Formula and Computation of 13th Month Pay

"Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year. The minimum 13th month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year.

"Basic salary" shall include all remunerations or earnings paid by an employer to an employee for services rendered but may not include cost-of-living allowances, profit-sharing payments, cash equivalent of unused vacation and sick leave credits, overtime pay, premium pay, night shift differential, holiday pay, and all allowances and monetary benefits which are not considered, or integrated as part of the regular or basic salary of the employee.

FORMULA AND COMPUTATION OF 13TH MONTH PAY

The 13th  month pay shall be paid not later than December 24 of every year. An employer, however, may give to his or her employees one-half (1/2) of the 13th month pay before the opening of the regular school year and the remaining half on or before December 24 of every year.

The BIR has issued Revenue Regulations No. 3-2015 implementing the Provisions of Republic Act No. 10653. "An act Adjusting the 13th Month Pay and Other Benefits Ceiling Excluded from the Computation of Gross Income for Purposes of Income Taxation.

Amending the provision on Revenue Regulations No. 2-98 - The amount of Thirty Thousand Pesos (P30,000.00), specifically referring to the total amount of 13th month pay and other benefits as one of the exclusions from gross compensation income received by an employee prescribed under the pertinent provisions, including the example computations of revenue Regulations (RR) No. 2-98, as amended, is hereby increased to "Eighty Two Thousand Pesos (P82,000.00)", pursuant to the provisions of RA No. 10653.

SOURCE: http://www.dole.gov.ph/files/LA%20012-13.pdf;  http://www.gov.ph/2015/02/12/republic-act-no-10653/ and http://www.gov.ph/1975/12/16/presidential-decree-no-851-s-1975/ and http://philippinetaxtalk.blogspot.com/2015/03/republic-act-no-10653-increase-of-total.html 

Lifting of Suspension of Effectivity of Certain Revenue Issuances under RMC No. 127-2016

The bureau just issued Revenue Memorandum Circular (RMC) No. 127-2016 for the suspension of effectivity of all  revenue issuances promulgated under RMC No. 69-2016 dated July 1, 2016 within the period covering June 1 to 30, 2016.

 

The suspension of the following revenue issuances is hereby lifted:

 

RMC / Title/Description of RMC

 

RMC No. 61-2016 - Prescribing Policies and Guidelines for Accounting and Recording Transactions Involving "Netting" or "Offsetting".

 

RMC No. 62-2016 - Clarification on Property Tax Treatment of Passed-on Gross Receipts Tax

 

The RMC is dated November 15, 2016 and the lifting of suspension of the effectivity of the foregoing revenue issuances the same shall be effective immediately.

 

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%20127-2016.pdf of the full text of RMC No. 127-2016.

Implement Rules and Regulations of Republic Act No. 10693 otherwise known as the "Microfinance NGOs ACT"

The bureau has issued Revenue Memorandum Circular (RMC) No. 124-2016 for the information and guidance of all internal revenue officials, employees and others concerned with regards to the Implementing Rules and Regulations of Republic Act No. 10693 otherwise known as the "Microfinance NGOs Act."

 

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%20124-2016.pdf of the full text of RMC No. 124-2016.

BIR Registration Forms for the Implementation of Taxpayer Registration System (TRS) under Electronic Tax Information System (eTIS-1)

Revenue Memorandum Circular (RMC) No. 9-2015 was issued by the bureau to inform taxpayers and others concerned on the availability of the  enhanced version (November 2014 ENCS) of the registration forms applicable only to the District Offices covered by the Systems Roll-out of Taxpayer Registration System (TRS) under the Electronic Tax Information System (eTIS-1), as follows:

 

BIR Form No. / Description

 

1901 - Application for Registration for Self-Employed (Single Proprietor/ Professional), Mixed Income Individuals, Marginal Income Earner, Non-resident Alien Engaged in trade/ Business, Estate and Trust

 

1902 - Application for Registration for Individuals Earning Purely Compensation Income (Local Employee and Resident Alien Employee)

 

1903 - Application for Registration for Corporations, Partnerships (Taxable/Non-taxable), including Government Agencies and Instrumentalities (GAIs), Local Government Units (LGUs), Cooperatives and Associations

 

1904 - Application for Registration for One-time Taxpayer/Person Registering under E. O. 98 and Foreign National

 

1905 - Application for Registration Information Update/Correction/Cancellation

 

2305 - Certificate of Update of Exemption and of Employer's and Employee's Information

 

Please refer:  http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMC%20No%209-2015.pdf of the full text of RMC No. 9-2015.

 

 

Gov't Debt Ratio and BIR's Tax Effort Improves

Did you know that the Gov't debt ratio improves in September?

According to the news released by the Department of Finance, the Gov’t debt ratio improves in September. The share of debt to the country’s economy slid further as of September this year as the gross domestic product (GDP) continued to grow faster than government liabilities, latest data from the Department of Finance (DOF) showed.

Following a series of liability management measures of the DOF, Finance Undersecretary Gil Beltran reported that the government debt-to-GDP ratio further improved to 44.2 percent by end-September from 44.7 percent in the same month last year.

“Debt management measures led to the continuing drop in the debt-GDP ratio to 44.2 percent as of September 2016, an improvement from end-2015 ratio of 44.7 percent,” Beltran, who is the DOF’s chief economist, said in a report to Finance Secretary Carlos Dominguez III.

The debt-to-GDP ratio is projected to sustain the yearly decline until falling to about 35 percent by the end of the Duterte administration.

The national government debt as a proportion of GDP had continually dropped from 52.4 percent in 2010 to 44.7 percent in 2015.

“Strong fiscal fundamentals will continue to underpin robust economic growth during the rest of the year,” said Beltran.

The Bureau of Internal Revenue’s tax effort improved to 11.31 percent from 11.27 percent, while the Bureau of Customs’ figure slightly fell to 2.78 percent from 2.81 percent.

Source: http://www.dof.gov.ph/index.php/govt-debt-ratio-improves-in-september/

BIR signs Memorandum of Agreement (MOA) with DTI for faster Tax Identification Number (TIN) issuance

As part of the bureau's campaign of "ease of doing business in the Philippines", the Bureau of Internal Revenue (BIR) and the Department of Trade and Industry (DTI) agreed to collaborate together to facilitate the issuance of Taxpayer Identification Number (TIN) to registering small and medium domestic businesses.

The Memorandum of Agreement (MOA) was signed by Commissioner Caesar R. Dulay (for the BIR) and Secretary Ramon M. Lopez (for the DTI) on October 10, 2016 at the Executive Conference Room in the BIR National Office.

The Commissioner mentioned during the open forum about the BIR's issuance of a Revenue Memorandum Circular (RMC) No. 93-2016, which streamlined the business registration process and documentary requirements.

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_5/2016%20BIR%20Monitor/v18n10%20high%20res.pdf of the full text of BIR News.

Enjoining All Government Officials and Employees to Strictly Observe and Comply with the Prohibition Against Going to Gambling Casinos

The bureau has issued Revenue Memorandum Circular (RMC) No. 106-2016 publishing the Full Tex of Memorandum Circular No. 06, Entitled "Enjoining All Government Officials and Employees to Strictly Observe and Comply with the Prohibition Against Going to Gambling Casinos".

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%20106-2016.pdf of the full text of  Memorandum Circular No. 06 dated September 20, 2016.

Procedure for Claiming Tax Treaty Benefits for Dividend, Interest and Royalty Income of Nonresident Income Earners

Revenue Memorandum Order (RMO) No. 27-2016 was issued by the bureau relative to the Procedure for Claiming Tax Treaty Benefits for Dividend, Interest and Royalty Income of Nonresident Income Earners from sources with the Philippines.

This Order seeks to provide for the new procedures in claiming preferential tax treaty benefits on dividend, interest and royalty income of nonresidents pursuant to effective tax treaties, thereby amending for this purpose, RMO No. 72-2010.

The foregoing objectives are achieved through:

a. Full disclosure of withholding tax agents on income derived by nonresidents by filing accurate and timely BIR Forms1601-F and1604-CF;

b. Mandatory audit investigation for final withholding tax payments on income of nonresidents deriving dividends, interest and royalty income in the Philippines; and

c. Enhancing BIR Forms 1601-F and 1604-CF.

Nonresidents - are not residents of the Philippines and not citizens thereof. For purposes of this Order they are classified into:

a. Nonresident Alien not engaged in trade or business (NANETB) -The aggregate period of stay in the Philippines does not exceed 180 days during any calendar year.

b. Nonresident foreign corporations (NRFC) - are corporations organized under foreign laws and not engaged in trade or business in the Philippines.

Beneficial Owner - refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. lt also includes those persons who exercise ultimate effective control over a legal person or arrangement.3

The preferential treaty rated for dividends, interests and royalties are granted outright by withholding final taxes at applicable treaty rates as shown in Annex A http://www.bir.gov.ph/images/bir_files/internal_communications_3/Full%20Text%20of%20RMO%202016/RMO%20No.%2027-2016%20Annex%20A.PDF of this RMO.

Guidelines for the Availment of Preferential Treaty Rates 

1. A duly accomplished BIR Form No. 1601-F and 1604-CF 1904-shall be filed before the appropriate RDO where the domestic withholding agents of nonresidents are registered. All particulars in the form must be properly filled up and timely filed in accordance with the provisions of the National lnternal Revenue Code (NIRC) of 1997, as amended. 

2. Payment of pertinent final taxes due shall be made to Authorized Agent Banks.

3. ln the event of audit investigation, withholding agents shall keep the following supporting documents in the records of the office pursuant to Revenue Regulations (RR) No. 5-20144 for substantiation of the claim for preferential treaty rates: 

a. Consularized Proof of Residency; 

b. For Dividends - 

1. Certification from Corporate Secretary. original copy of a duly notarized certificate executed by the corporate secretary of the domestic corporation showing all the following information: 

i. Details of dividend declaration (with attached related Board Resolution); 

ii. Nurnber, value and type of shares of the nonresident income earner as of the date of record/transaction, and as of the date of payment of the subject dividends; 

iii. Percentage of ownership of the nonresident income earner as of the date of record/transaction, and as of the date of the payment of subject dividends; 

iv. Acquisition date(s) of the subject shares; and 

v. Mode of acquisition of the subject shares.  

2. Board of lnvestments (BOl) Registration, if applicable 

Certified copy of Board of Investments registration of the payor of the interest, including a Sworn Statement that such registration has not been cancelled at the time of the transaction. 

c. For lnterest - original or certified copy of the notarized contract of loan or loan agreement. Board of lnvestments (BOl) Registration, if applicable certified copy of Board of lnvestments registration of the payor of the interest, including a Sworn Statement that such registration has not been cancelled at the time of the transaction. 

d. For Royalties - 

1. original or certified copy of the duly notarized Royalty Agreement, Technology Transfer Agreement, or Licensing Agreement; 

2. When applicable, 

i. Certified copy of Board of lnvestments registration of the payor of the royalties, including a Sworn Statement that such registration has not been cancelled at the time of the transaction; 

ii. A certified copy of the registration of the payor of the income or withholding agent with the Philippine Economic Zone Authority (PEZA) of the payor of the royalties including a Sworn Statement that such registration has not been cancelled at the time of the transaction. 

iii. Certified copy of lntellectual Property Office (IPO) registration. 

The BIR reserves the right to request other additional documents in the the course of audit. 

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_3/Full%20Text%20of%20RMO%202016/RMO%20No.%2027-2016.pdf of the full text of RMO No. 27-2016.

Procedures Relative to Issuance of Subpoena Duces Tecum, and Submission of Reports of Investigation/Verification on Tax Cases/Dockets

Recently, the bureau has issued Revenue Memorandum Circular (RMC) No. 111-2016 to clarify clarify and accordingly reiterate the procedures relative issuance of Subpoena Duces Tecum (SDT), and submission of reports of investigation/verification on tax cases/dockets to the reviewing Office.

It is stated in the circular:

One of the powers of the Commissioner under Section 6 of title National Internal Revenue Code of 1997 ("Tax Code"), as amended, is to authorize the examination of any taxpayer for the purpose of assessing the taxpayer's correct internal revenue tax liabilities. However, the issuance of an assessment must be made, generally, within the three (3)-year prescriptive period or, exceptionally, within the ten (10)-year' prescriptive period pursuant to Sections 203 and 222, respectively, of the Tax Code, as amended.

In this statutory context of prescription, when the taxpayer fails to present or submit his books of accounts and/or pertinent records, or to account for all sales/receipts/invoices and to substantiate all or any of the deductions, exemptions or credits claimed in his return, there are instances when jeopardy assessments, issued basically to comply with the prescriptive period, are resorted to by our Revenue Officers. To prevent the issuance of such assessments, the procedures for the issuance and enforcement of SDTs, as prescribed under Revenue Memorandum Order No. 10-2013, as amended by RMO No.8-2014, must best strictly observed by all concerned to compel taxpayers to submit or otherwise present the required books, records and documents.

Likewise, to ensure that the Bureau is not deprived of its right to assess and collect the correct amount of tax or any deficiency taxes so assessed, a tax docket with deficiency tax collections/assessments shall be transmitted by the investigating office to the reviewing/approving official not later than sixth months prior to prescription date (e. g., if the income tax case will prescribe on April 15, 2017, the docket should have been transmitted on October 15, 2016). The reviewing/approving official shall not accept any tax docket alter the aforesaid period, unless a duly accomplished "waiver form" is attached thereto.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%20111-2016.pdf of the full text of RMC No. 111-2016.

Amending Certain Provision of RMO No. 19-2015 Pertaining to Audit Policies

Revenue Memorandum Order (RMO) No. 64-2016 was recently issued by the bureau  to amend the policies and procedures requiring the approval of the Commissioner of Internal Revenue before a taxpayer may be audited for the (3rd) time and the removal of the fifty (50%) surcharge.

AMENDMENT

For purposes of auditing a taxpayer for the three succeeding years, the policy stated in Sec. lll No.4 of RMO NO. 19-2015 is hereby amended to read as follows: 

"lf the taxpayer has been audited for the last two (2) years and has been selected for audit an the current or third (3rd ) year, the RDO/LTD/LTAD shall encode right away the requested audit of the subject taxpayer in eLAMS/ eTIS-CMS which shall be approved by the Regional Director/ Assistant Commissioner who heads the investigating office. The Selection Code shall depend on the reason why the taxpayer has been selected." 

"Then deficiency assessment on these cases shall only be imposed with twenty-five percent (25%) surcharge unless the under declaration of income or overstatement oi expenses/ deductions reaches 30% or more which shall be imposed with fifty percent (50%) surcharge." 

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_3/Full%20Text%20of%20RMO%202016/RMO%20No.%2064-2016.pdf of RMO No. 64-2016