Circularizing Joint Administrative Order No. 002-2025, series of 2025, Entitled “Guidelines to Implement Sections 6,6, and 8 of Republic Act No. 12066, on the Certification of Export-Oriented Enterprise with Export Sales of at least Seventy Percent (70%) of the Total Annual Production of the Preceding Taxable Year”Joint Administrative Order No. 002-2025
Guidelines to Implement Sections 6,6, and 8 of Republic Act No. 12066, on the Certification of Export-Oriented Enterprise with Export Sales of at least Seventy Percent (70%) of the Total Annual Production of the Preceding Taxable Year
WHEARAS, Republic Act (RA) No. 12066, otherwise known as “An Act Amending Sections 24, 28, 32, 34, 57, 106, 108, 109, 112, 135, 237, 237-A, 269, 293, 294, 295, 296, 297, 300, 301, 308, 309, 310, and 311, and Adding New Sections 135-A, 295-A, 296-A, and 297-A of the National Internal Revenue Code of 1997, as amended (Tax Code), and for Other Purposes”, was enacted on 08 November 2024;
WHEREAS, Sections 6, 7, and 8 of RA No. 12066 amended Section 106(A)(2)(a)(3), 108(B)(5), and 109(dd) of the Tax Code and provides for the Value-added tax (VAT) zero-rating of sales of goods to and sale of services performed for export-oriented enterprises, and VAT exemption of importation of goods to and sale of services performed for export-oriented enterprises, and VAT exemption of importation of goods by export-oriented enterprises: Provided, that the export sales of such export-oriented enterprises are at least seventy percent (70%) of its total annual production for the preceding taxable year: Provided, further, That such goods and services are directly attributable to the export activity of the export-oriented enterprise;
WHEREAS, the same provisions designated the Department of Trade and Industry (DTI)-Export Marketing Bureau (EMB) to determine compliance with the aforementioned thresholds;
WHEREAS, the Department of Finance (DOF) is responsible for the formulation, institutionalization, and administration of fiscal policies, acting in coordination with other concerned political subdivisions, agencies, and instrumentalities of government;
WHEREAS, the DTI served as the primary coordinative, promotive, facilitative, and regulatory arm of government for the country’s trade, industry, and investment activies;
WHEREAS, the Bureau of Internal Revenue (BIR) assesses and collects all national internal revenue taxes, fees, and charges, enforces all forfeitures, penalties, and fines connected therewith, and interprets the provisions of the Tax Code and other tax laws;
WHEREAS, the Bureau of Customs (BOC) supervises and controls the entrance and clearance of vessels and aircraft engaged in foreign commerce, enforces the Customs Modernization and Tariff Act and all other laws, rules, and regulations related to tariff and customs administration, including the enforcement of forfeitures, penalties, and fines connected therewith.
WHEREAS, the DTI, through the DTI-EMB, is mandated to oversee the development, promotion, and monitoring of Philippine exports and provide exporters with the enabling environment to make them globally competitive;
NOW, THEREFORE, pursuant to the above-mentioned, and subject to the limitations of their mandates conferred by law, the DOF, BIR, BOC, and DTI, do hereby promulgate the following guidelines through this Joint Administrative Order (JAO).
Section 1. General Provisions
Section 2. Definition of Terms
As used in the JAO:
Section 3. Certification Procedure
Section 4. Validity of the Certification
The DTI-EMB Certification shall be valid until the end of the applicable taxable year (calendar/fiscal) adopted by the export-oriented enterprise unless earlier revoked.
Section 5. Revocation of Certification
If it is determined that export sales of the export sales of the export-oriented enterprise is less than seventy percent (70%) of the total annual production of the preceding taxable year the Certification shall be revoked by the DTI-EMB.
After revocation of the DTI-EMB Certification, the export-oriented enterprise shall be subject to VAT on their importations for such taxable year covered by the revoked STI-EMB Certification and shall be allowed to refund the excess input tax after verification.
Section 6. Roles and Responsibilities
To fully implement the provisions of these Guidelines, the following agencies shall have the following roles and responsibilities:
Section 7. Violations and Penalties
Any violation of any of the provisions of RA No. 12066, as implemented by these Guidelines, shall be grounds for the initiation of appropriate action against the export-oriented enterprise without prejudice to the filing of appropriate administrative, civil, or criminal charges.
Section 8. Additional Requirements
The DTI-EMB, BIR, and BOC may issue pertinent administrative orders, memorandum circulars, or other similar documents further providing details for enforcement of these Guidelines.
Section 9. Information Dissemination
This JAO shall be disseminated nationwide by the DTI-EMB, BIR and BOC. Information campaigns, and dissemination programs and activities shall be undertaken by the agencies to educate export-oriented enterprises, local suppliers, and other stakeholders.
Section 10. Separability
If any provision of part of this JAO is found invalid, illegal, and unenforceable, the remainder of the rules shall remain valid, legal and subsisting.
Section 11. Repealing Clause
All other others, issuances, rules and regulations which are inconsistent with RA No. 12066 and these rules are hereby repealed and modified.
Section 12. Effectivity
This JAO shall take effect immediately following its publication in a newspaper in general circulation and filing of three (3) copies hereof with the Office of National Administrative Register (ONAR), University of the Philippines (UP) Law Center, Diliman, Quezon City, pursuant to Presidential Memorandum Circular No. 11 dated 09 October 1992.
An act creating a VAT Refund mechanism for non-resident tourists, adding a new section 112-A to the National Internal Revenue Code of 1997, as amended, for the purpose
Section 1 – A new section designated as Section 112-A under Chapter I, Title IV of the National Internal Revenue Code, as amended, is hereby inserted to read as follows:
“Sec 112-A VAT Refund for Tourists – (a) A Tourist shall be eligible for a VAT refund on locally purchased goods if the following requisites are present (1) The goods are purchased in person by the tourist in duly accredited stores; (2) Such goods are taken out of the Philippines by the tourist within sixty (60) days from the date of purchase; and (3) The value of goods purchased per transaction is equivalent to at least Three thousand pesos (P3,000.00): Provided, That such threshold shall be subject to review and adjustment every three (3) years by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, taking into consideration the Consumer Price Index (CPI) as published by the Philippine Statistics Authority (PSA). (b) The Department of Finance shall engage the services of one (1) or more reputable, globally recognized and experienced VAT refund operators to provide end-to-end solutions to the government for the establishment and operation of a VAT refund system for tourists. (c) The refund under this section may be made either electronically or in cash. (d) The amount necessary for the VAT refund system for tourist under this Code shall be charged against the special account in the General Fund as provided under Section 106 of this Code.For the purpose of this section the term ‘Tourist’ means a non-resident foreign passport holder.” Section 2 – Implementing Rules and Regulations – Within ninety (90) calendar days from the effectivity of this Act, the Secretary of Finance shall, after due consultation with the Department of Trade and Industry, Department of Transportation, Department of Tourism, National Economic and Development Authority, Bureau of Internal Revenue, and Bureau of Customs, promulgate the necessary rules and regulations to faithfully implement the intent and provisions of this Act. Section 3 – Separability Clause – If any provision of this Act is declared unconstitutional, the remaining parts or provisions not affected thereby shall remain in full force and effect. Section 4 – Repealing Clause – All laws, decrees, executive orders, implementing rules and regulations, issuances, or any part thereof inconsistent with the provisions of this Act are deemed repealed, amended, or modified accordingly. Section 5 – Effectivity – This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in a newspaper of general circulation.
“Sec 112-A VAT Refund for Tourists –
Section 2 – Implementing Rules and Regulations – Within ninety (90) calendar days from the effectivity of this Act, the Secretary of Finance shall, after due consultation with the Department of Trade and Industry, Department of Transportation, Department of Tourism, National Economic and Development Authority, Bureau of Internal Revenue, and Bureau of Customs, promulgate the necessary rules and regulations to faithfully implement the intent and provisions of this Act.
Section 3 – Separability Clause – If any provision of this Act is declared unconstitutional, the remaining parts or provisions not affected thereby shall remain in full force and effect.
Section 4 – Repealing Clause – All laws, decrees, executive orders, implementing rules and regulations, issuances, or any part thereof inconsistent with the provisions of this Act are deemed repealed, amended, or modified accordingly.
Section 5 – Effectivity – This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in a newspaper of general circulation.
Amending the Pertinent Provisions of Revenue Regulations NO. 16-2005 to Implement the Value-Added Tax Provisions under Section 106, 108, 109, and 112 the National Internal Revenue Code of 1997, as Amended by Republic Act No. 12066
SECTION 1. Scope. – Pursuant to Sections 244 and 245 of the National Internal Revenue Code of 1997, as amended (Tax Code), in relation to Section 32 of Republic Act (RA) No. 12066, these Regulations are hereby promulgated to implement the Value Added Tax (VAT) provisions under Section 6,7,8, and 9 of the said Act.
Section 2 Coverage. – These regulations shall amend pertinent provisions of Revenue Regulations (RR) No. 16-2005, as amended, to cover the following provisions of the Tax Code:
SECTION 3. ZERO-RATED SALES OF GOODS OR PROPERTIES. – The entire Section 4.106-5 of RR No. 16-2005, as amended, is hereby further amended to read as follows:
“Sec. 4.106-5. Zero-Rated Sales of Goods and Properties. – A zero-rated sale of goods or properties (by a VAT-registered person) is a taxable transaction for VAT purposes, but shall not results in any output tax. However, the input tax on purchases of goods or properties, related to such zero-rated sale, shall be available as tax credit or refund in accordance with these Regulations.
The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:
SECTION 4. ZERO-RATED SALE OF SERVICES. – The entire Section 4.108-5 of RR No. 16-2005, as amended, is hereby further amended and shall now be read as follows:
“SEC. 4.108-5. Zero-Rated Sale of Services. –
SECTION 5. VAT-EXEMPT TRANSACTIONS. – Section 4.109(u) is hereby amended, and Section 4.109(dd) shall be added to RR No. 16-2005, to read as follows.
“SEC. 4.109. VAT-Exempt Transactions. –
xxx xxx xxx
(B) Exempt transactions. – The following transactions shall be exempt from VAT:
(u) Importation of fuel, goods, and supplies used for international shipping or air transport operations. 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;
xxx xxx xxx (dd) Importation of goods by an export-oriented enterprise whose export sales is at least seventy percent (70%) of the total annual production or sales of the preceding taxable year: Provided, That such goods are directly attributable to the export activity of the export-oriented enterprise: Provided, further, That the EMB of the DTI shall determine the compliance with the aforementioned threshold. For this purpose, ‘directly attributable’ shall follow the same definition under Section 4.106(a)(3)(ii) of these Regulations.”
SECTION 6. VAT REFUND/CREDIT. – Section 4.112-1 of RR No. 16-2005 shall now be renumbered as Section 4.112 and shall be further amended to read as follows:
“INPUT VAT REFUND OR TAX CREDIT CERTIFICATE”
SEC. 4.112. Claims for Cash Refund/Tax Credit Certificate of Input Tax. –
A VAT-registered person whose sales of goods, properties or services are zero-rated or effectively zero-rated may apply for the issuance of a cash refund of input tax attributable to such sales. The input tax that may be subject of the claim shall exclude the portion of input tax that has been applied against the output tax. The application should be filed within two (2) years after the close of the taxable quarter when such sales were made. In case of zero-rated sales under Secs. 106(A)(2)(a)(1) and (3), Secs. 108(B)(1) and (2) of the Tax Code, the payments for the sales must have been made in acceptable foreign currency duly accounted for in accordance with the BSP rules and regulations.
Where the taxpayer is engaged in both zero-rated or effectively zero- rated sales and in taxable or exempt sales of goods, properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, only the proportionate share of input taxes allocated to zero-rated or effectively zero-rated sales can be claimed for refund or issuance of a tax credit certificate.
In the case of a person engaged in the transport of passenger and cargo by air or sea vessels from the Philippines to a foreign country, the input taxes shall be allocated ratably between his zero-rated sales and non- zero-rated sales (sales subject to regular rate and VAT-exempt sales).
A VAT-registered person whose registration has been cancelled due to retirement from or cessation of business, or due to changes in or cessation of status under Sec. 106(C) of the Tax Code may, within two (2) years from the date of cancellation, apply for the issuance of tax credit certificate or cash refund for any unused input tax which he may use in payment of his other internal revenue taxes or apply for refund for any unused input tax: Provided, however, that the taxpayer- claimant shall be entitled to a refund if it has no internal revenue tax liabilities against which the tax credit certificate may be utilized: Provided further, that for purposes of dissolution or cessation of business, the date of cancellation being referred hereto is the date of the issuance of BIR Tax Clearance.
Claims for tax credits/refunds shall be filed with the appropriate BIR Office in accordance with the existing rules and regulations.
(1) In proper cases, the CIR shall grant refund for creditable input taxes within ninety (90) days from the date of submission of certified true copies of invoices and other documents specifically limited to those prescribed in the revenue issuances and in support of the application filed in accordance with Subsections (a) and (b) hereof: Provided that, should the CIR find that the grant of refund is not proper, the CIR must state in writing the legal and factual basis for the denial. The 90-day period to process and decide shall start from the filing of the claim up to the release of the payment of the approved VAT refund: Provided that, the claim/application is considered to have been filed only upon submission of the duly certified copies of invoices and other documents in support of the application as prescribed under pertinent revenue issuances.
(2) The taxpayer shall have fifteen (15) days from receipt of the full or partial denial to file a request for reconsideration. The request for reconsideration shall be limited only to questions of law on the full or partial denial of the claim for refund. Additional documentary requirements particularly those unsubmitted/unsupported mandatory requirements during the filing of the claim shall not be accepted. The CIR or his duly authorized representative shall decide on the request for reconsideration within fifteen (15) days from receipt thereof. Failure to file a request for reconsideration within the fifteen (15)-day period shall render the decision final.
(3) In case of full or partial denial of the request for reconsideration, or failure on the part of the CIR to act on the application for refund or request for reconsideration within the periods prescribed above, the taxpayer affected may appeal with the CTA within thirty (30) days:
i. after the expiration of the ninety (90)- day period to decide on the application for refund, in case where no action is made by the CIR on the application for refund; or
ii. from the receipt of the decision denying the request for reconsideration; or
iii. after the lapse of the fifteen (15)-day period decide on the request for reconsideration in cases where no actions is made by the CIR on the request for reconsideration
When no decision is rendered within the 90-day period or the 15-day period, as the case may be, and the taxpayer-claimant opted to seek for a juridical remedy within thirty (30) days from such period, the administrative claim for refund or the request for reconsideration shall be considered moot and shall no longer be processed.
VAT refund claims shall be classified into low-, medium-, and high-risk, with the risk classification based on the amount of VAT refund claim, tax compliance history, frequency of filing vat refund claims, among others: Provided, that medium- and high-risk claims shall be subject to audit or other verification process in accordance with the BIR’ national audit program for the relevant year.
Refund shall be moved upon warrants drawn by the CIR or by his duly authorized representative without the necessary pf being countersigned by the Chairman, Commission on Audit (COA), the provisions of the Revised Corporation Code of 1987 to the contrary notwithstanding: Provided further, That the BIR shall publish statistics on the aggregated volume, processing time, approval rate of refund claims, and other relevant statistics in their website: Provided further, that in case of disallowed by the COA, only the taxpayer shall be liable for the disallowed amount without prejudice to any administrative liability on the part of any employee of the BIR who may be found to be grossly negligent in the grant of refund.
The Department of Finance shall establish a VAT refund center in the BIR and in the Bureau of Customs (BOC) that will handle the electronic processing and granting of cash refunds of creditable input tax. In the absence of automated processing, the existing procedures shall apply.
An amount equivalent to five percent (5%) of the total VAT collection of the BIR and the BOC from the immediately preceding year shall be automatically appropriated annually and shall be treated as a special account in the General Fund or as trust receipts for the purpose of funding claims for VAT refund: Provided that, any unused fund, at the end of the year shall revert to the General Fund.
(i) Quarterly Report
The BIR and the BOC shall be required to submit to the Congressional Oversight Committee on the Comprehensive Tax Reform Program (COCCTRP) a quarterly report of all pending claims for refund and any unused fund.”
SECTION 7. TRANSITORY PROVISIONS. – For VAT credit/refund claims pursuant to Section 112(A) and 112(B) of the Tax Code, these Regulations shall apply to VAT credit/refund claims that are filed starting April 1, 2025, onwards to provide ample time for taxpayers and the BIR to adjust with the new requirements and procedures that will be imposed for this purpose.
SECTION 8. SEPARABILITY CLAUSE. – If any of the provisions of these Regulations is subsequently declared invalid or unconstitutional, the validity of the remaining provisions hereof shall remain in full force and effect.
SECTION 9. REPEALING CLAUSE. – All other issuances and rules and regulations or parts thereof which are contrary to and inconsistent with the provisions of these Regulations are hereby repealed, amended or modified accordingly.
SECTION 10. EFFECTIVITY. – These Regulations shall take effect fifteen (15) days following its publication in the Official Gazette or the BIR Official Website, whichever comes first.
Republic of the Philippines
Congress of the Philippines
Metro Manila
Nineteenth Congress
Third Regular Session
Begun and held in Metro Manila, on Monday, the twenty-second day of July, two thousand twenty-four.
[REPUBLIC ACT NO. 12066]
AN ACT AMENDING SECTIONS 27, 28, 32, 34, 57,106, 108, 109, 112, 135, 237, 237-A, 269, 292, 293, 294, 295, 296, 297, 300, 301, 308, 309, 310, AND 311, AND ADDING NEW SECTIONS 135-A, 295-A, 296-A, AND 297-A OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
SECTION 1. Section 27 (A) of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
“SEC. 27. Rates of Income Tax on Domestic Corporations. –
(A) In General. – Except as otherwise provided in this Code, an income tax rate of twenty-five percent (25%) effective July 1, 2020 is hereby imposed upon the taxable income derived during each taxable year from all sources within and without the Philippines by every corporation, as defined in Section 22(B) of this Code and taxable under this Title as a corporation, organized in, or existing under the laws of the Philippines: Provided, That corporations with net taxable income not exceeding Five million pesos (P5,000,000) and with total assets not exceeding One hundred million pesos (P100,000,000), excluding land on which the particular business entity’s office, plant, and equipment are situated during the taxable year for which the tax is imposed, shall be taxed at twenty percent (20%): Provided, further, That registered business enterprises under the enhanced deductions regime as provided in Section 294(C) of this Code shall be taxed at a rate equivalent to twenty percent (20%) on their taxable income derived from registered projects or activities during each taxable year.
xxx.”
SEC. 2. Section 28 (A)(1) of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
“SEC. 28. Rates of Income Tax on Foreign Corporations. –
(A) Tax on Resident Foreign Corporations. –
(1) In General. – Except as otherwise provide in this Code, a corporation organized, authorized, or existing under the laws of any foreign country, engaged in trade or business within the Philippines, shall be subject to an income tax equivalent to twenty-five (25%) of the taxable income derived in the preceding taxable year from all sources within the Philippines effective July 1, 2020: Provided, That the registered business enterprises under the enhanced deductions regime as provided in Section 294(C) of this Code, shall be subject to a tax rate equivalent to twenty percent (20%) of their taxable income derived from registered projects or activities during each taxable year.
x x x.
(B) Tax on Non-resident Foreign Corporation. –
(1) In General. – x x x.”
SEC. 3. Section 32 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 32. Gross Income. –
(A) General Definition. – x x x
(B) Exclusion from Gross Income. – The following items shall not be included in the gross income and shall be exempt from taxation under this Title:
(1) x x x;
(2) x x x;
(3) x x x;
(4) x x x;
(5) Income Exempt under Treaty. – Income of any kind, to the extent required by any treaty obligation, including agreements entered into by the President with economies and administrative regions, subject to the concurrence of the Senate, binding upon the Government of the Philippines.
(6) x x x; and
(7) x x x.”
SEC. 4. Section 34 of the National Internal Revenue Code of 1997, as amended, is hereby further emended to read as follows:
“SEC. 34. Deductions from Gross Income. –
x x x
(B) Interest. – x x x
(C) Taxes. – x x x
(1) In General. – x x x
(2) Limitations on Deductions. – x x x
(3) Credit Against Tax for Taxes of Foreign Countries – x x x
(4) Limitations on Credit. – x x x
(5) Adjustments on Payment Incurred Taxes. – x x x
(6) Year in Which Credit Taken – x x x
(7) Proof of Credits – x x x
(8) Input Tax Attributable to VAT-Exempt Sales. – Input tax paid on local purchases attributable to VAT-exempt sales shall be deductible from the gross income of the taxpayer.
x x x.”
SEC. 5. Section 57 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 57. Withholding of Tax at Source.-
(A) Withholding of Final Tax on Certain Incomes. – x x x
(B) Withholding of Creditable Tax at Source. – The Secretary of Finance may, upon the recommendation of the Commissioner, require the withholding of a tax on the items of income payable to natural or juridical persons, residing in the Philippines, by payor-corporation/persons as provided for by law, at the rate of not more than fifteen percent (15%) thereof, which shall be credited against the income tax liability of the taxpayer for the taxable year.
(C) Tax-free Covenant Bonds. – x x x
SEC. 6. Section 106 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 106. Value-Added Tax on Sale of Goods or Properties.-
(A) Rate and Base of Tax. – x x x.
(1) ‘Goods or Properties.’ The term ‘goods’ or ‘properties’ x x x;
(2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:
(a) Export Sales. – The term ‘export sales’ means:
(2) Sale of raw materials or packaging materials to a non-resident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer’s goods and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
(3) Sale of goods to an export-oriented enterprise whose export sales is at least seventy percent (70%) of the total annual production of the preceding taxable year: Provided, That such goods are directly attributable to the export activity of the export-oriented enterprise: Provided, further, That the Export Marketing Bureau of the Department of Trade and Industry (DTI) shall determine compliance with the aforementioned threshold. Any export-oriented enterprise that fails to meet the threshold shall be disqualified from availing of VAT zero-rating on local purchases in the immediately succeeding year: Provided, finally, That input tax otherwise due on VAT zero-rated local purchases attributable to VAT-exempt sales shall be paid and deductible from the gross income of the taxpayer. For this purpose, ‘directly attributable’ shall refer to goods and services that are incidental to and reasonably necessary for the export activity of the export-oriented enterprise, including janitorial, security, financial, consultancy, marketing and promotion services, and services rendered for administrative operations such as human resources, legal, and accounting;
(4) The sale of goods, supplies, equipment, and fuel to persons engaged in international shipping or international air transport operations; Provided, That the goods, supplies, equipment, and fuel shall be used for international shipping or air transport operations; and
(5) Sales to bonded manufacturing warehouses of export-oriented enterprises.
The Department of Finance (DOF) shall establish a VAT refund center in the Bureau of Internal Revenue (BIR) and in the Bureau of Customs (BOC) that will handle the electronic processing and granting of cash refunds of creditable input tax.
An amount equivalent to five percent (5%) of the total VAT collection of the BIR and the BOC from the immediately preceding year shall be treated as a special account in the General Fund or as trust receipts for the purpose of funding claims for VAT refund: Provided, That any unused fund, at the end of the year shall revert to the General Fund: Provided, further, That the BIR and the BOC shall be required to submit to the Congressional Oversight Committee on the Comprehensive Tax Reform Program (COCCTRP) a quarterly report of all pending claims for refund and any unused fund.
(b) x x x;
(c) x x x; and
(d) Those sales subject to zero percent (0%) VAT under special laws.
SEC. 7. Section 108 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. –
(A) Rate and Base of Tax.- x x x
(B) Transactions Subject to Zero Percent (0%) Rate.- The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate:
(5) Services performed for an export-oriented enterprise whose export sales is at least seventy percent (70%) of the total annual production of the preceding taxable year: Provided, That such services are directly attributable to the export activity of the export-oriented enterprise: Provided, further, That the Export Marketing Bureau of the DTI shall determine compliance with the aforementioned threshold. Any export-oriented enterprise that fails to meet the threshold shall be disqualified from availing of VAT zero-rating in the immediately succeeding year: Provided, finally, That input tax otherwise due on VAT zero-rated local purchases attributable to VAT-exempt sales shall be paid and deductible from the gross income of the taxpayer. For this purpose, ‘directly attributable’ shall follow the same definition under Section 106 of this Code.
(6) x x x;
(7) x x x; and
(8) Sales subject to zero percent (0%) VAT under special laws.
The DOF shall establish a VAT refund center in the BIR and in the BOC that will handle the electronic processing and granting of cash refunds of creditable input tax.
SEC. 8 Section 109 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
“SEC. 109. Exempt Transactions. –
(u) Importation of fuel, goods, and supplies used for international shipping or air transport operations;
(dd) Importation of goods by an export-oriented enterprise whose export sales is at least seventy percent (70%) of the total annual production of the preceding taxable year. Provided, That such goods are directly attributable to the export activity of the export-oriented enterprise: Provided, further, That the Export Marketing Bureau of the DTI shall determine the compliance with the aforementioned threshold. For this purpose, ‘directly attributable’ shall follow the same definition under Section 106 of this Code.”
SEC. 9. Section 112 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 112. Refunds or Tax Credits of Input Tax.-
The taxpayer shall have fifteen (15) days from receipt of the full or partial denial to file a request for reconsideration. The Commissioner shall decide on the request for reconsideration within fifteen (15) days from receipt thereof. Failure to file a request for reconsideration within the fifteen (15)-day period shall render the decision final.
In case of full or partial denial of the request for reconsideration, or failure on the part of the Commissioner to act on the application for refund or request for reconsideration within the periods prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the request for reconsideration, or after the expiration of the ninety (90)-day period to decide on the application for refund, or after the lapse of the fifteen (15)-day period to decide on the request for reconsideration in cases where no action is made by the Commissioner on the request for reconsideration, appeal the decision with the Court of Tax Appeals: Provided, however, That failure on the part of any official, agent, or employee of the BIR to act on the application for VAT refund within the ninety (90)-day period and on the request for reconsideration within the fifteen (15)-day period shall be punishable under Section 269 of this Code.
SEC. 10. Section 135 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 135. – Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. – Petroleum products sold to the following are exempt from excise tax:
(a) International carriers of the Philippine or foreign registry directly importing petroleum products, on their use or consumption outside the Philippines: Provided, That the petroleum products sold to these international carriers shall be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner:
Suppliers of petroleum products to international carriers shall be allowed to file a claim for refund of excise tax paid on such products, upon presenting proof that the petroleum products were sold to international carriers of Philippine or foreign registry, for their use or consumption outside the Philippines, following the procedure under Section 135-A of this Code.
(b) x x x
(c) x x x.”
SEC. 11. A new Section 135-A shall be introduced in the National Internal Revenue Code of 1997, as amended. The new Section 135-A shall read as follows:
”SEC. 135-A. Refund of Excise Tax on Petroleum Products. – No refund or credit of excise tax paid by suppliers on otherwise exempt sales under Section 135 shall be allowed, unless the taxpayer files a written claim for refund with the Commissioner, within two (2) years after the payment of excise tax: Provided, however, That a return filed showing an overpayment shall be considered a written claim for refund.
The Commissioner shall process and decide the refund under this provision within ninety (90) days from the submission of complete documents supporting the application filed. Should the Commissioner deny the claim for refund in full or in part, the Commissioner shall communicate in writing to the taxpayer, the legal and/or factual basis for the denial.
The taxpayer shall have fifteen (15) days from the receipt of the denial to file a request for reconsideration, which shall be resolved by the Commissioner within fifteen (15) days from the receipt thereof. Failure to file a request for reconsideration within the fifteen (15)-day period shall render the decision final.
In case of full or partial denial of the request for reconsideration, or failure on the part of the Commissioner to act on the application for refund or request for reconsideration within the periods prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the request for reconsideration, or after the lapse of the period to decide on the application for refund or request for reconsideration, in cases where no action is made by the Commissioner, appeal the decision with the Court of Tax Appeals.
Failure on the part of any official agent or employee of the BIR to process and decide on the application within the ninety (90)-day period and on the request for reconsideration within the fifteen (15)-day period shall be punishable under Section 269 of this Code.”
SEC. 12. Section 237 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
“SEC. 237. Issuance of Invoices. –
Upon the establishment of a system capable of storing and processing the required data, the Bureau shall require taxpayers engaged in the export of goods and services, taxpayers engaged in e-commerce, and taxpayers under the jurisdiction of the Large Taxpayers Service to issue electronic invoices, subject to rules and regulations to be issued by the Secretary of Finance upon recommendation of the Commissioner following a public hearing held for this purpose: Provided, That taxpayers not covered by the mandate of this provision may voluntarily issue electronic invoices: Provided, further, That the Secretary of Finance, upon the recommendation of the Commissioner , may require taxpayers to issue electronic invoices.
SEC. 13. Section 237-A of the National Internal Revenue Code of 1997, as amended, is hereby further amended, to read as follows:
“SEC. 237-A. Electronic Sales Reporting System. – Upon the establishment of a system capable of storing and processing the required data, the Bureau shall require taxpayers engaged in the export of goods and services, and taxpayers under the jurisdiction of the Large Taxpayer Service to electronically report their sales data to the Bureau through the use of electronic point of sale systems, subject to rules and regulations to be issued by the Secretary of Finance as recommended by the Commissioner of Internal Revenue: Provided, That the machines, fiscal devices, and fiscal memory devices shall be at the expense of the taxpayer: Provided, further, That the Secretary of Finance, upon the recommendation of the Commissioner, may require taxpayers to electronically report their sales data to the Bureau.
All taxpayers required to issue and those who voluntarily choose to issue electronic invoices and electronically report their sales data to the Bureau shall be granted, in addition to the allowable deduction provided under Section 34(A)(1), the following allowable deductions:
(1) For micro and small taxpayers as defined under Section 21(B) of this Code, an additional deduction from taxable income of one hundred percent (100%) of the total cost for setting up an electronic sales reporting system.
(2) For medium and large taxpayers as defined under Section 21(B) of this Code, an additional deduction from taxable income of fifty percent (50%) of the total cost for setting up an electronic sales reporting system.
The foregoing allowable deduction shall be availed of only once. The importation of such electronic sales reporting system shall also be exempt from taxes.
SEC. 14. Section 269(j) of the National Internal Revenue Code of 1997, as amended, is further amended to read as follows:
”SEC. 269. Violations Committed by Government Enforcement Officers. – Every official, agent, or employee of the BIR or any other agency of the Government charged with the enforcement of the provisions of this Code, who is guilty of any of the offense herein below specified 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 ten (10) years but not more than fifteen (15) years and shall likewise suffer an additional penalty of perpetual disqualification to hold public office, to vote, and to practice in any public election:
(j) Deliberate failure to act on the application for refunds within the prescribed period provided under Sections 112, 135-A, and 204 of this Act.
SEC. 15. Section 292 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 292. Extent of Authority to Grant Tax Incentives. – The Fiscal Incentives Review Board or the Investment Promotion Agency, shall grant the appropriate tax incentives provided in this Title to RBEs only to the extent of their approved registered project or activity under the Strategic Investment Priority Plan (SIPP), taking into consideration the infusion of investment capital, generation of direct local employment which takes into account Republic Act No. 11962, otherwise known as the ‘Trabaho Para sa Bayan Act’, and other standard and project-specific performance metrics of the registered project or activity that may be imposed by the Fiscal Incentives Review Board of the concerned Investment Promotion Agency.”
SEC. 16. Section 293 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
“SEC.293. Definitions. – When used in this Title:
SEC. 17. Section 294 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 294. Incentives.-Subject to the conditions and period of availment in Sections 295, 296, and 296-A, respectively, the following types of tax incentives may be granted to registered projects or activities:
SEC. 18. Section 295 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 295. Conditions of Availment. – The availment of tax incentive in the preceding section shall be governed by the following rules:
The elected incentive package shall be irrevocable for the entire duration for entitlement to such incentives under Sections 296 and 296-A of this Code: Provided, That in no case shall the EDR be granted simultaneously with the SCIT.
The elected incentive package shall be irrevocable for the entire duration for entitlement to such incentives under Sections 296 and 296-A of this Code.
The folowing conditions for the availment of each enhanced deduction shall be complied with:
The Department of Finance, in coordination with the BIR, Fiscal Incentives Review Board, and Investment Promotion Agencies, shall prescribe the terms and conditions on the grant of EDR under Section 294(C) and this Title.
An Investment Promotion Agency may authorize the importation of capital equipment, raw materials, spare parts, or accessories pending issuance of the certificate of registration, subject to the posting of a performance bond or bank guarantee equivalent to duties and taxes waived on such importations and other conditions as may be determined by the concerned Investment Promotion Agency and the BOC.
No taxes and duties shall be imposed on subsequent sale, transfer, or disposition of the capital equipment, raw materials, spare parts, or accessories, which were granted tax and customs duty exemption hereunder within the first five (5) years from date of importation. The approval of the Investment Promotion Agency must be secured before the sale, transfer, or disposition of the capital equipment, raw materials, spare parts, or accessories, which were granted tax and customs duty exemption hereunder, and shall be allowed only under any of the following circumstances:
In case of subsequent sale, transfer, or disposition of tax and duty-free capital equipment, raw materials, spare parts, or accessories, within the first five (5) years from the date of importation and upon approval by the Investment Promotion Agency, there shall be taxes and duties assessed based on the net book value of the capital equipment, raw materials, spare parts, or accessories if:
Provided, That if the RBE sells, transfers, or disposes the aforementioned imported items without prior approval, the RBE and the vendee, transferee, or assignee shall be solidarily liable to pay twice the amount of the duty exemption that should have been paid during its importation: Provided, further, That the sale, transfer, or disposition, of the capital equipment, raw materials, spare parts, or accessories made after five (5) years from the date of importation shall require that prior notice be given by the RBE to the Investment Promotion Agency: Provided, furthermore, That even if the sale, transfer, or disposition of the capital equipment, raw materials, spare parts, or accessories was made after five (5) years from the date of importation with notice to the Investment Promotion Agency, the RBE is still liable to pay the duties based on the net book value of the capital equipment, raw materials, spare parts, or accessories if it violated any of its registration terms and conditions.
Provided, That the local sales of goods and/or services by an RBE, regardless of the income tax incentives regime and location, shall be subject to twelve percent (12%) VAT, unless otherwise exempt or zero-rated under Titles IV and XIII of this Code. For this purpose, ‘local sales’ shall cover sales of goods and services to domestic market enterprises or non-RBEs, regardless of whether the sale occurs within the freeport or economic zones: Provided, further, That the liability to pay and remit the VAT to the government rests with the buyer of the said goods or services.
Any registered export enterprise that fails to meet the seventy percent (70%) export sales threshold in the immediately preceding year or high-value domestic market enterprise that fails to meet the export sale or investment capital requirement shall be disqualified from availing of duty exemption on importation under Section 294(D), and VAT exemption on importation and VAT zero-rating on local purchases under Section 294(E) in the immediately succeeding year.
Notwithstanding the provisions in the preceding paragraphs, sales receipts and other income derived from non-registered project or activity shall be subject to appropriate taxes imposed under this Code.
Any law to the contrary notwithstanding, the importation of petroleum products by any person, including RBEs, shall be subject to the payment of applicable duties and taxes as provided under Republic Act No. 10863, otherwise known as the ‘Customs Modernization and Tariff Act’, and this Code, respectively, upon importation into the Philippine customs territory and/or into free zones as defined under Republic Act No. 10863: Provided, That the importation of petroleum products used in international shipping or air transport operations shall be covered by the provisions of Sections 109 (U) and 135(A) of this Code.
Provided, That applicable duties x x x
The tax shall be directly remitted by the RBE to the Treasurer’s office of the municipality or city where the enterprise is located.
Where two (2) or more local government units cover the same enterprise, the sharing between such local government units shall be as follows:
Fifty percent (50%) of the share of the municipality based on the foregoing allocation shall be remitted to the province where the said municipality is located: Provided, That cities shall retain one hundred percent (100%) of their share.
Local government units may reduce or waive the rate of tax, or their share thereof, in the case of two (2) or more local government units covering the same enterprise.
RBEs, whose performance commitments include job generation, shall maintain their employment levels to the extent practicable. In case of reduced employment or when the performance commitment for job generation is not met, the RBEs must submit to their respective Investment Promotion Agencies and the Fiscal Incentives Review Board their justifications for and plans to address the same in the succeeding year.”
SEC. 19. A new Section 295-A shall be introduced in the National Internal Revenue Code of 1997, as amended. The new Section 295-A shall read as follows:
“SEC. 295-A. Registered Business Enterprises Taxpayer Service – A separate service within the BIR is hereby created to support the end-to-end tax compliance of RBEs. The Commissioner shall prescribe the manner and place of filing returns and payment of taxes by RBEs through the said service. For ease of compliance with tax rules and regulations, simplified filing and payment processes shall be implemented for RBEs.”
SEC. 20, Section 296 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
“SEC. 296. Period of Availment of Incentives for Projects or Activities Approved by the Investment Promotion Agencies – The period of availment of incentives granted by the Investment Promotion Agencies to RBEs shall be as follows:
(A) For export enterprise under the SIPP, ITH of four (4) to seven (7) years, depending on location and industry priorities as specified in this section, followed by SCIT or EDR for ten (10) years, or SCIT or EDR for a maximum period of fourteen (14) to seventeen (17) years, depending on location and industry priorities: Provided, That the application for extension of availment of incentives shall only be allowed for the same registered project or activity if such project or activity employs at least ten thousand (10,000) direct local employees and maintains the said number during its registration, even if the registered project or activity no longer complies with the conditions and qualifications set forth in the SIPP: Provided, further, That the extension of availment of incentives shall not exceed five (5) years, subject to the performance review by the Investment Promotion Agency, Notwithstanding any provision to the contrary, no ITH shall be granted to registered export enterprises that applied for extension of availment of incentives for the same project or activity.
A qualified expansion project or activity registered under this Act may qualify to avail of SCIT or EDR for eight (8) years, subject to the provisions of Sections 294(B) and (C), qualifications set forth in the SIPP, and performance review by the Investment Promotion Agency: Provided, That existing registered projects or activities prior to the effectivity of Republic Act No. 11534 otherwise known as the ‘Corporate Recovery and Tax Incentives for Enterprises Act’, may qualify to register on or before December 31, 2024 and avail of the incentives granted under Republic Act No. 11534 for the prescribed period, subject to the criteria and conditions set forth in the SIPP. The qualified expansion project or activity may also be entitled to duty exemption on importation, VAT exemption on importation, and VAT zero-rating on local purchases subject to the provisions of Sections 294(D) and (E), respectively.
A qualified expansion project or activity registered under this Act may qualify to avail of EDR for eight (8) years, subject to the provisions of Section 294(C), qualifications set forth in the SIPP and performance review by the Investment Promotion Agency or the Fiscal Incentives Review Board, as the case may be: Provided, That existing registered projects or activities prior to the effectivity of Republic Act No. 11534 may qualify to register on or before December 31, 2024 and avail of the incentives granted under Republic Act No. 11534 for the prescribed period, subject to the criteria and conditions set forth in the SIPP.
The period of availment of the foregoing income tax-based incentives shall commence from the actual start of commercial operations with the RBE availing of the tax incentives within three (3) years from the date of registration, unless otherwise provided in the SIPP and its corresponding guidelines.
The period of availment of incentives based on the combination of both location and industry priorities, as determined in the SIPP, shall be as follows:
For exporters:
For domestic market activities:
In addition to the incentives provided in the tiers above, projects or activities of registered business enterprises located in areas recovering from armed conflict or a major disaster, as determined by the Office of the President, shall be entitled to two (2) additional years of income tax-based incentives.
Projects or activities registered prior to the effectivity of this Act, or under the incentive system provided herein that shall, in the duration of their incentives, completely relocate from the National Capital Region, shall be entitled to three (3) additional years of income tax-based incentives: Provided, That the additional incentive shall commence at the completion of the relocation of operations.
RBEs may continue to avail of the VAT zero-rating on local purchases and VAT exemption on importation under Section 294(E), and duty exemption on importation under Section 294(D), for the entire registration period as an RBE, reckoned from the date of registration, if the RBEs continue to meet the terms and conditions of registration by their respective Investment Promotion Agencies and if the RBEs maintain at least seventy percent (70%) of total annual production or output as export sales for the immediately preceding year.
Registered domestic market enterprises may avail of duty exemption on importation from the date of registration until the expiration of the income tax-based incentives granted in this section.
After the expiration of the entitlement to VAT zero-rating on local purchases and VAT exemption on importation under this Title, registered export enterprises may avail of the VAT zero-rating on local purchases and VAT exemption on importation under Sections 106, 108, and 109 of this Code: Provided, That they comply with the requirements set forth therein.”
SEC. 21. A new Section 296-A shall be introduced in the National Internal Revenue Code of 1997, as amended. The new Section 296-A shall read as follows:
”SEC. 296-A. Period of Availment of Incentives for Projects or Activities Approved by the Fiscal Incentives Review Board. – The period of availment of incentives granted by the Fiscal Incentives Review Board to RBEs shall be as follows:
(A) For an export enterprise under the SIPP, ITH of four (4) to seven (7) years, depending on location and industry priorities as specified in this section, followed by SCIT or EDR for twenty (20) years, or SCIT or EDR for a maximum period of twenty-four (24) to twenty-seven (27) yeras, depending on location and industry priorities: Provided, That the application for extension of availment of incentives shall only be allowed for the same registered project or activity if such project or activity employs at least ten thousand (10,000) direct local employees and maintains the said number during its registration, even if the registered project or activity no longer complies with the conditions and qualifications set forth in the SIPP: Provided, further, That the extension of availment of incentives shall not exceed ten (10) years, subject to the performance review by the Fiscal Incentives Review Borad. Notwithstanding any provision to the contrary, no ITH shall be granted to registered export enterprises that have applied for extension of availment of incentives for the same project or activity.
A qualified expansion project or activity registered under this Act may qualify to avail of SCIT or EDR for thirteen (13) years, subject to the provisions of Sections 294(B) and (C), qualifications set forth in the SIPP and performance review by the Fiscal Incentives Review Board: Provided, That existing registered projects or activities prior to the effectivity of this Act may qualify to register and avail of the incentives granted under this Act for the prescribed period, subject to the criteria and conditions set forth in the SIPP. The qualified expansion project or activity may also be entitled to VAT exemption on importation and VAT zero-rating on local purchases under Section 294(E) and duty exemption on importation under Section 294 (D).
(B) For domestic market enterprise under the SIPP, ITH of four (4) to seven (7) years, followed by EDR for twenty (20) years, or EDR for a maximum period of twenty-four (24) to twenty-seven (27) years, depending on location and industry priorities: Provided, That the application for extension of availment of incentives shall be allowed for the same registered project or activity only if employment level for such project or activity employs at least ten thousand(10,000) direct local employees and maintains the said number during its registration, even if the registered project or activity no longer complies with the conditions and qualifications set forth in the SIPP: Provided, further, That the extension of availment of incentives shall not exceed ten (10) years, subject to the performance review by the Fiscal Incentives Review Board. Notwithstanding any provision to the contrary, no ITH shall be granted to domestic market enterprises that have applied for extension of availment of incentives for the same project or activity.
A qualified expansion project or activity registered under this Act may qualify to avail of EDR for thirteen (13) years, subject to the provisions of Section 294(C), qualifications set forth in the SIPP, and performance review by the Investment Promotion Agency or Fiscal Incentives Review Board, as the case may be: Provided, That existing registered projects or activities prior to the effectivity of this Act may qualify to register and avail of the incentives granted under this Act for the prescribed period, subject to the criteria and conditions set forth in the SIPP. The qualified expansion project or activity may also be entitled to VAT exemption on importation and VAT zero-rating on local purchases under Section 294(E) and duty exemption on importation under Section 294(D).
The period availment of the foregoing income tax-based incentives shall commence from the actual start of commercial operations with the RBE availing of the tax incentives within three (3) years from the date of registration, unless otherwise provided in the SIPP and its corresponding guidelines.
RBEs may continue to avail of the VAT zer-rating on local purchases and VAT exemption on importation under Section 294(E), and duty exemption on importation under Section 294(D), for the entire registration period as an RBE, reckoned from the date of registration, if the RBEs continue to meet the terms and conditions of their registration with their respective Investment Promotion Agencies and if the following requirements are met for the immediately preceding year:
Registered domestic market enterprise may avail of duty exemption from the date of registration until the expiration of the income tax-based incentives granted in this section.
After the expiration of the entitlement to VAT zero-rating on local purchases and VAT exemption on importation under this Title, registered export enterprises may avail of the VAT zero-rating on local purchases and VAT exemption on importation under Sections 106, 108, and 109 of this Code: Provided, That they comply with the requirements set forth therein.
Projects or activities registered prior to the effectivity of this Act or under the incentive system provided herein that completely relocate from the National Capital Region, within the duration of their incentives, shall be entitled to three (3) additional years of income tax-based incentives: Provided, That the additional incentive shall commence upon the completion of the relocation of operations.”
SEC. 22. Section 297 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
“SEC. 297. Expanded Functions of the Fiscal Incentives Review Board. – The functions and powers of the Fiscal Incentives Review Board created under the Presidential Decree No. 776, as amended, shall be further expanded as follows:
(A) To exercise policy-making, oversight, regulatory, and quasi-judicial functions on the administration and grant of tax incentives by the Investment Promotion Agencies and other government agencies administering tax incentives. In particular, the Fiscal Incentives Review Board shall:
(1) Determine the target performance metrics as conditions to avail of tax incentives;
(2) Review and audit the compliance of Investment Promotion Agencies and other government agencies administering tax incentives, with respect to the administration and grant of tax incentives and impose sanctions such as, but not limited to, withdrawal, suspension, cancellation of their authority to grant tax incentives under this Title without prejudice to the conduct of inquiry, investigation, and filing of appropriate criminal and administrative cases against erring officials and employees in accordance with the procedures prescribed under existing laws;
(3) Conduct regular monitoring and evaluation of investment and non-investment tax incentives, such as using cost-benefit analysis to determine their impact on the economy and whether agreed performance targets are met; and prescribe data requirements, reporting standards, processes, and procedures for the application of incentives for the calculation of costs and benefits upon application;
(4) Check and verify, as necessary, the compliance of RBEs through the Investment Promotion Agencies, with the terms and conditions of their availment, in particular the agreed target performance metrics, rules and regulations of this Act, and other relevant laws or issuances;
(5) Provide Investment Promotion Agencies with capacity-building activities to ensure that they are equipped to comply with reportorial requirements; and
(6) Assess its organizational structure, focusing on the adequacy of its human resources for regulatory and quasi-judicial functions. If necessary, the Fiscal Incentives Review Board shall submit to the Department of Budget and Management the proposed organizational changes to strengthen its human resources in accordance with existing laws and regulations.
For this purpose, all Investment Promotion Agencies and other government agencies administering tax incentives shall annually furnish the Fiscal Incentives Review Board with all the issuances related to the grant and administration of incentives
(B) To approve or disapprove the grant of tax incentives to the extent of the registered project or activity listed in the SIPP upon the recommendation of the Investment Promotion Agency: Provided, That the application for tax incentives shall be duly accompanied by a cost-benefit analysis: Provided, further, That the Investment Promotion Agencies shall use the Fiscal Incentives Review Board-prescribed data requirements and methodologies for the application of incentives in calculating the costs and benefits upon application: Provided, further, That the Investment Promotion Agencies shall grant the tax incentives to registered projects or activities listed in the SIPP with investment capital of Fifteen Billion pesos (P15,000,000,000) and below: Provided, furthermore, That the Fiscal Incentives Review Board, in consultation with the Investment Promotion Agencies, may increase the threshold amount of Fifteen billion pesos (P15,000,000,000);
(C) To approve applications for tax subsidies to government-owned or –controlled corporations, government instrumentalities, government commissaries and state universities and colleges.
For this purpose, the other government agencies shall ensure complete submission of applications, documents, records, books, or other relevant data or material;
(D) To formulate additional time-bound or place-specified projects or activities for inclusion in the SIPP during periods of recovery from calamities and post-conflict situations and where the Fiscal Incentives Review Board determines that there is a need to attract many classes, firms, and other investors that would accelerate the growth of a region’s flagship industries in accordance with the Medium-Term Development Plan and Republic Act No. 11962, otherwise known as the ‘Trabaho Para sa Bayan Act’ and recommend incentives to the President;
(E) To cancel, suspend, or withdraw, after due process, the enjoyment of fiscal incentives of concerned RBEs on its own initiative or upon the recommendation of the Investment Promotion Agency for flagrant and material violations of any of the conditions imposed in the grant of fiscal incentives, including but not limited to, the non-compliance with the agreed performance commitments and endorse RBEs whose incentives are cancelled, suspended, or withdrawn to the concerned revenue agencies for the assessment and collection of taxes and duties due commencing from the first year of availment;
(F) x x x
(G) To require Investment Promotion Agencies and other government agencies administering tax incentives to submit, regularly or when requested, summaries of approved investment and incentives granted, and firm- or entity –level tax incentives and benefits data as input to the Fiscal Incentives Review Board’s review and audit function, and evaluation of performance of recipients of tax incentives. For this purpose, the Fiscal Incentives Review Board shall maintain a master list of registered products and services for export or domestic consumption that are entitled to incentives: Provided, That to facilitate compliance with the foregoing, the DTI, in coordination with relevant regulatory bodies, shall cause the registration and reporting by RBEs of the types of services rendered whether domestically or to foreign clients; types of products manufactured domestically, products imported and sold locally, and products exported;
(H) To publish regularly, per firm, the data pertaining to the amount of tax incentives, tax payments, and other related information, including benefits data, subject to the provisions of Chapter V of this Title;
(I) x x x
(J) x x x
(K) To decide on issues, on its own initiative or upon the recommendation of the Investment Promotion Agency after due hearing, concerning the approval, disapproval, cancellation, suspension, withdrawal, or forfeiture of tax incentives or tax subsidy in accordance with this Act. The Fiscal Incentives Review Board shall decide on the matter within ninety (90) days from the date when the Fiscal Incentives Review Board may, within thirty (30) days from receipt of the adverse decision, appeal the same to the Court of Tax Appeals;
(L) To promulgate such rules and regulations as may be necessary to implement the intent and provisions of this Title. The Fiscal Incentives Review Board may use any electronic means of publication in the Official Gazette or its official website;
(M) x x x
(N) x x x
(O) To recommend policies to prevent abuse of fiscal incentives availment and tax evasion under this Code and smuggling activities; and
(P) To exercise all other powers necessary or incidental to attain the purposes of this Act and other laws vesting additional functions on the Fiscal Incentives Review Board.
SEC. 23. A new Section 297-A shall be introduced in the National Internal Revenue Code of 1997, as amended. The new Section 297-A shall read as follows:
”SEC. 297-A. Processing of Tax Incentive Applications. – The Fiscal Incentives Review Board and Investment Promotion Agencies shall issue a decision on applications for tax incentives within twenty (20) working days from the receipt of all required documents, in accordance with Section 9 of Republic Act No. 11032, otherwise known as the ‘Ease of Doing Business and Efficient Government Service Delivery Act of 2018’. An extension of the processing period may be permitted only once, and shall in no case exceed an additional twenty (20) working days.”
SEC. 24. Section 300 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 300. Strategic Investment Priority Plan. – The BOI, in consultation with the Fiscal Incentives Review Board, and the Investment Promotion Agencies, other government agencies administering tax incentives, and the private sector, shall formulate the SIPP to be submitted to the President for approval, which may contain recommendations for types of non-fiscal support needed to create high-skilled jobs to grow a local pool of enterprises, particularly micro, small and medium enterprises (MSMEs), that can supply to domestic and global value chains, to increase the sophistication of products and services that are produced and/or sourced domestically, to expand domestic supply and reduce dependence on imports, and to attract significant foreign capital or investment. The SIPP may include areas of investment that are specific to an area or region, taking into consideration the project or activity that the Investment Promotion Agencies in those areas or regions deem fit to promote, in order to foster regional growth and attract investments: Provided, That the project or activity identified by the Investment Promotion Agencies shall be consistent with the Philippine Development Plan and Republic Act No. 11962, otherwise known as the ‘Trabaho Para sa Bayan Act’. The SIPP shall be valid for a period of three (3) years, subject to review and amendment every three (3) years thereafter unless there would be a supervening event that would necessitate its review: Provided, That the BOI shall cause the publication of the rules and regulations implementing the SIPP, including any amendments thereof, in the Official Gazette or newspaper of general circulation, and on its official website, to be effective.
The SIPP shall contain the following:
(B) Scope and coverage of location and industry tiers in Section 296.
All sectors or industries that may be included in the SIPP shall undergo an evaluation to determine the suitability and potential of the industry or the sector in promoting long-term growth and sustainable development, and the national interest. In no case shall a sector or industry be included in the SIPP unless it is supported by a formal evaluation process or report.
In no case shall the Investment Promotion Agencies accept application unless the project or activity is listed in the SIPP. Projects or activities not listed in the SIPP shall be automatically disapproved.”
SEC. 25. Section 301 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 301. Power of the President to Grant Incentives. – Notwithstanding the provisions of Sections 295, 296, and 296-A, the President may, in the interest of national economic development, or upon the recommendation of the Fiscal Incentives Review Board, modify the mix, period or manner of availment of incentives provided under this Code or craft the appropriate fiscal and non-fiscal support package for a highly desirable project or a specific industrial activity based on defined development strategies for creating high-value jobs, building new industries to diversify economic activities, and attracting significant foreign and domestic capital or investment, and the fiscal requirements of the activity or project, subject to maximum incentive levels recommended by the Fiscal Incentives Review Board: Provided, That the grant of ITH shall not exceed ten (10) years followed by SCIT of five percent (5%) or EDR; or SCIT or EDR, which may be immediately granted at the start of commercial operations: Provided, further, That the total period of income tax-based inventive availment shall not exceed forty (40) years.
The Fiscal Incentives Review Board shall determine whether the benefits that the government may derive from such investment are clear and convincing and far outweigh the cost of incentives that will be granted in determining whether a project or activity is highly desirable.
The determination by the Fiscal Incentives Review Board shall guide the President in calibrating either or both the magnitude of the incentives to be granted and the agreed performance target corresponding to the grant.
The President may exercise the powers under this section: Provided, That the following conditions are satisfied:
Provided, That the threshold shall be subject to a periodic review by the Fiscal Incentives Review Board every three (3) years, taking into consideration international standards or other economic indicators: Provided, further, That if the project fails to substantially meet the projected impact on the economy and agreed performance targets, the Fiscal Incentives Review Board shall recommend to the President the cancellation of the tax incentive or fiscal and non-fiscal support package or the modified period or manner of availment of incentives, after due hearing and an adequate opportunity to substantially comply with the agreed performance targets and outputs.
For this purpose, the President may grant non-fiscal support package limited to the utilization of government resources such as use of land and budgetary support provision under the annual General Appropriations Act.
This power of the President, in as far as it commands additional public sector expenditures in support of investors, is suspended during fiscal years when, an unmanageable fiscal deficit is declared by the President on the advice of the Development Budget Coordination Committee with a consequence that even core budgetary obligations, such as but not limited to, mandatory revenue allotments for local government units and budget for the National Economic and Development Authority’s core public investments program, cannot be fully financed.
Notwithstanding the provisions in the preceding paragraphs, tax and duty incentives granted through legislative franchises shall be exempted from the foregoing powers of the President to review, withdraw, suspend, or cancel tax incentives and subsidies.”
SEC. 26. Section 308 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 308. Penalties for Noncompliance with Filing and Reportorial Requirements. – Any RBE or other registered enterprises, which fails to comply with filing and reportorial requirements with the appropriate Investment Promotion Agencies or other government agencies administering tax incentives and/or, which fails to show proof of filing of tax returns using the electronic system for filing and payment of taxes of the BIR under Section 305 hereof, shall be imposed the following penalties by the appropriate Investment Promotion Agency or other government agency administering tax incentives:
Provided, That if the failure to show such proof is not due to the fault of the RBEs or other registered enterprises, the same shall not be a ground for the suspension of the ITH and/or other tax incentives availment: Provided, further, That collections from the penalties shall accrue to the general fund.
After due process, the concerned Investment Promotion Agency may cancel the registration, suspend the enjoyment of inventive benefits of any registered enterprise, and/or require refund of incentives enjoyed by such enterprise, including interests and monetary penalties, for any willful and material misrepresentation of information or submission of falsified or misleading information or documents for the purpose of availing of more incentives that what is entitled to under this Code: Provided, further, That in case of cancellation of the certificate of registration, the project or activity of the RBE shall cease to be registered and the RBE shall be required to pay all appropriate taxes and duties from the date of cancellation order becomes final and executory.
Provided, That the Investment Promotion Agency, with the recommendation of the Commissioner, may revoke or suspend incentives granted by the Investment Promotion Agency, and/or order a business closure of the RBE that violated Title VI (Excise Taxes on Certain Goods) and Title X (Statutory Offenses and Penalties) of this Code and other related revenue regulations, order, or issuances of the government: Provided, further, That such authority shall cover the acts of the RBE committed even in the first year of availment of incentives. Notwithstanding the provisions of this section, the DOF, the BIR, and the BOC shall retain their respective mandates, powers and functions as provided for under this Act and related laws.
Any government official or employee who fails without justifiable reason to provide or furnish the required tax incentives report or other data or information as required under Sections 306 and 307 of the Act shall be penalized, after due process, by a fine equivalent to the official’s or employee’s basic salary for a period of one (1) month to six (6) months or by suspension from government service for not more than one (1) year, or both, in addition to any criminal and administrative penalties imposable under existing laws.”
SEC. 27. Section 309 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 309. Prohibition on Registered Activities. – Except as allowed under this provision, a qualified registered project or activity under an Investment Promotion Agency administering an economic zone or freeport shall be exclusively conducted or operated within the geographical boundaries of the zone or freeport being administered by the Investment Promotion Agency in which the project or activity is registered: Provided, That an RBE may conduct or operate more than one qualified registered project or activity within the same zone or freeport under the same Investment Promotion Agency: Provided, further, That any project or activity conducted or performed outside the geographical boundaries of the zone or freeport shall not be entitled to the incentives provided in this Act: Provided, furthermore, That RBEs may institute a ‘telecommuting’ program as defined under Republic Act No. 11165, otherwise known as the “Telecommuting Act”, including work-from-home arrangements, which shall not cover more than fifty percent (50%) of the total workforce, and shall be subject to the rule and regulations formulated by the Investment Promotion Agency. The RBEs shall continue to avail of all the incentives provided under this Act and under their registration with any applicable Investment Promotion Agency: Provided, finally, That double registration for purposes of availing of other incentives under special laws shall not be allowed.”
SEC. 28. Section 310 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 310. Establishment of One-Stop Action Center and Initial Point of Contact for Foreign Investment Leads. – All Investment Promotion Agencies shall establish a one-stop shop or one-stop action center that will facilitate and expedite, to the extent possible, the setting up and conduct of registered projects or activities, including assistance in coordinating with the local government units and other government agencies to comply with the Republic Act No. 11032, otherwise known as the ‘Ease of Doing Business and Efficient Government Service Delivery Act of 2018’: Provided, however, That the enterprises shall continue to avail of the one-stop shop facility notwithstanding the expiration of their incentives under this Code.
Unless otherwise provided under special laws, local government units may delegate to the concerned Investment Promotion Agency, through appropriate memoranda of agreement, the functions of accepting, processing, and granting business permits and licenses.
The Investment Promotion Agency may also assist RBEs in obtaining licenses and permits from national government agencies by accepting and submitting documentary requirements for such licenses and permits, on behalf of the RBEs to the appropriate national government agencies.
The Investment Promotion Agency may undertake activities necessary to perform the function as the initial point of contact for foreign investment leads. Such activities shall include assisting potential foreign investors in establishing their business enterprises in the concerned Investment Promotion Agency or in the economic zone best suited to their specific needs.”
SEC. 29. Section 311 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:
”SEC. 311. Investments Prior to the Effectivity of Republic Act No. 11534. – RBEs with incentives granted prior to the effectivity of Republic Act No. 11534 shall be subject to incentives granted in their certificate of registration or certificate of registration and tax exemption, ad to the following rules:
SEC. 30. Appropriations. – The Secretary of Finance shall immediately include in the Department’s program the operationalization of the electronic processing of the VAT refund system, the funding of which shall be included in the annual General Appropriations Act.
SEC. 31. Transitory Provisions. – The following provisions shall apply prospectively to projects or activities granted with tax incentives under Republic Act No. 11534 upon the effectivity of this Act:
No tax refund or credit shall be granted to RBEs covered by Section 19 of this Act.
SEC. 32. Implementing Rules and Regulations. – Within ninety (90) days from the effectivity of this Act, the Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue, shall promulgate the necessary rules and regulations for its effective implementation: Provided, That for the provisions under Title XIII of the National Internal Revenue Code of 1997, as amended, the Secretary of Finance and the Secretary of Trade and Industry shall jointly promulgate the necessary rules and regulations thereof within the same period, after due consultation with the BIR, the BOC, the BOI, and other Investment Promotion Agencies, for its effective implementation. Failure to promulgate the rules and regulations shall not prevent the implementation of this Act upon its effectivity.
SEC. 33. Separability Clause. – If any provisions of this Act is declared unconcstitutional, the remaining parts or provisions hereof not affected thereby shall remain in full force and effect.
SEC. 34. Repealing Clause. – All laws, decrees, executive orders, implementing rules and regulations, issuances, or any part thereof inconsistent with the provisions of this Act are deemed repealed, amended, or modified accordingly.
SEC. 35. Effectivity. – This Act shall take effect after fifteen (15) days following its publication in the Official Gazette or in a newspaper of general circulation.
Approved,
(signed) (signed)
FERDINAND MARTIN G. ROMUALDEZ FRANCIS “CHIZ” G. ESCUDERO
Speaker of the House of Representatives President of the Senate
This Act, which is consolidation of Senate Bill No. 2762 and House Bill No. 9794, was passed by the Senate of the Philippines and the House of Representatives on September 10, 2024.
REGINALD S. VELASCO RENATO N. BANTUG JR.
Secretary General Secretary of the Senate
House of Representatives
Approved: Nov 08, 2024
(signed)
FERDINAND ROMUALDEZ MARCOS JR
President of the Philippines
Published in Business World
Clarification of Certain Policies and Procedures Relative to the Implementation of the Risk-based Approach in the Verification and Processing of Value-Added Tax (VAT) Refund Claims, as Introduced in Republic Act No. 11976, Otherwise Known as the “Ease of Paying Taxes Act”
This circular is being issued to clarify and address concerns in the risk-based approach verification and processing of VAT refund claims pursuant to Section 112 (A) of the National Internal Revenue Code of 1997 (Tax Code), as amended by Republic Act No. 11976 r the Ease of Paying Taxes (EOPT) Act, and as implemented by the Revenue Regulations (RR) No. 05-2024, and Revenue Memorandum Order (RMO) No. 23-2024, as amended by RMO No. 42-2024.
Example 2: The taxpayer-claimant submitted the following documents in support of its claim for VAT refund amounting to P 7,000,000.00:
By: Garry Pagaspas, CPA
With the advent of advanced technology, sales of goods and services has been automated online worldwide through digitalization without much interaction among buyers and sellers. For buyers, this gave much advantage for being able to acquire goods and services from outside the country, while local suppliers are challenged for competition within and outside Philippines. On the other side, it made the government realized the seemingly inequality on taxation between local suppliers paying taxes on sales while giving undue advantage for non-resident suppliers deriving income through digital platform from Philippine buyers without paying taxes on them in Philippines. These inequalities paved way to the legislation of Republic Act No, 12023 – Value Added Tax (VAT) on Digital Services Law in Philippines (RA 12023 -VAT on Digital Services Philippines) that is aimed to level the playing field among digital service providers – local and foreign. By this present, let us share the basic features of Republic Act No, 12023 – Value Added Tax (VAT) on Digital Services Law in Philippines as follows:
1. Classified and defined digital services and digital services providers
RA 12023 -VAT on Digital Services Philippines now classified digital services as among those services subject to 12% value added tax in Philippines. By definition, “digital services” shall refer to any service supplied over the internet or other electronic network with the use of information technology and where the supply of the service is essentially automated. Digital services shall include online search engines; online marketplace or e-marketplace; cloud services; online media and advertising; online platforms; or digital goods. For the purpose and by implication, digital service providers would refer to those who supply digital services subject to 12% value added tax in Philippines and is further classified as resident or non-resident – those that has no physical presence in Philippines.
In a Press Release of the Department of Finance dated September 28, 2024, it cited among digital service providers some popular streaming services such as Netflix, Disney+, and online shopping sites such as Shein, Temu and Amazon who will now have to pay for VAT on their digital services that are consumed in Philippines.
2. Imposed 12% VAT on non-resident digital services providers consumed in Philippines
Under RA 12023 – VAT on Digital Services Philippines, digital service providers are liable for 12% value added tax on their supply of digital services – whether residents on non-residents. This seems plain and simple for resident digital service providers who have a registered local entity in Philippines while for non-residents, this seems totally new, if not challenging. Accordingly, non-resident digital services providers are now subject to 12% VAT under RA 12023 – VAT on Digital Services Philippines and the following special rules apply:
RA 12023 -VAT on Digital Services Philippines specifically provides that non-resident digital service providers are not allowed to claim creditable input VAT.
Notably, prior to RA 12023 -VAT on Digital Services Philippines, 12% VAT on services of non-residents normally apply to those services being rendered in the Philippines, regardless of whether they are regularly rendered in Philippines. Under RA 12023 -VAT on Digital Services Philippines, digital services of non-residents through their digital platforms are considered services performed in Philippines if such services are consumed in the Philippines.
3. Imposed further tax compliance obligations on non-resident digital services providers
RA 12023 -VAT on Digital Services Philippines requires the following tax compliance obligations upon non-resident digital services providers:
Notably, penalties would be imposed for non-compliance of the above by the digital service providers in Philippines.
4. VAT exemption on digital services in Philippines
While RA 12023 -VAT on Digital Services Philippines imposes 12% VAT on digital services consumed in Philippines, it nevertheless imposed the following exemptions:
5. Ph local buyers’ obligation to withhold VAT on payments to digital service providers
Considering the peculiarity of non-residents who do not have physical presence, RA 12023 -VAT on Digital Services Philippines imposed the following withholding tax obligations to local buyers in the Philippines:
Notably, the above are added withholding tax obligations imposed under RA 12023 -VAT on Digital Services Philippines while the rest of the withholding VAT rules would seem to remain in place such as 5% creditable VAT on government money payments to local VAT suppliers.
6. Funding for the development of creative industry in Philippines
Under RA 12023 -VAT on Digital Services Philippines 5% of incremental VAT revenues on digital services for the first five (5) years from effectivity of the law will be allocated and exclusive used for the development of creative industries in the Philippines.
7. Eyed to generate PhP80B to PhP145 B of revenues for 2025 to 2028.
As Sec of Finance puts it during its Press Release dated Sept. 28, 2024, RA 12023 – VAT on Digital Services Law in Philippine projects around PhP80B to PhP145B of VAT revenues for the period 2025 to 2028, depending on the compliance of digital services providers and related taxpayers.
8. Power to block digital services of non-residents in coordination with DICT through NTC
RA 12023 -VAT on Digital Services Philippines provides that the power of the Commissioner of Internal Revenue to suspend operations shall include the blocking of digital services performed or rendered in the Philippines by a digital service provider which shall be implemented by the Department of Information and Communications Technology (DICT) through the National Telecommunications Commission (NTC).
Disclaimer.
The above features are lifted from the author’s understanding and personal take of the provisions of RA 12023 -VAT on Digital Services Philippines summarized for better appreciation of its provisions. The author suggests reading through the provisions of RA 12023 -VAT on Digital Services Philippines and watch-out for the implementing rules to be issued soon for further details.
Author’s Profile:
Garry Pagaspas, CPA is a currently the Managing and Tax Partner of G. Pagaspas Partners & Co. CPAs (independent member firm of Allinial Global, 2nd largest accounting association worldwide based on International Accounting Bulletin’s 2023 released survey) based in Makati City with Global Outsourcing offices in Kalibo, Aklan. He is likewise the President at Tax and Accounting Center, Inc., the training and consulting company he founded in relation to his passion for teaching and helping out Ph entrepreneurs and foreign investors to Philippines.
Views in this article is personal to the author, not equivalent to a professional opinion and does not represent that of the organizations he is connected with. For your feedback or related concerns on staff leasing or employer of record in Philippines, you may send mail at info(@)taxactgcenter.ph (please exclude open and close parenthesis on the @ sign.
Prescribing the Updated Floor Price for Cigarette, Heated Tobacco, and Vapor Products Pursuant to Sections 114(B) and (C) and 145 (C) of the NIRC of 1997, As Ammended
Section 1. Scope – Sections 144 (B) and (C), and 145 (C) of the National Internal Revenue Code (NIRC) of 1997, as amended by the Republic Act (RA) Nos. 11346 and 11467, in the Products Regulation Act,” mandate the Bureau of Internal Revenue (BIR) to prescribe the floor price of Cigarettes, Heated Tobacco Products, and Vapor Products.
Pursuant to the provisions of the Sections 244 and 245 of the NIRC of 1997, as amended, these Regulations are hereby promulgated in order to update the floor price of Cigarette, Heated Tobacco, and Vapor Products prescribed in Revenue Memorandum Circular (RMC) No. 49-2023, which revised the floor prices set forth in Section 6 of revenue Regulations (RR) No. 14-2022 and RMC No. 79-2022.
Section 2. Definition of Terms – For purposes of these regulations, the words and phrases listed hereunder are defined as follows:
E-marketplace – refers to an online intermediary that allows participating merchants to exchange information about products or services into an electronic commerce transaction.
Floor Price – refers to the minimum price of cigarette, heated tobacco and vapor products per unit, which shall be equivalent to the total reasonable production cost/expenses of the cheapest brand per tobacco product in the sum of the excise tax and VAT.
Heated Tobacco Products (HTPs) – refer to tobacco products that may be consumed through heating tobacco, either electrically or through other means sufficiently to release an aerosol that can be inhaled, without burning or any combustion of the tobacco. Heated tobacco products include liquid solutions and gels that are part of the product and are heated to generate an aerosol.
Seller – a person engaged in the business of selling consumer products directly to consumers. It includes online sellers or merchants or any person or entity selling products or services to customers through an e-marketplace. It shall also include a supplier or distributor; (2) the seller interchanges personnel or maintains common or overlapping officers or directors with the supplier or distributor; or (3) the supplier or distributor provides or excises supervision, direction or control over the selling practices of the seller.
Vapor Products – shall mean Electronic Nicotine and Non- Nicotine Delivery systems (ENDS/ENNDS), which are combinations of (i) a liquid solution or gel, that transforms into an aerosol without combustion through the employment of a mechanical or electronic heating element, battery or circuit that can be used to heat such solution or gel, and includes, but is not limited to (ii) a cartridge, (iii) a tank, and (iv) the device without a cartridge or tank. It is commonly known as a nicotine salt/salt nicotine, and conventional ‘freebase’ or ‘classic’ nicotine, and other similar products. All vapor products shall be covered regardless of its nicotine content.
Section 3. Floor Price – Provided hereunder are the updated floor prices for the subject tobacco products:
A. Cigarettes
B. Heated Tobacco Products
C. Vapor Products1. Nicotine Salt or Salt Nicotine
2. Conventional ‘ Freebase’ or ‘Classic’ Nicotine
The above floor prices shall only be used as reference for taxation purposes in the absence of other documents/proof as to the actual price of the product that is higher than the identified floor price.
Section 4. Penalties – Selling of tobacco products at a price lower than the combined excise and value-added taxes imposed under the law shall be prohibited.
Under Section 145 (C) of the NIRC of 1997, as amended, the seller of such products shall be punished with a fine of not less than ten (10) times the amount of excise plus value-added taxes due but not less than Two hundred thousand pesos (P200,00.00) nor more than Five hundred thousand pesos (P500,000.00), and imprisonment of not less than four (4) years but not more than six (6) years.
Under Section 263-A of the same code, as amended, any person who sells heated tobacco products and vapor products at a price lower than the combined excise and value-added taxes shall be punished with a fine of not less than ten (10) times the amount of excise tax plus value-added tax due but not less than Two hundred thousand pesos (P200,000.00) nor more than Five hundred thousand pesos (P500,000.00), and imprisonment of not less than four (4) years but not more than six (6) years.
Section 5. Repealing/Amendatory Clause – All existing rules, regulations, issuances or parts thereof contrary to or inconsistent with the provisions of these Regulations are hereby repealed, amended or modified accordingly.
Section 6. Separability Clause – If any of the provisions of these Regulations is subsequently declared unconstitutional or invalid, the validity of the remaining provisions hereof shall remain in full force and effect.
Section 7 Effectivity – These Regulations shall take effect fifteen days following the publication thereof in the Official Gazette or the BIR’s official website, whichever comes first.
Implementing Sections 113,235,236,268,242,243 of the National Internal Revenue Code of 1997, as Amended by Republic Act No 11976, otherwise known as the “Ease of Paying Taxes Act”, on the Registration Procedures and Invoicing Requirements
Section 1. Scope. – Pursuant to the provisions of Sections 244 and 245 of the National Internal Revenue Code of 1997, as amended (Tax Code), in relation to Section 47 of Republic Act (RA) No. 11976, otherwise known as the “Ease of Paying Taxes (EOPT) Act”, these Regulations are hereby promulgated to Implement the amendments on Registration Procedures and Invoicing Requirements Tax provisions.
Section 2. Definition of Terms, –
Invoice may also be serve as a written admission or acknowledgement of the fact that money has been paid and received for the payment of goods or services.
2. Supplementary Document – is a written document, other than sales or commercial invoice, which serves as source of accounting entries in the books of accounts.
This includes but not limited to official receipt, delivery receipt, order slip, debit and/or credit memo, purchase order, acknowledgement or cash receipt, collection receipt, bill of lading, billing statement, statement of account and any other documents, by whatever name it is known or called, whether prepared manually (hand written information) or pre-printed/numbered loose leaf (information typed using spreadsheet program or typewriter) or computerized as long as they are used in the ordinary course of business and being issued to customers or otherwise.
For purposes of VAT, supplementary Documents are not valid proof to support the claim of input taxes by the buyers/puchasers of goods and/or services.
Section 3. Invoicing and Accounting Requirements for Value-Added Tax (VAT) Registered Persons under Section 113 of the Tax Code. –
All VAT-registered persons and those required to register for VAT shall comply with the following:
A. Invoicing Requirements
B. Information Contained in a VAT Invoice – The following information shall be indicated in the VAT Invoice:
C. Accounting Requirements – All persons subject to VAT under Sections 106 and 108 of the Tax Code shall maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded, in addition to the regular accounting records required.
D. Consequences of Issuing Erroneous VAT Invoice
Section 4. Preservation of Books of Accounts and Other Accounting Records under Section 235 of the Tax Code. –
A. Preservation
2. The term “other accounting records” includes the corresponding invoices, receipts, vouchers and returns, and other source documents supporting the entries in the Books of Accounts.
3. The term “last entry” refers to a particular business transaction or an item thereof that is entered or posted last or the latest in the Books of Accounts when the same was closed.
4. The foregoing notwithstanding, if the taxpayer has any pending protest or claim for tax credit/refund of taxes, and the books and records concerned are material to the case, the taxpayer is required to preserve the Books of Accounts and other accounting records until the case is finally resolved in support of their defenses and aid, even beyond the prescribed 5-year retention period.
5. Unless a longer period of retention is required under the Tax Code of other relevant laws, the independent Certified public Accountant (CPA) who audited the records and certified the financial statements of the taxpayer, has the responsibility – similar to that the taxpayer – to maintain and preserve electronic copies of the audited and certified financial statements including the audit working papers for a period of five (5) years form the due date of filing the annual income tax return or the actual date of filing thereof, whichever comes later.
6. Books of Accounts and Other Accounting Records shall be subject to examination and inspection by internal revenue officers; Provided, that for income tax purposes, such examination and inspection shall be made only once in a taxable year, except for the following cases:
7. Any provision of existing general or special law to the contrary notwithstanding, the Books of Accounts and other pertinent records of Tax-exempt, organizations or grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which they have been granted tax exemptions or tax incentives, and their tax liability, if any.
B. Examination and Inspection
Section 5. Registration Requirements under Section 236 of the Tax Code.-
A. Manner and Time of Registration – Every person subject to any internal revenue tax shall register, either electronically or manually, with the Revenue District Office (RDO) as follows:
B. Place of Registration – the following taxpayers shall be registered either electronically or manually, with the appropriate RDO.
In case of system downtime or technical issues or errors, manual application for registration shall be processed at the concerned BIR Offices. In any case, the Commissioner of Internal Revenue may issue and change the manner of registration through revenue issuances or circulars for tax administration purposes.
The requirement of payment of Annual Registration Fee of Five Hundred Pesos (P500.00) for every separate or distinct establishment or place of business is repealed and shall no longer be applicable effective January 22, 2024.
The place of residence may refer to the taxpayer’s legal residence, principal residence, current residence or permanent residence.
C. Registration of Business Taxpayers – All persons engaged in business or practice of profession, self-employed and professionals not under employer-employee relationships, juridical entities, online sellers/merchants including those engaged in providing digital goods and services, unless otherwise exempted, shall:
The concerned RDO shall include the newly registered business taxpayers who registered electronically or manually in their monthly conduct of Tax Compliance Verification Drive (TCVD) after thirty (30) days from the date of business registration to validate declarations in their application and verify their existence.
All online sellers/merchants shall register with the BIR on or before the commencement of business in an e-marketplace platform in accordance with the Section 236 of the Tax Code. Consequently, and in furtherance to the government’s thrust to protect and uphold the interests of the buyers/consumers from trade malpractices, e-marketplace operators shall require from their respective sellers/merchants the submission of their Certificate of Registration (COR) or BIR Form No. 2303, and include the same as part of e-marketplace operators’ minimum seller/merchant accreditation requirements.
D. Registration of Business Name – Each Business Name used, including the “store name” used in any online store or e-commerce platform, shall be registered with the BIR and shall be reflected in the BIR Certificate of Registration, provided, that each Business Name or “store name” is also registered with the Securities and Exchange Commission (SEC) or Department of Trade and Industry (DTI) as evidenced by a valid DTI Certificate of Business Name Registration or SEC Certificate of Registration or Articles of Incorporation or Partnership.
E. BIR Business Registration Date – The BIR Business Registration shall be reckoned form the date when the taxpayer registered its business and/or Business Name as reflected in the BIR Certificate of Registration.
F. Issuance of Certificate of Registration of Head Office, Branch and Facility – Subject to the provisions of Section 5(C) hereof, each Head Office, Branch and Facility shall be issued a Certificate of Registration or Electronic Certificate of Registration within the period/time prescribed in the BIR Citizen’s Charter, upon submission of complete documentary requirements. Employees, ONETT taxpayers, individuals who have secured a TIN under EO No. 98 and/or non-business taxpayers, non-business Estate and Trust shall not be issued a Certificate of Registration.
A Thirty pesos (P30.00) Documentary Stamp Tax (loose DST) shall be paid upon issuance of BIR Certificate of Registration or Electronic Certificate of Registration.
G. Posting of Certificate of Registration – All persons subject to the provisions of Section 5(C) and (D) hereof shall post or exhibit their original COR/Electronic Certificate of Registration (eCOR) at the place where the business is conducted and at each branch and/or facility in a way that is clearly and easily visible to the public. In case of a peddler or other persons not having a fixed place of business, the COR/eCOR shall be kept in the possession of the holder thereof or at the place of residence or at the Head Office’s address, if applicable, subject to production upon demand of any internal revenue officer.
H. Posting of Proof of Registration on Online Websites, E-Commerce or E-Marketplace Seller/Merchant’s Page and other Platforms – All online businesses, sellers or merchants and service providers operating a business through a website, social media or any digital or electronic means, shall display conspicuously the electronic copy of the BIR Certificate of Registration on their website, seller/merchant’s account or profile pages of the e-commerce platform or mobile application. The displayed proof of registration shall be easily accessible and visible to buyers or customers visiting the seller’s merchant page or online/e-commerce shop.
I. Registration of Each Type of Internal Revenue Tax – Every person who is required to register with the BIR under Section 5(A) hereof, shall register each type of internal revenue tax for which such person is obligated; file a return and pay the tax due thereon either electronically or manually; and updated such registration of any changes thereof.
J. Cancellation of Registration – The registration of any person shall be cancelled upon mere filing, either electronically or manually, of an application for registration information update in a form prescribed therefor with the RDO where such person is registered. However, this shall not preclude the Commissioner of Internal Revenue or his authorized representative from conducting an audit to determine any tax liability.
K. Transfer Registration – In case a registered person decides to transfer the place of business or head office or branch/es, it shall be the person’s duty to update the registration status by merely filing, either electronically or manually, an application for registration information update in the audit investigation, the RDO which initiated the audit investigation shall continue the same.
L. Unlawful Pursuit of Business – Any person who carries on or engages in any business and is not duly registered with the BIR shall, upon conviction for each act of omission, be punished in accordance with the penalty provided in Sec. 258 of the Tax Code.
SECTION 6. Issuance of Invoices under Section 237 of the Tax Code.
A. Issuance –
B. Information Contained in the Invoice – The Invoice shall contain the following information:
C. Tickets and other Similar Forms as Invoice – Tickets, such as transportation tickets, event tickets, amusement tickets, movie tickets, parking tickets, raffle tickets, gaming/gambling tickets, electronic tickets, and other similar tickets, regardless of form or name, including those issued by ticketing machines, shall serve as both an invoice and proof of payment, if the word “Invoice” is printed therein and it contains all the required information outlined in Section 6(B) hereof. Otherwise, the same shall be considered as supplementary document and as separate invoice shall still be issued therefor.
SECTION 7. Printing if Invoices under Section 238 of the Tax Code.
SECTION 8. Transitory Provisions. –
SECTION 9. Separability Clause. – If any of the provisions of these Regulations is subsequently declared invalid or unconstitutional, the validity of the remaining provisions hereof shall remain in full force and effect.
SECTION 10. Repealing Clause. – All other issuances and rules and regulations or parts thereof which are contrary to and inconsistent with any provisions of these Regulations are hereby repealed, amended, or modified accordingly.
SECTION 11. Effectivity. – These Regulations shall take effect fifteen (15) days following its publication in the Official Gazette or the BIR Official Website whichever comes first.
In an effort to streamline and facilitate tax compliance, Philippine government has been initiating numerous tax reforms. With the end view to ease the burden and make it more comfortable for taxpayers to file and pay their taxes along with related reports, Republic Act No. 11976 otherwise known as Ease of Paying Taxes” in the Philippines has been signed into law last January 5, 2024 and made effective last January 22, 2024 or within 15 days from publication last January 7, 2024.
Under Republic Act No. 11976 otherwise known as “Ease of Paying Taxes” in the Philippines or “RA 11976 EOPT Ph”, the following are new Philippines Value Added Tax (VAT) rules being implemented by the Bureau of Internal Revenue (BIR) that taxpayers should be aware of:
1. Eased VAT registration and updates under RA 11976 EOPT Ph
Prior to RA 11976 EOPT Ph, taxpayers are required to file and pay PhP500.00 Annual Registration Fee (ARF) every year not later than January of each calendar year. Under RA 11976 EOPT Ph, such PhP500.00 Annual Registration Fee has been discontinued effective January 22, 2024 and so, taxpayers who have not yet paid for 2024 as of January 22, 2024 and for subsequent years are no longer required to file and pay PhP500.00 Annual Registration Fee. Further, under RA 11976 EOPT Ph, filing of registration update could be made either manually or online so it would become easier to effect changes on taxpayers’ registration, but this will not preclude BIR from conducting an audit to determine tax liability. VAT threshold of PhP3,000,000 is likewise bound to be adjusted every three (3) years based on Consumer Price Index of Philippine Statistics Authority so taxpayers could just watch out for such changes and determine impact for them accordingly.
2. Eased filing and payment of VAT under RA 11976 EOPT Ph
Prior to RA 11976 EOPT Ph, taxpayers are required to pay taxes strictly at the BIR Revenue District Office of registration and if registered under electronic filing and payment system (EFPS), the same should be filed and paid electronically. Should the taxpayer fail to do so, a surcharge of 25% of the basic tax shall be imposed as “wrong venue” filing and payment.
Under RA 11976 EOPT Philippines, filing and payment of taxes has been made easier. First, it provides that taxes in Philippines could be filed and paid either manually or electronically with the authorized agent bank (AAB), revenue collection officer (RCO) of the BIR office, or through a tax software provider. Secondly, it provided a “filing and payment anywhere”, not just within the coverage of BIR Revenue District Office of registration, but in any BIR Revenue District Office coverage. Thirdly, the 25% surcharge on the wrong venue has been abolished.
3. Eased VAT Invoicing under RA 11976 EOPT Ph
Prior to RA 11976 EOPT Philippines, sellers of goods are required to issue an Invoice while sellers of service are quired to issue an Official Receipts as basis for 12% VAT, and this becomes confusing at times resulting to disallowances of claims for tax credits on input VAT. To simplify VAT invoicing in Philippines, RA 11976 EOPT Ph came up with a uniform invoicing for both sellers of goods and sellers of services through issuance of a “VAT Invoice” as basis in Philippines for 12% Output VAT of the seller and Input VAT credit of the buyer effective April 27, 2024 upon the effectivity of RR 3-2024. Supplementary documents (e.g. delivery receipt, official receipt, acknowledgment receipt, billing statement, etc.) could also be used to document the transaction but will not become a valid proof of support for 12% Input VAT claim.
On transition, unused manual and loose leaf VAT Official Receipts in Philippines of sellers of services could still be used for 12% VAT transactions until December 31, 2024 but they have to strike “Official Receipts” and stamp as VAT Invoice (see Section 8(2), RR 7-2024), and submit an Inventory of such unused receipts within 30 days from effectivity of RR 7-2024 or until May 27, 2024. Alternatively, they could use such unused manual and loose leaf Official Receipts in Philippines until fully consumed as supplementary document with the phrase stamped on its face – “This document is not valid for claim of Input VAT’.
Certain information shall be contained in the VAT Invoice in Philippines under RA 11976 EOPT Ph and should the seller fail to indicate specific information, the seller could be held liable for such failure while the buyer could still claim the Input VAT from such VAT Invoice, despite being incomplete in details. For transactions of PhP1,000.00 or more, the rules previously require indicating “business style” and this rule has also been removed by RA 11976 EOPT Ph.
4. Simplified 12% VAT base and new input VAT on receivables under RA 11976 EOPT Ph
With the adoption of uniform VAT invoice for VATable sales in Philippines, RA 11976 EOPT Ph effectively adopted accrual basis of accounting for sellers of service making them liable for 12% based on billings for services rendered, instead of previously being liable for 12% VAT based on collections from services. Simply stated, sellers of services will now be liable for 12% VAT based on VAT Invoice in Philippines for services rendered, regardless of whether or not the customer or client pays them during the quarter. Should the customer or client fail to pay the VAT Invoice during the quarter, 12% VAT on such receivable/s from transactions that transpired upon the effectivity of the implementing rules (RR No. 3-2024) or starting April 27, 2024 could be allowed as VAT credit, provided such receivables has not yet been actually written off as worthless accounts for income tax purposes. In the event of recovery of such receivables, VAT portion will be added to the VAT liability on the quarter of recovery.
5. Enhanced VAT refund rules under RA 11976 EOPT Ph
Refund of excess Input VAT from zero-rated transactions will be acted upon by the BIR based on risk-level assessment: low risk requiring no further verification of duly submitted documents; medium risk requiring verification of at least 50% of its purchases and sales documents; and high-risk that would require 100% verification of duly submitted documents. Under RA 11976 EOPT Ph, if post-audit by the Commission on Audit (COA) resulted to disallowances, taxpayer should be made to account for such funds received based on COA rules for disallowances.
Previously, VAT refund process for excess Input VAT from zero-rated transactions should be completed by the BIR Philippines within 120 days from filing the application with complete documents and should the BIR fail to act (approve or deny) within such period, the taxpayer could file an appeal with the Court of Tax Appeals (CTA). This 120-day period was made 90 days in the previous amendment of the Tax Code but the 30-day appeal for inaction was removed. This appeal to CTA for BIR inaction is now restored under RA 11976 EOPT Ph.
For refund of VAT that was erroneously or illegally collected, the previous attempt to impose a processing period for BIR has been vetoed. Under RA 11976 EOPT Ph, it provides that the same should now be processed by the BIR within 180 days from submission of complete documents and inaction of the BIR is appealable to CTA within 30 days from lapse of the 180 days. Should BIR personnel/officer deliberately failed to act on such application, they could be held liable upon conviction under Section 269(J) of the Tax Code, as amended, for a penalty of PhP50,000 to PhP100,000 and/or an imprisonment of 5 to 10 years, among other penalties.
6. Reduces penalties for micro and small taxpayers under RA 11976 EOPT Ph
Under RA 11976 EOPT Philippines, certain concessions were made to micro (up to P3M gross sales) and small taxpayers (up to PhP 20M gross sales) such as the following:
While this seems a good thing, the author suggest micro and small taxpayers to focus on ensuring compliance instead of relying on these reduced penalties.
7. Enhanced period for keeping books of accounts
Prior to RA 11976 EOPT Ph, books of accounts and other accounting records are required to be kept within a period of ten (10) years and subsequent BIR issuance allowed keeping hard copies for first five (5) years and online copies for the next five (5) years.
Under RA 11976 EOPT Ph, books of accounts and other accounting records will only be required to be kept for a period of five (5) years reckoned from the day following the deadline in filing a return or from the date of late filing for the taxable year when the last entry was made in the Books of Accounts. Under the implementing rules (see Section 4, RR 7-2024), they should be kept in hard copies for those under manual books of accounts and manual bound loose leaf books of accounts while those under computerized books of accounts, they could be kept in electronic copies.
Profile:
Garry Pagaspas, CPA is a currently the Managing and Tax Partner of G. Pagaspas Partners & Co. CPAs (independent member firm of Allinial Global, 2nd largest accounting association worldwide based on International Accounting Bulletin’s 2023 released survey) based in Makati City with Global Outsourcing offices in Kalibo, Aklan. Views in this article is personal to the author, not equivalent to a professional opinion and does not represent that of the organizations he is connected with.
This circularizes Republic Act (RA) No. 11976 (Ease of Paying Taxes [EOPT] Act), together with the Veto Message both signed by President Ferdinand R. Marcos Jr. on January 5, 2024.
The following Sections of the National Internal Revenue Code (NIRC) were amended under the EOPT Act:
The BIR shall develop an EOPT and digitalization roadmap that will provide for the programs and projects to be implemented to ensure ease of compliance of tax laws, rules and regulations, including but not limited to adoption of simplifies tax returns, streamlining of tax processes, reduction of tax or documentary requirements, and digitalization of BIR services as provided under Section 40 of the Act; Provided, That in developing this roadmap, the BIR shall prioritize taxpayers who are considered as micro and small taxpayers for purposes of the Act, in terms of streamlining tax procedures and documentary requirements according to taxpayer size and capacity to comply; Provided, further, that the BIR shall ensure accessibility of its various services to different taxpayers particularly micro and small taxpayers so as to improve tax compliance, and enhance taxpayer convenience.
Within ninety (90) calendar days from the effectivity of the Act, the Secretary of Finance, after due consultation with the BIR, and the private sector, shall promulgate the necessary rules and regulations for its effective implementation.
The provision of the EOPT Act granting micro-enterprises exemption from the obligation to withhold taxes was vetoed by the President.
Originally Published in GPP CPAs website.
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