SUBJECT : Clarification on the Computations of Withholding Taxes and Other Requirements on Government Money Payments Due or Payable to Suppliers of Goods and/or Services, in Connection With the Implementation of Republic Act No. 9337, as Amended, Republic Act No. 1051, and Revenue Regulations No. 2-98, as Amended, in Relation to Revenue Regulations No. 9-2001, as Amended, and Revenue Regulations No. 2-2006.
TO : All Internal Revenue Officials, Employees and Others Concerned.
This circular is being issued to clarify the basis of computations of Withholding taxes and other requirements on government money payments due or payable to all suppliers of goods and/or services in relation to the implementation of the provisions of Republic Act No. 9337 (RA No. 9337), as amended, together with its implementing regulations (Revenue Regulations No. 16-2005, (RR No. 16-2005), as amended); Republic Act No. 1051 (RA No. 1051); and the appropriate provisions of Revenue Regulations No. 2-98 (RR No. 2-98), as amended, in relation to Revenue Regulations No. 9-2001 (RR No. 9-2001), as amended, and Revenue Regulations No.2-2006 (RR No. 2-2006).
Section 4.112-2 of RR No. 16-2005, as amended, provides for the withholding of the 5% Final VAT on Government Money Payments (GMP). The application of the said provision should be synchronized with the provisions of RR No. 2-98, as amended, on the withholding of income tax of 1% on purchase of goods and 2% on purchase of services, except on purchases by any government official and employee recorded as reimbursable allowance, benefit or incentive to government official and employee by the concerned government office (e.g., RATA) and on casual government purchases amounting to not more than P10,000. The basis of the withholding of income tax should always be net of the Value-Added Tax (VAT) imposed on the said purchase of goods and/or services.
Purchases of the government that are covered by Purchase Orders duly signed by the authorized official/s as well as purchases using the Petty Cash Fund shall be subject to the 5% final VAT withholding. However, purchases by any government official and employee recorded as reimbursable allowance, benefit or incentive to government official and employee by the concerned government office (e.g., RATA) are not covered by the withholding of 5% final VAT.
Example: GOVERNMENT PURCHASES FROM VAT REGISTERED SUPPLIERS OF GOODS AND/OR SERVICES
A government agency has the following purchases for the month of January, 2007 from VAT registered suppliers of goods and/or services:
Invoice Amount
Purchase of Goods (inclusive of VAT) P1,120.00
Purchase of Services (inclusive of VAT) 5,600.00
How will the government agency compute for the amount due to their suppliers?
How will the government agency compute for the amount of withholding tax to be filed and remitted for the month of January, 2007?
Hereinbelow are the answers to the foregoing questions:
a) Purchase of Goods
Selling Price P1,000.00
Output VAT (P1,000.00 x 12%) 120.00
Invoice Amount P1,120.00
Less:
5% withholding of final VAT (P1,000.00 x 5%) 50.00
1% withholding of Income Tax (P1,000.00 x 1%) 10.00
Amount Payable to supplier of Goods P1,060.00
b) Purchase of Service
Selling Price P5,000.00
Output VAT (P5,000.00 x 12%) 600.00
Invoice Amount P5,600.00
Less:
5% withholding of final VAT (P5,000.00 x 5%) 250.00
2% withholding of Income Tax (P5,000.00 x 2%) 100.00
Amount Payable to supplier of Services P5,250.00
The person in-charge of withholding in each government agency (Government offices, bureaus, agencies or instrumentalities, local government units, GOCCs) shall prepare the following forms, file the tax returns to the appropriate BIR collecting agents and pay the corresponding withholding taxes due thereon, to wit:
BIR Form 1600 (Monthly Remittance Return of Value-Added Tax and Other Percentage Taxes Withheld) to be filed on or before the 10th day of the month following the month in which the withholding was made for the following amount based on the above example:
Withholding of Final VAT on Goods P 50.00
Withholding of Final VAT on Services 250.00
BIR Form 1601-E (Monthly Remittance Return of Creditable Income Taxes Withheld -Expanded) to be filed on or before the 10th day of the month following the month in which the withholding was made except for tax returns covering transactions in December which shall be filed on or before January 15 of the succeeding year, for the following amount based on the above example:
Withholding on GMP-goods (EWT) P 10.00
Withholding on GMP-services (EWT) 100.00
( Filers under the Electronic Filing and Payment System [EFPS] of the Bureau of Internal Revenue [BIR] are governed by the EFPS rules on filing of tax returns and payment of taxes.)
BIR Form 2306 (Certificate of Final Tax Withheld at Source) to be given to the supplier of goods and/or services within ten (10) days following the end of the month in which the withholding was made or upon demand. The certificates and hard copy of the Summary Alphalist of Withholding Taxes (SAWT) shall be attached to the Monthly/Quarterly VAT Declaration/Return (BIR Form 2550M/2550Q), in those instances where there are not more than ten (10) withholding agents, or the certificates shall be used for the preparation of the electronic Summary Alphalist of Withholding Taxes (SAWT) which shall be attached, together with the certificates, to the VAT Return of the seller-payee, in those instances where there are more than ten (10) withholding agents. For the above example, the following amount shall be reflected on the Certificate (BIR Form 2306):
Withholding of Final VAT on Goods P 50.00
Withholding of Final VAT on Services 250.00
( EFPS filers shall always submit the SAWT in electronic format.)
BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) for the withholding of income tax on GMP to be given to the supplier of goods and/or services not later than the 20th day of the month following the close of the taxable quarter in which the withholding was made or upon demand. The certificates shall be the proof of claimed tax credit of EWT against income tax due and shall be attached to the Quarterly/Annual Income Tax Return, together with the hard copy of the SAWT, in those instances where there are not more than ten (10) withholding agents, or the certificates shall be used for the preparation of the electronic SAWT that sha ll be attached, together with the certificates, to the Quarterly/Annual Income Tax Return of the seller-payee, in those instances where there are more than ten (10) withholding agents. For the above example, the following amount shall be reflected on the Certificate (BIR Form 2307):
Withholding on GMP-goods (EWT) P 10.00
Withholding on GMP-services (EWT) 100.00
(EFPS filers shall always submit the SAWT in electronic format.)
Government purchases that are subject to percentage tax shall be governed by RA No. 1051 on the withholding of percentage tax, as well as, by RR No. 2-98, as amended, on the withholding of Percentage Tax and Income Tax. It is to be stressed that purchases by any government official and employee recorded as reimbursable allowance, benefit or incentive to government official and employee by the concerned government office (e.g., RATA) as well as casual government purchases amounting to not more than P10,000 are not subject to the 1% or 2% withholding of income tax.
Example: GOVERNMENT PURCHASES FROM NON-VAT REGISTERED SUPPLIERS OF GOODS AND/OR SERVICES
A government agency has the following purchases for the month of January, 2007 from NON-VAT registered taxpayer:
Invoice Amount
Purchase of Goods P1,000.00
Purchase of Services 5,000.00
How will the government agency compute the amount of withholding tax due from their suppliers? How will the government agency compute for the amount of withholding tax to be remitted for the month of January, 2007?
Hereinbelow are the answers to the foregoing questions:
a) Purchase of Goods
Selling Price P1,000.00
Less:
3% withholding of Percentage Tax (P1,000.00 x 3%) 30.00
1% withholding of Income Tax (P1,000.00 x 1%) 10.00
Amount Payable to the supplier of Goods P 960.00
b) Purchase of Service
Selling Price P5,000.00
Less:
3% withholding of Percentage Tax (P5,000.00 x 3%) 150.00
2% withholding of Income Tax (P5,000.00 x 2%) 100.00
Amount Payable to supplier of Services P 4,750.00
The person in-charge of withholding in each government agency (Government offices, bureaus, agencies or instrumentalities, local government units, GOCCs) shall prepare the following forms, file the tax returns together with the required Monthly Alphalist of Payees as required under RR No. 2-2006, to the BIR collecting agents and pay the corresponding withholding taxes due thereon, to wit:
BIR Form 1600 (Monthly Remittance Return of Value-Added Tax and Other Percentage Taxes Withheld) to be filed on or before the 10th day of the month following the month in which the withholding was made, for the following amount based on the above example:
Withholding of Percentage Tax on Purchase of Goods P 30.00
Withholding of Percentage Tax on Purchase of Services 150.00
BIR Form 1601-E (Monthly Remittance Return of Creditable Income Taxes Withheld -Expanded) to be filed on or before the 10th day of the month following the month in which the withholding was made except for tax returns covering transactions in December which shall be filed on or before January 15 of the succeeding year, for the following amount based on the above example:
Withholding on GMP-goods (EWT) P 10.00
Withholding on GMP-services (EWT) 100.00
(Filers under the EFPS of the BIR are governed by the EFPS rules on filing of tax returns and payment of taxes.)
BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) for the withholding of income tax on GMP to be given to the supplier of goods and/or services not later than the 20th day of the month following the close of the taxable quarter in which the withholding was made or upon demand. The certificates shall be the proof of claimed tax credit of EWT against income tax due and shall be attached to the Quarterly/Annual Income Tax Return, together with the hard copy of the SAWT, in those instances where there are not more than ten (10) withholding agents, or said certificates shall be used for the preparation of the electronic SAWT that shall be attached, together with the certificates, to the Quarterly/Annual Income Tax Return of the seller-payee, in those instances where there are more than ten (10) withholding agents. For the above example, the following amount shall be reflected on the Certificate (BIR Form 2307):
Withholding on GMP-goods (EWT) P 10.00
Withholding on GMP-services (EWT) 100.00
(EFPS filers shall always submit the SAWT in electronic format.)
BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) for the withholding of Percentage Tax on GMP to be given to the supplier of goods and/or services not later than the 10th day of the month following the close of the month in which the withholding was made or upon demand. The certificates shall be used as proof of the claimed percentage tax credit against Percentage Tax Due and shall be attached to the Percentage Tax Return, together with the hard copy of the SAWT, in those instances where there are not more than ten (10) withholding agents, or said certificates shall be used for the preparation of the electronic SAWT that shall be attached, together with the certificates, to the Percentage Tax Return of the seller-payee, in those instances where there are more than ten (10) withholding agents. For the above example, the following amount shall be reflected on the Certificate (BIR Form 2307):
Withholding of Percentage Tax on Purchase of Goods P 30.00
Withholding of Percentage Tax on Purchase of Services 150.00
( EFPS filers shall always submit the SAWT in electronic format.)
Considering that BIR Form No. 2307 is the certificate that is issued for withholding of both income tax and percentage tax, it is inherent that there may be two (2) sets of BIR Form No. 2307 that may be issued for one (1) particular transaction.
It is hereby emphasized, however, that the rates of withholding of income tax on specific types of income payments as prescribed in RR No. 2-98, as amended, shall be followed; thus, the rates of 1% on purchase of goods and 2% on purchase of services shall apply only to those types of income payments not specifically enumerated in the said Regulations.
All concerned are hereby enjoined to be accordingly guided by the foregoing, and to give this circular as wide a publicity as possible.
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue
A-1
REVENUE MEMORANDUM CIRCULAR NO. 21-2007
SUBJECT : Attachment to the Annual Income Tax Return to be Filed for Taxable Year 2006 and Onwards
TO : All Revenue Officials, BOI- / BOI-ARMM- / PEZA-Registered Entities and Others Concerned
Section 6 of the National Internal Revenue Code (NIRC) of 1997, as amended, provides that the Commissioner may prescribe the manner of compliance with any documentary or procedural requirement relative to the preparation and submission of financial statements and tax returns. Pursuant thereto, all taxpayers registered with the Board of Investments (BOI), BOI Autonomous Region of Muslim Mindanao (BOI-ARMM) and Philippine Economic Zone Authority (PEZA) availing of fiscal incentives approved by the said agencies are hereby required, upon filing of their Annual Income Tax Return (i.e., BIR Form 1701 and 1702) for taxable year 2006 and onwards, to attach thereto the following:
a. Photocopy of the Certificate of Entitlement (CE) for Income Tax Holiday (ITH) issued by the BOI/BOI-ARMM stating therein that the concerned entity is a bona fide BOI/BOI-ARMM-registered enterprise entitled to ITH incentives; and b. Photoc opy of the Certification issued by the PEZA stating therein that the entity is a bona fide PEZA-registered enterprise entitled to ITH and / or the 5% Gross Income Tax incentive.
The above requirement is in keeping with the joint undertaking spelled out in separate Memoranda of Agreement (MOA) executed on March 1, 2007 between the BIR and the BOI / BOI-ARMM, and the PEZA. All internal revenue officers and others concerned are hereby enjoined to strictly implement the provisions of this Circular.
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue
I-2
TO : All Revenue Officials, BOI- / BOI-ARMM- / PEZA-Registered Entities and Others Concerned
Section 6 of the National Internal Revenue Code (NIRC) of 1997, as amended, provides that the Commissioner may prescribe the manner of compliance with any documentary or procedural requirement relative to the preparation and submission of financial statements and tax returns. Pursuant thereto, all taxpayers registered with the Board of Investments (BOI), BOI Autonomous Region of Muslim Mindanao (BOI-ARMM) and Philippine Economic Zone Authority (PEZA) availing of fiscal incentives approved by the said agencies are hereby required, upon filing of their Annual Income Tax Return (i.e., BIR Form 1701 and 1702) for taxable year 2006 and onwards, to attach thereto the following:
a. Photocopy of the Certificate of Entitlement (CE) for Income Tax Holiday (ITH) issued by the BOI/BOI-ARMM stating therein that the concerned entity is a bona fide BOI/BOI-ARMM-registered enterprise entitled to ITH incentives; and b. Photoc opy of the Certification issued by the PEZA stating therein that the entity is a bona fide PEZA-registered enterprise entitled to ITH and / or the 5% Gross Income Tax incentive.
The above requirement is in keeping with the joint undertaking spelled out in separate Memoranda of Agreement (MOA) executed on March 1, 2007 between the BIR and the BOI / BOI-ARMM, and the PEZA. All internal revenue officers and others concerned are hereby enjoined to strictly implement the provisions of this Circular.
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue
I-2
REVENUE MEMORANDUM CIRCULAR NO. 17-2007
SUBJECT : Publishing the Full Text of the Memorandum of Agreement between the Board of Investments (BOI), BOI Autonomous Region of Muslim Mindanao (BOI-ARMM) and the Bureau of Internal Revenue (BIR) Executed on March 1, 2007
TO : All Revenue Officials and Personnel and Others Concerned
Circularized hereunder is the full text of the Memorandum of Agreement between the Board of Investments (BOI), BOI Autonomous Region of Muslim Mindanao and the Bureau of Internal Revenue (BIR) executed on March 1, 2007:
“MEMORANDUM OF AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement is made and entered into by and between:
The BOARD OF INVESTMENTS, with principal office at the Industry and Investments Building, 385 Sen. Gil J. Puyat Avenue, Makati City, represented herein by Undersecretary Elmer C. Hernandez, hereinafter referred to as the BOI;
The BOARD OF INVESTMENTS – AUTONOMOUS REGION OF MUSLIM MINDANAO, with principal office at ORC Compound, Cotabato City, Maguindanao, represented herein by Chairman & Managing Head Sheryl B. Siao, hereinafter referred to as the BOI-ARMM; and
The BUREAU OF INTERNAL REVENUE, with principal office at the BIR National Office Building, Agham Road, Diliman, Quezon City, represented herein by Commissioner Jose Mario C. Buñag, hereinafter referred to as the BIR;
WITNESSETH THAT:
WHEREAS, the National Internal Revenue Code of 1997 (Tax Code), as amended, mandates the BIR to administer and execute all internal revenue tax laws;
WHEREAS, Section 5 (B) thereof authorizes the BIR Commissioner to obtain, on a regular basis, from any person, government agencies and instrumentalities, any information to ascertain the liability of any person for any internal revenue tax;
WHEREAS, Section 203 thereof provides for a three (3)-year statute of limitations or prescriptive period for the BIR to make a deficiency tax assessment to be reckoned from the last day prescribed by law for the filing of tax return, or from the date of filing of the said return, whichever comes later;
WHEREAS, Article 7, Chapter II of Executive Order (EO) No. 226, as amended, also known as the Omnibus Investment Code of 1987, provides that the BOI / BOI-ARMM shall be responsible for the regulation and promotion of investments in the Philippines. As such, it is empowered to process and approve applications for registration with the Board, imposing such terms and conditions as it may deem necessary to promote the objectives of the Code, and to cancel the registration or suspend the enjoyment of incentives benefits of any registered enterprise and/or require refund of incentives including interests and monetary penalties for violation of any provision of the Code, its implementing rules and regulations, or of the terms and conditions of the registration agreement;
WHEREAS, there is a need to provide for an effective mechanism to monitor registered enterprises enjoying Income Tax Holiday (ITH) incentives under Art. 39 (a) of EO No. 226, as amended;
WHEREAS, the parties mutually agree to assist one another in the implementation of strategies to enhance tax enforcement and collection efforts towards an efficient tax incentives system;
NOW, THEREFORE, for and in consideration of the foregoing premises, the parties, through their respective representatives, and subject to the confidentiality and disclosure provisions of EO No. 226, as amended, and the Tax Code, as amended, do hereby agree to undertake the following:
I. The BOI/BOI-ARMM shall:
1. Coordinate and work closely with the BIR to ensure effective monitoring of ITH availments by BOI / BOI-ARMM-registered enterprises, and provide documents, records and such other valuable information relevant to the ITH claims;
2. Furnish the BIR the following:
a. Within a month following the close of each semester (i.e., on or before July 31 and on or before January 31), an updated alphabetical master list of BOI / BOI-ARMM -registered enterprises entitled to ITH incentives with the following column headings:
· Name of Registered Enterprise
· TIN of Registered Enterprise
· Registered Address
· BOI / BOI-ARMM Registration Number
· Date of Registration
· Validity Period of ITH entitlement plus extension, if any
· Start of ITH
· Registered Activity (including registered capacity, if applicable)
· Date of Filing of Application for ITH Availment and the Period Covered (Indicate if no application was filed)
· Performance Data for the Taxable Year
· Amount of ITH Applied
· Amount of ITH Approved and Date of Approval
· % of Income Tax Exemption Approved
· Other relevant information
b. Within thirty (30) days after issuance to the BOI / BOI-ARMMregistered enterprise, the second copy of the Certificate of ITH Entitlement (CE) stating that the said enterprise is a bonafide BOI / BOI-ARMM -registered entitled to ITH incentive;
c. Not later than November 30 of each year, an alphabetical list of BOI / BOI-ARMM -registered enterprises that have filed applications for ITH incentives with the BOI/ BOI-ARMM within six (6) months from the date of filing of the annual Income Tax Returns (ITRs) with the BIR or from the last day prescribed by law for the filing of the annual ITR, whichever comes later, indicating therein the amount of the ITH incentives applied for; and
d. Within thirty (30) days after the end of every month, an alphabetical list of BOI / BOI-ARMM -registered enterprises whose ITH incentives entitlements have expired during the preceding month;
3. Consider any of the following as grounds for forfeiture of the BOI / BOI-ARMM-registered enterprise’s ITH incentives for the taxable year:
a. Failure by the BOI / BOI-ARMM -registered enterprise to secure CE from the BOI / BOI-ARMM and to attach the same in the annual ITR upon its filing with the BIR;
b. Failure by the BOI / BOI-ARMM -registered enterprise with issued CE to apply for ITH incentive with the BOI / BOI-ARMM within six (6) months from the date of filing of the annual ITR with the BIR or from the last day prescribed by law for the filing of the annual ITR, whichever comes later; or
c. Failure by the BOI / BOI-ARMM -registered enterprise with and without CE to file the ITH application with the BOI / BOIARMM;
4. Process, review and endorse to the Assessment Service of the BIR National Office all applications for ITH incentive, including dockets bearing on the evaluation thereof, financial statements, schedules and supporting documents attached thereto, for taxable year 2006 and every year thereafter within one year from official receipt of the ITH applications;
In the event an ITH application cannot be processed and evaluated within the prescribed one-year period due to policy and/or legal issues, the BOI / BOI-ARMM shall immediately inform the BIR within one (1) month after the end of the said one-year period so as not to prejudice the duty of the latter to make an assessment within the three (3)-year period prescribed1 under Section 203 of the Tax Code, as amended.
II. The BIR shall:
1. Require the BOI / BOI-ARMM -registered enterprise to attach the BOI / BOI-ARMM -issued CE upon filing of the annual ITR. In the absence thereof, the BIR shall not allow any claim for ITH incentive that is reflected in the annual ITR. For large taxpayers filing on -line, submission of CE shall be done manually until such time that the BIR’s Electronic Integrated Tax System (e-ITS) facility is enhanced for this purpose;
2. Defer issuance of Letter of Authority (LOA)/ Letter Notice (LN)/ Tax Verification Notice (TVN) to BOI / BOI-ARMM-registered enterprises whose operations are 100% registered with the BOI/BOI-ARMM, until after the completion of BOI / BOI-ARMM evaluation of ITH application but not to exceed one and a half (1 1/2) years from the last day prescribed by law for the filing of the annual ITR;
However, for BOI / BOI-ARMM-registered enterprises, with mixed operations (i.e., registered and unregistered activities), the above deferment shall only be for one (1) year from the last day prescribed by law for the filing of the annual ITR; BOI / BOI-ARMM-registered enterprises described above may be entitled to the above deferment, except those falling under any of the following instances:
a. Cases handled by the BIR under the Run After Tax Evader (RATE) Program;
b. Persons under investigation as a result of verified information filed by a Tax Informer under Section 282 of the NIRC, duly processed and recorded in the BIR Official Registry Book;
c. Cases involving claims for tax refund; and
d. Cases in which Letter Notices (LNs) were issued, where the discrepancy in sales exceeds 30% of sales of base year or the discrepancy in purchases exceeds 30% of the purchases of the base year;
3. Conduct post -audit/review of the dockets bearing on ITH incentive availment endorsed by the BOI / BOI-ARMM prior to the end of the prescriptive period provided under Section 203 of the Tax Code, as amended, through the Assessment Service in the BIR National Office;
If any deficiency tax assessment arises from the review of incentive availment, the Assessment Service shall transmit its 1 The 3 year prescriptive period is reckoned after the last day prescribed by law for the filing of the Annual ITR, or from the day such return was filed, whichever comes later. For taxpayers adopting an accounting period on a calendar year basis, the last day for filing shall be on or before the fifteenth (15th) day of April of the succeeding year. For taxpayers on a fiscal year basis, however, the last day for filing shall be on or before the fifteenth (15th) day of the fourth month following the close of the fiscal year.
findings of discrepancy and the corresponding documents to the concerned RDOs to enforce the immediate collection thereof, including increments accruing thereon;
4. Conduct immediate investigation of BOI / BOI-ARMM -registered enterprises that claimed ITH incentives in their annual ITR but failed to attach the CE, failed to file or filed applications for ITH incentives with the BOI/ BOI-ARMM beyond the six (6)-month period as provided in Item I (3)(b) above for purposes of enforcing collection of income taxes pertaining to forfeited ITH claims, including all increments accruing thereon;
5. Inform the BOI / BOI-ARMM of its findings on the post audit and/or review it has conducted within thirty (30) days from the approval by the concerned BIR official;
6. Furnish BOI / BOI-ARMM with copies of pertinent BIR regulations, rulings, other revenue issuances, and other information within thirty (30) days from issuance thereof, the latter however, is subject to the provisions of Sec. 270, in conjunction with Sec. 71 of the Tax Code, as amended; and
7. Issue a Revenue Memorandum Circular for the effective implementation of the provisions of this Agreement.
III. The BOI/ BOI-ARMM and BIR shall:
1. Within thirty (30) days from signing of this Agreement, create a Working Group, with the inclusion of one representative each from the Department of Finance (DOF) and Department of Trade and Industry (DTI), that shall oversee and monitor the proper implementation of the provisions of this Agreement, including the creation of a database on investment incentives for policy purposes;
2. Within thirty (30) days from the creation of the Working Group, promulgate and disseminate their respective rules and regulations for the execution of the provisions of this Agreement;
3. Undertake to promptly resolve any issue involving discrepancies in exchanged data/information; and
4. Carry out information campaign of the contents of this Agreement through letters and publications in newspapers of general circulation for the awareness of all concerned.
IV. Transitory Provisions:
a. All applications covering taxable years 2004 and 2005 received prior to the effectivity of this Agreement and still pending processing by the BOI / BOI-ARMM shall be immediately processed/reviewed for transmittal to the BIR, for post-audit, not later than August 31, 2007; and
b. All BOI / BOI-ARMM -regist ered enterprises entitled to ITH incentives for taxable years 2004/2005 shall be required by BOI / BOI-ARMM to file their ITH applications not later than May 31, 2007. Processed applications for said taxable years shall be transmitted to the BIR, for post-audit, not later than August 31, 2007.
V. Effectivity:
Subject to the provisions of item IV of this Agreement, the rest of the herein provisions shall apply to ITH incentives availments covering taxable year 2006 and onwards, unless revoked by the parties.
IN WITNESS WHEREOF, the parties hereto have affixed their signatures this 1st day of March, 2007, in the City of Pasay , Philippines.
BOARD OF INVESTMENTS
By:
(Original signed)
ELMER C. HERNANDEZ
Vice Chairman and Managing Head
BOI-AUTONOMOUS REGION OF MUSLIM MINDANAO
By:
(Original signed)
SHERYL B. SIAO
Chairman & Managing Head
BUREAU OF INTERNAL REVENUE
By:
(Original signed)
JOSE MARIO C. BUÑAG
Commissioner
SIGNED IN THE PRESENCE OF:
(Original signed)
Efren V.Leano
(Original signed)
Nemesio S. Manaay
(Original signed)
Erlinda A. Simple
Board of Investments BOI-ARMM Bureau of Internal Revenue”
All concerned are hereby enjoined to be guided accordingly and give this circular as wide as publicity as possible.
(Original Sig ned)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue
I-2
TO : All Revenue Officials and Personnel and Others Concerned
Circularized hereunder is the full text of the Memorandum of Agreement between the Board of Investments (BOI), BOI Autonomous Region of Muslim Mindanao and the Bureau of Internal Revenue (BIR) executed on March 1, 2007:
“MEMORANDUM OF AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement is made and entered into by and between:
The BOARD OF INVESTMENTS, with principal office at the Industry and Investments Building, 385 Sen. Gil J. Puyat Avenue, Makati City, represented herein by Undersecretary Elmer C. Hernandez, hereinafter referred to as the BOI;
The BOARD OF INVESTMENTS – AUTONOMOUS REGION OF MUSLIM MINDANAO, with principal office at ORC Compound, Cotabato City, Maguindanao, represented herein by Chairman & Managing Head Sheryl B. Siao, hereinafter referred to as the BOI-ARMM; and
The BUREAU OF INTERNAL REVENUE, with principal office at the BIR National Office Building, Agham Road, Diliman, Quezon City, represented herein by Commissioner Jose Mario C. Buñag, hereinafter referred to as the BIR;
WITNESSETH THAT:
WHEREAS, the National Internal Revenue Code of 1997 (Tax Code), as amended, mandates the BIR to administer and execute all internal revenue tax laws;
WHEREAS, Section 5 (B) thereof authorizes the BIR Commissioner to obtain, on a regular basis, from any person, government agencies and instrumentalities, any information to ascertain the liability of any person for any internal revenue tax;
WHEREAS, Section 203 thereof provides for a three (3)-year statute of limitations or prescriptive period for the BIR to make a deficiency tax assessment to be reckoned from the last day prescribed by law for the filing of tax return, or from the date of filing of the said return, whichever comes later;
WHEREAS, Article 7, Chapter II of Executive Order (EO) No. 226, as amended, also known as the Omnibus Investment Code of 1987, provides that the BOI / BOI-ARMM shall be responsible for the regulation and promotion of investments in the Philippines. As such, it is empowered to process and approve applications for registration with the Board, imposing such terms and conditions as it may deem necessary to promote the objectives of the Code, and to cancel the registration or suspend the enjoyment of incentives benefits of any registered enterprise and/or require refund of incentives including interests and monetary penalties for violation of any provision of the Code, its implementing rules and regulations, or of the terms and conditions of the registration agreement;
WHEREAS, there is a need to provide for an effective mechanism to monitor registered enterprises enjoying Income Tax Holiday (ITH) incentives under Art. 39 (a) of EO No. 226, as amended;
WHEREAS, the parties mutually agree to assist one another in the implementation of strategies to enhance tax enforcement and collection efforts towards an efficient tax incentives system;
NOW, THEREFORE, for and in consideration of the foregoing premises, the parties, through their respective representatives, and subject to the confidentiality and disclosure provisions of EO No. 226, as amended, and the Tax Code, as amended, do hereby agree to undertake the following:
I. The BOI/BOI-ARMM shall:
1. Coordinate and work closely with the BIR to ensure effective monitoring of ITH availments by BOI / BOI-ARMM-registered enterprises, and provide documents, records and such other valuable information relevant to the ITH claims;
2. Furnish the BIR the following:
a. Within a month following the close of each semester (i.e., on or before July 31 and on or before January 31), an updated alphabetical master list of BOI / BOI-ARMM -registered enterprises entitled to ITH incentives with the following column headings:
· Name of Registered Enterprise
· TIN of Registered Enterprise
· Registered Address
· BOI / BOI-ARMM Registration Number
· Date of Registration
· Validity Period of ITH entitlement plus extension, if any
· Start of ITH
· Registered Activity (including registered capacity, if applicable)
· Date of Filing of Application for ITH Availment and the Period Covered (Indicate if no application was filed)
· Performance Data for the Taxable Year
· Amount of ITH Applied
· Amount of ITH Approved and Date of Approval
· % of Income Tax Exemption Approved
· Other relevant information
b. Within thirty (30) days after issuance to the BOI / BOI-ARMMregistered enterprise, the second copy of the Certificate of ITH Entitlement (CE) stating that the said enterprise is a bonafide BOI / BOI-ARMM -registered entitled to ITH incentive;
c. Not later than November 30 of each year, an alphabetical list of BOI / BOI-ARMM -registered enterprises that have filed applications for ITH incentives with the BOI/ BOI-ARMM within six (6) months from the date of filing of the annual Income Tax Returns (ITRs) with the BIR or from the last day prescribed by law for the filing of the annual ITR, whichever comes later, indicating therein the amount of the ITH incentives applied for; and
d. Within thirty (30) days after the end of every month, an alphabetical list of BOI / BOI-ARMM -registered enterprises whose ITH incentives entitlements have expired during the preceding month;
3. Consider any of the following as grounds for forfeiture of the BOI / BOI-ARMM-registered enterprise’s ITH incentives for the taxable year:
a. Failure by the BOI / BOI-ARMM -registered enterprise to secure CE from the BOI / BOI-ARMM and to attach the same in the annual ITR upon its filing with the BIR;
b. Failure by the BOI / BOI-ARMM -registered enterprise with issued CE to apply for ITH incentive with the BOI / BOI-ARMM within six (6) months from the date of filing of the annual ITR with the BIR or from the last day prescribed by law for the filing of the annual ITR, whichever comes later; or
c. Failure by the BOI / BOI-ARMM -registered enterprise with and without CE to file the ITH application with the BOI / BOIARMM;
4. Process, review and endorse to the Assessment Service of the BIR National Office all applications for ITH incentive, including dockets bearing on the evaluation thereof, financial statements, schedules and supporting documents attached thereto, for taxable year 2006 and every year thereafter within one year from official receipt of the ITH applications;
In the event an ITH application cannot be processed and evaluated within the prescribed one-year period due to policy and/or legal issues, the BOI / BOI-ARMM shall immediately inform the BIR within one (1) month after the end of the said one-year period so as not to prejudice the duty of the latter to make an assessment within the three (3)-year period prescribed1 under Section 203 of the Tax Code, as amended.
II. The BIR shall:
1. Require the BOI / BOI-ARMM -registered enterprise to attach the BOI / BOI-ARMM -issued CE upon filing of the annual ITR. In the absence thereof, the BIR shall not allow any claim for ITH incentive that is reflected in the annual ITR. For large taxpayers filing on -line, submission of CE shall be done manually until such time that the BIR’s Electronic Integrated Tax System (e-ITS) facility is enhanced for this purpose;
2. Defer issuance of Letter of Authority (LOA)/ Letter Notice (LN)/ Tax Verification Notice (TVN) to BOI / BOI-ARMM-registered enterprises whose operations are 100% registered with the BOI/BOI-ARMM, until after the completion of BOI / BOI-ARMM evaluation of ITH application but not to exceed one and a half (1 1/2) years from the last day prescribed by law for the filing of the annual ITR;
However, for BOI / BOI-ARMM-registered enterprises, with mixed operations (i.e., registered and unregistered activities), the above deferment shall only be for one (1) year from the last day prescribed by law for the filing of the annual ITR; BOI / BOI-ARMM-registered enterprises described above may be entitled to the above deferment, except those falling under any of the following instances:
a. Cases handled by the BIR under the Run After Tax Evader (RATE) Program;
b. Persons under investigation as a result of verified information filed by a Tax Informer under Section 282 of the NIRC, duly processed and recorded in the BIR Official Registry Book;
c. Cases involving claims for tax refund; and
d. Cases in which Letter Notices (LNs) were issued, where the discrepancy in sales exceeds 30% of sales of base year or the discrepancy in purchases exceeds 30% of the purchases of the base year;
3. Conduct post -audit/review of the dockets bearing on ITH incentive availment endorsed by the BOI / BOI-ARMM prior to the end of the prescriptive period provided under Section 203 of the Tax Code, as amended, through the Assessment Service in the BIR National Office;
If any deficiency tax assessment arises from the review of incentive availment, the Assessment Service shall transmit its 1 The 3 year prescriptive period is reckoned after the last day prescribed by law for the filing of the Annual ITR, or from the day such return was filed, whichever comes later. For taxpayers adopting an accounting period on a calendar year basis, the last day for filing shall be on or before the fifteenth (15th) day of April of the succeeding year. For taxpayers on a fiscal year basis, however, the last day for filing shall be on or before the fifteenth (15th) day of the fourth month following the close of the fiscal year.
findings of discrepancy and the corresponding documents to the concerned RDOs to enforce the immediate collection thereof, including increments accruing thereon;
4. Conduct immediate investigation of BOI / BOI-ARMM -registered enterprises that claimed ITH incentives in their annual ITR but failed to attach the CE, failed to file or filed applications for ITH incentives with the BOI/ BOI-ARMM beyond the six (6)-month period as provided in Item I (3)(b) above for purposes of enforcing collection of income taxes pertaining to forfeited ITH claims, including all increments accruing thereon;
5. Inform the BOI / BOI-ARMM of its findings on the post audit and/or review it has conducted within thirty (30) days from the approval by the concerned BIR official;
6. Furnish BOI / BOI-ARMM with copies of pertinent BIR regulations, rulings, other revenue issuances, and other information within thirty (30) days from issuance thereof, the latter however, is subject to the provisions of Sec. 270, in conjunction with Sec. 71 of the Tax Code, as amended; and
7. Issue a Revenue Memorandum Circular for the effective implementation of the provisions of this Agreement.
III. The BOI/ BOI-ARMM and BIR shall:
1. Within thirty (30) days from signing of this Agreement, create a Working Group, with the inclusion of one representative each from the Department of Finance (DOF) and Department of Trade and Industry (DTI), that shall oversee and monitor the proper implementation of the provisions of this Agreement, including the creation of a database on investment incentives for policy purposes;
2. Within thirty (30) days from the creation of the Working Group, promulgate and disseminate their respective rules and regulations for the execution of the provisions of this Agreement;
3. Undertake to promptly resolve any issue involving discrepancies in exchanged data/information; and
4. Carry out information campaign of the contents of this Agreement through letters and publications in newspapers of general circulation for the awareness of all concerned.
IV. Transitory Provisions:
a. All applications covering taxable years 2004 and 2005 received prior to the effectivity of this Agreement and still pending processing by the BOI / BOI-ARMM shall be immediately processed/reviewed for transmittal to the BIR, for post-audit, not later than August 31, 2007; and
b. All BOI / BOI-ARMM -regist ered enterprises entitled to ITH incentives for taxable years 2004/2005 shall be required by BOI / BOI-ARMM to file their ITH applications not later than May 31, 2007. Processed applications for said taxable years shall be transmitted to the BIR, for post-audit, not later than August 31, 2007.
V. Effectivity:
Subject to the provisions of item IV of this Agreement, the rest of the herein provisions shall apply to ITH incentives availments covering taxable year 2006 and onwards, unless revoked by the parties.
IN WITNESS WHEREOF, the parties hereto have affixed their signatures this 1st day of March, 2007, in the City of Pasay , Philippines.
BOARD OF INVESTMENTS
By:
(Original signed)
ELMER C. HERNANDEZ
Vice Chairman and Managing Head
BOI-AUTONOMOUS REGION OF MUSLIM MINDANAO
By:
(Original signed)
SHERYL B. SIAO
Chairman & Managing Head
BUREAU OF INTERNAL REVENUE
By:
(Original signed)
JOSE MARIO C. BUÑAG
Commissioner
SIGNED IN THE PRESENCE OF:
(Original signed)
Efren V.Leano
(Original signed)
Nemesio S. Manaay
(Original signed)
Erlinda A. Simple
Board of Investments BOI-ARMM Bureau of Internal Revenue”
All concerned are hereby enjoined to be guided accordingly and give this circular as wide as publicity as possible.
(Original Sig ned)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue
I-2
REVENUE MEMORANDUM CIRCULAR NO. 15-2007
SUBJECT : Publishing the Full Text of the Memorandum of Agreement between the Philippine Economic Zone Authority (PEZA) and the Bureau of Internal Revenue (BIR) Executed on March 1, 2007
TO : All Revenue Officials and Personnel and Others Concerned
Circularized hereunder is the full text of the Memorandum of Agreement between the Philippine Economic Zone Authority (PEZA) and the Bureau of Internal Revenue (BIR) executed on March 1, 2007:
“MEMORANDUM OF AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement is made and entered into by and between:
The PHILIPPINE ECONOMIC ZONE AUTHORITY , a government corporation created and operating under Republic Act No. 7916, as amended, with principal office at the PEZA Building, Roxas Blvd. cor. San Luis St., Pasay City, represented herein by its Director General, LILIA B. DE LIMA, who is duly authorized, hereinafter referred to as the PEZA; and
The BUREAU OF INTERNAL REVENUE, a government agency under the Department of Finance (DOF), with principal office at the BIR National Office Building, Agham Road, Diliman, Quezon City, represented herein by its Commissioner, JOSE MARIO C. BUÑAG, who is likewise duly authorized, hereinafter referred to as the BIR;
WITNESSETH THAT:
WHEREAS, the National Internal Revenue Code of 1997 (Tax Code), as amended, mandates the BIR to administer and execute all internal revenue tax laws;
WHEREAS, Sec. 5(B) thereof authorizes the BIR Commissioner and his subordinates to obtain on a regular basis, from any person, government agencies and instrumentalities any information to ascertain the liability of any person for any internal revenue tax;
WHEREAS, Sec. 203 thereof provides that internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of tax return, or from the date of filing of the said return, whichever comes later;
WHEREAS, Sec. 13(b) of Republic Act (R.A.) No. 7916, otherwise known as “The Special Economic Zone Act of 1995”, as amended, mandates the PEZA “to register, regulate and supervise the enterprises in the ECOZONE in an efficient and decentralized manner”;
WHEREAS, Secs. 1 and 5 of Rule XIII, Part VII of the Rules and Regulations implementing R.A. No. 7916, as amended, provide that all applications for availment of incentives shall be filed with the PEZA, and the incentives granted by the PEZA shall apply only to registered operations of the ECOZONE Enterprise, and only during the period of its registration with the PEZA;
WHEREAS, there is an imperative need to institutionalize coordination between the PEZA and the BIR in order to effectively administer the income tax holiday (ITH) and the 5% tax on gross income earned (GIT) in centives enjoyed by PEZA -registered enterprises;
NOW, THEREFORE, for and in consideration of the foregoing premises, the PEZA and the BIR, through their respective representatives, subject to the provisions of Sec. 270 (Unlawful Divulgence of Trade Secrets) in conjunction with Sec. 71 (Disposition of Income Tax Returns, Publication of Lists of Taxpayers and Filers) of the Tax Code, as amended, do hereby agree to undertake the following:
A. The PEZA shall:
1. Require all PEZA -registered enterprises to register their area of operations (head office, branch or facility) with the appropriate BIR Revenue District Offices (RDOs) having jurisdiction over such area (head office, branch or facility) located in the PEZA-owned economic zones, PEZA-administered Special Economic Zone/s (SEZ), IT Parks, IT buildings and the like, pursuant to the registration requirements provided under Sec. 236 of the Tax Code, as amended, and its implementing regulations;
2. Require all registered enterprises entitled to ITH and/or the 5% GIT incentive to secure from PEZA on an annual basis a certification that the enterprise is a bona fide PEZA-registered enterprise entitled to ITH and/or the 5% GIT incentive, and to attach the said certification to their annual Income Tax Returns (ITRs) upon filing thereof;
3. Require all registered enterprises to submit to PEZA a copy of their annual ITRs, together with the Audited Financial Statements (AFS) and other required supporting attachments/schedules filed with the BIR and duly stamped “Received” by the BIR, within thirty (30) days from the prescribed last day of filing thereof with the BIR, or actual filing thereof whichever comes later, submission of which shall serve as sufficient compliance to the requirements for availment of incentives provided under Rule XIII, Part VII of the Rules and Regulations implementing R.A. No. 7916, as amended;
4. Furnish the BIR the following:
a. On or before January 31 of each year, an alphabetical master list of PEZA-registered enterprises which are entitled to ITH and/or the 5% GIT incentive, with the following column headings:
i. Name of Registered Enterprise;
ii. Type of Registered Enterprise;
iii. TIN of Registered Enterprise;
iv. Zone Location(s) /Address;
v. PEZA Registration Certificate No. of the Enterprise;
vi. Date of PEZA Registration of the Enterprise;
vii . Registered activities and the following information on each:
· Date of registration;
· Type of Incentives (i.e., ITH or 5% GIT);
· ITH entitlement period plus extension, if any;
· Date of Start of Commercial Operations;
· Percentage of export sales as against volume of production;
b. Not later than July 31 of each year, furnish an update of the list identified in Item 4 (a) above with the following additional information:
i. Whether or not the registered enterprises submitted their final annual ITRs, together with the AFS and other required supporting attachments/schedules, and whether or not they submitted the same on time pursuant to Item A.3 above;
ii. New PEZA-registered enterprises together with the information listed in Item A.4(a) above;
iii. PEZA-registered enterprises whose registration were cancelled, the reason for the cancellation, and the date of cessation of operations;
5. Coordinate and work closely with the BIR to ensure effective monitoring of incentive avai lments (ITH or 5% GIT) by PEZA-registered enterprises, and provide documents, records and such other valuable information relevant to their incentives claims; and
6. Within one (1) year from receipt by PEZA of the documents described in Item A.3 above, endorse the same to the BIR, together with PEZA’s (a) validation that the period covered by the annual ITRs is covered by the ITH / 5% GIT incentive of the enterprise concerned, on a per registered activity / project basis; (b) determination of the incomes that should not be covered by ITH / 5% GIT, if any; and (c) validation of the actual percentage of export sales. B. The BIR shall:
1. Within one (1) year prior to the end of the three (3) – year prescriptive period provided under Sec. 203 of the Tax Code, as amended, conduct, through the Assessment Service in the BIR National Office, review of the documents bearing on incentive availment endorsed by PEZA; If any deficiency tax assessment arises from the review of incentive availment, the Assessment Service sh all transmit its findings of discrepancy and the corresponding documents to the concerned RDOs to enforce the immediate collection thereof, including increments accruing thereon;
2. Conduct immediate audit of enterprises that claimed income tax exemptions but failed to submit to PEZA a copy of their final annual ITRs and AFS pursuant to Item A.3 of this Agreement and enforce collection of income taxes pertaining to invalidated ITH / 5% GIT incentive claims, including all increments accruing thereon;
3. Inform PEZA of its findings resulting from its review within thirty (30) days after the approval by the concerned BIR official;
4. Furnish PEZA with copies of pertinent BIR regulations, rulings, other revenue issuances, and other information within thirty (30) days from issuance thereof, the latter however, is subject to the provisions of Sec. 270, in conjunction with Sec. 71 of the Tax Code, as amended; and
5. Issue a Revenue Memorandum Circular for the effective implementation of the provisions of this Agreement.
C. The PEZA and BIR shall:
1. Within thirty (30) days from signing of this Agreement, create a Working Group, with the inclusion of one representative each from the Department of Finance (DOF) and Department of Trade and Industry (DTI), that shall oversee and monitor the proper implementation of the provisions of this Agreement, including the creation of a database on investment incentives for policy purposes;
2. Within thirty (30) days from the creation of the Working Group, promulgate and disseminate their respective guidelines for the implementation of the provisions of this Agreement;
3. Undertake to promptly resolve any issues involving discrepancies in exchanged data/information; and
4. Disseminate to concerned parties the contents of this Agreement in order to make them aware of the herein requirements.
D. Transitory Provisions:
1. PEZA’s endorsement of the annual ITRs and AFS of enterprises covering taxable years 2004 (ending July 31, 2004 up to June 30, 2005) and 2005 (ending July 31, 2005 up to June 30, 2006), together with the corresponding information indicated in Item A.6 of this Agreement shall be transmitted to the BIR not later than July 31, 2007 for taxable year 2004, and May 31, 2008 for taxable year 2005; and
2. The first alphabetical master list of PEZA-registered enterprises to be furnished by the PEZA to the BIR under Item A.4.b of this Agreement shall be transmitted to the BIR not later than July 31, 2007.
E. Effectivity:
This Agreement shall apply to ITH or 5% GIT incentives availments covering taxable year ending July 31, 2006 and onwards, unless revoked by the parties.
IN WITNESS WHEREOF, the parties hereto have affixed their signatures this 1st day of March, 2007, in the City of Pasay, Philippines.
PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA)
By:
(Original Signed)
LILIA B. DE LIMA
Director General
BUREAU OF INTERNAL REVENUE (BIR)
By:
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner
SIGNED IN THE PRESENCE OF:
(Original signed)
JUSTO PORFIRIO YUCINGCO
Deputy Director General
PEZA
(Original signed)
ERLINDA A. SIMPLE
Assistant Commissioner
BIR”
All concerned are hereby enjoined to be guided accordingly and give this circular as wide as publicity as possible.
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue
TO : All Revenue Officials and Personnel and Others Concerned
Circularized hereunder is the full text of the Memorandum of Agreement between the Philippine Economic Zone Authority (PEZA) and the Bureau of Internal Revenue (BIR) executed on March 1, 2007:
“MEMORANDUM OF AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement is made and entered into by and between:
The PHILIPPINE ECONOMIC ZONE AUTHORITY , a government corporation created and operating under Republic Act No. 7916, as amended, with principal office at the PEZA Building, Roxas Blvd. cor. San Luis St., Pasay City, represented herein by its Director General, LILIA B. DE LIMA, who is duly authorized, hereinafter referred to as the PEZA; and
The BUREAU OF INTERNAL REVENUE, a government agency under the Department of Finance (DOF), with principal office at the BIR National Office Building, Agham Road, Diliman, Quezon City, represented herein by its Commissioner, JOSE MARIO C. BUÑAG, who is likewise duly authorized, hereinafter referred to as the BIR;
WITNESSETH THAT:
WHEREAS, the National Internal Revenue Code of 1997 (Tax Code), as amended, mandates the BIR to administer and execute all internal revenue tax laws;
WHEREAS, Sec. 5(B) thereof authorizes the BIR Commissioner and his subordinates to obtain on a regular basis, from any person, government agencies and instrumentalities any information to ascertain the liability of any person for any internal revenue tax;
WHEREAS, Sec. 203 thereof provides that internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of tax return, or from the date of filing of the said return, whichever comes later;
WHEREAS, Sec. 13(b) of Republic Act (R.A.) No. 7916, otherwise known as “The Special Economic Zone Act of 1995”, as amended, mandates the PEZA “to register, regulate and supervise the enterprises in the ECOZONE in an efficient and decentralized manner”;
WHEREAS, Secs. 1 and 5 of Rule XIII, Part VII of the Rules and Regulations implementing R.A. No. 7916, as amended, provide that all applications for availment of incentives shall be filed with the PEZA, and the incentives granted by the PEZA shall apply only to registered operations of the ECOZONE Enterprise, and only during the period of its registration with the PEZA;
WHEREAS, there is an imperative need to institutionalize coordination between the PEZA and the BIR in order to effectively administer the income tax holiday (ITH) and the 5% tax on gross income earned (GIT) in centives enjoyed by PEZA -registered enterprises;
NOW, THEREFORE, for and in consideration of the foregoing premises, the PEZA and the BIR, through their respective representatives, subject to the provisions of Sec. 270 (Unlawful Divulgence of Trade Secrets) in conjunction with Sec. 71 (Disposition of Income Tax Returns, Publication of Lists of Taxpayers and Filers) of the Tax Code, as amended, do hereby agree to undertake the following:
A. The PEZA shall:
1. Require all PEZA -registered enterprises to register their area of operations (head office, branch or facility) with the appropriate BIR Revenue District Offices (RDOs) having jurisdiction over such area (head office, branch or facility) located in the PEZA-owned economic zones, PEZA-administered Special Economic Zone/s (SEZ), IT Parks, IT buildings and the like, pursuant to the registration requirements provided under Sec. 236 of the Tax Code, as amended, and its implementing regulations;
2. Require all registered enterprises entitled to ITH and/or the 5% GIT incentive to secure from PEZA on an annual basis a certification that the enterprise is a bona fide PEZA-registered enterprise entitled to ITH and/or the 5% GIT incentive, and to attach the said certification to their annual Income Tax Returns (ITRs) upon filing thereof;
3. Require all registered enterprises to submit to PEZA a copy of their annual ITRs, together with the Audited Financial Statements (AFS) and other required supporting attachments/schedules filed with the BIR and duly stamped “Received” by the BIR, within thirty (30) days from the prescribed last day of filing thereof with the BIR, or actual filing thereof whichever comes later, submission of which shall serve as sufficient compliance to the requirements for availment of incentives provided under Rule XIII, Part VII of the Rules and Regulations implementing R.A. No. 7916, as amended;
4. Furnish the BIR the following:
a. On or before January 31 of each year, an alphabetical master list of PEZA-registered enterprises which are entitled to ITH and/or the 5% GIT incentive, with the following column headings:
i. Name of Registered Enterprise;
ii. Type of Registered Enterprise;
iii. TIN of Registered Enterprise;
iv. Zone Location(s) /Address;
v. PEZA Registration Certificate No. of the Enterprise;
vi. Date of PEZA Registration of the Enterprise;
vii . Registered activities and the following information on each:
· Date of registration;
· Type of Incentives (i.e., ITH or 5% GIT);
· ITH entitlement period plus extension, if any;
· Date of Start of Commercial Operations;
· Percentage of export sales as against volume of production;
b. Not later than July 31 of each year, furnish an update of the list identified in Item 4 (a) above with the following additional information:
i. Whether or not the registered enterprises submitted their final annual ITRs, together with the AFS and other required supporting attachments/schedules, and whether or not they submitted the same on time pursuant to Item A.3 above;
ii. New PEZA-registered enterprises together with the information listed in Item A.4(a) above;
iii. PEZA-registered enterprises whose registration were cancelled, the reason for the cancellation, and the date of cessation of operations;
5. Coordinate and work closely with the BIR to ensure effective monitoring of incentive avai lments (ITH or 5% GIT) by PEZA-registered enterprises, and provide documents, records and such other valuable information relevant to their incentives claims; and
6. Within one (1) year from receipt by PEZA of the documents described in Item A.3 above, endorse the same to the BIR, together with PEZA’s (a) validation that the period covered by the annual ITRs is covered by the ITH / 5% GIT incentive of the enterprise concerned, on a per registered activity / project basis; (b) determination of the incomes that should not be covered by ITH / 5% GIT, if any; and (c) validation of the actual percentage of export sales. B. The BIR shall:
1. Within one (1) year prior to the end of the three (3) – year prescriptive period provided under Sec. 203 of the Tax Code, as amended, conduct, through the Assessment Service in the BIR National Office, review of the documents bearing on incentive availment endorsed by PEZA; If any deficiency tax assessment arises from the review of incentive availment, the Assessment Service sh all transmit its findings of discrepancy and the corresponding documents to the concerned RDOs to enforce the immediate collection thereof, including increments accruing thereon;
2. Conduct immediate audit of enterprises that claimed income tax exemptions but failed to submit to PEZA a copy of their final annual ITRs and AFS pursuant to Item A.3 of this Agreement and enforce collection of income taxes pertaining to invalidated ITH / 5% GIT incentive claims, including all increments accruing thereon;
3. Inform PEZA of its findings resulting from its review within thirty (30) days after the approval by the concerned BIR official;
4. Furnish PEZA with copies of pertinent BIR regulations, rulings, other revenue issuances, and other information within thirty (30) days from issuance thereof, the latter however, is subject to the provisions of Sec. 270, in conjunction with Sec. 71 of the Tax Code, as amended; and
5. Issue a Revenue Memorandum Circular for the effective implementation of the provisions of this Agreement.
C. The PEZA and BIR shall:
1. Within thirty (30) days from signing of this Agreement, create a Working Group, with the inclusion of one representative each from the Department of Finance (DOF) and Department of Trade and Industry (DTI), that shall oversee and monitor the proper implementation of the provisions of this Agreement, including the creation of a database on investment incentives for policy purposes;
2. Within thirty (30) days from the creation of the Working Group, promulgate and disseminate their respective guidelines for the implementation of the provisions of this Agreement;
3. Undertake to promptly resolve any issues involving discrepancies in exchanged data/information; and
4. Disseminate to concerned parties the contents of this Agreement in order to make them aware of the herein requirements.
D. Transitory Provisions:
1. PEZA’s endorsement of the annual ITRs and AFS of enterprises covering taxable years 2004 (ending July 31, 2004 up to June 30, 2005) and 2005 (ending July 31, 2005 up to June 30, 2006), together with the corresponding information indicated in Item A.6 of this Agreement shall be transmitted to the BIR not later than July 31, 2007 for taxable year 2004, and May 31, 2008 for taxable year 2005; and
2. The first alphabetical master list of PEZA-registered enterprises to be furnished by the PEZA to the BIR under Item A.4.b of this Agreement shall be transmitted to the BIR not later than July 31, 2007.
E. Effectivity:
This Agreement shall apply to ITH or 5% GIT incentives availments covering taxable year ending July 31, 2006 and onwards, unless revoked by the parties.
IN WITNESS WHEREOF, the parties hereto have affixed their signatures this 1st day of March, 2007, in the City of Pasay, Philippines.
PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA)
By:
(Original Signed)
LILIA B. DE LIMA
Director General
BUREAU OF INTERNAL REVENUE (BIR)
By:
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner
SIGNED IN THE PRESENCE OF:
(Original signed)
JUSTO PORFIRIO YUCINGCO
Deputy Director General
PEZA
(Original signed)
ERLINDA A. SIMPLE
Assistant Commissioner
BIR”
All concerned are hereby enjoined to be guided accordingly and give this circular as wide as publicity as possible.
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue
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