financial Officers and/or Tax Practitioners
TO : All Internal Revenue Officials, Employees and Others Concerned
Many reports have reached this Office about the illegal and unscrupulous practices being resorted to by financial officers and/or tax practitioners, who are either independent Certified Public Accountant (CPA) or not, leading to tax evasion and nonpayment of proper taxes by concerned taxpayers.
This Circular is being issued to remind all concerned of the provision of the National Internal Revenue Code of 1997 (Tax Code), as amended, enumerating the punishable acts and the penal liabilities imposed for the commission of such act, to wit;
"SEC. 257. Penal Liability for Making False Entries, Records or Reports, or Using Falsified or Fake Accountable Forms. -
(A) Any financial officer or independent Certified Public Accountant engaged to examine and audit books of accounts of taxpayers under Section 232 (A) and any person under his direction who:
(1) Willfully falsifies any report or statement bearing on any examination or audit, or renders a report, including exhibits, statements, schedules or other forms of accountancy work which has 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 sound auditing practices; or
(2) Certifies financial statements of a business enterprise containing an essential misstatement of facts or omission in respect of the transactions, taxable income, deduction and exemption of his client; or
(B) Any person who:
(1) Not being an independent Certified Public Accountant according to Section 232(B) or a financial officer, examines and audits books of accounts of taxpayers; or
(2) Offers to sign and certify financial statements without audit; or
(3) Offers any taxpayer the use of accounting bookkeeping records for internal revenue purposes not in conformity with the requirements prescribed in this Code or rules and regulations promulgated thereunder; or
(4) Knowingly makes any false entry or enters any false or fictitious name in the books of accounts or records mentioned in the preceding paragraphs; or
(5) Keeps two (2) or more sets of such records or books of accounts; or
(6) In any way commits an act or omission, in violation of the provisions of this Section; or
(7) Fails to keep the books of accounts or records mentioned in Section 232 in a native language, English or Spanish, or to make a true and complete translation as required in Section 234 of this Code, or whose books of accounts or records kept in a native language, English or Spanish, and found to be at material variance with books or records kept by him in another language; or
(8) Willfully attempts in any manner to evade or defeat any tax imposed under this Code, or knowingly uses fake or falsified revenue official receipts, Letters of Authority, certificates authorizing registration, Tax Credit Certificates, Tax Debit Memoranda and other accountable forms shall, upon conviction for each act or omission, be punished by a fine of not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000) and suffer imprisonment of not less than two (2) years but not more than six (6) years.
If the offender is a Certified Public Accountant, his certificate as a Certified Public Accountant shall be automatically revoked or cancelled upon conviction. In the case of foreigners, conviction under this Code shall result in his immediate deportation after serving sentence, without further proceedings for deportation.”
(Emphasis supplied.)
The application and implementation of the aforesaid Tax Code provision has likewise been made the subject of Revenue Regulations No. 15-99 (RR No. 15-99), as amended by RR No. 11-2006, in relation to Sec. 6 (G) of the Tax Code, as amended, providing for the acceptable norms of conduct of a Tax Practitioner, and the imposition of the penalties of suspension or cancellation of the certificate of accreditation of tax practitioners, in addition to the penalties provided for under the provisions of the Tax Code, as amended, the pertinent provisions of RR 11-2006 are as follows;
“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. Xxx xxx xxx ” (Emphasis supplied.)
In view of the foregoing, all Regional Directors, Revenue District Officers, heads of investigating offices and Task Forces are hereby directed to initiate necessary actions such as suspension or cancellation of accreditation, filing of criminal actions, etc., against any financial officers and tax practitioners, who may be found guilty of violating any of the aforesaid provisions.
All concerned are hereby enjoined to be guided accordingly and to give this circular a wide publicity as possible.
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue
REVENUE MEMORANDUM CIRCULAR NO. 29-2007
SUBJECT : Publishing the Full Text of Republic Act No. 9399 Entitled An Act Declaring a One -Time Amnesty on Certain Tax and Duty Liabilities, Inclusive of Fees, Fines, Penalties, Interests and Other Additions Thereto, Incurred by Certain Business Enterprises Operating Within the Special Economic Zones and Freeports Created Under Proclamation No. 163, series of 1993; Proclamation No. 216, series of 1993; Proclamation No. 420, series of 1994; and Proclamation No. 984, series of 1997, Pursuant to Section 15 of Republic Act No. 7227, as Amended, and for Other Purposes
TO : All Internal Revenue Officials, Employees and Others Concerned
________________________________________________________________________
For the information and guidance of all internal revenue officials, employees and others concerned, quoted hereunder is the full text of REPUBLIC ACT NO. 9399, AN ACT DECLARING A ONE-TIME AMNESTY ON CERTAIN TAX AND DUTY LIABILITIES, INCLUSIVE OF FEES, FINES, PENALTIES, INTERESTS AND OTHER ADDITIONS THERETO, INCURRED BY CERTAIN BUSINESS ENTERPRISES OPERATING WITHIN THE SPECIAL ECONOMIC ZONES AND FREEPORTS CREATED UNDER PROCLAMATION NO. 163, SERIES OF 1993; PROCLAMATION NO. 216, SERIES OF 1993; PROCLAMATION NO. 420, SERIES OF 1994; AND PROCLAMATION NO. 984, SERIES OF 1997, PURSUANT TO SECTION 15 OF REPUBLIC ACT NO. 7227, AS AMENDED, AND FOR OTHER PURPOSES, as follows:
“ [REPUBLIC ACT NO. 9399]
AN ACT DECLARING A ONE-TIME AMNESTY ON CERTAIN TAX AND DUTY LIABILITIES, INCLUSIVE OF FEES, FINES, PENALTIES, INTERESTS AND OTHER ADDITIONS THERETO, INCURRED BY CERTAIN BUSINESS ENTERPRISES OPERATING WITHIN THE SPECIAL ECONOMIC ZONES AND FREEPORTS CREATED UNDER PROCLAMATION NO. 163, SERIES OF 1993; PROCLAMATION NO. 216, SERIES OF 1993; PROCLAMATION NO. 420, SERIES OF 1994; AND PROCLAMATION NO. 984, SERIES OF 1997, PURSUANT TO SECTION 15 OF REPUBLIC ACT NO. 7227, AS AMENDED, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
SECTION 1. Grant of Tax Amnesty . - Registered business enterprises operating prior to the effectivity of this Act within the special economic zones and freeports created pursuant to Section 15 of Republic Act No. 7227, as amended, such as the Clark Special Economic Zone created under Proclamation No. 163, series of 1993; Poro Point Special Economic and Freeport Zone created under Proclamation No. 216, series of 1993; John Hay Special Economic Zone created under Proclamation No. 420, series of 1994; and Morong Special Economic Zone created under Proclamation No. 984, series of 1997, may avail themselves of the benefits of remedial tax amnesty herein granted on all applicable tax and duty liabilities, inclusive of fines, penalties, interests and other additions thereto, incurred by them or that might have accrued to them due to the rulings of the Supreme Court in the cases of John Hay People’s Coalition v. Lim, et al., G.R. No. 119775 dated 23 October 2003 and Coconut Oil Refiners Association, Inc. v. Torres, et al., G.R. No. 132527 dated 29 July 2005, by filing a notice and return in such form as shall be prescribed by the Commissioner of Internal Revenue and the Commissioner of Customs and thereafter, by paying an amnesty tax of Twenty-five thousand pesos (P25,000.00) within six months from the effectivity of this Act:
Provided, That the applicable tax and duty liabilities to be covered by the tax amnesty shall refer only to the difference between: (i) all national and local tax impositions under relevant tax laws, rules and regulations; and (ii) the five percent (5%) tax on gross income earned by said registered business enterprises as determined under relevant revenue regulations of the Bureau of Internal Revenue and memorandum circulars of the Bureau of Customs during the period covered: Provided, however, That the coverage of the tax amnesty herein granted shall not include the applicable taxes and duties on articles, raw materials, capital goods, equipment and consumer items removed from the special economic zone and freeport and entered in the customs territory of the Philippines for local or domestic sale, which shall be subject to the usual taxes and duties prescribed in the National Internal Revenue Code (NIRC) of 1997, as amended, and the Tariff and Customs Code of the Philippines, as amended.
SEC. 2. Immunities and Privileges. - Those who have availed themselves of the tax amnesty and have fully complied with all its conditions shall be relieved of any civil, criminal and/or administrative liabilities arising from or incident to the nonpayment of taxes, duties and other charges covered by the tax amnesty granted under Section 1 herein.
SEC. 3. Implementing Rules and Regulatio ns. - The Department of Finance, in coordination with the Bureau of Internal Revenue and The Bureau of Customs, and in consultation with the Bases Conversion and Development Authority, the Clark Development Corporation, the John Hay Management Corporation, the Poro Point Management Corporation, and the Bataan Technology Park, Inc., shall promulgate and publish the necessary rules and regulations for the effective implementations of this Act within two months from the date of effectivity of this Act.
SEC. 4. Separability Clause. - If any portion or provision of this Act is declared unconstitutional, the remainder of this Act or any provision not affected thereby shall remain in force and effect.
SEC. 5. Repealing Clause. - All laws, decrees, orders, rules and regulations or other issuances or parts thereof inconsistent with the provisions of this Act are hereby repealed or modified accordingly.
SEC. 6. Effectivity . - This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in any two newspapers of general circulation, whichever comes earlier.
Approved,
(Original Signed)
MANNY VILLAR
President of the Senate
(Original Signed)
JOSE DE VENECIA, JR.
Speaker of the House of Representatives
This Act which is a consolidation of House Bill No. 4900 and Senate Bill No. 2259 was finally passed by the House of Representatives and the Senate on January 31, 2007 and February 5, 2007, respectively.
(Original Signed)
OSCAR G. YABES
Secretary of the Senate
(Original Signed)
ROBERTO P. NAZARENO
Secretary General
House of Representatives
Approved:
(Original Signed)
GLORIA MACAPAGAL-ARROYO
President of the Philippines”
All concerned are hereby enjoined to be guided accordingly and give this circular a wide publicity as possible.
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner or Internal Revenue
A-1
TO : All Internal Revenue Officials, Employees and Others Concerned
________________________________________________________________________
For the information and guidance of all internal revenue officials, employees and others concerned, quoted hereunder is the full text of REPUBLIC ACT NO. 9399, AN ACT DECLARING A ONE-TIME AMNESTY ON CERTAIN TAX AND DUTY LIABILITIES, INCLUSIVE OF FEES, FINES, PENALTIES, INTERESTS AND OTHER ADDITIONS THERETO, INCURRED BY CERTAIN BUSINESS ENTERPRISES OPERATING WITHIN THE SPECIAL ECONOMIC ZONES AND FREEPORTS CREATED UNDER PROCLAMATION NO. 163, SERIES OF 1993; PROCLAMATION NO. 216, SERIES OF 1993; PROCLAMATION NO. 420, SERIES OF 1994; AND PROCLAMATION NO. 984, SERIES OF 1997, PURSUANT TO SECTION 15 OF REPUBLIC ACT NO. 7227, AS AMENDED, AND FOR OTHER PURPOSES, as follows:
“ [REPUBLIC ACT NO. 9399]
AN ACT DECLARING A ONE-TIME AMNESTY ON CERTAIN TAX AND DUTY LIABILITIES, INCLUSIVE OF FEES, FINES, PENALTIES, INTERESTS AND OTHER ADDITIONS THERETO, INCURRED BY CERTAIN BUSINESS ENTERPRISES OPERATING WITHIN THE SPECIAL ECONOMIC ZONES AND FREEPORTS CREATED UNDER PROCLAMATION NO. 163, SERIES OF 1993; PROCLAMATION NO. 216, SERIES OF 1993; PROCLAMATION NO. 420, SERIES OF 1994; AND PROCLAMATION NO. 984, SERIES OF 1997, PURSUANT TO SECTION 15 OF REPUBLIC ACT NO. 7227, AS AMENDED, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
SECTION 1. Grant of Tax Amnesty . - Registered business enterprises operating prior to the effectivity of this Act within the special economic zones and freeports created pursuant to Section 15 of Republic Act No. 7227, as amended, such as the Clark Special Economic Zone created under Proclamation No. 163, series of 1993; Poro Point Special Economic and Freeport Zone created under Proclamation No. 216, series of 1993; John Hay Special Economic Zone created under Proclamation No. 420, series of 1994; and Morong Special Economic Zone created under Proclamation No. 984, series of 1997, may avail themselves of the benefits of remedial tax amnesty herein granted on all applicable tax and duty liabilities, inclusive of fines, penalties, interests and other additions thereto, incurred by them or that might have accrued to them due to the rulings of the Supreme Court in the cases of John Hay People’s Coalition v. Lim, et al., G.R. No. 119775 dated 23 October 2003 and Coconut Oil Refiners Association, Inc. v. Torres, et al., G.R. No. 132527 dated 29 July 2005, by filing a notice and return in such form as shall be prescribed by the Commissioner of Internal Revenue and the Commissioner of Customs and thereafter, by paying an amnesty tax of Twenty-five thousand pesos (P25,000.00) within six months from the effectivity of this Act:
Provided, That the applicable tax and duty liabilities to be covered by the tax amnesty shall refer only to the difference between: (i) all national and local tax impositions under relevant tax laws, rules and regulations; and (ii) the five percent (5%) tax on gross income earned by said registered business enterprises as determined under relevant revenue regulations of the Bureau of Internal Revenue and memorandum circulars of the Bureau of Customs during the period covered: Provided, however, That the coverage of the tax amnesty herein granted shall not include the applicable taxes and duties on articles, raw materials, capital goods, equipment and consumer items removed from the special economic zone and freeport and entered in the customs territory of the Philippines for local or domestic sale, which shall be subject to the usual taxes and duties prescribed in the National Internal Revenue Code (NIRC) of 1997, as amended, and the Tariff and Customs Code of the Philippines, as amended.
SEC. 2. Immunities and Privileges. - Those who have availed themselves of the tax amnesty and have fully complied with all its conditions shall be relieved of any civil, criminal and/or administrative liabilities arising from or incident to the nonpayment of taxes, duties and other charges covered by the tax amnesty granted under Section 1 herein.
SEC. 3. Implementing Rules and Regulatio ns. - The Department of Finance, in coordination with the Bureau of Internal Revenue and The Bureau of Customs, and in consultation with the Bases Conversion and Development Authority, the Clark Development Corporation, the John Hay Management Corporation, the Poro Point Management Corporation, and the Bataan Technology Park, Inc., shall promulgate and publish the necessary rules and regulations for the effective implementations of this Act within two months from the date of effectivity of this Act.
SEC. 4. Separability Clause. - If any portion or provision of this Act is declared unconstitutional, the remainder of this Act or any provision not affected thereby shall remain in force and effect.
SEC. 5. Repealing Clause. - All laws, decrees, orders, rules and regulations or other issuances or parts thereof inconsistent with the provisions of this Act are hereby repealed or modified accordingly.
SEC. 6. Effectivity . - This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in any two newspapers of general circulation, whichever comes earlier.
Approved,
(Original Signed)
MANNY VILLAR
President of the Senate
(Original Signed)
JOSE DE VENECIA, JR.
Speaker of the House of Representatives
This Act which is a consolidation of House Bill No. 4900 and Senate Bill No. 2259 was finally passed by the House of Representatives and the Senate on January 31, 2007 and February 5, 2007, respectively.
(Original Signed)
OSCAR G. YABES
Secretary of the Senate
(Original Signed)
ROBERTO P. NAZARENO
Secretary General
House of Representatives
Approved:
(Original Signed)
GLORIA MACAPAGAL-ARROYO
President of the Philippines”
All concerned are hereby enjoined to be guided accordingly and give this circular a wide publicity as possible.
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner or Internal Revenue
A-1
REVENUE REGULATIONS NO. 4-2007
SUBJECT : Amending Certain Provisions of Revenue Regulations No. 16-2005, As Amended, Otherwise Known as the Consolidated Value-Added Tax Regulations of 2005.
TO : All Internal Revenue Officers and Others Concerned.
Section 1. SCOPE. - Pursuant to the provisions of Sec. 244 and 245 of the National Internal Revenue Code of 1997, as amended, in relation to Title IV of the same Tax Code, these Regulations are hereby promulgated to amend certain provisions of Revenue Regulations (RR) No. 16-2005, as amended, otherwise known as the Consolidated Value-Added Tax Regulations of 2005.
Section 2. VAT ON SALE OF GOODS OR PROPERTIES. - Sec. 4.106-1 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-1. VAT on Sale of Goods or Properties. – VAT is imposed and collected on every sale, barter or exchange, or transactions “deemed sale” of taxable goods or properties at the rate of twelve percent (12%) (starting February 1, 2006) of the gross selling price or gross value in money of the goods or properties sold, bartered, or exchanged, or deemed sold in the Philippines.”
Section 3. SALE OF REAL PROPERTIES. - Sec. 4.106-3 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-3. Sale of Real Properties. - Sale of real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business of the seller shall be subject to VAT.
Sale of residential lot with gross selling price exceeding P1,500,000.00, residential house and lot or other residential dwellings with gross selling price exceeding P2,500,000.00, where the instrument of sale (whether the instrument is nominated as a deed of absolute sale, deed of conditional sale or otherwise) is executed on or after Nov. 1, 2005, shall be subject to ten percent (10%) output VAT, and starting Feb. 1, 2006, to twelve percent (12%) output VAT.
Installment sale of residential house and lot or other residential dwellings with gross selling price exceeding P1,000,000.00, where the instrument of sale (whether the instrument is nominated as a deed of absolute sale, deed of conditional sale or otherwise) was executed prior to November 1, 2005, shall be subject to ten percent (10%) output VAT.
Sale of real property on installment plan means sale of real property by a real estate dealer, the initial payments of which in the year of sale do not exceed twenty-five (25%) of the gross selling price. In case of installment sale, the seller shall be subject to output VAT on the installment payments received, including the interests and penalties for late payment, actually and/or constructively received, subject to the provisions of Sec.4.106-4 hereof. Correspondingly, the buyer of the property can claim the input tax in the same period as the seller recognized the output tax. Installment payments, including interests and penalties, actually and/or constructively received starting February 1, 2006 shall be subject to twelve percent (12%) output VAT.
Sale of real property by a real estate dealer on a deferred payment basis not on the installment plan means sale of real property, the initial payments of which in the year of sale exceed twenty-five percent (25%) of the gross selling price.
“Initial payments” means payment or payments which the seller receives before or upon execution of the instrument of sale and payments which he expects or is scheduled to receive in cash or property (other than evidence of indebtedness of the purchaser) during the taxable year when the sale or disposition of the real property was made. It covers any down payment made and includes all payments actually or constructively received during the year of sale, the aggregate of which determines the limit set by law.
Initial payments do not include the amount of mortgage on the real property sold except when such mortgage exceeds the cost or other basis of the property to the seller, in which case the excess shall be considered part of the initial payments. Also excluded from the initial payments are notes or other evidence of indebtedness issued by the purchaser to the seller at the time of the sale.
In the case of sale of real properties on a deferred-payment basis not on the installment plan, the transaction shall be treated as cash sale which makes the entire selling price taxable in the month of sale. Output tax shall be recognized by the seller and input tax shall accrue to the buyer at the time of the execution of the instrument of sale.
Payments subsequent to “initial payments” shall no longer be subject to output VAT, in the case of sale on a deferred payment basis.
Pre-selling of real estate properties by real estate dealers shall be subject to VAT in accordance with the rules prescribed above.
Real estate dealer includes any person engaged in the business of buying, developing, selling, exchanging real properties as principal and holding himself out as a full or part-time dealer in real estate.
Transmission of property to a trustee shall not be subject to VAT if the property is to be merely held in trust for the trustor and/or beneficiary. However, if the property transferred is one for sale, lease or use in the ordinary course of trade or business and the transfer constitutes a completed gift, the transfer is subject to VAT as a deemed sale transaction pursuant to Section 4.106-7(a)(1) of these Regulations. The transfer is a completed gift if the transferor divests himself absolutely of control over the property, i.e., irrevocable transfer of corpus and/or irrevocable designation of beneficiary.”
Section 4. GROSS SELLING PRICE. - Sec. 4.106-4 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-4. Meaning of the Term ‘Gross Selling Price’. – The term “gross selling price” means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding VAT. The excise tax, if any, on such goods or properties shall form part of the gross selling price.
In the case of sale, barter or exchange of real property subject to VAT, gross selling price shall mean the consideration stated in the sales document or the fair market value whichever is higher. If the VAT is not billed separately in the document of sale, the selling price or the consideration stated therein shall be deemed to be inclusive of VAT.
The term ‘fair market value’ shall mean whichever is higher of:
1) the fair market value as determined by the Commissioner /zonal value, or
2) the fair market value as shown in schedule of values of the Provincial and City Assessors (real property tax declaration). However, in the absence of zonal value/fair market value as determined by the Commissioner, gross selling price refers to the market value shown in the latest real property tax declaration or the consideration, whichever is higher.
If the gross selling price is based on the zonal value or market value of the property, the zonal or market value shall be deemed exclusive of VAT. Thus, the zonal value/market value, net of the output VAT, should still be higher than the consideration in the document of sale, exclusive of the VAT.
If the sale of real property is on installment plan where the zonal value/fair market value is higher than the consideration/selling price, exclusive of the VAT, the VAT shall be based on the ratio of actual collection of the consideration, exclusive of the VAT, against the agreed consideration, exclusive of the VAT, appearing in the Contract to Sell/Contract of Sale applied to the zonal value/fair market value of the property at the time of the execution of the Contract to Sell/Contract of Sale at the inception of the contract. Thus, since the output VAT is based on the market value of the property which is higher than the consideration/selling price in the sales document, exclusive of the VAT, the input VAT that can be claimed by the buyer shall be the separately-billed output VAT in the sales document issued by the seller. Therefore, the output VAT which is based on the market value must be billed separately by the seller in the sales document with specific mention that the VAT billed separately is based on the market value of the property.
Illustration:
ABC Corporation sold a parcel of land to XYZ Company on July 2, 2006 for P1,000,000.00, plus the output VAT, with a monthly installment payment of P10,000.00, plus the output VAT. The zonal value of the subject property at the time of sale amounted to P1,500,000.00. Compute for the output tax due on the installment payment.
Formula:
(Actual collection (exclusive of the VAT) / Agreed consideration (exclusive of the VAT))
x Zonal value x 12%
(P10,000.00 / P1,000,000.00) x P1,500,000.00 = P15,000.00
P15,000.00 x 12% = P1,800.00
Selling price is the amount of consideration in a contract of sale between the buyer and seller or the total price of the sale which may include cash or property and evidence of indebtedness issued by the buyer, excluding the VAT. “
Section 5. ZERO-RATED SALES. - Sec. 4.106-5 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-5. Zero-Rated Sales of Goods or Properties. - Xxx xxx xxx.
The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:
(a) Export Sales. - Xxx xxx.
(5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws. “Considered export sales under Executive Order No. 226” shall mean the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same; Provided, That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents; Provided, further, That pursuant to EO 226 and other special laws, even without actual exportation, the following shall be considered constructively exported:
(1) sales to bonded manufacturing warehouses of export-oriented manufacturers;
(2) sales to export processing zones pursuant to Republic Act (RA) Nos. 7916, as amended, 7903, 7922 and other similar export processing zones;
(3) sale to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority pursuant to RA 7227;
(4) sales to registered export traders operating bonded trading warehouses supplying raw materials in the manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC);
(5) sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of locally manufactured, assembled or repacked products whether paid for in foreign currency or not.
Xxx xxx xxx.
(6) The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations; Provided, that the same is limited to goods, supplies, equipment and fuel pertaining to or attributable to the transport of goods and passengers from a port in the Philippines directly to a foreign port, or vice versa, without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes that originated from abroad, or to load passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other than that mentioned in this paragraph, such portion of fuel goods and supplies shall be subject to twelve percent (12%) output VAT starting February 1, 2006.
(b) Foreign Currency Denominated Sale. - Xxx xxx xxx xxx.
(c) Sales to Persons or Entities Deemed Tax-exempt Under Special Law or International Agreement. - Sale of goods or property to persons or entities who are tax-exempt under special laws or international agreements to which the Philippines is a signatory, such as, Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc., shall be effectively subject to VAT at zero-rate.”
Section 6. EFFECTIVELY ZERO-RATED. - Sec. 4.106-6 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-6. Meaning of the term ‘Effectively Zero-Rated Sale of Goods and Properties’. – The term ‘effectively zero-rated sale of goods and properties’ shall refer to the local sale of goods and properties by a VATregistered person to a person or entity who was granted indirect tax exemption under special laws or international agreement.”
Section 7. TRANSACTIONS DEEMED SALE. – Sec. 4.106-7 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-7. Transactions Deemed Sale. - xxx xxx xxx.
(b) The Commissioner of Internal Revenue shall determine the appropriate tax base in cases where a transaction is deemed a sale, barter or exchange of goods or properties under Sec. 4.106-7 paragraph (a) hereof, or where the gross selling price is unreasonably lower than the actual market value. The gross selling price is unreasonably lower than the actual market value if it is lower by more than 30% of the actual market value of the same goods of the same quantity and quality sold in the immediate locality on or nearest the date of sale. Nonetheless, if one of the parties in the transaction is the government as defined and contemplated under the Administrative Code, the output VAT on the transaction shall be based on the actual selling price.
Xxx xxx xxx.”
Section 8. CHANGE OR CESSATION OF STATUS AS VATREGISTERED PERSON. – Sec. 4.106-8 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-8. Change or Cessation of Status as VAT-registered Person. - xxx xxx xxx.
(b) Not subject to output tax
The VAT shall not apply to goods or properties existing as of the occurrence of the following:
(1) Change of control of a corporation by the acquisition of the controlling interest of such corporation by another stockholder or group of stockholders. The goods or properties used in business or those comprising the stock-in-trade of the corporation, having a change in corporate control, will not be considered sold, bartered or exchanged despite the change in the ownership interest in the said corporation.
Illustration:
Abel Corporation is a merchandising concern and has an inventory of goods for sale amounting to Php 1 million. Nel Corporation, a real estate developer, exchanged its real estate properties for the shares of stocks of Abel Corporation resulting to the acquisition of corporate control. The inventory of goods owned by Abel Corporation (Php 1 million worth) is not subject to output tax despite the change in corporate control because the same corporation still owns them. This is in recognition of the separate and distinct personality of the corporation from its stockholders.
However, the exchange of real estate properties held for sale or for lease, for shares of stocks, whether resulting to corporate control or not, is subject to VAT, subject to exceptions provided under Section 4.106-3 hereof. On the other hand, if the transferee of the transferred real property by a real estate dealer is another real estate dealer, in an exchange where the transferor gains control of the transferee-corporation, no output VAT is imposable on the said transfer.
(2) Change in the trade or corporate name of the business;
(3) Merger or consolidation of corporations. The unused input tax of the dissolved corporation, as of the date of merger or consolidation, shall be absorbed by the surviving or new corporation.”
Section 9. VAT ON THE SALE OF SERVICES AND USE OR LEASE OF PROPERTIES. - Sec. 4.108-1 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.108-1. VAT on the Sale of Services and Use or Lease of Properties. – Sale or exchange of services, as well as the use or lease of properties, as defined in Sec. 108(A) of the Tax Code shall be subject to VAT, equivalent to twelve percent (12%) of the gross receipts (excluding VAT) starting February 1, 2006.”
Section 10. DEFINITIONS AND SPECIFIC RULES ON SELECTED SERVICES. - Sec. 4.108-3 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.108-3. Definitions and Specific Rules on Selected Services.- Xxx xxx xxx.
(e) Domestic common carriers by air and sea are subject to twelve percent (12%) VAT on their gross receipts from their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines starting Feb. 1, 2006.
(f) Sale of electricity by generation, transmission, and distribution companies shall be subject to twelve percent (12%) VAT on their gross receipts starting Feb. 1, 2006; Provided, that sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels shall be subject to 0% VAT.
Xxx xxx xxx.
(h) Services of franchise grantees xxx xxx.
Gross receipts of all other franchisees, other than those covered by Sec. 119 of the Tax Code , regardless of how their franchises may have been granted, shall be subject to the twelve percent (12%) VAT imposed under Sec. 108 of the Tax Code starting Feb. 1, 2006. This includes among others, the Philippine and Amusement Gaming Corporation (PAGCOR), and its licensees or franchisees.
Xxx xxx xxx.
(i) Non-life insurance companies including surety, fidelity, indemnity and bonding companies are subject to VAT. They are not liable to the payment of the premium tax under Sec. 123 of the Tax Code. ‘Non-life insurance companies’ including surety, fidelity, indemnity and bonding companies, shall include all individuals, partnerships, associations, or corporations, including professional reinsurers defined in Sec. 280 of PD 612, otherwise known as the Insurance Code of the Philippines, mutual benefit associations and government-owned or controlled corporations, engaging in the business of property insurance, as distinguished from insurance on human lives, health, accident and insurance appertaining thereto or connected therewith which shall be subject to the percentage tax under Sec. 123 of the Tax Code.
The gross receipts from non-life insurance shall mean total premiums collected whether paid in money, notes, credits or any substitute for money. Non-life insurance premiums are subject to VAT whereas non-life reinsurance premiums are not subject to VAT, the latter being already subjected to VAT upon receipt of the insurance premiums. Insurance and reinsurance commissions, whether life of non-life, are subject to VAT.
(j) Pre -need Companies xxx xxx.
Xxx xxx xxx.”
Section 11. GROSS RECEIPTS. - Sec. 4.108-4 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.108-4. Definition of Gross Receipts. – ‘Gross receipts’ refers to the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits applied as payments for services rendered and advance payments actually or constructively received during the taxable period for the services performed or to be performed for another person, excluding the VAT, except those amounts earmarked for payment to unrelated third (3rd ) party or received as reimbursement for advance payment on behalf of another which do not redound to the benefit of the payor. A payment is a payment to a third (3rd) party if the same is made to settle an obligation of another person, e.g., customer or client, to the said third party, which obligation is evidenced by the sales invoice/official receipt issued by said third party to the obligor/debtor (e.g., customer or client of the payor of the obligation).
An advance payment is an advance payment on behalf of another if the same is paid to a third (3rd) party for a present or future obligation of said another party which obligation is evidenced by a sales invoice/official receipt issued by the obligee/creditor to the obligor/debtor (i.e., the aforementioned “another party”) for the sale of goods or services by the former to the latter.
For this purpose ‘unrelated party’ shall not include taxpayer’s employees, partners, affiliates (parent, subsidiary and other related companies), relatives by consanguinity or affinity within the fourth (4th) civil degree, and trust fund where the taxpayer is the trustor, trustee or beneficiary, even if covered by an agreement to the contrary. ‘Constructive receipt’ occurs when the money consideration or its equivalent is placed at the control of the person who rendered the service without restrictions by the payor.
The following are examples of constructive receipts:
(1.) deposits in banks which are made available to the seller of services without restrictions;
(2.) issuance by the debtor of a notice to offset any debt or obligation and acceptance thereof by the seller as payment for services rendered; and
(3.) transfer of the amounts retained by the payor to the account of the contractor.”
Section 12. ZERO-RATED SALE OF SERVICES. - Sec. 4.108-5(b)(4) of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.108-5. Zero-Rated Sale of Services.- Xxx xxx xxx.
(b) Transactions Subject to Zero Percent (0%) VAT Rate. -
xxx xxx xxx
(4) Services rendered to persons engaged in international shipping or air transport operations, including leases of property for use thereof; Provided, however, that the services referred to herein shall not pertain to those made to common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines, the same being subject to twelve percent (12%) VAT under Sec. 108 of the Tax Code starting Feb. 1, 2006; Xxx xxx xxx.”
Section 13. EFFECTIVELY ZERO-RATED SALE OF SERVICES. - Sec. 4.108-6 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.108-6. Meaning of the term ‘Effectively Zero-Rated Sale of Services’. The term ‘effectively zero-rated sales of services’ shall refer to the local sale of services by a VAT -registered person to a person or entity who was granted indirect tax exemption under special laws or international agreement.”
Section 14. VAT-EXEMPT TRANSACTIONS. - Sec. 4.109-1(B)(1) of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.109-1. VAT-Exempt Transactions.-
Xxx xxx xxx.
(B) Exempt transactions . – Subject to the provisions of Sec. 4.109-2 hereof, the following transactions shall be exempt from VAT:
Xxx xxx xxx.
(l) Sales by agricultural cooperatives duly registered and in good standing with the Cooperative Development Authority (CDA) to their members, as well as sale of their produce, whether in its original state or processed form, to non-members, their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce. Sale by agricultural cooperatives to non-members can only be exempted from VAT if the producer of the agricultural products sold is the cooperative itself. If the cooperative is not the producer (e.g., trader), then only those sales to its members shall be exempted from VAT; It is to be reiterated however, that sale or importation of agricultural food products in their original state is exempt from VAT irrespective of the seller and buyer thereof, pursuant to Subsection (a) hereof.
Xxx xxx xxx.
(p) The following sales of real properties are exempt from VAT, namely:
(1) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business. However, even if the real property is not primarily held for sale to customers or held for lease in the ordinary course of trade or business but the same is used in the trade or business of the seller, the sale thereof shall be subject to VAT being a transaction incidental to the taxpayer’s main business. Xxx xxx xxx.
(q) Xxx xxx xxx.
The term ‘residential units’ shall refer to apartments and houses & lots used for residential purposes, and buildings or parts or units thereof used solely as dwelling places (e.g., dormitories, rooms and bed spaces) except motels, motel rooms, hotels, hotel rooms, lodging houses, inns and pension houses. The term ‘unit’ shall mean an apartment unit in the case of apartments, house in the case of residential houses; per person in the case of dormitories, boarding houses and bed spaces; and per room in case of rooms for rent.
Xxx xxx xxx.
(t) Importation of life-saving equipment, safety and rescue equipment and communication and navigational safety equipment, steel plates and other metal plates including marine-grade aluminum plates, used for shipping transport operations; Provided, that the exemption shall be subject to the provisions of Section 4 of Republic Act. No. 9295, otherwise known as ‘The Domestic Shipping Development Act of 2004’;
(u) Importation of capital equipment, machinery, spare parts, lifesaving and navigational equipment, steel plates and other metal plates including marine-grade aluminum plates to be used in the construction, repair, renovation or alteration of any merchant marine vessel operated or to be operated in the domestic trade. Provided, that the exemption shall be subject to the provisions of Section 19 of Republic Act. No. 9295, otherwise known as ‘The Domestic Shipping Development Act of 2004’;
(v) Importation of fuel, goods and supplies by persons engaged in international shipping or air transport operations; Provided, that the said fuel, goods and supplies shall be used exclusively or shall pertain to the transport of goods and/or passenger from a port in the Philippines directly to a foreign port, or vice versa, without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes that originated from abroad, or to load passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other than that mentioned in this paragraph, such portion of fuel, goods and supplies shall be subject to twelve percent (12%) VAT starting February 1, 2006;
(w) Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries, such as money changers and pawnshops, subject to percentage tax under Secs. 121 and 122 , respectively, of the Tax Code; and
(x) Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of One Million Five Hundred Thousand Pesos (P1,500,000.00). Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amount of P1,500,000.00 shall be adjusted to its present value using the Consumer Price Index, as published by the NSO. For purposes of the threshold of P1,500,000.00, the husband and the wife shall be considered separate taxpayers. However, the aggregation rule for each taxpayer shall apply, for instance, if a professional, aside from the practice of his profession, also derives revenue from other lines of business which are otherwise subject to VAT, the same shall be combined for purposes of determining whether the threshold has been exceeded. Thus, the VAT-exempt sale shall not be included in determining the threshold.”
Section 15. VAT REGISTERED PERSON MAY ELECT THAT EXEMPT TRANSACTIONS UNDER SEC. 4.109-1 BE REGISTERED FOR VAT PURPOSES. – Sec. 4.109-2 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.109-2. Exempt Transactions May be Registered for VAT Purposes. - A VAT-registered person may, in relation to Sec. 9.236-1(c) of these Regula tions, elect that the exemption in Sec. 4.109-1(B) hereof shall not apply to his sales of goods or properties or services. Once the election is made, it shall be irrevocable for a period of three (3) years counted from the quarter when the election was made except for franchise grantees of radio and TV broadcasting whose annual gross receipts for the preceding year do not exceed ten million pesos (P10,000,000.00) where the option becomes perpetually irrevocable .”
Section 16. INPUT TAX ON DEPRECIABLE GOODS. - Sec. 4.110-3 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.110-3. Claim for Input Tax on Depreciable Goods. -Xxx xxx xxx.
(a) Xxx xxx xxx.
(b) If the estimated useful life of a capital good is less than five (5) years – The input tax shall be spread evenly on a monthly basis by dividing the input tax by the actual number of months comprising the estimated useful life of a capital good. The claim for input tax credit shall commence in the month that the capital goods were acquired. Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished depreciable capital goods purchased or imported during any calendar month does not exceed one million pesos (P1,000,000.00), the total input taxes will be allowable as credit against output tax in the month of acquisition.
Capital goods or properties refers to goods or properties with estimated useful life greater than one (1) year and which are treated as depreciable assets under Sec. 34(F) of the Tax Code, used directly or indirectly in the production or sale of taxable goods or services. The aggregate acquisition cost of depreciable assets in any calendar month refers to the total price, excluding the VAT, agreed upon for one or more assets acquired and not on the payments actually made during the calendar month. Thus, an asset acquired on installment for an acquisition cost of more than P1,000,000.00, excluding the VAT, will be subject to the amortization of input tax despite the fact that the monthly payments/installments may not exceed P1,000,000.00.
Xxx xxx xxx.
Construction in progress (CIP) is the cost of construction work which is not yet completed. CIP is not depreciated until the asset is placed in service. Normally, upon completion, a CIP item is reclassified and the reclassified asset is capitalized and depreciated. CIP is considered, for purposes of claiming input tax, as a purchase of service, the value of which shall be determined based on the progress billings. Until such time the construction has been completed, it will not qualify as capital goods as herein defined, in which case, input tax credit on such transaction can be recognized in the month the payment was made; Provided, that an official receipt of payment has been issued based on the progress billings.
In case of contract for the sale of service where only the labor will be supplied by the contractor and the materials will be purchased by the contractee from other suppliers, input tax credit on the labor contracted shall still be recognized on the month the payment was made based on a progress billings while input tax on the purchase of materials shall be recognized at the time the materials were purchased. Once the input tax has already been claimed while the construction is still in progress, no additional input tax can be claimed upon completion of the asset when it has been reclassified as a depreciable capital asset and depreciated.”
Section 17. INPUT TAX ON MIXED TRANSACTIONS. - Sec. 4.110-4 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.110-4. Apportionment of Input Tax on Mixed Transactions. - xxx xxx xxx.
1. All the input taxes that can be directly attributed to transactions subject to VAT may be recognized for input tax credit; Provided, that input taxes that can be directly attributable to VAT taxable sales of goods and services to the Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall not be credited against output taxes arising from sales to non-Government entities.
Claims for VAT refund/Tax Credit Certificate (TCC) with the Bureau of Internal Revenue, Board of Investment, and One-Stop-Shop and Duty Drawback Center of the Dept. of Finance should be deducted from the allowable input tax that are attributable to zero-rated sales.
2. Xxx xxx xxx.
Illustration: ERA Corporation has the following sales during the month:
Sale to private entities subject to 12% - P100,000.00
Sale to private entities subject to 0% - 100,000.00
Sale of exempt goods - 100,000.00
Sale to gov’t. subjected to
5% final VAT Withholding - 100,000.00
Total Sales for the month - P400,000.00
The following input taxes were passed on by its VAT suppliers:
Input tax on taxable goods 12% - P5,000.00
Input tax on zero-rated sales - 3,000.00
Input tax on sale of exempt goods - 2,000.00
Input tax on sale to government - 4,000.00
Input tax on depreciable capital good not attributable to any specific activity (monthly amortization for 60 months) - P20,000.00
A. The input tax attributable to sales to private entities subject to 12%, for the month, shall be computed as follows:
Input tax directly attributable to sale subject to 12% - P5,000.00
Ratable portion of the input tax not directly attributable to any activity:
Taxable sales (12%) / Total Sales x Amount of input tax not directly attributable to any activity P100,000.00 / 400,000.00 X P20,000.00 - P5,000.00
Total input tax attributable to sales to private entities for the month - P10,000.00
B. The input tax attributable to zero-rated sales for the month shall be computed as follows:
Input tax directly attributable to zero-rated sale - P 3,000.00
Ratable portion of the input tax not directly attributable to any activity:
Taxable sales (0% ) / Total Sales x Amount of input tax not directly attributable to any activity P100,000.00 / 400,000.00 X P20,000.00 - P 5,000.00
Total input tax attributable to zero-rated sales for the month - P 8,000.00
C. The input tax attributable to VAT-exempt sales for the month shall be computed as follows:
Input tax directly attributable to VAT-exempt sales - P2,000.00
Ratable portion of the input tax not directly attributable to any activity:
VAT-exempt sales / Total sales X Amount of input tax not directly attributable to any activity: P100,000.00 /400,000.00 X P20,000.00 - P5,000.00
Total input tax attributable to VAT-exempt sales - P7,000.00
D. The input tax attributable to sales to government for the month shall be computed as follows:
Input tax directly attributable to sale to gov’t.- P4,000.00
Ratable portion of the input tax not directly attributable to any activity:
Taxable sales to government / Total Sales x Amount of input tax not directly attributable to any activity P100,000.00 / 400,000.00 X P20,000.00 - P5,000.00
Total input tax attributable to sale to gov’t. - P9,000.00
The table below shows a summary of the foregoing transactions of ERA Corporation:
* These amounts are not available for input tax credit but may be recognized as cost or expense.
** Standard input VAT of 7% on sales to Government as provided in SEC. 4.114-2(a).
*** Withheld by Government entity as Final Withholding VAT.
Xxx xxx xxx.”
Section 18. Determination of the Output Tax and VAT Payable and Computation of VAT Payable or Excess Tax Credits. – Sec. 4.110-6 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.110-6. Determination of the Output Tax and VAT Payable and Computation of VAT Payable or Excess Tax Credits.
Xxx xxx xxx.
There shall be allowed as a deduction from the output tax the amount of input tax deductible as determined under Sec.4.110-1 to 4.110-5 of these Regulations to arrive at VAT payable on the monthly declaration and the quarterly VAT returns.”
Section 19. VAT Payable (Excess Output) or Excess Input Tax.- Sec. 4.110-7 of RR No. 16-2005, as last amended by RR No. 2-2007, is hereby further amended to read as follows:
“SEC.4.110-7. VAT Payable (Excess Output) or Excess Input Tax .
xxx xxx xxx.
(b.) If the input tax inclusive of input tax carried over from the previous quarter exceeds the output tax, the excess input tax shall be carried over to the succeeding quarter or quarters; Provided, however, that any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or applied for a tax credit certificate which may be used in the payment of internal revenue taxes, subject to the limitations as my be provided for by law, as well as, other implementing rules.
Illustration:
For a given taxable quarter, XYZ Corporation has output VAT of 100 and input VAT of 110. Since input tax exceeds the output tax for such taxable quarter, there is an excess input tax at the end of the quarter of which may be carried over to the next quarter or quarters."
Section 20. Invoicing and Recording Deemed Sale Transactions.- Sec. 4.113-2 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.113-2. Invoicing and Recording Deemed Sale Transactions.
Xxx xxx xxx.
Xxx xxx xxx.
Xxx xxx xxx.
Example: “A” at the time of retirement, had 1,000 pieces of merchandise which was deemed sold at a value of P20,000.00 with an output tax of P2,000.00. After retirement, “A” sold to “B”, 500 pieces for P12, 000.00. In the contract of sale or invoice, “A” should state the sales invoice number wherein the output tax on “deemed sale” was imposed and the corresponding tax paid on the 500 pieces is P1,000.00, which is included in the P12,000.00, or he should indicate it separately as follows:
Gross selling price P11,000.00
VAT previously paid on “deemed sale” 1,000.00
Total P12,000.00
In this case, “B” shall be entitled only to P1,000 as input tax and not 12/112 x 12,000.”
Section 21. Filing of Return and Payment of VAT. SEC. 4.114-1 is hereby amended to read as follows:
“SEC. 4.114-1. Filing of Return and Payment of VAT.
(A) Filing of Return. – Xxx xxx xxx.
Xxx xxx xxx.
Xxx xxx xxx.
(B) Payment of VAT
I. Advance Payment. – Xxx xxx xxx.
1. Sale of Refined Sugar
(a) Xxx xxx xxx.
(b) Xxx xxx xxx.
(c ) Basis for Determining the Amount of Advance VAT Payment. –
i. Base Price. – The amount of advance VAT payment shall be determined by applying VAT rate of 12% on the applicable base price of P850.00 per 50 kg. bag for refined sugar produced by a sugar refinery, and P760.00 per 50 kg. bag for refined sugar produced by a sugar mill.
ii. Subsequent Base Price Adjustments. –
Xxx xxx xxx.
(d) Xxx xxx xxx.
(e) Xxx xxx xxx.
(f) Xxx xxx xxx.
2. Sale of Flour
(a) Xxx xxx xxx.
(b) Xxx xxx xxx.
(c ) Xxx xxx xxx.
(d) Basis of Determining the Amount of Advance VAT Payment.-
i. Determination of advance VAT. – The amount of advance VAT payment shall be determined by applying VAT rate of 12% on the tax base.
ii. Tax Base. – Xxx xxx xxx.
iii. Subsequent tax base adjustments. – Xxx xxx xxx.
(e) Xxx xxx xxx.
(f) Xxx xxx xxx.
(C) Xxx xxx xxx.
(D) Xxx xxx xxx."
Section 22. WITHHOLDING OF VAT. - Sec. 4.114-2 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.114-2. Withholding of VAT on Government Money Payments and Payments to Non-Residents. –
(a) The government or any of its political subdivisions, instrumentalities or agencies including government-owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and/or of services taxed at twelve percent (12%) VAT pursuant to Secs. 106 and 108 of the Tax Code, deduct and withhold a final VAT due at the rate of five percent (5%) of the gross payment thereof. The five percent (5%) final VAT withholding rate shall represent the net VAT payable of the seller. The remaining seven percent (7%) effectively accounts for the standard input VAT for sales of goods or services to government or any of its political subdivisions, instrumentalities or agencies including GOCCs in lieu of the actual input VAT directly attributable or ratably apportioned to such sales. Should actual input VAT attributable to sale to government exceeds seven percent (7%) of gross payments, the excess may form part of the sellers’ expense or cost. On the other hand, if actual input VAT attributable to sale to government is less than seven percent (7%) of gross payment, the difference must be closed to expense or cost.
(b) The government or any of its political subdivisions, instrumentalities or agencies including GOCCs, as well as private corporation, individuals, estates and trusts, whether large or non-large taxpayers, shall withhold twelve percent (12%) VAT, starting February 1, 2006, with respect to the following payments:
(1) Lease or use of properties or property rights owned by nonresidents; and
(2) Other services rendered in the Philippines by non-residents.
Xxx xxx xxx.”
Section 23. ISSUANCE OF TAX CREDIT CERTIFICATES FOR UNUTILIZED ADVANCE VAT PAYMENTS. – Sec. 8.229-1 is hereby added to the provisions of RR 16-2005, to read as follows:
“SEC. 8.229-1. Issuance of Tax Credit Certificate for Unutilized Advance VAT Payments. – The advance payments made by the seller/owner of refined sugar and importer/miller of wheat/flour shall be allowed as credit against their output tax on the actual gross selling price of refined sugar/flour.
However, advance payments which remains unutilized at the end of taxpayer’s taxable year where the advance payment was made, which is tantamount to excess payment, may, at the option of the owner/seller/taxpayer or importer/miller/taxpayer, be available for the issuance of TCC upon application duly filed with the BIR by the seller/owner or importer/miller within two (2) years from the date of filing of the 4th quarter VAT return of the year such advance payments were made, or if filed out of time, from the last day prescribed by law for filing the return.
Advance VAT payments which have been the subject of an application for the issuance of TCC shall not be allowed as carry-over nor credited against the output tax of the succeeding quarter/year.
Advanced VAT payments which remained unutilized for more than one (1) year prior to the effectivity of these regulations may, at the option of the seller/owner of the refined sugar or importer/miller of wheat/flour, be the subject of application for TCC to be filed within two (2) years from the date of filing of the last quarterly VAT return where the unutilized advance VAT payments appeared, or if filed out of time, from the last day prescribed by law for filing the return.
Issuance of TCC shall be limited to the unutilized advance VAT payment and shall not include excess input tax. Issuance of TCC for input tax attributable to zero-rated sales shall be covered by a separate application for TCC following applicable rules.”
Section 24. REGISTRATION. - Sec. 9.236-1(b) and (c) of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 9.236-1. Registration of VAT Taxpayers. – Xxx xxx xxx.
(b) Mandatory: Xxx xxx xxx.
Moreover, franchise grantees of radio and television broadcasting, whose gross annual receipt for the preceding taxable year exceeded P10,000,000.00 shall register within thirty (30) days from the end of the taxable year.
(c) Optional VAT Registration:
xxx xxx xxx.
The above-stated taxpayers may apply for VAT registration not later than ten (10) days before the beginning of the taxable quarter and shall pay the registration fee prescribed under sub-paragraph (a) of this Section, unless they have already paid at the beginning of the year. In any case, the Commissioner of Internal Revenue may, for administrative reason deny any application for registration. Once registered as VAT person, the taxpayer shall be liable to output tax and be entitled to input tax credit beginning on the first day of the month following registration.”
Section 25. REGISTRATION OF NON-VAT OR EXEMPT TAXPAYER. - Sec. 9.236-2 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 9.236-2. Registration of Non-VAT or Exempt Taxpayer. - Xxx xxx xxx.
5) Radio and TV broadcasting whose gross annual receipts do not exceed ten million pesos (P10,000,000) and which do not opt to be VAT registered;
6._PEZA and other ecozone registered enterprises enjoying the preferential tax rate of 5% in lieu of all taxes;
7.) SBMA and other free port zone-registered enterprises enjoying the preferential tax rate of 5% in lieu of all taxes.”
Section 26. REPEALING CLAUSE. – The provisions of RR 16-2005 and all other issuances inconsistent herewith are hereby repealed, modified or amended accordingly.
Section 27. EFFECTIVITY. – These Regulations shall take effect after fifteen (15) days following its publication in any newspaper of general circulation or in the Official Gazette.
(Original Signed)
MARGARITO B. TEVES
Secretary
Department of Finance
Recommending Approval:
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue
A-1
TO : All Internal Revenue Officers and Others Concerned.
Section 1. SCOPE. - Pursuant to the provisions of Sec. 244 and 245 of the National Internal Revenue Code of 1997, as amended, in relation to Title IV of the same Tax Code, these Regulations are hereby promulgated to amend certain provisions of Revenue Regulations (RR) No. 16-2005, as amended, otherwise known as the Consolidated Value-Added Tax Regulations of 2005.
Section 2. VAT ON SALE OF GOODS OR PROPERTIES. - Sec. 4.106-1 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-1. VAT on Sale of Goods or Properties. – VAT is imposed and collected on every sale, barter or exchange, or transactions “deemed sale” of taxable goods or properties at the rate of twelve percent (12%) (starting February 1, 2006) of the gross selling price or gross value in money of the goods or properties sold, bartered, or exchanged, or deemed sold in the Philippines.”
Section 3. SALE OF REAL PROPERTIES. - Sec. 4.106-3 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-3. Sale of Real Properties. - Sale of real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business of the seller shall be subject to VAT.
Sale of residential lot with gross selling price exceeding P1,500,000.00, residential house and lot or other residential dwellings with gross selling price exceeding P2,500,000.00, where the instrument of sale (whether the instrument is nominated as a deed of absolute sale, deed of conditional sale or otherwise) is executed on or after Nov. 1, 2005, shall be subject to ten percent (10%) output VAT, and starting Feb. 1, 2006, to twelve percent (12%) output VAT.
Installment sale of residential house and lot or other residential dwellings with gross selling price exceeding P1,000,000.00, where the instrument of sale (whether the instrument is nominated as a deed of absolute sale, deed of conditional sale or otherwise) was executed prior to November 1, 2005, shall be subject to ten percent (10%) output VAT.
Sale of real property on installment plan means sale of real property by a real estate dealer, the initial payments of which in the year of sale do not exceed twenty-five (25%) of the gross selling price. In case of installment sale, the seller shall be subject to output VAT on the installment payments received, including the interests and penalties for late payment, actually and/or constructively received, subject to the provisions of Sec.4.106-4 hereof. Correspondingly, the buyer of the property can claim the input tax in the same period as the seller recognized the output tax. Installment payments, including interests and penalties, actually and/or constructively received starting February 1, 2006 shall be subject to twelve percent (12%) output VAT.
Sale of real property by a real estate dealer on a deferred payment basis not on the installment plan means sale of real property, the initial payments of which in the year of sale exceed twenty-five percent (25%) of the gross selling price.
“Initial payments” means payment or payments which the seller receives before or upon execution of the instrument of sale and payments which he expects or is scheduled to receive in cash or property (other than evidence of indebtedness of the purchaser) during the taxable year when the sale or disposition of the real property was made. It covers any down payment made and includes all payments actually or constructively received during the year of sale, the aggregate of which determines the limit set by law.
Initial payments do not include the amount of mortgage on the real property sold except when such mortgage exceeds the cost or other basis of the property to the seller, in which case the excess shall be considered part of the initial payments. Also excluded from the initial payments are notes or other evidence of indebtedness issued by the purchaser to the seller at the time of the sale.
In the case of sale of real properties on a deferred-payment basis not on the installment plan, the transaction shall be treated as cash sale which makes the entire selling price taxable in the month of sale. Output tax shall be recognized by the seller and input tax shall accrue to the buyer at the time of the execution of the instrument of sale.
Payments subsequent to “initial payments” shall no longer be subject to output VAT, in the case of sale on a deferred payment basis.
Pre-selling of real estate properties by real estate dealers shall be subject to VAT in accordance with the rules prescribed above.
Real estate dealer includes any person engaged in the business of buying, developing, selling, exchanging real properties as principal and holding himself out as a full or part-time dealer in real estate.
Transmission of property to a trustee shall not be subject to VAT if the property is to be merely held in trust for the trustor and/or beneficiary. However, if the property transferred is one for sale, lease or use in the ordinary course of trade or business and the transfer constitutes a completed gift, the transfer is subject to VAT as a deemed sale transaction pursuant to Section 4.106-7(a)(1) of these Regulations. The transfer is a completed gift if the transferor divests himself absolutely of control over the property, i.e., irrevocable transfer of corpus and/or irrevocable designation of beneficiary.”
Section 4. GROSS SELLING PRICE. - Sec. 4.106-4 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-4. Meaning of the Term ‘Gross Selling Price’. – The term “gross selling price” means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding VAT. The excise tax, if any, on such goods or properties shall form part of the gross selling price.
In the case of sale, barter or exchange of real property subject to VAT, gross selling price shall mean the consideration stated in the sales document or the fair market value whichever is higher. If the VAT is not billed separately in the document of sale, the selling price or the consideration stated therein shall be deemed to be inclusive of VAT.
The term ‘fair market value’ shall mean whichever is higher of:
1) the fair market value as determined by the Commissioner /zonal value, or
2) the fair market value as shown in schedule of values of the Provincial and City Assessors (real property tax declaration). However, in the absence of zonal value/fair market value as determined by the Commissioner, gross selling price refers to the market value shown in the latest real property tax declaration or the consideration, whichever is higher.
If the gross selling price is based on the zonal value or market value of the property, the zonal or market value shall be deemed exclusive of VAT. Thus, the zonal value/market value, net of the output VAT, should still be higher than the consideration in the document of sale, exclusive of the VAT.
If the sale of real property is on installment plan where the zonal value/fair market value is higher than the consideration/selling price, exclusive of the VAT, the VAT shall be based on the ratio of actual collection of the consideration, exclusive of the VAT, against the agreed consideration, exclusive of the VAT, appearing in the Contract to Sell/Contract of Sale applied to the zonal value/fair market value of the property at the time of the execution of the Contract to Sell/Contract of Sale at the inception of the contract. Thus, since the output VAT is based on the market value of the property which is higher than the consideration/selling price in the sales document, exclusive of the VAT, the input VAT that can be claimed by the buyer shall be the separately-billed output VAT in the sales document issued by the seller. Therefore, the output VAT which is based on the market value must be billed separately by the seller in the sales document with specific mention that the VAT billed separately is based on the market value of the property.
Illustration:
ABC Corporation sold a parcel of land to XYZ Company on July 2, 2006 for P1,000,000.00, plus the output VAT, with a monthly installment payment of P10,000.00, plus the output VAT. The zonal value of the subject property at the time of sale amounted to P1,500,000.00. Compute for the output tax due on the installment payment.
Formula:
(Actual collection (exclusive of the VAT) / Agreed consideration (exclusive of the VAT))
x Zonal value x 12%
(P10,000.00 / P1,000,000.00) x P1,500,000.00 = P15,000.00
P15,000.00 x 12% = P1,800.00
Selling price is the amount of consideration in a contract of sale between the buyer and seller or the total price of the sale which may include cash or property and evidence of indebtedness issued by the buyer, excluding the VAT. “
Section 5. ZERO-RATED SALES. - Sec. 4.106-5 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-5. Zero-Rated Sales of Goods or Properties. - Xxx xxx xxx.
The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:
(a) Export Sales. - Xxx xxx.
(5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws. “Considered export sales under Executive Order No. 226” shall mean the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same; Provided, That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents; Provided, further, That pursuant to EO 226 and other special laws, even without actual exportation, the following shall be considered constructively exported:
(1) sales to bonded manufacturing warehouses of export-oriented manufacturers;
(2) sales to export processing zones pursuant to Republic Act (RA) Nos. 7916, as amended, 7903, 7922 and other similar export processing zones;
(3) sale to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority pursuant to RA 7227;
(4) sales to registered export traders operating bonded trading warehouses supplying raw materials in the manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC);
(5) sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of locally manufactured, assembled or repacked products whether paid for in foreign currency or not.
Xxx xxx xxx.
(6) The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations; Provided, that the same is limited to goods, supplies, equipment and fuel pertaining to or attributable to the transport of goods and passengers from a port in the Philippines directly to a foreign port, or vice versa, without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes that originated from abroad, or to load passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other than that mentioned in this paragraph, such portion of fuel goods and supplies shall be subject to twelve percent (12%) output VAT starting February 1, 2006.
(b) Foreign Currency Denominated Sale. - Xxx xxx xxx xxx.
(c) Sales to Persons or Entities Deemed Tax-exempt Under Special Law or International Agreement. - Sale of goods or property to persons or entities who are tax-exempt under special laws or international agreements to which the Philippines is a signatory, such as, Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc., shall be effectively subject to VAT at zero-rate.”
Section 6. EFFECTIVELY ZERO-RATED. - Sec. 4.106-6 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-6. Meaning of the term ‘Effectively Zero-Rated Sale of Goods and Properties’. – The term ‘effectively zero-rated sale of goods and properties’ shall refer to the local sale of goods and properties by a VATregistered person to a person or entity who was granted indirect tax exemption under special laws or international agreement.”
Section 7. TRANSACTIONS DEEMED SALE. – Sec. 4.106-7 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-7. Transactions Deemed Sale. - xxx xxx xxx.
(b) The Commissioner of Internal Revenue shall determine the appropriate tax base in cases where a transaction is deemed a sale, barter or exchange of goods or properties under Sec. 4.106-7 paragraph (a) hereof, or where the gross selling price is unreasonably lower than the actual market value. The gross selling price is unreasonably lower than the actual market value if it is lower by more than 30% of the actual market value of the same goods of the same quantity and quality sold in the immediate locality on or nearest the date of sale. Nonetheless, if one of the parties in the transaction is the government as defined and contemplated under the Administrative Code, the output VAT on the transaction shall be based on the actual selling price.
Xxx xxx xxx.”
Section 8. CHANGE OR CESSATION OF STATUS AS VATREGISTERED PERSON. – Sec. 4.106-8 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.106-8. Change or Cessation of Status as VAT-registered Person. - xxx xxx xxx.
(b) Not subject to output tax
The VAT shall not apply to goods or properties existing as of the occurrence of the following:
(1) Change of control of a corporation by the acquisition of the controlling interest of such corporation by another stockholder or group of stockholders. The goods or properties used in business or those comprising the stock-in-trade of the corporation, having a change in corporate control, will not be considered sold, bartered or exchanged despite the change in the ownership interest in the said corporation.
Illustration:
Abel Corporation is a merchandising concern and has an inventory of goods for sale amounting to Php 1 million. Nel Corporation, a real estate developer, exchanged its real estate properties for the shares of stocks of Abel Corporation resulting to the acquisition of corporate control. The inventory of goods owned by Abel Corporation (Php 1 million worth) is not subject to output tax despite the change in corporate control because the same corporation still owns them. This is in recognition of the separate and distinct personality of the corporation from its stockholders.
However, the exchange of real estate properties held for sale or for lease, for shares of stocks, whether resulting to corporate control or not, is subject to VAT, subject to exceptions provided under Section 4.106-3 hereof. On the other hand, if the transferee of the transferred real property by a real estate dealer is another real estate dealer, in an exchange where the transferor gains control of the transferee-corporation, no output VAT is imposable on the said transfer.
(2) Change in the trade or corporate name of the business;
(3) Merger or consolidation of corporations. The unused input tax of the dissolved corporation, as of the date of merger or consolidation, shall be absorbed by the surviving or new corporation.”
Section 9. VAT ON THE SALE OF SERVICES AND USE OR LEASE OF PROPERTIES. - Sec. 4.108-1 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.108-1. VAT on the Sale of Services and Use or Lease of Properties. – Sale or exchange of services, as well as the use or lease of properties, as defined in Sec. 108(A) of the Tax Code shall be subject to VAT, equivalent to twelve percent (12%) of the gross receipts (excluding VAT) starting February 1, 2006.”
Section 10. DEFINITIONS AND SPECIFIC RULES ON SELECTED SERVICES. - Sec. 4.108-3 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.108-3. Definitions and Specific Rules on Selected Services.- Xxx xxx xxx.
(e) Domestic common carriers by air and sea are subject to twelve percent (12%) VAT on their gross receipts from their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines starting Feb. 1, 2006.
(f) Sale of electricity by generation, transmission, and distribution companies shall be subject to twelve percent (12%) VAT on their gross receipts starting Feb. 1, 2006; Provided, that sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels shall be subject to 0% VAT.
Xxx xxx xxx.
(h) Services of franchise grantees xxx xxx.
Gross receipts of all other franchisees, other than those covered by Sec. 119 of the Tax Code , regardless of how their franchises may have been granted, shall be subject to the twelve percent (12%) VAT imposed under Sec. 108 of the Tax Code starting Feb. 1, 2006. This includes among others, the Philippine and Amusement Gaming Corporation (PAGCOR), and its licensees or franchisees.
Xxx xxx xxx.
(i) Non-life insurance companies including surety, fidelity, indemnity and bonding companies are subject to VAT. They are not liable to the payment of the premium tax under Sec. 123 of the Tax Code. ‘Non-life insurance companies’ including surety, fidelity, indemnity and bonding companies, shall include all individuals, partnerships, associations, or corporations, including professional reinsurers defined in Sec. 280 of PD 612, otherwise known as the Insurance Code of the Philippines, mutual benefit associations and government-owned or controlled corporations, engaging in the business of property insurance, as distinguished from insurance on human lives, health, accident and insurance appertaining thereto or connected therewith which shall be subject to the percentage tax under Sec. 123 of the Tax Code.
The gross receipts from non-life insurance shall mean total premiums collected whether paid in money, notes, credits or any substitute for money. Non-life insurance premiums are subject to VAT whereas non-life reinsurance premiums are not subject to VAT, the latter being already subjected to VAT upon receipt of the insurance premiums. Insurance and reinsurance commissions, whether life of non-life, are subject to VAT.
(j) Pre -need Companies xxx xxx.
Xxx xxx xxx.”
Section 11. GROSS RECEIPTS. - Sec. 4.108-4 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.108-4. Definition of Gross Receipts. – ‘Gross receipts’ refers to the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits applied as payments for services rendered and advance payments actually or constructively received during the taxable period for the services performed or to be performed for another person, excluding the VAT, except those amounts earmarked for payment to unrelated third (3rd ) party or received as reimbursement for advance payment on behalf of another which do not redound to the benefit of the payor. A payment is a payment to a third (3rd) party if the same is made to settle an obligation of another person, e.g., customer or client, to the said third party, which obligation is evidenced by the sales invoice/official receipt issued by said third party to the obligor/debtor (e.g., customer or client of the payor of the obligation).
An advance payment is an advance payment on behalf of another if the same is paid to a third (3rd) party for a present or future obligation of said another party which obligation is evidenced by a sales invoice/official receipt issued by the obligee/creditor to the obligor/debtor (i.e., the aforementioned “another party”) for the sale of goods or services by the former to the latter.
For this purpose ‘unrelated party’ shall not include taxpayer’s employees, partners, affiliates (parent, subsidiary and other related companies), relatives by consanguinity or affinity within the fourth (4th) civil degree, and trust fund where the taxpayer is the trustor, trustee or beneficiary, even if covered by an agreement to the contrary. ‘Constructive receipt’ occurs when the money consideration or its equivalent is placed at the control of the person who rendered the service without restrictions by the payor.
The following are examples of constructive receipts:
(1.) deposits in banks which are made available to the seller of services without restrictions;
(2.) issuance by the debtor of a notice to offset any debt or obligation and acceptance thereof by the seller as payment for services rendered; and
(3.) transfer of the amounts retained by the payor to the account of the contractor.”
Section 12. ZERO-RATED SALE OF SERVICES. - Sec. 4.108-5(b)(4) of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.108-5. Zero-Rated Sale of Services.- Xxx xxx xxx.
(b) Transactions Subject to Zero Percent (0%) VAT Rate. -
xxx xxx xxx
(4) Services rendered to persons engaged in international shipping or air transport operations, including leases of property for use thereof; Provided, however, that the services referred to herein shall not pertain to those made to common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines, the same being subject to twelve percent (12%) VAT under Sec. 108 of the Tax Code starting Feb. 1, 2006; Xxx xxx xxx.”
Section 13. EFFECTIVELY ZERO-RATED SALE OF SERVICES. - Sec. 4.108-6 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.108-6. Meaning of the term ‘Effectively Zero-Rated Sale of Services’. The term ‘effectively zero-rated sales of services’ shall refer to the local sale of services by a VAT -registered person to a person or entity who was granted indirect tax exemption under special laws or international agreement.”
Section 14. VAT-EXEMPT TRANSACTIONS. - Sec. 4.109-1(B)(1) of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.109-1. VAT-Exempt Transactions.-
Xxx xxx xxx.
(B) Exempt transactions . – Subject to the provisions of Sec. 4.109-2 hereof, the following transactions shall be exempt from VAT:
Xxx xxx xxx.
(l) Sales by agricultural cooperatives duly registered and in good standing with the Cooperative Development Authority (CDA) to their members, as well as sale of their produce, whether in its original state or processed form, to non-members, their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce. Sale by agricultural cooperatives to non-members can only be exempted from VAT if the producer of the agricultural products sold is the cooperative itself. If the cooperative is not the producer (e.g., trader), then only those sales to its members shall be exempted from VAT; It is to be reiterated however, that sale or importation of agricultural food products in their original state is exempt from VAT irrespective of the seller and buyer thereof, pursuant to Subsection (a) hereof.
Xxx xxx xxx.
(p) The following sales of real properties are exempt from VAT, namely:
(1) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business. However, even if the real property is not primarily held for sale to customers or held for lease in the ordinary course of trade or business but the same is used in the trade or business of the seller, the sale thereof shall be subject to VAT being a transaction incidental to the taxpayer’s main business. Xxx xxx xxx.
(q) Xxx xxx xxx.
The term ‘residential units’ shall refer to apartments and houses & lots used for residential purposes, and buildings or parts or units thereof used solely as dwelling places (e.g., dormitories, rooms and bed spaces) except motels, motel rooms, hotels, hotel rooms, lodging houses, inns and pension houses. The term ‘unit’ shall mean an apartment unit in the case of apartments, house in the case of residential houses; per person in the case of dormitories, boarding houses and bed spaces; and per room in case of rooms for rent.
Xxx xxx xxx.
(t) Importation of life-saving equipment, safety and rescue equipment and communication and navigational safety equipment, steel plates and other metal plates including marine-grade aluminum plates, used for shipping transport operations; Provided, that the exemption shall be subject to the provisions of Section 4 of Republic Act. No. 9295, otherwise known as ‘The Domestic Shipping Development Act of 2004’;
(u) Importation of capital equipment, machinery, spare parts, lifesaving and navigational equipment, steel plates and other metal plates including marine-grade aluminum plates to be used in the construction, repair, renovation or alteration of any merchant marine vessel operated or to be operated in the domestic trade. Provided, that the exemption shall be subject to the provisions of Section 19 of Republic Act. No. 9295, otherwise known as ‘The Domestic Shipping Development Act of 2004’;
(v) Importation of fuel, goods and supplies by persons engaged in international shipping or air transport operations; Provided, that the said fuel, goods and supplies shall be used exclusively or shall pertain to the transport of goods and/or passenger from a port in the Philippines directly to a foreign port, or vice versa, without docking or stopping at any other port in the Philippines unless the docking or stopping at any other Philippine port is for the purpose of unloading passengers and/or cargoes that originated from abroad, or to load passengers and/or cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other than that mentioned in this paragraph, such portion of fuel, goods and supplies shall be subject to twelve percent (12%) VAT starting February 1, 2006;
(w) Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries, such as money changers and pawnshops, subject to percentage tax under Secs. 121 and 122 , respectively, of the Tax Code; and
(x) Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of One Million Five Hundred Thousand Pesos (P1,500,000.00). Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amount of P1,500,000.00 shall be adjusted to its present value using the Consumer Price Index, as published by the NSO. For purposes of the threshold of P1,500,000.00, the husband and the wife shall be considered separate taxpayers. However, the aggregation rule for each taxpayer shall apply, for instance, if a professional, aside from the practice of his profession, also derives revenue from other lines of business which are otherwise subject to VAT, the same shall be combined for purposes of determining whether the threshold has been exceeded. Thus, the VAT-exempt sale shall not be included in determining the threshold.”
Section 15. VAT REGISTERED PERSON MAY ELECT THAT EXEMPT TRANSACTIONS UNDER SEC. 4.109-1 BE REGISTERED FOR VAT PURPOSES. – Sec. 4.109-2 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.109-2. Exempt Transactions May be Registered for VAT Purposes. - A VAT-registered person may, in relation to Sec. 9.236-1(c) of these Regula tions, elect that the exemption in Sec. 4.109-1(B) hereof shall not apply to his sales of goods or properties or services. Once the election is made, it shall be irrevocable for a period of three (3) years counted from the quarter when the election was made except for franchise grantees of radio and TV broadcasting whose annual gross receipts for the preceding year do not exceed ten million pesos (P10,000,000.00) where the option becomes perpetually irrevocable .”
Section 16. INPUT TAX ON DEPRECIABLE GOODS. - Sec. 4.110-3 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.110-3. Claim for Input Tax on Depreciable Goods. -Xxx xxx xxx.
(a) Xxx xxx xxx.
(b) If the estimated useful life of a capital good is less than five (5) years – The input tax shall be spread evenly on a monthly basis by dividing the input tax by the actual number of months comprising the estimated useful life of a capital good. The claim for input tax credit shall commence in the month that the capital goods were acquired. Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished depreciable capital goods purchased or imported during any calendar month does not exceed one million pesos (P1,000,000.00), the total input taxes will be allowable as credit against output tax in the month of acquisition.
Capital goods or properties refers to goods or properties with estimated useful life greater than one (1) year and which are treated as depreciable assets under Sec. 34(F) of the Tax Code, used directly or indirectly in the production or sale of taxable goods or services. The aggregate acquisition cost of depreciable assets in any calendar month refers to the total price, excluding the VAT, agreed upon for one or more assets acquired and not on the payments actually made during the calendar month. Thus, an asset acquired on installment for an acquisition cost of more than P1,000,000.00, excluding the VAT, will be subject to the amortization of input tax despite the fact that the monthly payments/installments may not exceed P1,000,000.00.
Xxx xxx xxx.
Construction in progress (CIP) is the cost of construction work which is not yet completed. CIP is not depreciated until the asset is placed in service. Normally, upon completion, a CIP item is reclassified and the reclassified asset is capitalized and depreciated. CIP is considered, for purposes of claiming input tax, as a purchase of service, the value of which shall be determined based on the progress billings. Until such time the construction has been completed, it will not qualify as capital goods as herein defined, in which case, input tax credit on such transaction can be recognized in the month the payment was made; Provided, that an official receipt of payment has been issued based on the progress billings.
In case of contract for the sale of service where only the labor will be supplied by the contractor and the materials will be purchased by the contractee from other suppliers, input tax credit on the labor contracted shall still be recognized on the month the payment was made based on a progress billings while input tax on the purchase of materials shall be recognized at the time the materials were purchased. Once the input tax has already been claimed while the construction is still in progress, no additional input tax can be claimed upon completion of the asset when it has been reclassified as a depreciable capital asset and depreciated.”
Section 17. INPUT TAX ON MIXED TRANSACTIONS. - Sec. 4.110-4 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.110-4. Apportionment of Input Tax on Mixed Transactions. - xxx xxx xxx.
1. All the input taxes that can be directly attributed to transactions subject to VAT may be recognized for input tax credit; Provided, that input taxes that can be directly attributable to VAT taxable sales of goods and services to the Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall not be credited against output taxes arising from sales to non-Government entities.
Claims for VAT refund/Tax Credit Certificate (TCC) with the Bureau of Internal Revenue, Board of Investment, and One-Stop-Shop and Duty Drawback Center of the Dept. of Finance should be deducted from the allowable input tax that are attributable to zero-rated sales.
2. Xxx xxx xxx.
Illustration: ERA Corporation has the following sales during the month:
Sale to private entities subject to 12% - P100,000.00
Sale to private entities subject to 0% - 100,000.00
Sale of exempt goods - 100,000.00
Sale to gov’t. subjected to
5% final VAT Withholding - 100,000.00
Total Sales for the month - P400,000.00
The following input taxes were passed on by its VAT suppliers:
Input tax on taxable goods 12% - P5,000.00
Input tax on zero-rated sales - 3,000.00
Input tax on sale of exempt goods - 2,000.00
Input tax on sale to government - 4,000.00
Input tax on depreciable capital good not attributable to any specific activity (monthly amortization for 60 months) - P20,000.00
A. The input tax attributable to sales to private entities subject to 12%, for the month, shall be computed as follows:
Input tax directly attributable to sale subject to 12% - P5,000.00
Ratable portion of the input tax not directly attributable to any activity:
Taxable sales (12%) / Total Sales x Amount of input tax not directly attributable to any activity P100,000.00 / 400,000.00 X P20,000.00 - P5,000.00
Total input tax attributable to sales to private entities for the month - P10,000.00
B. The input tax attributable to zero-rated sales for the month shall be computed as follows:
Input tax directly attributable to zero-rated sale - P 3,000.00
Ratable portion of the input tax not directly attributable to any activity:
Taxable sales (0% ) / Total Sales x Amount of input tax not directly attributable to any activity P100,000.00 / 400,000.00 X P20,000.00 - P 5,000.00
Total input tax attributable to zero-rated sales for the month - P 8,000.00
C. The input tax attributable to VAT-exempt sales for the month shall be computed as follows:
Input tax directly attributable to VAT-exempt sales - P2,000.00
Ratable portion of the input tax not directly attributable to any activity:
VAT-exempt sales / Total sales X Amount of input tax not directly attributable to any activity: P100,000.00 /400,000.00 X P20,000.00 - P5,000.00
Total input tax attributable to VAT-exempt sales - P7,000.00
D. The input tax attributable to sales to government for the month shall be computed as follows:
Input tax directly attributable to sale to gov’t.- P4,000.00
Ratable portion of the input tax not directly attributable to any activity:
Taxable sales to government / Total Sales x Amount of input tax not directly attributable to any activity P100,000.00 / 400,000.00 X P20,000.00 - P5,000.00
Total input tax attributable to sale to gov’t. - P9,000.00
The table below shows a summary of the foregoing transactions of ERA Corporation:
| Output VAT | Input VAT directly Attributable | Input VAT not directly Attributable to any Activity | Total Input VAT | Creditable Input VAT | Net VAT Payable | Excess Input VAT for Carry Over | Input VAT for Refund | Unreco verable Input VAT | |
| Sale subject to 12% VAT | 12,000 | 5,000 | 5,000 | 10,000 | 10,000 | 2,000 | 0 | 0 | 0 |
| Sale subject to 0% VAT | 0 | 3,000 | 5,000 | 8,000 | 8,000 | 0 | 0 | 8,000 | 0 |
| Sale of exempt goods | 0 | 2,000 | 5,000 | 7,000 | 0 | 0 | 0 | 0 | 7,000* |
| Sale to Government subject to 5% Final Withholding Tax | 12,000 | 4,000 | 5,000 | 9.000 | 7,000** | 5,000*** | 0 | 0 | 2,000* |
** Standard input VAT of 7% on sales to Government as provided in SEC. 4.114-2(a).
*** Withheld by Government entity as Final Withholding VAT.
Xxx xxx xxx.”
Section 18. Determination of the Output Tax and VAT Payable and Computation of VAT Payable or Excess Tax Credits. – Sec. 4.110-6 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.110-6. Determination of the Output Tax and VAT Payable and Computation of VAT Payable or Excess Tax Credits.
Xxx xxx xxx.
There shall be allowed as a deduction from the output tax the amount of input tax deductible as determined under Sec.4.110-1 to 4.110-5 of these Regulations to arrive at VAT payable on the monthly declaration and the quarterly VAT returns.”
Section 19. VAT Payable (Excess Output) or Excess Input Tax.- Sec. 4.110-7 of RR No. 16-2005, as last amended by RR No. 2-2007, is hereby further amended to read as follows:
“SEC.4.110-7. VAT Payable (Excess Output) or Excess Input Tax .
xxx xxx xxx.
(b.) If the input tax inclusive of input tax carried over from the previous quarter exceeds the output tax, the excess input tax shall be carried over to the succeeding quarter or quarters; Provided, however, that any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or applied for a tax credit certificate which may be used in the payment of internal revenue taxes, subject to the limitations as my be provided for by law, as well as, other implementing rules.
Illustration:
For a given taxable quarter, XYZ Corporation has output VAT of 100 and input VAT of 110. Since input tax exceeds the output tax for such taxable quarter, there is an excess input tax at the end of the quarter of which may be carried over to the next quarter or quarters."
Section 20. Invoicing and Recording Deemed Sale Transactions.- Sec. 4.113-2 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.113-2. Invoicing and Recording Deemed Sale Transactions.
Xxx xxx xxx.
Xxx xxx xxx.
Xxx xxx xxx.
Example: “A” at the time of retirement, had 1,000 pieces of merchandise which was deemed sold at a value of P20,000.00 with an output tax of P2,000.00. After retirement, “A” sold to “B”, 500 pieces for P12, 000.00. In the contract of sale or invoice, “A” should state the sales invoice number wherein the output tax on “deemed sale” was imposed and the corresponding tax paid on the 500 pieces is P1,000.00, which is included in the P12,000.00, or he should indicate it separately as follows:
Gross selling price P11,000.00
VAT previously paid on “deemed sale” 1,000.00
Total P12,000.00
In this case, “B” shall be entitled only to P1,000 as input tax and not 12/112 x 12,000.”
Section 21. Filing of Return and Payment of VAT. SEC. 4.114-1 is hereby amended to read as follows:
“SEC. 4.114-1. Filing of Return and Payment of VAT.
(A) Filing of Return. – Xxx xxx xxx.
Xxx xxx xxx.
Xxx xxx xxx.
(B) Payment of VAT
I. Advance Payment. – Xxx xxx xxx.
1. Sale of Refined Sugar
(a) Xxx xxx xxx.
(b) Xxx xxx xxx.
(c ) Basis for Determining the Amount of Advance VAT Payment. –
i. Base Price. – The amount of advance VAT payment shall be determined by applying VAT rate of 12% on the applicable base price of P850.00 per 50 kg. bag for refined sugar produced by a sugar refinery, and P760.00 per 50 kg. bag for refined sugar produced by a sugar mill.
ii. Subsequent Base Price Adjustments. –
Xxx xxx xxx.
(d) Xxx xxx xxx.
(e) Xxx xxx xxx.
(f) Xxx xxx xxx.
2. Sale of Flour
(a) Xxx xxx xxx.
(b) Xxx xxx xxx.
(c ) Xxx xxx xxx.
(d) Basis of Determining the Amount of Advance VAT Payment.-
i. Determination of advance VAT. – The amount of advance VAT payment shall be determined by applying VAT rate of 12% on the tax base.
ii. Tax Base. – Xxx xxx xxx.
iii. Subsequent tax base adjustments. – Xxx xxx xxx.
(e) Xxx xxx xxx.
(f) Xxx xxx xxx.
(C) Xxx xxx xxx.
(D) Xxx xxx xxx."
Section 22. WITHHOLDING OF VAT. - Sec. 4.114-2 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 4.114-2. Withholding of VAT on Government Money Payments and Payments to Non-Residents. –
(a) The government or any of its political subdivisions, instrumentalities or agencies including government-owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and/or of services taxed at twelve percent (12%) VAT pursuant to Secs. 106 and 108 of the Tax Code, deduct and withhold a final VAT due at the rate of five percent (5%) of the gross payment thereof. The five percent (5%) final VAT withholding rate shall represent the net VAT payable of the seller. The remaining seven percent (7%) effectively accounts for the standard input VAT for sales of goods or services to government or any of its political subdivisions, instrumentalities or agencies including GOCCs in lieu of the actual input VAT directly attributable or ratably apportioned to such sales. Should actual input VAT attributable to sale to government exceeds seven percent (7%) of gross payments, the excess may form part of the sellers’ expense or cost. On the other hand, if actual input VAT attributable to sale to government is less than seven percent (7%) of gross payment, the difference must be closed to expense or cost.
(b) The government or any of its political subdivisions, instrumentalities or agencies including GOCCs, as well as private corporation, individuals, estates and trusts, whether large or non-large taxpayers, shall withhold twelve percent (12%) VAT, starting February 1, 2006, with respect to the following payments:
(1) Lease or use of properties or property rights owned by nonresidents; and
(2) Other services rendered in the Philippines by non-residents.
Xxx xxx xxx.”
Section 23. ISSUANCE OF TAX CREDIT CERTIFICATES FOR UNUTILIZED ADVANCE VAT PAYMENTS. – Sec. 8.229-1 is hereby added to the provisions of RR 16-2005, to read as follows:
“SEC. 8.229-1. Issuance of Tax Credit Certificate for Unutilized Advance VAT Payments. – The advance payments made by the seller/owner of refined sugar and importer/miller of wheat/flour shall be allowed as credit against their output tax on the actual gross selling price of refined sugar/flour.
However, advance payments which remains unutilized at the end of taxpayer’s taxable year where the advance payment was made, which is tantamount to excess payment, may, at the option of the owner/seller/taxpayer or importer/miller/taxpayer, be available for the issuance of TCC upon application duly filed with the BIR by the seller/owner or importer/miller within two (2) years from the date of filing of the 4th quarter VAT return of the year such advance payments were made, or if filed out of time, from the last day prescribed by law for filing the return.
Advance VAT payments which have been the subject of an application for the issuance of TCC shall not be allowed as carry-over nor credited against the output tax of the succeeding quarter/year.
Advanced VAT payments which remained unutilized for more than one (1) year prior to the effectivity of these regulations may, at the option of the seller/owner of the refined sugar or importer/miller of wheat/flour, be the subject of application for TCC to be filed within two (2) years from the date of filing of the last quarterly VAT return where the unutilized advance VAT payments appeared, or if filed out of time, from the last day prescribed by law for filing the return.
Issuance of TCC shall be limited to the unutilized advance VAT payment and shall not include excess input tax. Issuance of TCC for input tax attributable to zero-rated sales shall be covered by a separate application for TCC following applicable rules.”
Section 24. REGISTRATION. - Sec. 9.236-1(b) and (c) of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 9.236-1. Registration of VAT Taxpayers. – Xxx xxx xxx.
(b) Mandatory: Xxx xxx xxx.
Moreover, franchise grantees of radio and television broadcasting, whose gross annual receipt for the preceding taxable year exceeded P10,000,000.00 shall register within thirty (30) days from the end of the taxable year.
(c) Optional VAT Registration:
xxx xxx xxx.
The above-stated taxpayers may apply for VAT registration not later than ten (10) days before the beginning of the taxable quarter and shall pay the registration fee prescribed under sub-paragraph (a) of this Section, unless they have already paid at the beginning of the year. In any case, the Commissioner of Internal Revenue may, for administrative reason deny any application for registration. Once registered as VAT person, the taxpayer shall be liable to output tax and be entitled to input tax credit beginning on the first day of the month following registration.”
Section 25. REGISTRATION OF NON-VAT OR EXEMPT TAXPAYER. - Sec. 9.236-2 of RR No. 16-2005 is hereby amended to read as follows:
“SEC. 9.236-2. Registration of Non-VAT or Exempt Taxpayer. - Xxx xxx xxx.
5) Radio and TV broadcasting whose gross annual receipts do not exceed ten million pesos (P10,000,000) and which do not opt to be VAT registered;
6._PEZA and other ecozone registered enterprises enjoying the preferential tax rate of 5% in lieu of all taxes;
7.) SBMA and other free port zone-registered enterprises enjoying the preferential tax rate of 5% in lieu of all taxes.”
Section 26. REPEALING CLAUSE. – The provisions of RR 16-2005 and all other issuances inconsistent herewith are hereby repealed, modified or amended accordingly.
Section 27. EFFECTIVITY. – These Regulations shall take effect after fifteen (15) days following its publication in any newspaper of general circulation or in the Official Gazette.
(Original Signed)
MARGARITO B. TEVES
Secretary
Department of Finance
Recommending Approval:
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue
A-1
REVENUE MEMORANDUM CIRCULAR NO. 28-2007
SUBJECT: Publishing the full text of Joint Memorandum Circular No. 2007-1 by the Secretary of Department of Budget and Management (DBM) and the President and General Manager of Government Service Insurance System (GSIS) dated January 2, 2007 entitled Guidelines on the Recomputation and Refund of the Benefits of Government Service Insurance System (GSIS) Retirees/Members Whose Retirement and Other Benefits Were Reduced by Reason of the Increase in the National Government’s Share in Premium Contribution for the Period July 1997 to December 1998
TO : All Internal Revenue Officers, Employees and Others Concerned For the information and guidance of all internal revenue officers, employees and others concerned, quoted hereunder is the full text of Joint Memorandum Circular No. 2007-1 by the Secretary of Department of Budget and Management (DBM) and the President and General Manager of Government Service Insurance System (GSIS) dated January 2, 2007:
“DEPARTMENT OF BUDGET AND MANAGEMENT
GOVERNMENT SERVICE INSURANCE SYSTEM
Joint Memorandum Circular No. 2007 -1
January 2, 2007
TO : Heads of Departments, Bureaus, Offices, and Agencies of the National Government, including State Universities and Colleges, Finance Directors, Budget Officers, Heads of Accounting Units, and All Others Concerned
SUBJECT: Guidelines on the Recomputation and Refund of the Benefits of Government Service Insurance System (GSIS) Retirees/Members Whose Retirement and Other Benefits Were Reduced by Reason of the Increase in the National Government’s Share in Premium Contribution for the Period July 1997 to December 1998
1.0 This Joint Memorandum Circular is being issued to prescribe the rules and regulations to govern the implementation of Republic Act (R.A.) No. 9358, or the Supplemental Appropriations for Fiscal Year 2006, specifically on the increase in the National Government share in premium contribution from 9.5% to 12% for the period July 1997 to December 1998.
1.1 Subparagraph I.2, Paragraph I, Section 1 of R.A. No. 9358 appropriates the sum of Three Billion Two Hundred Ninety Nine Million Seven Hundred Ninety One Thousand Pesos (P3,299,791,000.00) for the increase in the National Government share in premium rate of 2.5% or the difference between 9.5% to 12% from July 1997 to December 1998; and
1.2 Subparagraph 2, Paragraph C, Section 2 of R.A. No. 9358 states that the release of deficiencies in government counterpart contributions due the Government Service Insurance System (GSIS) representing deficiency from July 1997 to December 1998 shall, notwithstanding any provision of law to the contrary, be considered as payment of the principal and not on any interest due thereon: Provided, that GSIS under takes to readjust the benefit of all retirees whose retirement and other benefits were reduced by reason of such deficiency in employer’s counterpart contributions.
2.0 National Government personnel who were granted life and retirement benefits from August 2003 (when GSIS began deducting the increase in the employer’s share including interest charged thereon from the members) to present shall be entitled to benefits corresponding to payment of the premium adjustment for the period July 1997 to December 1998.
3.0 All deductions made by the GSIS and thereafter applied as payment for this premium deficiency shall be refunded to the employees.
4.0 Any interest imposed by the GSIS resulting from the increase in government share in premium contribution for the period July 1997 to December 1998 shall be resolved by GSIS and the Department of Budget and Management (DBM) in separate discussions.
5.0 Specific responsibilities of DBM, GSIS, and concerned government entities/GSIS members are as follows:
5.1 DBM shall:
5.1.1 Release to GSIS the appropriated amount of P3,299,791,000.00 for the increase in the National Government share in premium rate of 2.5% or the difference between 9.5% to 12% for the period July 1997 to December 1998.
5.1.2 Post to the DBM website (www.dbm.gov.ph) said increase in the National Government share in premium contribution by paying agency/office per GSIS computation.
5.2 GSIS shall:
5.2.1 Post to the individual GSIS retirees’ and members’ account the payment corresponding to the increase in the National Government share in premium contribution from July 1997 to December 1998. Any interest being claimed thereon by the GSIS shall not be charged against the retiree/member but shall be subject to separate discussions by GSIS and DBM.
5.2.2 Generate and provide the agencies concerned the list of active and retired members that availed of the following benefits starting August 2003 to present:
5.2.2.1 Retirement benefits; and
5.2.2.2 Life insurance claims due to matured policy and salary/policy loans (only in cases where deductions in premium arrearages including interest were made by GSIS by reason of subject increase in employer’s share in premium contribution).
5.2.3 Process the members’ request within ten days after the receipt of the agencies’ official endorsement.
5.2.4 Pay the following to GSIS members concerned:
5.2.4.1 Adjustment in the retirement benefits and basic monthly pension as a result of the payment of the said increase in the National Government share in premium contribution to retired GSIS members; and
5.2.4.2 Refund of the full amount deducted by GSIS from active members whose matured policies and salary/policy loans, if any, were reduced as a result of the increase in the National Government share in premium contribution including interest.
5.3 National Government Agencie s shall:
5.3.1 Verify the accuracy of the GSIS computation posted on the DBM website as cited in Par. 5.1.2 against agency records relative to the increase in the National Government share in premium rate of 2.5% or the difference between 9.5% to 12% for the period July 1997 to December 1998.
5.3.2 Notify the members concerned who are included in the list specified under Par. 5.2.2.
5.3.3 Provide its current and former employees eligible for the claim with GSIS with copies of the Business Forms (BF), shown as Annex A, for their accomplishment.
5.3.4 Officially endorse and submit the properly accomplished BF to the GSIS office currently handling the claims transactions of its employees.
5.4 GSIS Members Concerned shall:
5.4.1 Properly accomplish and submit the GSIS BF to the responsible official of their respective agencies for subsequent official endorsement and submission to GSIS.
6.0 This Circular shall take effect immediately.
(SGD) ROLANDO G. ANDAYA, JR.
Secretary
Department of Budget and Management
(SGD) WINSTON F. GARCIA
President and General Manager
Government Service Insurance System”
All revenue officials and employees are enjoined to give this Circular as wide a publicity as possible.
(Original Signed)
VIRGINIA L. TRINIDAD
Deputy Commissioner
Resource Management Group
N-6
ZBC _____
LPO _____
FUA _____
TO : All Internal Revenue Officers, Employees and Others Concerned For the information and guidance of all internal revenue officers, employees and others concerned, quoted hereunder is the full text of Joint Memorandum Circular No. 2007-1 by the Secretary of Department of Budget and Management (DBM) and the President and General Manager of Government Service Insurance System (GSIS) dated January 2, 2007:
“DEPARTMENT OF BUDGET AND MANAGEMENT
GOVERNMENT SERVICE INSURANCE SYSTEM
Joint Memorandum Circular No. 2007 -1
January 2, 2007
TO : Heads of Departments, Bureaus, Offices, and Agencies of the National Government, including State Universities and Colleges, Finance Directors, Budget Officers, Heads of Accounting Units, and All Others Concerned
SUBJECT: Guidelines on the Recomputation and Refund of the Benefits of Government Service Insurance System (GSIS) Retirees/Members Whose Retirement and Other Benefits Were Reduced by Reason of the Increase in the National Government’s Share in Premium Contribution for the Period July 1997 to December 1998
1.0 This Joint Memorandum Circular is being issued to prescribe the rules and regulations to govern the implementation of Republic Act (R.A.) No. 9358, or the Supplemental Appropriations for Fiscal Year 2006, specifically on the increase in the National Government share in premium contribution from 9.5% to 12% for the period July 1997 to December 1998.
1.1 Subparagraph I.2, Paragraph I, Section 1 of R.A. No. 9358 appropriates the sum of Three Billion Two Hundred Ninety Nine Million Seven Hundred Ninety One Thousand Pesos (P3,299,791,000.00) for the increase in the National Government share in premium rate of 2.5% or the difference between 9.5% to 12% from July 1997 to December 1998; and
1.2 Subparagraph 2, Paragraph C, Section 2 of R.A. No. 9358 states that the release of deficiencies in government counterpart contributions due the Government Service Insurance System (GSIS) representing deficiency from July 1997 to December 1998 shall, notwithstanding any provision of law to the contrary, be considered as payment of the principal and not on any interest due thereon: Provided, that GSIS under takes to readjust the benefit of all retirees whose retirement and other benefits were reduced by reason of such deficiency in employer’s counterpart contributions.
2.0 National Government personnel who were granted life and retirement benefits from August 2003 (when GSIS began deducting the increase in the employer’s share including interest charged thereon from the members) to present shall be entitled to benefits corresponding to payment of the premium adjustment for the period July 1997 to December 1998.
3.0 All deductions made by the GSIS and thereafter applied as payment for this premium deficiency shall be refunded to the employees.
4.0 Any interest imposed by the GSIS resulting from the increase in government share in premium contribution for the period July 1997 to December 1998 shall be resolved by GSIS and the Department of Budget and Management (DBM) in separate discussions.
5.0 Specific responsibilities of DBM, GSIS, and concerned government entities/GSIS members are as follows:
5.1 DBM shall:
5.1.1 Release to GSIS the appropriated amount of P3,299,791,000.00 for the increase in the National Government share in premium rate of 2.5% or the difference between 9.5% to 12% for the period July 1997 to December 1998.
5.1.2 Post to the DBM website (www.dbm.gov.ph) said increase in the National Government share in premium contribution by paying agency/office per GSIS computation.
5.2 GSIS shall:
5.2.1 Post to the individual GSIS retirees’ and members’ account the payment corresponding to the increase in the National Government share in premium contribution from July 1997 to December 1998. Any interest being claimed thereon by the GSIS shall not be charged against the retiree/member but shall be subject to separate discussions by GSIS and DBM.
5.2.2 Generate and provide the agencies concerned the list of active and retired members that availed of the following benefits starting August 2003 to present:
5.2.2.1 Retirement benefits; and
5.2.2.2 Life insurance claims due to matured policy and salary/policy loans (only in cases where deductions in premium arrearages including interest were made by GSIS by reason of subject increase in employer’s share in premium contribution).
5.2.3 Process the members’ request within ten days after the receipt of the agencies’ official endorsement.
5.2.4 Pay the following to GSIS members concerned:
5.2.4.1 Adjustment in the retirement benefits and basic monthly pension as a result of the payment of the said increase in the National Government share in premium contribution to retired GSIS members; and
5.2.4.2 Refund of the full amount deducted by GSIS from active members whose matured policies and salary/policy loans, if any, were reduced as a result of the increase in the National Government share in premium contribution including interest.
5.3 National Government Agencie s shall:
5.3.1 Verify the accuracy of the GSIS computation posted on the DBM website as cited in Par. 5.1.2 against agency records relative to the increase in the National Government share in premium rate of 2.5% or the difference between 9.5% to 12% for the period July 1997 to December 1998.
5.3.2 Notify the members concerned who are included in the list specified under Par. 5.2.2.
5.3.3 Provide its current and former employees eligible for the claim with GSIS with copies of the Business Forms (BF), shown as Annex A, for their accomplishment.
5.3.4 Officially endorse and submit the properly accomplished BF to the GSIS office currently handling the claims transactions of its employees.
5.4 GSIS Members Concerned shall:
5.4.1 Properly accomplish and submit the GSIS BF to the responsible official of their respective agencies for subsequent official endorsement and submission to GSIS.
6.0 This Circular shall take effect immediately.
(SGD) ROLANDO G. ANDAYA, JR.
Secretary
Department of Budget and Management
(SGD) WINSTON F. GARCIA
President and General Manager
Government Service Insurance System”
All revenue officials and employees are enjoined to give this Circular as wide a publicity as possible.
(Original Signed)
VIRGINIA L. TRINIDAD
Deputy Commissioner
Resource Management Group
N-6
ZBC _____
LPO _____
FUA _____
REVENUE MEMORANDUM CIRCULAR NO. 27 - 2007
SUBJECT : Publishing the Full Text of Republic Act No. 9400 Entitled an Act Amending Republic Act No. 7227, as Amended, Otherwise Known as the Bases Conversion and Development Act of 1992, and for Other Purposes
TO : All Internal Revenue Officials, Employees and Others Concerned
________________________________________________________________________
For the information and guidance of all internal revenue officials, employees and others concerned, quoted hereunder is the full text of REPUBLIC ACT NO. 9400, AN ACT AMENDING REPUBLIC ACT NO. 7227, AS AMENDED, OTHERWISE KNOWN AS THE BASES CONVERSION AND DEVELOPMENT ACT OF 1992, AND FOR OTHER PURPOSES, as follows:
“ [REPUBLIC ACT NO. 9400]
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
SECTION 1. Section 12 of Republic Act No. 7227, as amended, otherwise known as the Bases Conversion and Development Act of 1992, is hereby amended to read as follows:
“SEC. 12. Subic Special Economic Zone. – x x x
“(a) x x x
“(b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Tariff and Customs Code of the Philippines, as amended, the National Internal Revenue Code of 1997, as amended, and other relevant tax laws of the Philippines;
“( c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed within the Subic Special Economic Zone.
In lieu of said taxes, a five percent (5%) tax on gross income earned shall be paid by all bus iness enterprises within the Subic Special Economic Zone and shall be remitted as follows: three percent (3%) to the National Government, and two (2%) percent to the Subic Bay Metropolitan Authority (SBMA) for distribution to the local government units affected by the declaration of and contiguous to the zone, namely: the City of Olongapo and the municipalities of Subic, San Antonio, San Marcelino and Castillejos of the Province of Zambales; and the municipalities of Morong, Hermosa and Dinalupihan of the Province of Bataan, on the basis of population (50%), land area (25%), and equal sharing (25%).
“x x x.”
SEC. 2. Section 15 of the Republic Act No. 7227, as amended, is hereby amended to read as follows:
“SEC. 15. Clark Special Economic Zone (CSEZ) and Clark Freeport Zone (CFZ). – Subject to the concurrence by resolution of the local government units directly affected, the President is hereby authorized to create by executive proclamation a Special Economic Zone covering the lands occupied by the Clark military reservations and its contiguous extensions as embraced, covered and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended, located within the territorial jurisdiction of Angeles City, municipalities of Mabalacat and Porac, Province of Pampanga, and the municipalities of Capas and Bamban, Province of Tarlac, in accordance with the provision as herein provided insofar as applied to the Clark military reservations. The Clark Air Base proper with an area of not more than four thousand four hundred hectares (4,400 has.), with the exception of the twenty-twohectare commercial area situated near the main gate and the Bayanihan Park consisting of seven and a half hectares (7.5 has.) located outside the main gate of the Clark Special Economic Zone, is hereby declared a Freeport zone.
“The CFZ shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital equipment within, into and exported out of the CFZ, as well as provide incentives such as tax and duty-free importation of raw materials and capital equipment. However, exportation or removal of goods from the territory of the CFZ to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Tariff and Customs Code of the Philippines, as amended, the National Internal Revenue Code of 1997, as amended, and other relevant tax laws of the Philippines.
“The provisions of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed on registered business enterprises within the CFZ. In lieu of said taxes, a five percent (5%) tax on gross income earned shall be paid by all registered business enterprises within the CFZ and shall be directly remitted as follows: three percent (3%) to the National Government, and two percent (2%) to the treasurer’s office of the municipality or city where they are located.
“The governing body of the Clark Special Economic Zone shall likewise be established by executive proclamation with such powers and functions exercised by the Export Processing Zone Authority pursuant to Presidential Decree No. 66, as amended: Provided, That it shall have no regulatory authority over public utilities, which authority pertains to the regulatory agencies created by law for the purpose, such as the Energy Regulatory Commission created under Republic Act No. 9136 and the National Telecommunications Commission created under Republic Act No. 7925.
“x x x
“Subject to the concurrence by resolution of the local government units directly affected and upon recommendation of the Philippine Economic Zone Authority (PEZA), the President is hereby authorized to create by executive proclamation Special Economic Zones covering the City of Balanga and the municipalities of Limay, Mariveles, Morong, Hermosa, and Dinalupihan, Province of Bataan.
“Subject to the concurrence by resolution of the local government units directly affected and upon recommendation of the PEZA, the President is hereby authorized to create by executive proclamation Special Economic Zones covering the municipalities of Castillejos, San Marcelino, and San Antonio, Province of Zambales.
“Duly registered business enterprises that will operate in the Special Economic Zones to be created shall be entitled to the same tax and duty incentives as provided for under Republic Act No. 7916, as amended: Provided, That for the purpose of administering these incentives, the PEZA shall register, regulate, and supervise all registered enterprises within the Special Economic Zones.”
SEC. 3. A new Section 15-A is hereby inserted, amending Republic Act No. 7227, as amended, to read as follows:
“SEC. 15-A. Poro Point Freeport Zone (PPFZ). – The two hundred thirty-six and a half-hectare (236.5 has.) secured area in the Poro Point Special Economic and Freeport Zone created under Proclamation No. 216, series of 1993, shall be operated and managed as a freeport and separate customs territory ensuring free flow or movement of goods and capital equipment within, into and exported out of the PPFZ. The PPFZ shall also provide incentives such as tax and duty-free importation of raw materials and capital equipment. However, exportation or removal of goods from the territory of the PPFZ to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Tariff and Customs Code of the Philippines, as amended, the National Internal Revenue Code of 1997, as amended, and other relevant tax laws of the Philippines.
“The provisions of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed on registered business enterprises within the PPFZ. In lieu of said taxes, a five percent (5%) tax on gross income earned shall be paid by all registered business enterprises within the PPFZ and shall be directly remitted as follows: three percent (3%) to the National Government, and two percent (2%) to the treasurer’s office of the municipality or city where they are located.
“The governing body of the PPFZ shall have no regulatory authority over public utilities, which authority pertains to the regulatory agencies created by law for the purpose, such as the Energy Regulatory Commission created under Republic Act No. 9136 and the National Telecommunications Commission created under Republic Act No. 7925.”
SEC. 4. A new Section 15-B is hereby inserted, amending Republic Act No. 7227, as amended, to read as follows:
“SEC. 15-B. Morong Special Economic Zone (MSEZ). – Duly registered business enterprises operating within the MSEZ created under Proclamation No. 984, series of 1997, shall be entitled to tax and duty-free importation of raw materials and capital equipment. In lieu of all national and local taxes except real property tax on land, a five percent (5%) tax on gross income earned shall be paid by all registered business enterprises which shall be directly remitted as follows: three percent (3%) to the National Government, and two percent (2%) to the treasurer’s office of the municipality or city where they are located.”
SEC. 5. A new Section 15-C is hereby inserted, amending Republic Act No. 7227, as amended, to read as follows:
“Sec. 15-C. John Hay Special Economic Zone (JHSEZ). – Registered business enterprises which will operate after the effectivity of this Act, within the JHSEZ created under Proclamation No. 420, series of 1994, shall be entitled to the same tax and duty incentives as provided for under Republic Act 5 No. 7916, as amended: Provided, That for the purpose of administering these incentives, the PEZA shall register, regulate, and supervise all registered enterprises within the JHSEZ: Provided, further, That the Conversion Authority and the John Hay Management Corporation (JHMC) shall only engage in acquiring, owning, holding, administering or leasing real properties, and in other activities incidental thereto.”
SEC. 6. In case of conflict between national and local laws with respect to the tax exemption privileges in the CFZ, PPFZ, JHSEZ and MSEZ, the same shall be resolved in favor of the aforementioned zones: Provided, That the CFZ and PPFZ shall be subject to the provisions of paragraphs (d), (e), (f), (g), (h), and (i) of Section 12 of Republic Act No. 7227, as amended.
SEC. 7. Business enterprises presently registered and granted with tax and duty incentives by the Clark Development Corporation (CDC), Poro Point Management Corporation (PPMC), JHMC, and Bataan Technological Park Incorporated (BTPI), including such governing bodies, shall be entitled to the same incentives until the expiration of their contracts entered into prior to the effectivity of this Act.
SEC. 8. Administration, Implementation and Monitoring of Incentives. – The governing authorities shall be responsible for the administration and implementation of the incentives granted to their respective registered enterprises. They shall submit to the Department of Finance (DOF) their respective annual tax expenditures based on the computed costs in terms of revenue forgone on the tax incentives granted to their registered enterprises. For proper monitoring, the DOF shall create a single database of all incentives provided by all these authorities. The DOF shall monitor and review the incentives granted and submit an annual report to the President.
SEC. 9. Penal Provision. –Any registered business enterprise found guilty of smuggling by final judgment, either as principal, accomplice or accessory shall be perpetually barred from doing business in any freeport and special economic zone, in addition to the penalties and sanctions imposed by existing laws.
SEC. 10. Implementing Rules and Regulations. – The DOF, in coordination with the PEZA, the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC), and in consultation with the Bases Conversion Development Authority (BCDA), the SBMA, the CDC, the JHMC, the PPMC, and the BTPI, shall promulgate and publish the necessary rules and regulations for the effective implementation of this Act within two months from the date of effectivity of this Act.
SEC. 11. Separability Clause. – If any portion or provision of this Act is declared unconstitutional, the remainder of this Act or any provision not affected thereby shall remain in force and effect.
SEC. 12. Repealing Clause. – All laws, decrees, orders, proclamations, rules and regulations or other issuances or parts thereof inconsistent with the provisions of this Act are hereby repealed or modified accordingly. The provision of Section 50 of Republic Act No. 7916, as amended, is hereby repealed. The provisions of Section 13(b)(3) of Republic Act No. 7227, as amended, with respect to public utilities engaged in the provision of electric power and telecommunications services are hereby repealed.
SEC. 13. Effectivity. – This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in any two newspapers of general circulation, whichever comes earlier.
Approved,
(Original Signed)
MANNY VILLAR
President of the Senate
(Original Signed)
JOSE DE VENECIA, JR.
Speaker of the House
of Representatives
This Act which is a consolidation of House Bill No. 5064 and Senate Bill No. 2260 was finally passed by the House of Representatives and the Senate on January 31, 2007 and February 5, 2007, respectively.
(Original Signed)
OSCAR G. YABES
Secretary of the Senate
(Original Signed)
ROBERTO P. NAZARENO
Secretary General
House of Representatives
Approved:
(Original Signed)
GLORIA MACAPAGAL-ARROYO
President of the Philippines”
All concerned are hereby enjoined to be guided accordingly and give this circular a wide publicity as possible.
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner or Internal Revenue
TO : All Internal Revenue Officials, Employees and Others Concerned
________________________________________________________________________
For the information and guidance of all internal revenue officials, employees and others concerned, quoted hereunder is the full text of REPUBLIC ACT NO. 9400, AN ACT AMENDING REPUBLIC ACT NO. 7227, AS AMENDED, OTHERWISE KNOWN AS THE BASES CONVERSION AND DEVELOPMENT ACT OF 1992, AND FOR OTHER PURPOSES, as follows:
“ [REPUBLIC ACT NO. 9400]
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
SECTION 1. Section 12 of Republic Act No. 7227, as amended, otherwise known as the Bases Conversion and Development Act of 1992, is hereby amended to read as follows:
“SEC. 12. Subic Special Economic Zone. – x x x
“(a) x x x
“(b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Tariff and Customs Code of the Philippines, as amended, the National Internal Revenue Code of 1997, as amended, and other relevant tax laws of the Philippines;
“( c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed within the Subic Special Economic Zone.
In lieu of said taxes, a five percent (5%) tax on gross income earned shall be paid by all bus iness enterprises within the Subic Special Economic Zone and shall be remitted as follows: three percent (3%) to the National Government, and two (2%) percent to the Subic Bay Metropolitan Authority (SBMA) for distribution to the local government units affected by the declaration of and contiguous to the zone, namely: the City of Olongapo and the municipalities of Subic, San Antonio, San Marcelino and Castillejos of the Province of Zambales; and the municipalities of Morong, Hermosa and Dinalupihan of the Province of Bataan, on the basis of population (50%), land area (25%), and equal sharing (25%).
“x x x.”
SEC. 2. Section 15 of the Republic Act No. 7227, as amended, is hereby amended to read as follows:
“SEC. 15. Clark Special Economic Zone (CSEZ) and Clark Freeport Zone (CFZ). – Subject to the concurrence by resolution of the local government units directly affected, the President is hereby authorized to create by executive proclamation a Special Economic Zone covering the lands occupied by the Clark military reservations and its contiguous extensions as embraced, covered and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended, located within the territorial jurisdiction of Angeles City, municipalities of Mabalacat and Porac, Province of Pampanga, and the municipalities of Capas and Bamban, Province of Tarlac, in accordance with the provision as herein provided insofar as applied to the Clark military reservations. The Clark Air Base proper with an area of not more than four thousand four hundred hectares (4,400 has.), with the exception of the twenty-twohectare commercial area situated near the main gate and the Bayanihan Park consisting of seven and a half hectares (7.5 has.) located outside the main gate of the Clark Special Economic Zone, is hereby declared a Freeport zone.
“The CFZ shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital equipment within, into and exported out of the CFZ, as well as provide incentives such as tax and duty-free importation of raw materials and capital equipment. However, exportation or removal of goods from the territory of the CFZ to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Tariff and Customs Code of the Philippines, as amended, the National Internal Revenue Code of 1997, as amended, and other relevant tax laws of the Philippines.
“The provisions of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed on registered business enterprises within the CFZ. In lieu of said taxes, a five percent (5%) tax on gross income earned shall be paid by all registered business enterprises within the CFZ and shall be directly remitted as follows: three percent (3%) to the National Government, and two percent (2%) to the treasurer’s office of the municipality or city where they are located.
“The governing body of the Clark Special Economic Zone shall likewise be established by executive proclamation with such powers and functions exercised by the Export Processing Zone Authority pursuant to Presidential Decree No. 66, as amended: Provided, That it shall have no regulatory authority over public utilities, which authority pertains to the regulatory agencies created by law for the purpose, such as the Energy Regulatory Commission created under Republic Act No. 9136 and the National Telecommunications Commission created under Republic Act No. 7925.
“x x x
“Subject to the concurrence by resolution of the local government units directly affected and upon recommendation of the Philippine Economic Zone Authority (PEZA), the President is hereby authorized to create by executive proclamation Special Economic Zones covering the City of Balanga and the municipalities of Limay, Mariveles, Morong, Hermosa, and Dinalupihan, Province of Bataan.
“Subject to the concurrence by resolution of the local government units directly affected and upon recommendation of the PEZA, the President is hereby authorized to create by executive proclamation Special Economic Zones covering the municipalities of Castillejos, San Marcelino, and San Antonio, Province of Zambales.
“Duly registered business enterprises that will operate in the Special Economic Zones to be created shall be entitled to the same tax and duty incentives as provided for under Republic Act No. 7916, as amended: Provided, That for the purpose of administering these incentives, the PEZA shall register, regulate, and supervise all registered enterprises within the Special Economic Zones.”
SEC. 3. A new Section 15-A is hereby inserted, amending Republic Act No. 7227, as amended, to read as follows:
“SEC. 15-A. Poro Point Freeport Zone (PPFZ). – The two hundred thirty-six and a half-hectare (236.5 has.) secured area in the Poro Point Special Economic and Freeport Zone created under Proclamation No. 216, series of 1993, shall be operated and managed as a freeport and separate customs territory ensuring free flow or movement of goods and capital equipment within, into and exported out of the PPFZ. The PPFZ shall also provide incentives such as tax and duty-free importation of raw materials and capital equipment. However, exportation or removal of goods from the territory of the PPFZ to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Tariff and Customs Code of the Philippines, as amended, the National Internal Revenue Code of 1997, as amended, and other relevant tax laws of the Philippines.
“The provisions of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed on registered business enterprises within the PPFZ. In lieu of said taxes, a five percent (5%) tax on gross income earned shall be paid by all registered business enterprises within the PPFZ and shall be directly remitted as follows: three percent (3%) to the National Government, and two percent (2%) to the treasurer’s office of the municipality or city where they are located.
“The governing body of the PPFZ shall have no regulatory authority over public utilities, which authority pertains to the regulatory agencies created by law for the purpose, such as the Energy Regulatory Commission created under Republic Act No. 9136 and the National Telecommunications Commission created under Republic Act No. 7925.”
SEC. 4. A new Section 15-B is hereby inserted, amending Republic Act No. 7227, as amended, to read as follows:
“SEC. 15-B. Morong Special Economic Zone (MSEZ). – Duly registered business enterprises operating within the MSEZ created under Proclamation No. 984, series of 1997, shall be entitled to tax and duty-free importation of raw materials and capital equipment. In lieu of all national and local taxes except real property tax on land, a five percent (5%) tax on gross income earned shall be paid by all registered business enterprises which shall be directly remitted as follows: three percent (3%) to the National Government, and two percent (2%) to the treasurer’s office of the municipality or city where they are located.”
SEC. 5. A new Section 15-C is hereby inserted, amending Republic Act No. 7227, as amended, to read as follows:
“Sec. 15-C. John Hay Special Economic Zone (JHSEZ). – Registered business enterprises which will operate after the effectivity of this Act, within the JHSEZ created under Proclamation No. 420, series of 1994, shall be entitled to the same tax and duty incentives as provided for under Republic Act 5 No. 7916, as amended: Provided, That for the purpose of administering these incentives, the PEZA shall register, regulate, and supervise all registered enterprises within the JHSEZ: Provided, further, That the Conversion Authority and the John Hay Management Corporation (JHMC) shall only engage in acquiring, owning, holding, administering or leasing real properties, and in other activities incidental thereto.”
SEC. 6. In case of conflict between national and local laws with respect to the tax exemption privileges in the CFZ, PPFZ, JHSEZ and MSEZ, the same shall be resolved in favor of the aforementioned zones: Provided, That the CFZ and PPFZ shall be subject to the provisions of paragraphs (d), (e), (f), (g), (h), and (i) of Section 12 of Republic Act No. 7227, as amended.
SEC. 7. Business enterprises presently registered and granted with tax and duty incentives by the Clark Development Corporation (CDC), Poro Point Management Corporation (PPMC), JHMC, and Bataan Technological Park Incorporated (BTPI), including such governing bodies, shall be entitled to the same incentives until the expiration of their contracts entered into prior to the effectivity of this Act.
SEC. 8. Administration, Implementation and Monitoring of Incentives. – The governing authorities shall be responsible for the administration and implementation of the incentives granted to their respective registered enterprises. They shall submit to the Department of Finance (DOF) their respective annual tax expenditures based on the computed costs in terms of revenue forgone on the tax incentives granted to their registered enterprises. For proper monitoring, the DOF shall create a single database of all incentives provided by all these authorities. The DOF shall monitor and review the incentives granted and submit an annual report to the President.
SEC. 9. Penal Provision. –Any registered business enterprise found guilty of smuggling by final judgment, either as principal, accomplice or accessory shall be perpetually barred from doing business in any freeport and special economic zone, in addition to the penalties and sanctions imposed by existing laws.
SEC. 10. Implementing Rules and Regulations. – The DOF, in coordination with the PEZA, the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC), and in consultation with the Bases Conversion Development Authority (BCDA), the SBMA, the CDC, the JHMC, the PPMC, and the BTPI, shall promulgate and publish the necessary rules and regulations for the effective implementation of this Act within two months from the date of effectivity of this Act.
SEC. 11. Separability Clause. – If any portion or provision of this Act is declared unconstitutional, the remainder of this Act or any provision not affected thereby shall remain in force and effect.
SEC. 12. Repealing Clause. – All laws, decrees, orders, proclamations, rules and regulations or other issuances or parts thereof inconsistent with the provisions of this Act are hereby repealed or modified accordingly. The provision of Section 50 of Republic Act No. 7916, as amended, is hereby repealed. The provisions of Section 13(b)(3) of Republic Act No. 7227, as amended, with respect to public utilities engaged in the provision of electric power and telecommunications services are hereby repealed.
SEC. 13. Effectivity. – This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in any two newspapers of general circulation, whichever comes earlier.
Approved,
(Original Signed)
MANNY VILLAR
President of the Senate
(Original Signed)
JOSE DE VENECIA, JR.
Speaker of the House
of Representatives
This Act which is a consolidation of House Bill No. 5064 and Senate Bill No. 2260 was finally passed by the House of Representatives and the Senate on January 31, 2007 and February 5, 2007, respectively.
(Original Signed)
OSCAR G. YABES
Secretary of the Senate
(Original Signed)
ROBERTO P. NAZARENO
Secretary General
House of Representatives
Approved:
(Original Signed)
GLORIA MACAPAGAL-ARROYO
President of the Philippines”
All concerned are hereby enjoined to be guided accordingly and give this circular a wide publicity as possible.
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner or Internal Revenue
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