Tax Treatment of VAT on Government Money Payments for OECF Funded Projects

The bureau has issued recently the Revenue Memorandum Circular (RMC) No. 8-2017 to clarify the Tax Treatment of Value-Added Tax (VAT) on Government Money Payments for OECF Funded Projects under Exchange of Notes Between Republic of the Philippines and the Government of Japan.

This is related to the Exchange of Notes between the Republic of the Philippines and the Government  of Japan for OECF- Funded Projects ("Exchange of Notes") undertaken in the Philippines, the standard clauses pertaining to the tax treatment of participating Japanese suppliers, contractors and nationals clearly state that the Japanese suppliers, contractors or nationals engaged in OECF-Funded projects in the Philippines shall not be required to shoulder any fiscal levies and/or taxes associated with the project.

Applied to VAT, the 12% VAT under Section 106 and Section 108 of the Tax Code, as amended, imposed on all sales of goods and services, including sales of goods and services to the Government, shall be assumed by the Philippine Government or its executing agencies pursuant to the Exchange Notes.

It is stated in the circular that an y ruling or revenue issuance is inconsistent with this is hereby amended, repealed or modified accordingly.

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%208-2017.pdf of the full text of RMC No. 8-2017.

BIR's CY 2017 Priority Programs

Revenue Memorandum Circular (RMC) No. 5-2017 has issued by the bureau recently to published the Bureau's CY 2017 Programs and shall address the Bureau's three (3) principal objectives:

1. Attain collection targets

1.1 Comprehensive Profiling and industry Benchmarking
1.2 Oplan Kandado Program
1.3 Updating of Schedules of Zonal Value
1.4 Broadening of the Tax Base
1.5 Implementation of Centralized Arrears Management in Regional Offices
1.6 Run After Tax Evaders (RATE) Program
1.7 Exchange of Information (EOI) - Foreign Acount Tax Compliance Act (FATCA)
1.8 Expansion of Compromise Settlement Program (LTS audit cases)

2. Improve taxpayer satisfaction

2.1 Review of Revenue Issuances
2.2 Review of Tax Rulings
2.3 TP Segmentation (Large, Medium, Small)
2.4 Simplification of Tax Forms
2.5 Expansion of e-FPS Facilities
2.6 Additional Options/ Facilities for Payment of Taxes
2.7 Development of Tax Clearance Processing System
2.8 Enhancement of Electronic Registration System
2.9 Electronic Tax Information System (eTIS)
2.10 In-house enhancement of Electronic Certificate Authorizing Registration (eCAR) System
2.11 Geographical Information Systems (GIS)
2.12 Enhancement of Electronic Official Registry Book (eORB)
2.13 Internal Revenue Stamps Integrated System (IRSIS) for Alcohol Products-Distilled Spirits.

3. Protect revenues and recapture public trust

3.1 Integrity Management Program (IMP)
3.2 Revalidation/ Audit of tax assessent
3.3 Salary Standardization Law
3.4 Expedite recruitment of personnel
3.5 Use of Case Monitoring System (CMS)/ eLAMS

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%205-2017.pdf and http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2017%20Programs.pdf the full text of RMC No. 5-2017 and ANNEX 

How To Secure Replacement of Certificate of Registration (COR)

Application for Replacement of Certificate of Registration (COR) is under the Application for Registration Update of Primary Registration with the Bureau of Internal Revenue (BIR).

Taxpayers secure for replacement of COR due to updates of tax details to be filed, taxpayer, information, re-issuance and other related updates.

For the Application for Replacement of COR, it is important to consider the following;

Tax Form

BIR FORM 1905 – Application for Registration Information Update

Documentary Requirements

a) Old Certificate of Registration, for replacement;

b) Affidavit of Loss, if lost; and

c) Proof of Payment of Certification Fee and Documentary stamp- to be submitted before the issuance of the New Certificate of Registration

Procedure

Taxpayer applicant submits duly accomplished BIR Form 1905 to RDO/LTAD I or II/LTDO where he is registered together with the required attachments.

Source: http://www.bir.gov.ph/index.php/registration-requirements/primary-registration/application-for-registration-update.html#afrocor

Who are Rrequired to Register with BIR Without Paying the Annual Registration Fee (ARF)

The list of individuals and non-individuals who are required to Register and Application for Taxpayer Identification Number (TIN) with the Bureau of Internal Revenue (TIN) without paying the Annual Registration Fee (ARF) of PHP500.00  is as follows:

1. Cooperatives duly registered with the CDA;
2. Individual residents earning purely compensation income
3. OCWs/OFWs;
4. Marginal Income Earners;
5. GAIs, in the discharge of the governmental functions;
6. LGUs, in the discharge of their governmental functions;
7. Tax exempt corporations such as those enumerated under Section 30 of the Code, as amended, in pursuance of tax-exempt activities;
8. Non-stock/non-profit organizations not engaged in business;
9. Persons subject to tax under one-time transactions;
10. Persons registered under EO 98, series of 1998; and
11. Facility/ies where no sales transactions occur.

Please refer: http://www.bir.gov.ph/index.php/registration-requirements/primary-registration/application-for-tin.html#faqs

Application for Taxpayer Identification Number (TIN)

Application for Taxpayer Identification Number (TIN) is classified by the Bureau of Internal Revenue (BIR) as Primary Registration.

Any person, whether natural or juridical, required under the authority of the Internal Revenue Code to make, render or file a return, statement or other documents, shall be supplied with or assigned a Taxpayer Identification Number (TIN) to be indicated in the return, statement or document to be filed with the Bureau of Internal Revenue, for his proper identification for tax purposes (Sec. 236 (i) of the Tax Code).

The list of individuals, organizations and corporations for the Application for Taxpayer Identification Number (TIN) for Primary Registration is as follows: (Click each links to proceed for the Tax Form to filled -up; Documentary Requirements; Procedures and Deadline)

1. For Self-Employed and Mixed Income Individuals

2. Estates (under judicial settlement)

3. Trusts

4. Individuals Earning Purely Compensation Income

5. Non-Resident Citizens

6. OCWs/Seamen Earning Purely Foreign-Sourced Income

7. Corporations/Partnerships (Including Government-Owned and -Controlled Corporations) (Taxable/Non-Taxable)

8. Government Agencies and Instrumentalities

9. Local Government Units

10. One Time Taxpayers (With No Previously Issued TIN)

11. Persons Registering Under E. O. 98 (securing a TIN to be able to transact with any government office, e g. LTO, NBI, DFA, etc.)

RELATED REVENUE ISSUANCES

RR No. 13-93, RR No. 2-96, RR No. 11-99, RR No. 11-2000, RR No. 3-2003, RR No.12-2003 and RR. No. 7-2012

RMO No. 22-91, RMO No. 23-91, RMO No. 41-94, RMO No. 48-94, RMO No. 54-97, RMO No. 54-98, RMO No. 82-99, RMO No. 11-2000 and RMO No. 10-2002

RMC No. 58-91, RMC No. 39-95 and RMC No. 6-2003

Creation and Revision of Alphanumeric Tax Code (ATC) for Pure Business

The CIR of the bureau has issued Revenue Memorandum Order (RMO) No. 67-2016 recently for the creation and modification of the Description of Alphanumeric Tax Code (ATC) for Pure Business. The main objective is to facilitate the proper identification of tax collection from Pure Business agreeable to the Sec. 32 (A) (2) of the National Internal Revenue Code (NIRC), and in connection with the Bureau's Tax Forms Enhancement Program.

The following ATC is hereby created:

 

 

This RMO shall take effect  immediately upon issuance dated  December 23, 2016.

 

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_3/Full%20Text%20of%20RMO%202016/RMO%20No.%2067-2016.pdf of the full text of RMO No. 67-2016.

BIR Amends the Early Withdrawal Penalty of RA No. 9505

The Revenue Regulations (RR) No. 10-2016 dated December 27, 2016 has issued by the bureau recently amending Section 10.C. of RR No. 17-2001 Implementing the Early Withdrawal Penalty of Republic Act No. 9505, Otherwise Known as the Personal Equity and Retirement Account (PERA) Act of 2008.

The amendment shall read as follows:

SECTION 2. Amendment. - Section 10.C. of RR No. 17-2011 is hereby amended to read as follows:

"SECTION 10. PERA Distributions and Early Withdrawals. - 

XXX XXX XXX 

C. Imposition of Penalty. -- In case of Early Withdrawals not failing under any of the circumstances under Section 10 (B) above, the Contributor shall pay the following Early Withdrawal Penalties: 

(1) The five percent (5%) tax credit availed by the Contributors for the entire period of the PERA;

(2) A flat rate of twenty percent (20%) based on the total income earned by said account from the time of its opening/creation up to the time of withdrawal.

For full transparency, the Administrator shall fully disclose the above penalty arising from withdrawals to the contributor prior to account opening and shall likewise submit a quarterly report of such termination or withdrawal to the PERA Processing Office, within sixty (60) days following the end of the quarter of the date of termination or withdrawal.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202016/RR%20No.%2010-2016.pdf of the full text of RR No. 10-2016.

Availability of Stamp Verifier App to Authenticate Internal Revenue Stamps on Cigarettes

Revenue Memorandum Circular (RMC) No. 51-2016 was issued by the bureau to inform the public of the availability of a mobile application know as Stamp Verifier app, that will enable the user to determine the authenticity of the internal revenue stamps affixed to locally manufactured cigarettes intended for domestic consumption as well as imported cigarettes required under Revenue Regulations (RR) No. 7-2014 as amended by RR Nos. 8 and 9-2015.

The mobile application is a tool in identifying smuggled and counterfeit cigarettes proliferating in the country.

Stamp Verifier app is an Android and iOS application for BIR and public use to verify validity of QR coded of the stamp affixed on a cigarette pack. QR Code, one of the security features of the stamp, refers to a two-dimensional bar code that holds information relative to the the product to which the stamp is affixed, including a Unique Identifier Code (UIC) which is a code or serial number that represents an internal revenue stamp.

It is also stated the device requirements for the application and the procedures on how to download and install the Stamp Verifier app for Android and iOS. 

Moreover, it is also mentioned in the circular on how to use the Stamp Verifier app for Android and iOS.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%2051-2016.pdf of the full text of RMC No. 51-2016.

Limitation on the Availability of Mobile Application on Non-Android Phones to Authenticate Internal Revenue Stamps

The bureau has issued Revenue Memorandum Circular (RMC) No. 132-2016 recently to inform all taxpayers and others concerned on the limitation of the availability of Mobile Application (particularly on non-android phones) affecting the authentication of internal revenue stamps on cigarettes as circularized under RMC No. 51-2016.

It is stated in the circular the limitation is not on the Stamp Verifier Application but rather on non-android phones. 

The new or updated version of the said application can now be downloaded in the Google Play Store.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%20132-2016.pdf of the full text of RMC No. 132-2016.

Foreign Account Tax Compliance Act

Securities and Exchange Commission (SEC ) Memorandum Circular No. 8 was approved by the Commission En Banc in its meeting held on April 3, 2014. The objective of the circular is to guide non-bank financial institutions (NBFIs) that are covered by Foreign Account Tax Compliance Act (FATCA) regulations.

FATCA was enacted in 2010 by the United States (U. S.) Congress as part of the Hiring Incentives to Restore Employment (HIRE) Act. It was enacted to prevent off-shore tax abuses by U. S. taxpayers. FATCA requires, among others, the on-line registration of foreign financial institutions (FFIs) with the U. S. Internal Revenue Service (IRS) and their reporting to the IRS of information about financial accounts by FFIs in which U. S. taxpayers hold a substantial ownership interest. Under the Act, non-compliance therewith will result to the imposition of a 30 percent withholding tax on payments of U. S.-sourced income to FFIs.

The FFIs referred to in the FATCA pertain to financial institutions which are organized under the laws of a jurisdiction other than the United States of America.

The IRS has included the following FFIs in its non-exclusive list:

* Depository institutions

* Custodial institutions

* Investment entities

* Certain types of insurance companies that have cash value products or annuities

NBFIs that are licensed by the Commission are instructed to conduct the procedures stated in the circular.

Please refer http://www.sec.gov.ph/wp-content/uploads/2015/11/sec-memo-no.-8-s2014.pdf of the full text of SEC Circular No. 8 of the Foreign Account Tax Compliance Act.