Provisional Tax Clearance for Government Bidding in Philippines

By: Tax and Accounting Center Philippines

Under Executive No. 398 dated 12 January 2005, taxpayers desiring to enter into or participate in any contract with the government, its departments, bureaus, offices and agencies, government owned or controlled corporations and other public institutions are required to be tax compliant that the government must have enough sources of revenue to finance government projects. Accordingly, these taxpayers are required to submit the following:

1. Copy of latest income tax return stamped received by the Bureau of Internal Revenue (BIR) and duly validated with tax payment, if any.
2. Copy of latest business tax returns stamped received by the Bureau of Internal Revenue (BIR) and duly validated with tax payment, if any
3. Copy of BIR tax clearance to prove full and timely payment of taxes.

To implement the above, BIR issued Operations Memorandum (OM) No. 12-07-001 dated July 12, 2012 (Operations manual No. 12-2007) on the issuance of Provisional Tax Clearance for Bidding Purposes in the Philippines. Said Operations Manual 12-2007 provides for instances where a provisional tax clearance could be issued in order to prevent disruptions in the business operations of those transacting with government agencies.

Under Revenue Memorandum Circular No. 58-2013 (RMC No. 58-2013) dated August 30, 2013, an amendment to Operations Manual No. 12-2007 has been published. BIR Operations Manual No. 4-2013 dated July 24, 2013 has been issued to delete the following instances where a BIR Provisional Tax Clearance could be issued:

• The taxpayer has applied for compromise settlement of tax liabilities, the application of which is still pending final resolution by the Regional Evaluation Board (REB) or the National Evaluation Board (NEB), as the case may be, depending on the threshold provided under Section 204(A) of the National Internal Revenue Code of 1997, as amended, in relation to Revenue Regulations No. 30-2002;
• The taxpayer has applied for abatement of penalties under Section 204 (B) of the National Internal Revenue Code (NIRC), as amended, and implemented by Revenue Regulations No. 13-2001, the application of which is still pending final resolution by the Commissioner of Internal Revenue;

Instances of Provisional Tax Clearance

Under Operations Manual No. 4-2013 published by RMC No. 58-2013, the following are the new and updated list of instances where a BIR provisional tax clearance for bidding purposes in the Philippines could be issued:

1. The taxpayer availed of the Tax Amnesty Program under Republic Act No. 9480 and was issued a Certificate of Availment by the Tax Amnesty Task Force, but still awaiting the issuance of the Authority to Cancel Assessment (ATCA) by the Regional Office concerned pursuant to Operations Memorandum No. 11-12-005 dated December 20, 2011; or
2. The taxpayer’s case is still pending final resolution by the Court of Tax Appeals (CTA) or the Supreme Court (SC).”

The issuance of a provisional tax clearance in cases when the taxpayer’s case is still pending final resolution by the CTA and Supreme Court shall not be done automatically or as a matter of course.  Applications for provisional tax clearance based on pending tax case with Court of Tax Appeals or Supreme Court will have to be evaluated by the BIR processing office to see to it that the same is not frivolous and dilatory having been filed on final and executor tax assessments in the Philippines.

Effectivity of BIR OM No. 4-2013

BIR OM No. 4-2013 shall take effect immediately and all issuances or portions thereof which are inconsistent herewith are hereby repealed, modified, or amended accordingly.

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at in**@************er.org, or you may post a question at Tax and Accounting Center Forum and participate therein.