(1)

December 27, 1999 January 1, 2000

REVENUE REGULATIONS NO. 19-99

SUBJECT : Implementing Section 5 of Republic Act No. 8424,

Otherwise Known as the Tax Reform Act of 1997, and
Other Pertinent Provisions of the National Internal
Revenue Code of 1997, Imposing Value-Added Tax (VAT)
on Sale of Services by Persons Engaged in the Practice of
Profession or Calling and Professional Services Rendered
by General Professional Partnerships; Services Rendered
by Actors, Actresses, Talents, Singers and Emcees; Radio
and Television Broadcasters and Choreographers;
Musical, Radio, Movie, Television and Stage Directors;
and Professional Athletes, beginning January 1, 2000

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to the provisions of Sections 244

and 108 of the National Internal Revenue Code of 1997, in relation to Section
17 of Republic Act No. 7716, as amended by Section 11 of Republic Act 8241
, these Regulations are hereby promulgated to govern the imposition of
value-added tax on sale of services by persons engaged in the practice of
profession or calling and professional services rendered by general professional
partnerships; services rendered by actors, actresses, talents, singers and emcees,
radio and television broadcasters and choreographers; musical, radio, movie,
television and stage directors; and professional athletes. LexLib

SECTION 2. Coverage. — Beginning January 1, 2000, general

professional partnerships, professionals and persons described above shall be
governed by the provisions of Revenue Regulations No. 7-95 , as amended,
otherwise known as the "Consolidated Value-Added Tax Regulations". Provided,
however, that for purposes of these Regulations, a professional partnership shall be
treated as a separate and distinct taxable person from the individual partners
composing the partnership. Provided, further, that all gross receipts from sales of
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 1
 services rendered by the partners for and in the name of the partnership shall
entirely be taxable against the partnership. Provide, finally, that sales of services
made by any of the partners thereof in his personal and individual capacity shall
not be attributed to the partnership but shall rather be taxable against such partner
in his individual capacity.

SECTION 3. Repealing Clause. — Any revenue issuance inconsistent

herewith is hereby amended, revoked, modified or repealed accordingly.

SECTION 4. Effectivity Clause. — These Regulations shall take effect

beginning January 1, 2000. cdphil

(SGD.) SOLOMON S. CUA

Undersecretary of Finance
Officer in Charge

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

(2)

December 21, 1999 January 1, 2000

REVENUE REGULATIONS NO. 18-99

SUBJECT : Implementing Section 5 of Republic Act No. 8424,

otherwise known as the Tax Reform Act of 1997, and Other
Pertinent provisions of the National Internal Revenue Code

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 2
 of 1997 Imposing VAT on Services of Banks, Non-bank
Financial Intermediaries and Finance Companies,
Beginning January 1, 2000

TO : All Internal Revenue Officers Concerned

SECTION 1. Scope. — Pursuant to the provisions of Section 244

in relation to Section 108 of the National Internal Revenue Code of 1997,
these Regulations are hereby promulgated to govern the imposition of VAT on
banks, non-bank financial intermediaries and finance companies in accordance
with Section 5 of Republic Act No. 8424.

SECTION 2. Definition of Terms. — For purposes of these

Regulations, the terms enumerated hereunder shall have the following meaning:

1. Financial Institutions — shall refer to banks, non-bank financial

intermediaries and finance companies.

2. Banks or Banking Institutions — shall refer to those entities duly

authorized by the Monetary Board of the Bangko Sentral ng Pilipinas to engage in
the lending of funds obtained from the public through the receipt of deposits of any
kind. The terms "banks" or "banking institutions" are synonymous and
interchangeable and specifically include universal bank, commercial banks,
savings banks, mortgage banks, development banks, rural banks, stock savings and
loan associations, and branches and agencies in the Philippines of foreign banks.
LibLex

3. Non-bank Financial Intermediaries — shall refer to persons or entities

whose principal functions include the lending, investing or placement of funds or
evidences of indebtedness or equity deposited with them, acquired by them or
otherwise coursed through them, either for their own account or for the account of
others;

4. Finance Companies — shall refer to corporations, or partnerships,

except those regulated by the Bangko Sentral ng Pilipinas, the Insurance
Commissioner and the Cooperatives Administration Office which are primarily
organized for the purpose of extending credit facilities to consumers and to
industrial, commercial, or agricultural enterprises, either by discounting or
factoring commercial papers or accounts receivables, or by buying and selling
contracts, leases, chattel mortgages, or other evidences of indebtedness, or by
leasing of motor vehicles, heavy equipment and industrial machinery, business and
office machines and equipment, appliances and other movable property.

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 3
 5. Treasury Bill Rate (T-Bill rate) — Shall refer to the interest rate
charged by the BSP on the 91-day Treasury Bills floated in the primary market.

6. Gross Receipts — For purposes of these Regulations, the term shall

refer to the compensation for all financial and non-financial services, or
combination thereof, performed by banks, non-bank financial intermediaries and
finance companies, whether the fees charged are implicit or explicit, which
compensation or fees are actually or constructively received during the month or
quarter, which include:

a. Financial intermediation services, which is equivalent to the net

spread between the interest received and interest expense based
on T-Bill rate;

b. Rentals on properties, real or personal;

c. Royalties;

d. Commissions;

e. Service charges and other fees;

f. Net trading gains;

g. Net forex gains;

h. Trust fees;

i. Estate planning fees; and

j. Other charges or fees received as compensation for services.

For purposes of determining the compensation for financial intermediation

services, the net spread between interest income received and interest expense
computed by applying the T-Bill rate shall be considered as the implicit fee
received by the financial institution. This is the fee received for bringing
depositors/funders and borrowers together with the financial institution acting as
broker or intermediary in the lending of funds. cdphil

SECTION 3. Computation of the Output Tax. —

3.1. On Financial Intermediation Services. — The output tax on the

services rendered by banks including commercial banks, savings banks, mortgage
banks, development banks, rural banks, stock savings and loan associations, and
branches and agencies in the Philippines of foreign banks, non-bank financial
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 4
 intermediaries and finance companies for financial intermediation which is an
implicit fee hidden in the interest income and interest expense shall be computed
by multiplying the gross receipts from financial intermediation services by 1/11.
The gross receipts is measured by deducting from the interest income actually or
constructively received during the month, the interest expense computed by
applying the average T-Bill rate of the previous month. Provided, however, that for
the month of January 2000, the T-Bill rate to be applied is 8.895% per annum.

Illustration:

A loan amounting to P1 million was extended on March 2, 2000 by A Bank

and Trust Company to Abel Mfg. Corporation at an interest rate of 18% p.a. to
mature within 1 year from contract date. The interest was paid in advance. The
average T-Bill rate for the previous month (February 2000) as certified by the BSP
is 10%. The output tax due on the intermediation services is computed as follows:
Interest Received at contact rate P 180,000 18%
Less: Interest Expense at Ave. T-Bill rate 100,000 10%
———— ————
Service fee/Net Spread P 80,000 8%
vvvvvvvvv vvvvv

The output tax on the financial intermediation services of P80,000 shall be

computed by multiplying said figure with the factor 1/11 which results to
P7,272.72.

Since the T-Bill rate is more elastic than the actual lending rate, the net
spread on interest received shall be determined on a per contract of loan basis
applying the following formula:

Percentage of net spread divided by the interest rate per contract of

loan = Rate of Spread to Total Interest Received (ROS to TIR)

Interest received multiplied by the ROS to TIR rate = Net Spread

Applying the above formula, the ROS to TIR is 44.44%. Applying this rate
to total interest received of P180,000, the net spread is equivalent to P80,000.

In using the above formula, the spread/service fee is readily determinable as

a ratio or percentage of the interest received.

The net spread computed above multiplied by the factor 1/11 will be the
Output Tax due on the financial intermediation services which shall be the same
amount that can be claimed as input tax credit by the VAT-registered borrower

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 5
 other than a Financial Institution.

3.2 Other Services. — The output tax on the sale of other services, by
banks, non-bank financial intermediaries and finance companies, the compensation
of which is explicitly charged from their customers, i.e. Service Charges,
Commissions, rentals, etc., shall be computed by multiplying the total amount of
gross receipts during the month or quarter by 1/11.

SECTION 4. Treatment of the Output Tax Shifted to the Buyer of

Services. — In general, the payor of the income/fee who is a VAT-registered
person shall be entitled to claim the output tax paid by the financial institution as
an input tax credit. On the other hand, if the payor is not a VAT-registered person,
the VAT passed on by the payee shall form part of his cost. Provided, that a VAT
receipt/invoice shall be issued by the payee for all the compensation for services
received which shall be used as the evidence for the claim of input tax. cdphil

In the case of a borrower who pays interest expense to the financial

institution, the input tax shall be equivalent to the output tax paid on the
intermediation services computed by the financial institution on a per
contract-of-loan basis. Since the basis for the output tax on the part of the financial
institution/lender is only the net spread referred to in Section 3 hereof rather than
the total interest income, the VAT-registered borrower is entitled only to claim as
input tax the amount of output tax paid by the lender which must be covered by a
VAT receipt issued by the financial institution. Provided, however that if the
borrower is another financial institution, no input tax on the intermediation
services shall be allowed.

SECTION 5. Allowable Input Taxes. — The financial institution

shall be entitled to claim as credit against the output tax all input taxes evidenced
by a VAT invoice or official receipt issued in accordance with Section 113 of
the Tax Code. This includes the VAT on importation or local purchase of
goods and properties and the VAT on purchase of services. Provided, that, for
purchase of services, the VAT must have been actually paid by the financial
institution as evidenced by an official receipt.

The Financial Institution rendering financial intermediation services pays

interest for the use of the funds loaned to borrowers. These interest payments will
not give rise to input tax credit because the Output Tax is based only on the net
spread effectively imposing the VAT on the value-added received. As a proxy for
the input tax on interest expense, the cost of funds computed at average T-Bill rate
is instead allowed to be deducted from the interest income. Also, if a Financial
Institution pays interest to another Financial Institution, no input tax credit shall be
recognized even though the lender bills output tax on the net spread as determined
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 6
 under Section 3 hereof. Instead, the borrowing Financial Institution will be allowed
to deduct from its interest income the cost of fund computed at the average T-Bill
rate.

SECTION 6. Registration. — All financial institutions shall be

deemed to be a VAT-registered taxpayer and shall be liable to the value-added tax
on their gross receipts as herein defined beginning January 1, 2000, and shall then
be entitled to input taxes on their purchases of goods, properties, and services,
provided they shall register as VAT taxpayers on or before January 31, 2000 with
the appropriate Revenue District Officer. They shall likewise pay an annual
registration fee imposed under Sec. 236 of the Tax Code, for every separate
or distinct establishment or place of business and for every year thereafter on or
before the 31st day of January.

SECTION 7. Transitory Provisions —

7.1 Transitional Input Tax on Beginning Inventories. — Financial

institutions becoming liable to VAT under these Regulations shall be entitled to a
presumptive input tax on the inventory of office supplies on hand as of December
31, 1999. The transitional Input tax shall be 8% of the value of the inventory of
actual VAT paid, whichever is higher, which amount may be allowed as tax credit
against the output tax of the VAT-registered person. The value allowed for income
tax purposes on inventories shall be the basis for the computation of the 8%
transitional input tax. cdrep

7.2 Loan Transactions entered prior to Jan. 1, 2000. — The computation

of the output tax on financial intermediation services actually or constructively
received on or after Jan. 1, 2000 on loans entered into prior to Jan. 1, 2000 shall be
computed in the same manner as in Sec. 3.1 of this Regulation. However, for
purposes of computing the net spread, the T-Bill rate to be used in determining for
the imputed interest expense shall be 9.988%.

SECTION 8. Invoicing Requirements. — All financial

institutions shall for each transaction subject to VAT, issue duly registered receipts
which must show:

1. the name, TIN and address of the financial institution;

2. the date of transaction;

3. the name, TIN, business style, if any, and address of the

VAT-registered client;

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 7
 4. the invoice value or consideration.

For explicit charges received by the financial institution, the invoice must
show the total amount charged and the VAT-registered payor shall be entitled to an
input tax determined by multiplying the total amount charged by the factor 1/11.

For financial intermediation services, since the basis of the VAT is only the
net spread as determined under Section 3 of these Regulations, the invoice, to be
issued by the financial institution for the interest received from the borrower must
also show the following, provisions of Revenue Regulations No. 8-99 to the
contrary notwithstanding:

1. the amount of the interest received from the borrower;

2. the rate of spread to total interest received;

3. the amount of net spread; and

4. the amount of input tax to be claimed by the borrower.

Illustration : On February 2000, ABC Banking Corporation received

P30,000 from Mr. X as interest for the loan contracted in January 2000 at the rate
of 20% per annum. The average T-Bill rate for the month of December 1999 is
11%. In this example, the invoice to be issued by the ABC Banking Corporation to
Mr. X, in addition to the general information required to be indicated therein, shall
likewise show the following:

Amount of Interest Received for the Month P30,000.00

x % of Net Spread (20% - 11%) = 9% divide by 20% .45
——————
Amount of Net Spread P13,500.00
——————
Output Tax (1/11) (P13,500.00 x 1/11) P1,227.27

Provided, however, that for interest received on loans granted by a financial

institution to another financial institution, no input taxes may be allowed as credit
against the output tax of the borrowing financial institution.

For purposes of these Regulations, all financial institutions shall be given a

grace period of sixty (60) days within which to cause the printing and registration
of VAT invoices and receipts in conformity with Sections 113 and 237
of the Tax Code, provided, that all invoices and receipts issued within this period
are considered to be VAT invoices/receipts if clearly stamped with the words

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 8
 "VAT INCLUSIVE".

SECTION 9. Incorporation Clause. — All regulations, ruling, orders

or portions thereof which are not inconsistent with the provisions of these
regulations are hereby adopted and incorporated as part of these regulations. cdlex

SECTION 10. Effectivity. — These Regulations shall take effect

beginning January 1, 2000

(SGD.) SOLOMON S. CUA

Undersecretary
Officer in Charge
Department of Finance

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

(3)

December 16, 1999 January 1, 2000

REVENUE REGULATIONS NO. 17-99

SUBJECT : Implementing Sections 141, 142, 143 and 145 (A) and (C)
(1), (2), (3) and (4) of the National Internal Revenue Code
of 1997 relative to the increase of the excise tax on distilled
spirits, wines, fermented liquors and cigars and cigarettes
packed by machine by twelve percent (12%) on January 1,

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 9
 2000

TO : All Internal Revenue Officers and Others Concerned

Pursuant to Section 244 in relation to Sections 141, 142, 143 and 145
of the National Internal Revenue Code of 1997, these Regulations are hereby
promulgated to implement the twelve percent (12%) increase of the excise tax on
distilled spirits, wines, fermented liquors and cigars and cigarettes packed by
machine by January 1, 2000. Cdpr

SECTION 1. New Rates of Specific Tax. The specific tax rates

imposed under the following sections are hereby increased by twelve percent
(12%) and the new rates to be levied, assessed, and collected are as follows:

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 10
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 11
 Provided, however, that the new specific tax rate for any existing brand of
cigars, cigarettes packed by machine, distilled spirits, wines and fermented liquors
shall not be lower than the excise tax that is actually being paid prior to January 1,
2000.

SECTION 2. Illustrations.

I. New specific tax rate per pack is lower than the specific tax that is
actually being paid prior to January 1, 2000.

FLS CORPORATION, a manufacturer will remove 1,000 cases of "MAA

Cigarettes" from its place of production. Each case contains 500 packs of
cigarettes. Prior to January 1, 2000, the actual specific tax being paid is P3.30 per
pack and the specific tax rate is classified under the tax bracket of P1.00 per pack.
The excise tax due shall be computed as follows:

Computation:

Actual specific tax being paid prior to January 1, 2000 P3.30/pack

Specific tax prescribed under Sec. 145(c)(4) P1.00/pack
New Specific Tax Rate (P1 00 x 112%) P1.12

Note: Inasmuch as the prescribed specific tax due per pack is lower than the
actual specific tax currently being paid, the latter shall apply. Thus,
Volume of removals ( 1,000 cases x 500 packs) 500,000 packs
Multiplied by actual specific tax being paid P3.30
Excise Tax Due P1,650,000

II. New specific tax rate per pack is higher than the actual specific tax rate
currently being paid. cdtai

A manufacturer will remove 1,000 cases of "JAA Cigarettes" his place of

production. Each case contains 500 packs of cigarettes. Prior to January 1, 2000,
the actual specific tax being paid is P5.50 and the specific tax rate is classified
under the P5.00 tax class bracket. The excise tax due shall be computed as follows:

Computation:
Actual specific tax being paid prior to January 1, 2000 P5.50/pack
Specific tax prescribed under Sec. 145(c)(3) P5.00/pack
New Specific Tax Rate (P5.00 x 112%) P5.60/pack
Volume of removals (1,000 cases x 500 packs) 500,000 packs
Multiplied by the new specific tax rate per pack P5.60

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 12
 Excise Tax Due P2,800,000

SECTION 3. Transitory Provisions. For the effective implementation

of these regulations, the following guidelines shall be followed during the
transitory period:

1. The BIR shall conduct a physical inventory of all finished

products for all brands of distilled spirits, wines, fermented
liquors, cigars and cigarettes on January 1, 2000 in the presence
of authorized representative of the concerned manufacturer who
shall jointly attest to the fact of witnessing and verifying the
results thereof by affixing their signatures on the attestation
clause in the inventory certificate.

2. Every manufacturer, producer and importer of distilled spirits,

wines, fermented liquors, cigars, and cigarettes packed by
machine shall submit a duly notarized updated list of existing
registered brands indicating the following: net wholesale price
per case, Excise Tax, VAT and suggested retail price (excluding
VAT and Excise Tax), within ten (10) days from the date of
effectivity of these regulations.

SECTION 4. Repealing Clause. All existing rules and regulations or

parts thereof which are inconsistent with the provisions of these regulations are
hereby revoked. cdtai

SECTION 5. Effectivity. These regulations shall take effect on January

1, 2000.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 13
 (4)

September 27, 1999

REVENUE REGULATIONS NO. 16-99

SUBJECT : Amending Revenue Regulations No. 1-95, as amended, and

other related rules and regulations to implement the
provisions of paragraphs (b) & (c) of Section 12 of
Republic Act No. 7227, otherwise known as the "Bases
Conversion and Development Act of 1992" relative to the
tax incentives granted to enterprises registered in the Subic
Special Economic and Freeport Zone

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to the provisions of Sections 244

and 245 of Republic Act No. 8424 or the National Internal Revenue Code of
1997, as amended, in relation to Sections 5 (m) and 13 (b) (11) of
Republic Act No. 7227, these regulations are hereby promulgated to
implement the tax incentives provisions under Section 12 (c) of R.A. No.
7227, particularly the definition of the term gross income earned and the creditable
character of the tax paid therein against taxes paid to foreign governments.

SECTION 2. Declaration of Policy. — Within the framework and

subject to the mandate of the Constitution, it is hereby declared the policy of the
State to enhance the attractiveness and provide for the greater competitiveness of
the Philippines, its various economic zones, including the Subic Special Economic
and Freeport Zone Bay, as preferred area/s of foreign and local investments,
particularly in the Asia-Pacific region.

SECTION 3. Section 3 of Revenue Regulations No. 1-95 is

hereby amended by adding paragraph (4) under sub-section (o) thereof and by
adding thereto a sub-section (p), to read as follows: cda

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 14
 "o. Gross Income Earned. — . . .

1) Trading and manufacturing enterprises . . .;

2) Service enterprises . . .;

3) Financial Institutions . . .;

4) Subic Bay Regional Enterprise. — For purposes of this

paragraph, the term "Gross income earned" refers to the gross sales or
gross revenues derived from the business activity within the zone, net of
sales discounts and sales returns and allowances and minus the costs of
sales or direct costs and other costs that are material in the operations of
the business and involves a significant amount in determining the
profitability and viability of the business (but before any deduction for
administrative expenses or incidental losses during a given taxable period).
For financial enterprises, gross income shall include interest income, gains
from sales, and other income, net of allowable deductions. The following
deductions shall be allowable for the calculation of gross income earned for
the following specific types of enterprises:

(a) Trading and manufacturing enterprises

Direct salaries
Production supervision salaries
Raw materials used in the manufacture of products
Goods in process (Intermediate goods)
Finished goods
Supplier and fuels used in production
Toll manufacturing fees
Commission expenses
Distribution expenses
Depreciation of machineries and equipment used in production
and building owned and/or constructed by SBMA-registered
enterprise
Equipment lease payments
Rent and utility charges associated with. building,
equipment and warehouses, or handling of goods
Financing charges associated with fixed assets
Corporate management salaries
Administrative salaries
Marketing and sales salaries
Advertising
Research & Development
Royalty Fees
Travel expense

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 15
 Communication Expenses
Outside Professional Services
Interest & financial charges on working capital
Loss on foreign exchange translation
Loss on disposal of merchandise inventory
(b) Service enterprises
Direct salaries
Service supervision salaries
Direct Materials, supplies used or resold to
another SBMA registered enterprise
Depreciation of machineries, equipment and
buildings owned and/or constructed
Equipment lease payments
Financing Charges associated with fixed assets
Rent and utility charges for buildings and capital
Equipment
Corporate management salaries
Administrative salaries
Marketing and sales salaries
Advertising
Research & Development
Royalty Fees
Travel and Entertainment expenses
Communication expenses
Outside Professional Services
Interest & financial charges on working capital
Loss on foreign exchange translation
(c) Financial Services
Depreciation
Equipment lease payments
Financing Charges associated with fixed assets
Rent and Utility
Corporate management salaries
Administrative salaries
Marketing and sales salaries
Materials & supplies used
Advertising
Royalty Fees
Travel and Entertainment expenses
Communication expenses
Outside Professional Services
Insurance
Cost of securities

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 16
 Bad debts actually ascertained to be worthless and
written-off
Interest & financial charges
Loss on foreign exchange translation
(p) Registration of Subic Bay Regional Enterprises. — Any
multinational company, whose purpose, as expressed in its organizational
documents or by resolution of its Board of Directors or its equivalent, is to
engage in regional and/or international trade/services and in business
activities such as, but not limited to, manufacturing, including entering into
toll and contract manufacturing arrangements, employing commission agents
and/or distributors; trading, marketing, financial services and treasury
services may establish in the Subic Special Economic and Freeport Zone
(SSEFZ) its seat of management and the situs of its business transactions,
including the recording of its income, from some or all countries in the
Asia-Pacific region and or other parts of the world, including the Philippines,
by registering as a Subic Bay Regional Enterprise with the Subic Bay
Metropolitan Authority. cdtai

The following minimum requirements shall, however, be complied

with by the said multinational company:

(a) A certification from the appropriate government agency in the

multinational company's home country that said multinational company is an
entity engaged in regional and/or international trade/service in the
Asia-Pacific Region and/or other parts of the world.

1. The Regional Enterprise is engaged in regional

and/or international trade/services and in business activities
such as, but not limited to manufacturing, including
entering into toll and contract manufacturing arrangements,
employing commission agents and/or distributors; trading,
marketing, financial services and treasury services in some
or all of the countries in the Asia-Pacific region and/or
other parts of the world, including the Philippines.

2. The Regional Enterprise will establish in the

SSEFZ its seat of management and the situs of its business
transactions from some or all of the countries in the
Asia-Pacific region and/or other parts of the world,
including the Philippines.

(b) An undertaking that the multinational company will have an

investment in the SSEFZ in an amount not less than US $250,000.00, an
inward remittance of not less than US $250,000.00 and that it will employ at
least twenty (20) direct employees.

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 17
 (c) Any violation by the Subic Bay Regional Enterprise of any of
the provisions of R A. No. 7227 or the Bases Conversion and Development
Act or its implementing rules and regulations, or other terms and conditions
of its registration, or any provision of existing laws, shall constitute
sufficient cause for the cancellation of its license or registration. cdll

SECTION 4. Section 4 (A) (f) of Revenue Regulations No. 1-95 is

hereby amended to insert thereunder sub-section (f.1), to read as follows:

f. . . . .

f. 1. Subic Bay Regional Enterprise. —

(1) The Subic Bay Regional Enterprise shall pay a

tax of 5% on Gross Income Earned from business
transactions in some or all of the countries in the Asia
Pacific region and/or other parts of the world, including the
Philippines.

(2) The Subic Bay Regional Enterprise shall

establish in the SSFEZ its seat of management and situs of
its business transactions, including the recording of income,
in some or all of the Asia-Pacific region and/or other parts
of the world. The Regional Enterprise may engage the
services of toll manufacturers, commission agents, and/or
distributors in some or all of the countries in the
Asia-Pacific region and/or other parts of the world.

(3) The Subic Bay Regional Enterprise may

generate revenues from sources within the Customs
Territory up to 50% of its total revenues. The income
generated from the customs territory will be subject to the
tax of 5% on gross income earned as defined under Sec. 3
(o)(4) of these Regulations; Provided, That, if the revenues
derived from the customs territory exceed 50% of its total
revenues, the excess of the income generated by the
Regional Enterprise will be subject to the regular income
tax rates in the customs territory.

SECTION 5. Section 6 (b) of Revenue Regulations No. 1-95 is hereby

amended, to read as follows:

"b. Tax Credits for Foreign Corporations. — The 5% tax on gross

income earned paid herein by foreign corporations that are registered as
Subic Bay Regional Enterprises shall be considered as payment of income
tax. Said tax shall be in lieu of income tax, for purposes of application for
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 18
 tax credits by said foreign corporations in their respective home countries. In
addition, no other national or local taxes shall be imposed on the Subic Bay
Regional Enterprises.

SECTION 6. Monitoring and Reporting Requirements. — All

registered enterprises embraced under these Regulations shall keep separate Books
of Accounts, for each country in the Asia Pacific Region in which its operates,
which books shall be duly registered with the concerned Revenue District Office,
showing among others all transactions within and without the Philippines and the
gross income earned therefrom for purposes of the tax herein imposed. Schedules
showing sales and gross income earned per country shall be included as part of the
enterprise's duly audited financial statement to be filed with its annual final
adjustment return. LexLib

SECTION 7. Applicability of Existing Laws. Rules and Regulations.

—

For the effective implementation of the Act, pertinent provisions of the

National Internal Revenue Code, as amended, including Title X on Statutory
Penalties and Offenses as well as their implementing rules and regulations shall
apply to registered Subic Bay Regional Enterprises operating within the SSEFZ.

SECTION 8. Effectivity. — These Regulations shall take effect fifteen

days after its complete publication in the Official Gazette or any newspaper of
general circulation, whichever comes first.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Recommended by:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 19
 July 16, 1999

REVENUE REGULATIONS NO. 15-99

SUBJECT : Creating the Revenue Regional Accreditation Board

(RRAB) in each Revenue Region and the Revenue National
Accreditation Board (RNAB) in the National Office,
Defining their Function and Composition, and Providing
for the Rules for the Accreditation, Conduct and
Suspension of Tax Practitioners before the Bureau of
Internal Revenue.

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Policy. — The practice of taxation before the Bureau of

Internal Revenue is a specialized profession which has been left unregulated to
date insofar as the BIR is concerned. Pursuant to Section 6(G) of the Tax
Code of 1997, the Commissioner of Internal Revenue shall now accredit and
register, based on their professional competence, integrity and moral fitness, all
individuals, general professional partnerships and their representatives, who
regularly prepare and file tax returns, statements, reports, protests, requests for
rulings, and other papers with, or who regularly appear before the Bureau of
Internal Revenue in behalf of taxpayers for a consideration. The rule of regularity
and the acceptance of an engagement for a valuable consideration in representation
of taxpayers presuppose that one is engaging in tax practice before the BIR as a
profession and should be subject to the accreditation proceedings as prescribed
under these Regulations.

SECTION 2. Objective. — It is the aim of these Regulations to accord

official recognition to tax practitioners who possess the desired degree of
competence and professionalism and who demonstrate adherence to acceptable
norms of morality and good conduct in the exercise of their profession before the
BIR. Conversely, both the taxpayers and the government will now be afforded an
administrative mechanism for the withdrawal of such recognition for those tax
practitioners who have been proven to be grossly incompetent or is guilty of gross

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 20
 misconduct to the detriment of their client and/or the government. cdrep

SECTION 3. Purposes. — Pursuant to Section 244 of the Tax

Code of 1997, in relation to Section 6 (G) of the same Code, these Regulations are
hereby promulgated for the following purposes:

A. To prescribe the creation of the Revenue National Accreditation

Board in the National Office and the Revenue Regional
Accreditation Board in each Revenue Region;

B. To define the functions and memberships of said Boards;

C. To specify the guidelines and procedures to be observed in the

accreditation and suspension of tax practitioners recognized to
practice before the Bureau of Internal Revenue; and

D. To provide for the duties, restrictions and norms of conduct

relating to such practice.

SECTION 4. Creation of the Accreditation Boards; Composition. —

There is established in the Bureau of Internal Revenue the following accreditation
boards:

A. The Revenue National Accreditation Board (RNAB) in the

National Office to be composed of the following:

Chairman : One of the four (4) Deputy Commissioners to be

assigned by the Commissioner of Internal Revenue

Members : One (1) representative from the private sector to be

chosen by the Commissioner of Internal Revenue from
the nominees to be submitted by the Philippine
Chamber of Commerce and Industry (PCCI), or by the
Philippine Institute of Certified Public Accountants
(PICPA), or by the Tax Management Association of
the Philippines (TMAP); and

Three (3) senior internal revenue officials in the

National Office with the rank of Assistant
Commissioner to be designated by the Commissioner.

B. The Revenue Regional Accreditation Board (RRAB) in each

Revenue Region to be composed of the following: cdtai

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 21
 Chairman : Regional Director

Members : One (1) representative from the private sector to be

chosen by the Commissioner of Internal Revenue from
the nominees to be submitted by the local PICPA
chapter; and

Three (3) senior internal revenue officials in the

Regional Office with the rank of Assistant Division
Chief or higher to be designated by the Commissioner.

C. Term of office of the Chairman and Members of the RRAB and

RNAB. — The Chairman and members of either Board shall
serve for a maximum term of three (3) years from the date of
their nomination. Thereafter, the Commissioner of Internal
Revenue shall reconstitute the same through a Revenue Special
Order for that purpose with the end view that no chairman or
member of either Board shall serve therein for a term in excess
of three consecutive years. Provided, however, that any vacancy
occurring prior to the end of said term shall be filled up by any
qualified senior officer as may be assigned by the
Commissioner.

SECTION 5. Powers and Functions of the Accreditation Boards. — It

shall be the duty of the Accreditation Boards to act upon all applications to practice
before the Bureau of Internal Revenue, to institute and provide for the conduct of
accreditation, suspension or dis-accreditation proceedings and to perform such
other duties as are necessary or appropriate to carry out their functions as
prescribed by the Secretary of Finance. Provided, however, that any action or
decision of the Revenue Regional Accreditation Board (RRAB) shall only become
final upon affirmation by the Revenue National Accreditation Board (RNAB)
and/or by the Commissioner. cdtai

SECTION 6. Jurisdiction. — The RRAB or RNAB shall have

jurisdiction over the following persons:

A. Tax Agents or Tax Practitioners. — Those who are engaged in the

regular preparation, certification, audit and filing of tax returns, information
returns or other statements or reports required by the Code or Regulations; those
who are engaged in the regular preparation of requests for ruling, petitions for
reinvestigation, protests, requests for refund or tax credit certificates, compromise
settlement and/or abatement of tax liabilities and other official papers and
correspondence with the Bureau of Internal Revenue, and other similar or related
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 22
 activities; or those who regularly appear in meetings, conferences, and hearings
before any office of the Bureau of Internal Revenue officially on behalf of a
taxpayer or client in all matters relating to a client's rights, privileges, or liabilities
under laws or regulations administered by the Bureau of Internal Revenue, shall be
deemed to be engaged in tax practice and are required to apply for accreditation.

Provided, however, that the act of appearing before any office of the BIR
shall pertain to all official dealings or transactions which require discussions,
explanations and regular business intercourse on behalf of a taxpayer but shall not
cover mere acts of physical filing or following up the status of any document,
ruling or decision or any paper filed or pending with any office of the BIR.

The accreditation requirements shall specifically apply to the following:

a) Individual tax practitioners engaged in private practice who are

Certified Public Accountants (CPA); CPA-Lawyers who
issue/sign auditor's certificate or otherwise perform functions
exclusively pertaining to a CPA; and individuals other than
CPAs who meet the qualifications prescribed in these
Regulations;

b) Partners of a General Professional Partnership engaged in the

practice of taxation, accountancy, and/or auditing; their duly
authorized officers or representatives who regularly appear or
otherwise engage in tax practice before the BIR; and

c) Officers or duly authorized representatives of incorporated

business entities engaged in accounting, auditing or tax
consultancy services. cdll

B. Exceptions. — Allowed to appear and practice before the BIR without

undergoing accreditation proceedings are the following:

a) Individual-taxpayers acting on their own behalf provided they

present satisfactory identification;

b) Members of the Philippine Bar not suffering from

suspension/disbarment. However, they may at their option,
apply for accreditation;

c) Other individuals presenting satisfactory proof of identification

or authority in any one of the following circumstances of
limited practice or special appearances:

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 23
 (i) An individual representing a member of his or her
immediate family;

(ii) A regular full-time employee representing an individual

employer;

(iii) A bona fide officer or a regular full-time employee in

representation of his employer-corporation, association
or organized group;

(iv) A trustee, receiver, guardian, administrator, executor or

regular full-time employee in representation of a trust,
receivership, guardianship or estate;

(v) An officer or a regular employee of a government unit,

agency, or instrumentality representing said unit, agency
or instrumentality in the course of his or her official
duties.

SECTION 7. Minimum Qualifications of Applicants. — In general, the

grant of accreditation shall be based on the applicant's professional competence,
integrity and moral fitness. Along these lines, the following minimum
qualifications are hereby prescribed: cdlex

A. For Individual Tax Agents (other than a member of the Philippine

Bar):

1. He must be a Certified Public Accountant (CPA) with current

professional license from the Professional Regulations
Commission;

2. If he is not a Certified Public Accountant, he must have

obtained at least a degree in Law, Juris Doctor (JD) or its
equivalent, or a Bachelor's degree in Arts, Commerce, or
Business Administration with at least eighteen (18) units in
accounting and/or taxation in a college or university recognized
by the Department of Education, Culture and Sports (DECS) or
in a foreign school of known repute or one duly recognized by
its government. If he does not meet these stated standards, he
must be able to demonstrate or present convincing proof of
special competence in tax matters or tax practice, e.g.,
previously acquired experience; special training, seminars,
short-term courses, etc., subject to evaluation and approval by
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 24
 the Board;

3. He must be of good moral character as certified to under oath

by at least two (2) disinterested persons who are either members
of the Philippine Bar or Certified Public Accountants in good
standing;

4. He must not have been charged with and convicted by final

judgment of a crime involving moral turpitude, or found guilty
of any act or omission penalized under the Tax Code, or
found guilty of aiding or abetting or causing the commission of
any such offense by another; and

5. He must be a citizen of the Philippines.

B. For General Professional Partnerships engaged in the exercise of

professional accountancy, auditing or tax consultancy services (other than general
professional partnerships engaged in the practice of law), the application for
accreditation filed by the partners and/or the duly authorized officers and
representatives thereof shall conform with the following:

1. The partners and duly authorized officers or representatives

thereof must meet all the qualifications of an individual tax
agent as prescribed in item 5(A) hereof. In lieu of the
submission of documents or proof thereof, said qualifications
may be certified to under oath by the managing partner of the
firm; and

2. The partnership is one registered with the Securities and

Exchange Commission. Cdpr

C. In the case of incorporated entities engaged in accounting and tax

consultancy other than general professional partnerships:

1. The firm must be registered with the Securities & Exchange

Commission; and

2. The applicant-officers or duly authorized representatives thereof

must meet all the qualifications of an individual as prescribed
under Section 4(A) hereof.

SECTION 8. Accreditation Procedures. —

A. Where to File. — All applicants shall accomplish their application for

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 25
 accreditation in the form to be prescribed by the Commissioner of Internal
Revenue.

The duly-accomplished application form shall be submitted, together with

all documentary requirements prescribed in Item (B) of this Section, with the
RRAB of the place where the individual applicant or general professional
partnership has his/its residence or principal place of business.

B. Documentary Requirements. — Applicants shall submit, together with

their duly accomplished application forms, the following documents:

1. For Individual Applicants:

a. Certificate of registration and current license with the

Professional Regulation Commission, if a CPA;

b. Certificate of membership with PICPA or ACCPA, if a

CPA;

c. Certificate of Good Moral Character issued by two (2)

disinterested persons, who are either member of the Bar
or Certified Public Accountant in good standing; and

d. If non-CPA, certified copy of transcript of records from

the university or college showing compliance with the
required units in accounting or taxation as prescribed in
Section 5(A)(2) hereof; or in lieu thereof, proof of
special competence in tax matters or tax practice, e.g.,
previously acquired experience; special training,
seminars, etc., for the appreciation and approval by the
concerned Board. LexLib

2. For Partners, Directors, Officers or duly authorized

representatives of General Professional Partnerships and
incorporated entities engaged in accounting and tax
consultancy:

a. Certificate of good moral character issued by two (2)

disinterested persons who may either be member of the
Bar or Certified Public Accountant in good standing;

b. Other applicable requirements for an individual

applicant, or in lieu thereof, certification under oath by
the managing partner(s) that the applicant acting for the
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 26
 firm possesses all the qualifications prescribed under
Section 5(A) of these Regulations.

C. Processing Fee. — Each applicant shall pay a non-refundable

processing fee of Five hundred pesos (P500.00) upon filing of his application for
accreditation. If the applicant is a general professional partnership, the fee shall be
paid by each partner and authorized representative thereof. In the case of
incorporated entities engaged in accounting and tax consultancy services, the fee
shall be paid by each of the applicant officers or designated representatives thereof.

SECTION 9. Processing of Application for Accreditation. —

A. The RRAB shall act upon all applications for accreditation by

verifying the qualifications of an applicant, and the
completeness of the required documentation.

B. If an application is determined to be complete, that is, all

necessary supporting documentations have been submitted, and
the applicant's qualifications found to be in conformity with the
provisions of Section 5 of these Regulations, the application
shall be stamped "RECEIVED" bearing the date the completed
application was received by the RRAB. Thereafter, the RRAB
shall, within thirty (30) days from receipt thereof, evaluate the
application and forward its recommendation thereon to the
RNAB. LibLex

C. The RNAB shall act upon all applications for accreditation

recommended to it by the RRAB. In all cases, the RNAB shall
have the exclusive authority to approve/disapprove applications
for accreditation which shall be acted upon within thirty (30)
days from receipt of the recommendation of the RRAB.

D. Applicants whose applications for accreditation have been

approved by the RNAB shall be issued a Certificate of
Accreditation signed by its Chairman. Such Certificate shall be
valid for a period of three (3) years from the date of issue,
unless sooner revoked for cause. For purposes of easy
identifications the Commissioner of Internal Revenue shall
issue an identification card to each accredited tax agent or
practitioner.

E. Applicants whose applications for accreditation have been

disapproved by the RRAB shall be appealable to the RNAB.

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 27
 Any application disapproved by the RNAB may be appealed to
the Commissioner. An adverse decision by the Commissioner
may be appealed to the Secretary of Finance, who shall rule on
the appeal within sixty (60) days from receipt of such appeal.
Failure of the Secretary of Finance to rule on the appeal within
the prescribed period shall be deemed as approval of the
application for accreditation of the appellant.

F. The resignation, retirement, death or incapacity of any partner

of a general professional partnership who has been accredited
by the RNAB shall not result in the cancellation of the
partnership's accreditation but only that of the concerned
partner's accreditation. The partnership, however, must notify
the RNAB, and the RRAB having jurisdiction over the
partnership's principal place of business, of such occurrence and
shall surrender to the RNAB the concerned partner's Certificate
of Registration or Identification Card for cancellation.

SECTION 10. Acceptable Norms of Conduct of a Tax Practitioner. —

The following norms of conduct are hereby defined as a guide for the observance
of tax practitioner. Willful or reckless violation of any of them may be subject of
disciplinary action before the Boards

A. No tax practitioner shall represent conflicting interests in his

practice before the Bureau of Internal Revenue, except by
express consent of all directly interested parties after full
disclosure has been made;

B. The practitioner must make inquiry as to all relevant facts of the

tax case, be satisfied that the material facts are accurately and
completely described, and assure that any representation
contains no falsehood;

C. The practitioner must relate the law to the actual facts and,
when addressing issues based on future assumptions, must
clearly identify what facts are assumed;

D. The practitioner must ascertain that all material tax issues have
been fairly addressed and fully considered;

E. Where possible, the practitioner must provide an opinion

consonant with existing laws and regulations. He shall not
present as true those matters or issues which he knows to have

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 28
 been voided, superseded or otherwise invalidated. prcd

F. The practitioner advising a client on matters of tax liability must

inform the client of the penalties which may likely apply to him
in case of failure or omission to pay the tax in relation to the
position advised, prepared or reported.

G. The practitioner advising a client on tax matters must make

reasonable inquiries if the information as furnished appears to
be incorrect, inconsistent or incomplete and to the extent
possible, examine the proof or relevant documents in support of
his client's representations.

SECTION 11. Suspension or Cancellation of Certificate of

Accreditation. —

A. Causes for Suspension, Cancellation or Revocation. — The

accreditation certificate may be suspended, cancelled or revoked as the case may
be, upon petition by a taxpayer or by the PICPA or by the TMAP and other similar
professional organization, or upon petition by any internal revenue officer, or upon
motu proprio action by the RRAB or RNAB, after due notice and hearing set for
the purpose, based on any of the following grounds:

1. Conviction of any criminal offense under the National Internal

Revenue Code, or of any offense involving dishonesty, or
breach of trust.

2. Giving false or misleading information, or participating in any

way in the giving of false or misleading information to the
Bureau of Internal Revenue or to any officer or employee
thereof, in connection with any matter pending before them,
knowing such information to be false or misleading.

3. The use of false or misleading representations with intent to

deceive a client or prospective client in order to procure
employment, or representing that he can ably obtain special
consideration or action from the Bureau of Internal Revenue or
officer or employee thereof by improper or unlawful means;

4. Willfully failing to make a tax return in violation of the NIRC,

or evading, attempting to evade, or participating in any way in
evading or attempting to evade any national internal revenue tax
or payment thereof.

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 29
 5. Knowingly counselling or suggesting to a client or prospective
client of an illegal plan to evade taxes or payment thereof, or
concealing assets to evade taxes or payment thereof.

6. Misappropriating or failing to remit, funds received from a

client for the purpose of payment of taxes.

7. Directly or indirectly attempting to influence, or offering or

agreeing to attempt to influence the official action of any officer
or employee of the BIR by the use of threats, false accusations,
duress or coercion, or by offering any special inducement or
promise of advantage or by bestowing any gift, favor or thing of
substantial value. cda

8. Disbarment or suspension from the practice as an attorney or as

a certified public accountant.

9. Contemptuous conduct in connection with practice before the

BIR, including use of abusive language, making false
accusations and statements, knowing them to be false, or
circulating or publishing malicious or libelous matter.

10. Giving a false opinion, knowingly, recklessly or through gross

incompetence, including an opinion which is intentionally or
recklessly misleading, or a pattern of providing incompetent
opinions on questions arising under the Tax Code. False
opinion includes those which reflect or result from a known
misstatement of fact or law from an assertion of a position
known to be unwarranted under existing laws or regulations;
from advising or assisting in conduct known to be illegal or
fraudulent; from concealment of matters required by law or
regulations to be revealed. For purposes of this paragraph,
"reckless conduct" is a highly unreasonable omission or
misrepresentation involving an extreme departure from the
standards of ordinary care that a practitioner should observe
under the circumstances. A pattern of conduct is a factor that
will be taken into account in determining whether a practitioner
acted knowingly, recklessly, or through gross incompetence.

11. Upon administrative finding by the concerned Board that the

holder of an accreditation certificate has committed any of the
following offenses penalized under the Tax Code of 1997.

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 30
 a. Wilfully falsifying any report or statement bearing on
any examination or audit, or rendering a report, including
exhibits, statements, schedules or other forms of
accountancy work which have not been verified by him
personally or under his supervision or by a member of
his firm or by a member of his staff in accordance with
generally accepted accounting and auditing practices;

b. Certifying financial statements containing essential

misstatements of facts or omission of which he has
personal knowledge in respect of the transactions,
taxable income, deduction and exemption of his client;

c. Signing and certifying financial statements without

conducting an actual audit;

d. Assisting/Aiding any taxpayer in the use of

accounting/bookkeeping records for internal revenue
purposes not in conformity with the requirements
prescribed in the Tax Code or rules and regulations
promulgated thereunder;

e. Knowingly making any false entry or entering any false

or fictitious name in the books of accounts or records of
a taxpayer; llcd

f. Aiding or keeping in behalf of a taxpayer two or more

sets of such records or books of accounts;

g. Willfully attempting in any manner to evade or defeat

any tax imposed under the Tax Code,

h. Willfully using fake or falsified Revenue Official

Receipts (RORs), Letters of Authority (LAs),
Certificates Authorizing Registration (CARs), Tax
Credit Certificates (TCCs), Tax Debit Memoranda
(TDMs) and other accountable forms of the Bureau of
Internal Revenue;

i. Corrupting/Bribing or attempting to corrupt/bribe any

internal revenue official or employee through any of the
modes of corruption as defined by the Anti-Graft and
Corrupt Practices Act;
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 31
 j. Such other acts or omissions similar to the foregoing,
including all other offenses punishable under the Tax
Code or other laws;

B. Filing of Petitions for Disaccreditation/Suspension

1. A Petition for Disaccreditation/Suspension of an Accredited

Tax Agent may be filed with the RRAB having jurisdiction over
the residence or principal place of business of the accredited tax
agent against whom the Petition is being filed.

2. All Petitions must be filed together with appropriate documents

to support the premises upon which the Petition is anchored.

3. Petitions filed by PICPA, TMAP or any other similar

professional or non-governmental organization must be signed
by the incumbent President of the organization concerned. LibLex

Petitions found to have been filed by fictitious persons or organizations,

upon verification by the RRAB concerned, shall be dismissed for lack of factual or
legal bases.

C. Administrative Proceedings. —

1. No Accredited Tax Agent shall be suspended or disaccredited

without prior hearing set for the purpose.

2. The RRAB with whom a Petition for

Disaccreditation/Suspension was filed shall conduct hearing(s)
on such Petition, to allow both the Petitioner and the Accredited
Tax Agent concerned to present their side of the case.

3. In the conduct of hearings, a quorum is sufficient to convene the

RRAB. All such proceedings shall be presided over by the
Regional Director, in his capacity as Chairman, or in his
absence, by the designated Vice-Chairman of the RRAB.

4. Upon termination of the hearing, the RRAB shall submit the

entire docket of the proceedings for a Petition for
Disaccreditation/Suspension, together with its recommendation
thereon, to the RNAB, for final action.

5. The disaccreditation or suspension of an Accredited Tax Agent

must be reached by a majority vote of the members of the
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 32
 RNAB present and voting.

6. In cases of disaccreditation or suspension, the RNAB shall issue

to the Tax Agent concerned a Notice of
Disaccreditation/Suspension signed by its Chairman. A copy of
such Notice shall be sent to the Petitioner.

7. In the event that a Petition for Disaccreditation/Suspension is

not upheld, the RNAB shall inform both parties of such
decision, in an official communication signed by its Chairman.

D. Appeal. —

1. In the event that accreditation previously granted to a Tax

Agent is cancelled, suspended or revoked, the applicant or Tax
Agent concerned may appeal such disaccreditation/suspension
to the Commissioner of Internal Revenue within fifteen (15)
days from the date of receipt the official notice of denial or
Notice of Disaccreditation/Suspension.

2. The decision of the Commissioner of Internal Revenue shall be

immediately executory. LexLib

3. The decision of the Commissioner of Internal Revenue may, in

turn, be appealed by the applicant/Tax Agent concerned to the
Secretary of Finance, through a Petition for Reconsideration,
within fifteen (15) days from the date of receipt of such
decision.

4. The Secretary of Finance shall act on a Petition for

Reconsideration within sixty (60) days from the date of filing of
such Petition. In the event that the Secretary of Finance should
be unable to act on such Petition within the specified period, the
decision of the Commissioner shall be deemed sustained.

SECTION 12. Effects of Accreditation. — Only those Tax

Agents/Practitioners, Partners or Officers of General Professional Partnerships, or
Officers or Directors of Corporate entities engaged in tax practice who have been
issued Certificate of Accreditation or ID card shall be allowed to represent a
taxpayer or transact business with the Bureau of Internal Revenue in representation
of a taxpayer for the purpose(s) defined in these Regulations. The BIR may refuse
to transact official business with tax practitioners who are not accredited before it
as well as require that certain official statements, papers or documents be signed or

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 33
 certified to by accredited persons.

All accredited Tax Agents/Practitioners shall be included in a Master List of

Accredited Tax Agents/Practitioners which shall be kept up-to-date by the RNAB.

SECTION 13. Transitory Provision. — The requirements imposed

by these Regulations shall be mandatory after the lapse of six months from the date
of effectivity. After the said period, all returns, statements, reports, protests,
requests for ruling, official correspondence and other papers filed on behalf of a
taxpayer shall bear the following information below the signature of the accredited
tax representative:

A. For Individuals (CPA's, Members of GPPs, and others)

a. 1. Taxpayer Identification Number (TIN); and

a.2. Certificate of Accreditation Number, Date of Issuance, and Date

of Expiry:

B. For members of the Philippine Bar:

b. 1. Taxpayer Identification Number (TIN); and

b.2. Attorney's Roll number or Accreditation Number, if any.

SECTION 14. Effectivity. — These Regulations shall take effect fifteen

(15) days after publication in a newspaper of general circulation. cdphil

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 34
 (5)

October 13, 1999 October 13, 1999

REVENUE REGULATIONS NO. 14-99

SUBJECT : Amending Section 2 of Revenue Regulations No. 14-97,

Otherwise Known as Revenue Regulations Governing the
Imposition of Excise Taxes on Automobiles and Other
Motor Vehicles

TO : All Internal Revenue Officers Concerned

SECTION 1. Scope. — Pursuant to the provisions of Section 244, in

relation to Section 243 of the National Internal Revenue Code of 1997, these
regulations are hereby promulgated to implement the provisions of Section 149 of
Title VI, Chapter VI of the said Code, imposing excise taxes on automobiles and
other motor vehicles. LexLib

SECTION 2. Amended provisions. — Section 2 of Revenue

Regulations No. 14-97 is hereby amended and shall now read as follows:

a. AUTOMOBILE — shall be defined as a four (4) or more

wheeled vehicle other than trucks or passenger jeepneys, as defined under
R.A. 4136 and R.A. 1138 , which is propelled by gasoline, diesel,
electricity or any other motive power, and specially designed to transport
persons and not primarily to transport freight or merchandise. It shall include
utility or light commercial vehicles designed for passenger use with seats for
less than ten (10) passengers, including the driver. The number of seats shall
be determined in accordance with the rules stated in the fifth paragraph
below.

Provided, that the manufacturer's technical specifications as stated in

the manufacturer's certification and manufacturer's catalogue or brochure
must show that the vehicle has met the requirements of these regulations on
the number of seats, seatbelts, seat and feet space measurements and must
likewise contain the model code of the vehicle. Vehicles that do not have
manufacturer's certification and manufacturer's catalogues or brochures or
whose manufacturer's certification and manufacturer's catalogues or

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 35
 brochures do not contain the required information, or show that the vehicle
do not meet the requirements of this regulation shall be subject to tax under
Section 149 of the Tax Code as an automobile.

Provided, further, that ocular inspection must be conducted in all

cases, taking careful consideration of several factors, particularly the seat
and feet space measurement, for the proper determination as to whether said
vehicle is an automobile. A written report of each ocular inspection must be
prepared by the inspecting officer to enable the reviewing officer to
determine whether the vehicle inspected meets the criteria of an automobile
as defined in these regulations. LexLib

Provided, further, that notwithstanding any contrary rule, closed or

covered four-wheel drive vehicles, primarily designed to carry passengers,
regardless of the number of seats, shall be considered and taxed as an
automobile for purposes of these regulations starting February 1, 2000.

For the uniform application of the number of seats criterion, the

passenger seats must conform to the following rules and area specifications:

1. Each seat shall be a horizontal rectangular area with seat and

feet space of not less than thirty-five centimeters (35 cm.) wide and sixty
centimeters (60 cm.) long for each passenger and fifty centimeters (50 cm.)
wide and sixty centimeters (60 cm.) long for the driver or operator.

2. The requirements of the Seatbelts Use Act of 1999 (R.A. 8750

) must be complied with for a seat to be counted as such for purposes of
these regulations.

3. In all cases where there is a variance in the determination of the

correct number of seats, the number of seats shown in the manufacturer's
certification and catalogue or brochure shall prevail. prcd

SECTION 3. These Regulations shall take effect immediately.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 36
 (6)

July 26, 1999

REVENUE REGULATIONS NO. 13-99

SUBJECT : Exemption of Certain Individuals from the Capital Gains

Tax on the Sale, Exchange or Disposition of a Principal
Residence under Certain Conditions

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to Section 244, in relation to Section

24(D)(2) of the National Internal Revenue Code of 1997 , these Regulations
are hereby promulgated to govern the exemption of a citizen or a resident alien
individual from capital gains tax on the sale, exchange or disposition of his
principal residence.

SECTION 2. Definition of Terms. — For purposes of these

Regulations, the following items shall have the following meaning:

(1) "Natural person" — shall refer to a citizen or resident alien

individual taxable under Sec. 24 of the Code. It does not
include an estate or a trust, the provision of Sec. 60 of the
Code to the contrary notwithstanding.

(2) "Principal Residence" — shall refer to the dwelling house,

including the land on which it is situated, where the husband
and wife or an unmarried individual, whether or not qualified as
head of family, and members of his family reside. Actual
occupancy of such principal residence shall not be considered
interrupted or abandoned by reason of the individual's
temporary absence therefrom due to travel or studies or work
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 37
 abroad or such other similar circumstances. Such principal
residence must be characterized by permanency in that it must
be the dwelling house to which, whenever absent, the said
individual intends to return.

(3) "Fully Utilized" — shall mean that the taxpayer has actually
commenced with the construction of his new principal residence
or has actually entered into a contract for the purchase of his
new principal residence within eighteen (18) calendar months
from the date of sale, exchange or disposition thereof, with the
intention of using the entire proceeds of sale for the acquisition
or construction of his new principal residence. Provided, that
any expense paid for by the seller in effecting the sale, i.e.,
documentary stamp tax, transfer fees, broker's commission, if
any, shall be considered as part of the amount utilized.

SECTION 3. Conditions of Exemption. — The general provisions of

the Code to the contrary notwithstanding, capital gains presumed to have been
realized from the sale, exchange or disposition by a natural person of his principal
residence shall not be imposed with income tax, including the six percent (6%)
capital gains tax, subject to the following conditions:

(1) Sworn Declaration Requirement. — He shall submit a Sworn

Declaration (ANNEX A hereof) of his intent to avail of the tax
exemption herein provided which shall be filed with the
aforementioned Revenue District Office (RDO) having
jurisdiction over the location of the principal residence within
thirty (30) days from the date of its sale, exchange or
disposition, inclusive of the following:

(a) Duly Accomplished Capital Gains Tax Return (BIR

Form No. 1706);

(b) Proof of payment of documentary stamp tax on

conveyance of real property;

(c) A sworn statement from the Barangay Chairman that his

principal residence is located within the jurisdiction of
that Barangay and has been his residence as of the date
of sale, exchange or disposition thereof;

(d) A duplicate original copy of the Deed of Conveyance of

his Principal Residence;

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 38
 (e) Photocopy of the Transfer Certificate of Title (TCT)
or Condominium Certificate of Title (CCT), in case of a
condominium unit (covering the principal residence sold,
exchanged or disposed); and

(f) Latest Tax Declaration of the said principal residence

(land and improvement).

(2) Post Reporting Requirement. — The proceeds from the sale,

exchange or disposition of his principal residence must be fully
utilized in acquiring or constructing his new principal residence
within eighteen (18) calendar months from date of its sale,
exchange or disposition. In order to show proof that positive
action was undertaken to utilize the proceeds for the acquisition
or construction of his new principal residence within the
18-month reglementary period, he shall submit to the RDO
concerned, within thirty (30) days from the lapse of the said
period, the following documents:

(a) A sworn statement that the total proceeds from the sale
of his old principal residence has been actually utilized in
the acquisition or construction of his new principal
residence or, if the construction of his new principal
residence is still in progress, a sworn statement that such
amount shall be fully utilized to procure the necessary
materials and pay for the cost of labor and other
expenses for the construction thereof;

(b) A certified statement from his architect or engineer, or

both, showing the cost of materials and labor for the
construction of his new principal residence;

(c) A certified copy of the Building Permit issued by the

Office of the Building Official of the City or
Municipality where his new principal residence shall be
constructed, as well as photocopies of documents (e.g.
building specification plan, construction plans,
construction cost estimates) submitted with his
application for said permit;

(d) In case his new principal residence is acquired by

purchase, a duplicate original copy of the Deed of
Absolute Sale covering the purchase of his new principal
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 39
 residence.

(3) The tax exemption herein granted may be availed of only once
every ten (10) years;

(4) The historical cost or adjusted basis of his old principal

residence sold, exchanged or disposed shall be carried over to
the cost basis of his new principal residence; and

(5) If there is no full utilization of the proceeds of sale, exchange or

disposition of his old principal residence for the acquisition or
construction of his new principal residence, he shall be liable
for deficiency capital gains tax which shall be computed in
accordance with Sec. (4) hereof . Accordingly, only a
fractional part (which the utilized amount bears to the gross
selling price) of the historical cost of the old principal residence
sold shall be carried over to the cost basis of the new principal
residence.

SECTION 4. Determination of Capital Gains Tax Due if the Proceeds

of Sale, Exchange or Disposition of his Principal Residence has not Been Fully
Utilized. — In a case where the entire proceeds of sale is not utilized for the
purchase or construction of a new principal residence, the capital gains tax shall
attach. In computing the capital gains tax due on the sale of the principal residence,
we follow the following steps:

(1) Determine the percentage (%) of non-utilization applying the

formula:

Unutilized Portion of GSP

-------------------------- = Percentage (%) of Non-Utilization
GSP

(2) Multiply the % of non-utilization by the GSP or FMV,

whichever is higher.

(3) Multiply the product in item (2) above by the rate of six percent
(6%).

If the seller fails to utilize the proceeds of sale or disposition in full or in

part within the 18-month reglementary period, his right of exemption from the
capital gains tax did not arise to the extent of the unutilized amount, in which
event, the tax due thereon shall immediately become due and demandable on the
31st day after the date of the sale, exchange or disposition of principal residence.
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 40
 As such, he shall file his capital gains tax return covering the sale, exchange or
disposition of his principal residence and pay the deficiency capital gains tax
inclusive of the twenty five percent (25%) surcharge for late payment of the tax
plus twenty percent (20%) delinquency interest per annum incident to such late
payment computed on the basis of the basic tax assessed. The interest shall be
imposed from the thirty-first (31st) day after the date of the sale of principal
residence until the date of payment, provided, that the date of sale shall mean the
date of notarization of the document of sale, exchange, or disposition of principal
residence.

Illustrations:

(1) In case the proceeds from the sale, exchange or disposition of his
principal residence has been fully utilized to acquire his new principal residence.
— Assume that Mr. Arnold Buendia acquired his principal residence in 1986 at a
cost of P1,000,000.00. He sold the said property on January 1, 1998, with a fair
market value of P5,000,000.00, for a consideration of P4,000,000.00. Within the
18-month reglementary period, he purchased his new principal residence at a cost
of P7,000,000.00.

Computations:

Historical cost of old principal residence P1,000,000.00

Gross selling price (GSP) P4,000,000.00
Fair market value (FMV) of old principal residence
at the time of sale P5,000,000.00
Cost to acquire new principal residence P7,000,000.00

(a) To compute for the capital gains tax due. — In this case, Mr. Buendia
shall be exempt from the capital gains tax otherwise due from him since the entire
proceeds of the sale has been fully utilized to acquire his new principal residence.

(b) To compute for the basis of the new principal residence. — The
historical cost or adjusted cost basis of his old principal residence shall be carried
over to the cost basis of his new principal residence, computed as follows:

Historical cost of old principal residence P1,000,000.00

Add: Additional cost to acquire new principal
residence
Cost to acquire his new principal residence P7,000,000.00
Less: GSP of his old principal residence (4,000,000.00) 3,000,000.00
----------------- ----------------
Adjusted Cost Basis of New Principal Residence P4,000,000.00

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 41
 ==========

(2) In case the fair market value of the old principal residence is equal to
the cost to acquire the new principal residence. — Using the above illustration, if
for example, instead of P7,000,000.00, Mr. Buendia was able to acquire his new
principal residence at a cost of P4,000,000.00, which is equal to the gross selling
price of his old principal residence. Cdpr

(a) To compute for the capital gains tax due. — In this case, Mr. Buendia
is still exempt from the payment of the capital gains tax otherwise due from him
because there has been full utilization of the proceeds from the sale of his old
principal residence within the 18-month reglementary period.

(b) To compute for the basis of his new principal residence. — Since the
fair market value of his old principal residence is equal to the cost to acquire his
new principal residence, the historical cost of his old principal residence shall be
the basis of his new principal residence, computed as follows:

Historical cost of his old principal residence P1,000,000.00

Add: Additional cost to acquire new principal
residence:
Cost to acquire new principal residence P4,000,000.00
Less: GSP of old principal residence (4,000,000.00) -
----------------- ----------------
Adjusted Cost Basis of New Principal Residence P1,000,000.00
==========

(3) In case the proceeds from the sale of his old principal residence has
not been fully utilized to acquire his new principal residence. — If Mr. Buendia
acquired his new principal residence within the 18-month reglementary period but
did not, however, utilize the entire proceeds of the sale in acquiring his new
principal residence because he only used P3,000,000 thereof in acquiring his new
principal residence, that portion of the gross selling price not utilized in the
acquisition or construction of his new principal residence shall be subject to capital
gains tax.

Computations:

Historical cost of old principal residence P1,000,000.00

Gross selling price (GSP) P4,000,000.00
Fair market value (FMV) of old principal residence P5,000,000.00
Cost to acquire new principal residence P3,000,000.00

(a) To compute for the capital gains tax due. — To compute for the capital
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 42
 gains tax due, the following formula shall be used in determining capital gains tax
due on the taxable portion pertaining to the unutilized amount of the proceeds of
sale:

Unutilized Portion of GSP

of Old Principal Residence (GSP or FMV of Old Principal
----------------------------------------- x Residence, whichever is higher) x Capital gains tax rate
GSP of Old Principal Residence

= (P4,000,000 - P3,000,000)
------------------------------- x P5,000,000 x 6%
P4,000,000

= P1,000,000
------------------------------- x P5,000,000 x 6%
P4,000,000

= 25% x P5,000,000 x 6%

= P75,000.00
========

The capital gains tax due from Mr. Buendia for the said unutilized portion
shall be P75,000 out of the total of P300,000 capital gains tax otherwise due from
the sale of his old principal residence (i.e., P5,000,000 x 6% = P300,000).
However, he shall be exempt from capital gains tax to the extent allocable to that
portion which he actually utilized to acquire his new principal residence (i.e.,
capital gains tax portion of P225,000), as shown below:

Fair market value of the principal residence sold P5,000,000

-------------
Capital gains tax otherwise due thereon (6%) P300,000
Capital gains tax allocable to the unutilized portion 75,000
-------------
Amount of exempt capital gains tax allocable to the utilized
portion of proceeds from sale (P3,000,000/P4,000,000 = 75% P225,000
times P300,000) ========

(b) To compute for the basis of the new principal residence. — In this
case, since the entire proceeds was not utilized to acquire the new principal
residence, the cost basis to be carried over to his new principal residence shall be
equivalent to the proportion of the utilized amount over the GSP applied on the
historical cost, computed as follows:

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 43
 Historical cost of old principal residence P1,000,000
Less: Portion of historical cost pertaining to the tax
paid unutilized amount (25%) (250,000)
-------------
Adjusted Cost Basis of New Principal Residence P750,000
========

or another way for computing the adjusted cost basis of the new principal residence
is by using this formula:

Utilized Amount
of GSP
-------------------------- x Historical Cost = Amount to be Carried Over
GSP of Old of Old Principal to the Cost Basis of New
Principal Residence Residence Principal Residence

applied as follows:

(P4,000,000 - P1,000,000)
-------------------------------- x P1,000,000 = P750,000
P4,000,000 =======

SECTION 5. Disposition of the Principal Residence in Exchange for

Property Other than Cash. — (1) If the individual taxpayer's principal residence is
disposed in exchange for a condominium unit, the disposition of the taxpayer's
principal residence shall not be subjected to the capital gains tax herein prescribed,
provided that the said condominium unit received in the exchange shall be used by
the taxpayer-transferor as his new principal residence. In this particular case, the
exempt provision of Sec. 24(D)(2) of the 1997 Tax Code shall only apply to the
transferor of the principal residence and not to the transferee who shall be subject
to the capital gains tax in case his/its condominium unit is treated as capital asset
or to the income tax which shall be withheld in accordance with Sec. 2.57.2(J)
of Revenue Regulations No. 2-98, as amended, in case the condominium unit
is treated as an ordinary asset. However, if the condominium unit is similarly
treated by an individual owner as his principal residence, then the same shall also
be covered by the exempt provision under Sec. 24(D)(2) of the same Code. Cdpr

Example: Mr. Buendia assigned and conveyed his principal residence to

ABC Realty Corporation in exchange for a condominium unit which Mr. Buendia
will use as his new principal residence. Thus, Mr. Buendia is exempt the from
imposition of capital gains tax on the exchange of his new principal residence
while ABC Realty Corporation, on the other hand, shall be subject to income tax,
on its exchange of the condominium unit.
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 44
 (2) If the said taxpayer's principal residence is disposed of in exchange for
a parcel of land and such land received in the exchange shall be used for the
construction of his new principal residence, no income tax or capital gains tax shall
be imposed upon the owner of the principal residence. However, the owner of the
land shall be subject to capital gains tax or to income tax, as the case may be.

(3) If in the acquisition of his new principal residence, the taxpayer

exchanged his old principal residence plus cash or other property, the unutilized
portion subject to capital gains tax shall be determined by the difference between
the total consideration made on the conveyance of old principal residence
transferred (FMV of old principal residence + cash or FMV of other property) and
the total consideration received (FMV of new principal residence) for such
exchange.

Example: Mr. Buendia assigned and conveyed his principal residence with
fair market value of P4,000,000 and in addition paid P2,000,000 to acquire as new
principal residence the principal residence of Mr. Yabut. Mr. Yabut, on the other
hand, conveyed his principal residence to Mr. Buendia with fair market value of
P5,000,000, with the intention of making the property received from Mr. Buendia
as his new principal residence. The historical cost of the old principal residence of
Mr. Buendia is P1,000,000 while the historical cost of the old principal residence
of Mr. Yabut is P500,000.

(a) Computation of capital gains tax due on the exchange of property by

Mr. Buendia — No capital gains tax is due from Mr. Buendia for the reason that
there has been full utilization of the value of his old principal residence exchanged
where in addition to fair market value of his old principal residence of P4,000,000,
he still paid cash of P2,000,000 to acquire as his new principal residence the old
principal residence of Mr. Yabut valued at P5,000,000.

(b) Computation of cost basis of the new principal residence of Mr.

Buendia —

Historical cost of his old principal residence P1,000,000.00

Add: Additional cost to acquire new principal
residence:
Cost to acquire new principal residence P6,000,000.00
Less: FMV of old principal residence at the time of (4,000,000.00) 2,000,000.00
exchange ----------------- ----------------
Adjusted Cost Basis of New Principal Residence P3,000,000.00
==========

(c) Computation of capital gains tax due from Mr. Yabut — Mr. Yabut
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 45
 shall be liable to capital gains tax to the extent of the unutilized portion of the total
value of consideration received in the exchange which is computed as follows:

= (P6,000,000 - P5,000,000)
------------------------------- x P6,000,000 x 6%
P6,000,000

= P1,000,000
------------------------------- x P6,000,000 x 6%
P6,000,000

= P60,000.00
========

(d) Computation of the adjusted cost basis of the new principal residence
of Mr. Yabut — In computing for the adjusted cost basis of the new principal
residence of Mr. Yabut, only that portion of historical cost corresponding to the
unutilized portion of the value received shall be considered. In this case, the
adjusted cost basis of the new principal residence is computed as follows:

= P5,000,000
-------------- x P500,000
P6,000,000

= P416,667
=======

In order to avail of the tax exemption from capital gains tax with respect to
such exchanges, the aforesaid taxpayer is nevertheless required to acquire his new
principal residence within the eighteen (18) month reglementary period, otherwise,
he shall be liable to pay the capital gains tax on the disposition of his principal
residence.

In all cases of exchange of principal residence for another real property, the
liability of documentary stamp tax provided under Sec. 196 of the 1997 Code
shall accrue to both parties involved in the exchange.

SECTION 6. Issuance of Certificate Authorizing Registration (CAR)

or Tax Clearance Certificate (TCL). — The taxpayer's filing of the Sworn
Declaration of Intent to avail of the capital gains tax exemption in the manner
prescribed under Sec. (3) hereof shall be a sufficient basis of the RDO to approve
and issue the CAR or TCL of the principal residence sold, exchanged or disposed
by the aforesaid taxpayer. Said CAR or TCL shall state that on the sale, exchange
or disposition of the taxpayer's principal residence is exempt from capital gains tax

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 46
 pursuant to Sec. 24(D)(2) of the Code.

SECTION 7. Repealing Clause. — All existing rules and regulations

or parts thereof which are inconsistent with the provisions of these Regulations are
hereby amended, modified or repealed accordingly.

SECTION 8. Effectivity. — The provisions of these Regulations shall

take effect fifteen (15) days after publication in the Official Gazette or in any
newspaper of general circulation without prejudice, however, to those persons who
have availed of the capital gains tax exemption on account of such sale or
disposition during the period from January 1, 1998 to the date of effectivity of
these Regulations: Provided, however, that such persons shall be required to
comply with the documentary requirements herein prescribed within thirty (30)
days from date of effectivity hereof. cdll

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

ANNEX "A"

Republic of the Philippines

Department of Finance
BUREAU OF INTERNAL REVENUE
Revenue District Office No. ___
_____________________________

SWORN DECLARATION OF INTENT

I, ___________________________________________ (Name of Affiant),

____________________ (Nationality of Affiant), of legal age, married/single, and with
residence or forwarding address at ____________________, hereby voluntarily depose
and say:

THAT, I am the registered owner of a certain parcel of land and improvements

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 47
 thereon, described under Transfer Certificate of Title (TCT) No. _________________ of
the Register Deeds of _____________, Tax Declaration No. (Land) ____________, and
Tax Declaration No. (Improvement) _____________ of the City/Municipality of
__________________;

THAT, the aforesaid property is my principal residence;

THAT, I sold the said property to _____________________ (Buyer's name) with

address at _______________ under a Deed of Absolute Sale executed on _____________
for a consideration of ________________ Pesos;

THAT, pursuant to the provisions of Section 24(D)(2) of the National Internal

Revenue Code of 1997, and its implementing Regulations, I shall utilize the proceeds of
sale thereof in the acquisition or construction of my new principal residence within the
eighteen (18) month reglementary period; and

THAT, in the event that the proceeds of sale of the said principal residence be not
fully utilized for the acquisition or construction of my new principal residence, in the
manner as prescribed by law and its implementing regulation, I hereby undertake to pay
the corresponding capital gains tax on such unutilized amount of the proceeds of sale
within thirty (30) days after the lapse of the said 18-month reglementary period.

I HEREBY DECLARE UNDER THE PENALTIES OF PERJURY THAT THE

FOREGOING ATTESTATIONS ARE TRUE AND CORRECT TO THE BEST OF MY
KNOWLEDGE.

Name and Signature of Affiant/Taxpayer

TIN ___________________________
Address ________________________

(7) (8)

September 6, 1999

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 48
 REVENUE REGULATIONS NO. 12-99

SUBJECT : Implementing the Provisions of the National Internal

Revenue Code of 1997 Governing the Rules on Assessment
of National Internal Revenue Taxes, Civil Penalties and
Interest and the Extra-judicial Settlement of a Taxpayer's
Criminal Violation of the Code Through Payment of a
Suggested Compromise Penalty

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to the provisions of Section 244 ,

in relation to Section 245 of the National Internal Revenue Code of 1997,
these Regulations are hereby promulgated to implement the provisions of Sections
6 ,7 , 204 , 228 , 247 , 248 and 249 on assessment of
national internal revenue taxes, fees and charges and to provide the rules governing
the extra-judicial settlement of a taxpayer's criminal violation of the said Code or
any of its implementing Regulations through payment of a suggested compromise
penalty.

SECTION 2. General Principles. —

2.1 The surcharge and/or interest herein prescribed shall apply to all
taxes, fees and charges imposed under the Code which shall be
collected at the same time, in the same manner, and as part of
the tax.

2.2 In case the tax due from the taxpayer is paid on a partial or
installment basis, the interest on the deficiency tax or on the
delinquency tax liability of the taxpayer shall be imposed from
due date of the tax until full payment thereof. The interest shall
be computed based on the diminishing balance of the tax,
inclusive of interests.

SECTION 3. Due Process Requirement in the Issuance of a

Deficiency Tax Assessment. —

3.1 Mode of procedures in the issuance of a deficiency tax assessment:

3.1.1 Notice for informal conference. — The Revenue Officer who

audited the taxpayer's records shall, among others, state in his report whether or
not the taxpayer agrees with his findings that the taxpayer is liable for deficiency
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 49
 tax or taxes. If the taxpayer is not amenable, based on the said Officer's submitted
report of investigation, the taxpayer shall be informed, in writing, by the Revenue
District Office or by the Special Investigation Division, as the case may be (in the
case Revenue Regional Offices) or by the Chief of Division concerned (in the case
of the BIR National Office) of the discrepancy or discrepancies in the taxpayer's
payment of his internal revenue taxes, for the purpose of "Informal Conference," in
order to afford the taxpayer with an opportunity to present his side of the case. If
the taxpayer fails to respond within fifteen (15) days from date of receipt of the
notice for informal conference, he shall be considered in default, in which case, the
Revenue District Officer or the Chief of the Special Investigation Division of the
Revenue Regional Office, or the Chief of Division in the National Office, as the
case may be, shall endorse the case with the least possible delay to the Assessment
Division of the Revenue Regional Office or to the Commissioner or his duly
authorized representative, as the case may be, for appropriate review and issuance
of a deficiency tax assessment, if warranted.

3.1.2 Preliminary Assessment Notice (PAN). — If after review and

evaluation by the Assessment Division or by the Commissioner or his duly
authorized representative, as the case may be, it is determined that there exists
sufficient basis to assess the taxpayer for any deficiency tax or taxes, the said
Office shall issue to the taxpayer, at least by registered mail, a Preliminary
Assessment Notice (PAN) for the proposed assessment, showing in detail, the facts
and the law, rules and regulations, or jurisprudence on which the proposed
assessment is based (see illustration in ANNEX A hereof). If the taxpayer fails to
respond within fifteen (15) days from date of receipt of the PAN, he shall be
considered in default, in which case, a formal letter of demand and assessment
notice shall be caused to be issued by the said Office, calling for payment of the
taxpayer's deficiency tax liability, inclusive of the applicable penalties.

3.1.3 Exceptions to Prior Notice of the Assessment. — The notice for

informal conference and the preliminary assessment notice shall not be required in
any of the following cases, in which case, issuance of the formal assessment notice
for the payment of the taxpayer's deficiency tax liability shall be sufficient:

(i) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax appearing on
the face of the tax return filed by the taxpayer; or

(ii) When a discrepancy has been determined between the tax

withheld and the amount actually remitted by the withholding
agent; or

(iii) When a taxpayer who opted to claim a refund or tax credit of

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 50
 excess creditable withholding tax for a taxable period was
determined to have carried over and automatically applied the
same amount claimed against the estimated tax liabilities for the
taxable quarter or quarters of the succeeding taxable year; or

(iv) When the excise tax due on excisable articles has not been paid;
or

(v) When an article locally purchased or imported by an exempt

person, such as, but not limited to, vehicles, capital equipment,
machineries and spare parts, has been sold, traded or transferred
to non-exempt persons.

3.1.4 Formal Letter of Demand and Assessment Notice. — The

formal letter of demand and assessment notice shall be issued by the
Commissioner or his duly authorized representative. The letter of demand calling
for payment of the taxpayer's deficiency tax or taxes shall state the facts, the law,
rules and regulations, or jurisprudence on which the assessment is based,
otherwise, the formal letter of demand and assessment notice shall be void (see
illustration in ANNEX B hereof). The same shall be sent to the taxpayer only by
registered mail or by personal delivery. If sent by personal delivery, the taxpayer or
his duly authorized representative shall acknowledge receipt thereof in the
duplicate copy of the letter of demand, showing the following: (a) His name; (b)
signature; (c) designation and authority to act for and in behalf of the taxpayer, if
acknowledged received by a person other than the taxpayer himself; and (d) date of
receipt thereof.

3.1.5 Disputed Assessment. — The taxpayer or his duly authorized

representative may protest administratively against the aforesaid formal letter of
demand and assessment notice within thirty (30) days from date of receipt thereof.
If there are several issues involved in the formal letter of demand and assessment
notice but the taxpayer only disputes or protests against the validity of some of the
issues raised, the taxpayer shall be required to pay the deficiency tax or taxes
attributable to the undisputed issues, in which case, a collection letter shall be
issued to the taxpayer calling for payment of the said deficiency tax, inclusive of
the applicable surcharge and/or interest. No action shall be taken on the taxpayer's
disputed issues until the taxpayer has paid the deficiency tax or taxes attributable to
the said undisputed issues. The prescriptive period for assessment or collection of
the tax or taxes attributable to the disputed issues shall be suspended.

The taxpayer shall state the facts, the applicable law, rules and regulations,
or jurisprudence on which his protest is based, otherwise, his protest shall be
considered void and without force and effect. If there are several issues involved in
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 51
 the disputed assessment and the taxpayer fails to state the facts, the applicable law,
rules and regulations, or jurisprudence in support of his protest against some of the
several issues on which the assessment is based, the same shall be considered
undisputed issue or issues, in which case, the taxpayer shall be required to pay the
corresponding deficiency tax or taxes attributable thereto.

The taxpayer shall submit the required documents in support of his protest
within sixty (60) days from date of filing of his letter of protest, otherwise, the
assessment shall become final, executory and demandable. The phrase "submit the
required documents" includes submission or presentation of the pertinent
documents for scrutiny and evaluation by the Revenue Officer conducting the
audit. The said Revenue Officer shall state this fact in his report of investigation.

If the taxpayer fails to file a valid protest against the formal letter of
demand and assessment notice within thirty (30) days from date of receipt thereof,
the assessment shall become final, executory and demandable.

If the protest is denied, in whole or in part, by the Commissioner, the

taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from date
of receipt of the said decision, otherwise, the assessment shall become final,
executory and demandable.

In general, if the protest is denied, in whole or in part, by the Commissioner

or his duly authorized representative, the taxpayer may appeal to the Court of Tax
Appeals within thirty (30) days from date of receipt of the said decision, otherwise,
the assessment shall become final, executory and demandable: Provided, however,
that if the taxpayer elevates his protest to the Commissioner within thirty (30) days
from date of receipt of the final decision of the Commissioner's duly authorized
representative, the latter's decision shall not be considered final, executory and
demandable, in which case, the protest shall be decided by the Commissioner.

If the Commissioner or his duly authorized representative fails to act on the

taxpayer's protest within one hundred eighty (180) days from date of submission,
by the taxpayer, of the required documents in support of his protest, the taxpayer
may appeal to the Court of Tax Appeals within thirty (30) days from the lapse of
the said 180-day period, otherwise, the assessment shall become final, executory
and demandable.

3.1.6 Administrative Decision on a Disputed Assessment. — The

decision of the Commissioner or his duly authorized representative shall (a) state
the facts, the applicable law, rules and regulations, or jurisprudence on which such
decision is based, otherwise, the decision shall be void (see illustration in ANNEX
C hereof), in which case, the same shall not be considered a decision on a disputed
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 52
 assessment; and (b) that the same is his final decision.

3.1.7 Constructive Service. — If the notice to the taxpayer herein

required is served by registered mail, and no response is received from the taxpayer
within the prescribed period from date of the posting thereof in the mail, the same
shall be considered actually or constructively received by the taxpayer. If the same
is personally served on the taxpayer or his duly authorized representative who,
however, refused to acknowledge receipt thereof, the same shall be constructively
served on the taxpayer. Constructive service thereof shall be considered effected
by leaving the same in the premises of the taxpayer and this fact of constructive
service is attested to, witnessed and signed by at least two (2) revenue officers
other than the revenue officer who constructively served the same. The revenue
officer who constructively served the same shall make a written report of this
matter which shall form part of the docket of this case (see illustration in ANNEX
D hereof).

SECTION 4. Civil Penalties. —

4.1 Twenty-Five Percent (25%) Surcharge. — There shall be imposed, in

addition to the basic tax required to be paid, a penalty equivalent to twenty-five
percent (25%) thereof, in any the following cases:

4.1.1 Failure to file any return and pay the tax due thereon as required
under the provisions of this Code or rules and regulations on the
date prescribed; or

4.1.2 Unless otherwise authorized by the Commissioner, filing a

return with an internal revenue officer other than those with
whom the return is required to be filed; or

4.1.3 Failure to pay the deficiency tax within the time prescribed for
its payment in the notice of assessment; or

4.1.4 Failure to pay the full or part of the amount of tax shown on any
return required to be filed under the provisions of this Code or
rules and regulations, or the full amount of tax due for which no
return is required to be filed, on or before the date prescribed
for its payment.

4.2 Fifty Percent (50%) Surcharge:

4.2.1 In case of willful neglect to file the return within the period
prescribed by the Code, or in case a false or fraudulent return is
willfully made, the penalty to be imposed shall be fifty percent
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 53
 (50%) of the tax or of the deficiency tax, in case any payment
has been made on the basis of such return before the discovery
of the falsity or fraud: Provided, That a substantial
underdeclaration of taxable sales, receipts or income, or a
substantial overstatement of deductions, as determined by the
Commissioner or his duly authorized representative, shall
constitute prima facie evidence of a false or fraudulent return:
Provided, further, That failure to report sales, receipts or
income in an amount exceeding thirty percent (30%) of that
declared per return, and a claim of deductions in an amount
exceeding thirty percent (30%) of actual deductions, shall
render the taxpayer liable for substantial underdeclaration of
sales, receipts or income or for overstatement of deductions, as
mentioned herein: Provided, further, that the term "willful
neglect to file the return within the period prescribed by the
Code" shall not apply in case the taxpayer, without notice from
the Commissioner or his authorized representative, voluntarily
files the said return, in which case, only 25% surcharge shall be
imposed for late filing and late payment of the tax in lieu of the
above 50% surcharge. Conversely, the 50% surcharge shall be
imposed in case the taxpayer files the return only after prior
notice in writing from the Commissioner or his duly authorized
representative.

4.2.2 Section 6 (A) of the Code provides that any tax return filed by a
taxpayer "may be modified, changed or amended" by the
taxpayer "within three (3) years from date of such filing"
provided, however, that "no notice for audit or investigation of
such return, statement or declaration has, in the meantime,
been actually served upon the taxpayer." Thus, if upon
investigation, it is determined that the taxpayer's originally filed
tax return is false or fraudulent, such taxpayer shall remain
liable to the 50% civil penalty regardless that the taxpayer has
filed his amended tax return, if the said amended tax return,
however, has been filed only after issuance of the Letter of
Authority for the investigation of the taxpayer's tax return or
such amendment has been made in the course of the said
investigation.

SECTION 5. Mode of Procedures in Computing for the Tax and/or

Applicable Surcharge. — Shown hereunder are illustrative cases for the
computation and assessment of the tax, inclusive of surcharge (if applicable) and
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 54
 interest:

5.1 Late filing and late payment of the tax. — Illustration: Income
tax return for the calendar year 1998 was due for filing on April 15, 1999
but the taxpayer voluntarily filed his tax return, without notice from the
BIR, only on June 30, 1999. The tax due per return amounts to P100,000. In
this case, the taxpayer shall be liable for delinquency penalties consisting of
25% surcharge, plus 20% interest per annum, computed from due date of
the tax until date of payment, computed as follows:

Calendar Year 1998

Income tax due per return P100,000.00

Add: 25% surcharge for late filing and late
payment (P100,000.00 times 25%) P25,000.00
20% int. p.a. from 4-15-99 to 6-30-99
(P100,000.00 times .0415524) P4,155.24 P29,155.24
———— —————

Total amount due (excluding suggested compromise for

late filing and late payment of the tax) P129,155.24
=========

Only one 25% surcharge shall be imposed for late filing of the return and
late payment of the tax.

5.2 The tax return is filed on time but filed through an internal
revenue officer other than with whom the return is required to be filed. —
Illustration: The taxpayer's 1998 income tax return is required to be filed
through the authorized agent bank under the jurisdiction of RDO East
Makati. But, without prior authorization from the BIR, the taxpayer filed his
tax return and paid the tax through the authorized agent bank under the
jurisdiction of RDO Davao City. Tax due and paid per return is
P100,000.00.

Calendar Year 1998

Income tax due per return P100,000.00

Add: 25% surcharge P25,000.00
—————
Total amount due P125,000.00
Less: Amount paid P100,000.00
—————
Amount still due P25,000.00
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 55
 =========

5.3 Late filing and late payment due to taxpayer's willful neglect.
— Illustration: The taxpayer did not file his income tax return for the
calendar year 1997 which was due for filing on April 15, 1998. He was
notified by the BIR of his failure to file the tax return, for which reason, he
filed his tax return and paid the tax, only after the said notice, on June 30,
1999. The tax due per return is P100,000.00.

Calendar Year 1997

Income tax due per return P100,000.00

Add: 50% surcharge for willful neglect to
file the return and late payment of the tax
(P100,000 times 50%) P50,000.00

20% int. p.a. fr. 4-15-98 to 6-30-99

(P100,000.00 times .2415524) P24,155.24 P74,155.24
————— —————

Total amount due (excluding suggested compromise

for late filing and late payment of the tax) P174,155.24
=========

5.4 Penalty or penalties for deficiency tax. — As a rule, no

surcharge is imposed on deficiency tax and on the basic tax. However, if the
amount due inclusive of penalties is not paid on or before the due date
stated on the demand letter, the corresponding surcharge shall be imposed.

Illustration No. 1: Taxpayer filed on time his income tax return for
calendar year 1997 and paid P100,000.00 on April 15, 1998. Upon pre-audit
of his return, it was disclosed that he erroneously computed the tax due. The
correct amount of tax due is P120,000.00. The taxpayer is assessed for
deficiency income tax in a letter of demand and assessment notice issued on
June 30, 1999.

Calendar Year 1997

Tax due per pre-audit P120,000.00

Less: Amount assessed and paid per tax return filed P100,000.00
—————
Deficiency income tax P20,000.00
Add: 20% int. p.a. from 4-15-98 to 6-30-99
(P20,000.00 times .2415524) P4,831.05

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 56
 —————

Amount still due P24,831.05

=========

Illustration No. 2: ABC CORPORATION filed its income tax return

for calendar year 1997 and paid on time its income tax shown thereunder,
amounting to P100,000. Said taxpayer was investigated. Upon verification
of its accounting records, it was disclosed that its deduction, from gross
income, of representation expenses in the amount of P200,000.00 did not
meet all the statutory requisites for deductibility. The corporation was duly
notified of the said discrepancy through a Preliminary Assessment Notice.
Based on the 35% income tax rate on corporations applicable in the year
1997, the income tax due after investigation amounts to P170,000.00. After
deduction of income tax paid per return filed, the basic deficiency income
tax amounts to P70,000, excluding penalties. Failing to protest on time
against the preliminary assessment notice, a formal letter of demand and
assessment notice was issued on May 31, 1999, requiring payment of the
assessment not later than June 30, 1999.

Calendar Year 1997

Income tax due per investigation P170,000.00

Less: Income tax paid per return P100,000.00
—————
Deficiency income tax P70,000.00
Add: 20% int. p.a. fr. 4-15-98 to 6-30-99 (P70,000 times .2415524) P16,908.67
—————
Total amount still due P86,908.67
=========

Illustration No. 3: XYZ CORPORATION filed its income tax return

for calendar year 1997 with a net taxable income of P500,000.00. At the
applicable income tax rate of 35% for the year 1997, its income tax
amounted to P175,000.00. However, upon investigation, it was disclosed
that its income tax return was false or fraudulent because it did not report a
taxable income amounting to another P500,000.00. On its net income of
P1,000,000.00, per investigation, the income tax due is P350,000.00.
Deducting its payment per return filed, the deficiency, excluding penalties,
amounted to P175,000.00. It was duly informed of this finding through a
Preliminary Assessment Notice. Failing to protest on time against the
preliminary assessment notice, a formal letter of demand and assessment
notice was issued on May 31, 1999 calling for payment of the deficiency
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 57
 income tax on or before June 30, 1999.

In this case, said corporation is liable for the civil penalties of 50%
surcharge for having filed a false or fraudulent return, plus 20% interest per
annum on the deficiency, computed as follows:

Calendar Year 1997

Income tax due per investigation P350,000.00

Less: Income tax paid per return P175,000.00
—————
Deficiency income tax P175,000.00
Add: 50% surcharge for filing a fraudulent or false
return (P175,000.00 times 50%) P87,500.00
20% int. p.a. fr. 4-15-98 to 6-30-99
(P175,000.00 times .2415524) P42,271.67 P129,771.67
————— —————

Total amount due P304,771.67

=========

5.5 Late payment of a deficiency tax assessed. — In general, the

deficiency tax assessed shall be paid by the taxpayer within the time
prescribed in the notice and demand, otherwise, such taxpayer shall be
liable for the civil penalties incident to late payment.

Illustration: Based on the above Illustration No. 3, Scenario 4,

assuming that the calendar year 1997 deficiency income tax assessment
against XYZ CORPORATION, in the amount of P304,771.67, is not paid
by June 30, 1999, the deadline for payment of the assessment, and assuming
further that this assessment has already become final and collectible. In this
case, such corporation shall be considered late in payment of the said
assessment. Assuming, further, that the corporation pays its tax assessment
only by July 31, 1999, the civil penalties for late payment shall be computed
as follows:

Calendar Year 1997

Total deficiency income tax assessed on May 31, 1999 P304,771.67

Add: 25% surcharge for late payment
(P304,771.67 times 25%) P76,192.92
20% interest p.a. from 7-1-99 to
7-31-99 (P304,771.67
times .0166667) P5,079.54 P81,272.46

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 58
 ————— —————

Total amount due (excluding suggested compromise

penalty for late payment) P386,044.13
=========

5.6 Computation of 20% interest per annum in case of partial or

installment payment of a tax liability. — Illustration No. 1: In case extended
payment of the tax is duly authorized. — DEF CORPORATION, due to
financial incapacity, requested that it be allowed to pay its income tax
liability per return for calendar year 1998, in the amount of P1,000,000.00,
in four (4) monthly installments, starting April 15, 1999. Its request has
been duly approved pursuant to Sec. 53 of the Tax Code.

In this case, no 25% surcharge shall be imposed for late payment of

the tax since its deadline for payment has been duly extended. However,
20% interest per annum for the extended payment shall be imposed,
computed based on the diminishing balance of the "unpaid amount",
pursuant to the provisions of Section 249 (D) of the Code.

No 25% surcharge on extended payment shall be imposed provided,

however, that the taxpayer's request for extension of the period within
which to pay is made on or before the deadline prescribed for payment of
the tax due. Conversely, if such request is made after the deadline
prescribed for payment, the taxpayer shall already be treated late in
payment, in which case, the 25% surcharge shall be imposed, even if
payment of the delinquency be allowed in partial amortization.

Example:

Calendar Year 1998

Income tax due per return P1,000,000.00

Less: 1st installment of the tax on or before 4-15-99 P250,000.00
——————
Balance as of 4-15-99 P750,000.00
Add: 20% int. p.a. from 4-15-99 to 5-15-99
(P750,000.00 times .0166667) P12,500.03
——————
Amount due on 5-15-99 P762,500.03
Less: 2nd installment on 5-15-99 (P250,000.00 plus
P12,500.03 interest) P262,500.03
——————
Balance as of 5-15-99 P500,000.00
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 59
 Add: 20% int. p.a. from 5-15-99 to 6-15-99
(P500,000.00 times .0166667) P8,333.35
——————
Amount due on 6-15-99 P508,333.35
Less: 3rd installment on 6-15-99 (P250,000.00 plus
P8,333.35 interest) P258,333.35
——————
Balance as of 6-15-99 P250,000.00
Add: 20% int. p.a. from 6-15-99 to 7-15-99
(P250,000.00 times .0166667) P4,166.68
——————
4th and final installment on 7-15-99 P254,166.68
===========

Illustration No. 2: Computation of tax delinquency in case of partial

payment of the tax due without prior BIR authorization for extended
payment. —

Example: GHI CORPORATION did not file its final adjustment

income tax return for the calendar year 1998 which was due on April 15,
1999. The BIR informed the corporation of its failure to file its said tax
return and required that it file the same, inclusive of the 25% surcharge and
20% interest per annum penalties incident to the said omission. On May 15,
1999 it advised that its income tax due for the said year amounts to
P1,000,000.00 but, however, due to its adverse financial condition at the
moment, it will be unable to pay the entire amount, inclusive of the
delinquency penalties. Hence, on May 15, 1999, it made a partial payment
of P400,000.00. Assuming that the BIR demanded payment of the unpaid
balance of its tax obligation payable by June 15, 1999, the unpaid balance of
the corporation's delinquent income tax shall be computed as follows:

Calendar Year 1998

Income tax due per return P1,000,000.00

Add: 25% surcharge for late filing and
late payment P250,000.00
20% interest per annum from 4-15-99
to 5-15-99 (P1,000,000.00
times .0166667) P16,666.70 P266,666.70
————— —————
Amount due as of 5-15-99 P1,266,666.70
Less: Partial payment on 5-15-99 P400,000.00
—————

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 60
 Balance as of 5-15-99 P866,666.70
Add: 20% interest per annum from 5-15-99
to 6-15-99 (P866,666.70 times .0166667) P14,444.47
—————
Amount still due (exclusive of the suggested compromise
penalty for late filing and late payment P811,111.17
=========

If the said taxpayer fails to pay the amount of P811,111.17 by June

15, 1999, no further 25% surcharge for late payment of the tax shall be
imposed. Instead, only the 20% interest per annum shall be imposed against
the taxpayer against the taxpayer, computed from due date thereof (i.e., June
15, 1999) until paid. If said taxpayer pays the same on partial payment basis,
the 20% interest per annum shall be computed on the diminishing balance
thereof, pursuant to the procedures in the preceding Illustration No. 1,
Section 6.6 hereof.

SECTION 6. Suggested Compromise Penalty in Extra-judicial

Settlement of a Taxpayer's Criminal Violation. — Section 204 of the Tax Code of
1997 provides that "All criminal violations may be compromised except: (a) those
already filed in court, or (b) those involving fraud." This means that, in general,
the taxpayer's criminal liability arising from his violation of the pertinent provision
of the Code may be settled extra-judicially instead of the BIR instituting against
the taxpayer a criminal action in Court. A compromise in extra-judicial settlement
of the taxpayer's criminal liability for his violation is consensual in character,
hence, may not be imposed on the taxpayer without his consent. Hence, the BIR
may only suggest settlement of the taxpayer's liability through a compromise.

The extra-judicial settlement of the taxpayer's criminal liability and the

amount of the suggested compromise penalty shall conform with the schedule of
compromise penalties provided under Revenue Memorandum Order No. 1-90 or as
hereafter revised.

SECTION 7. Repealing Clause. — Any revenue issuance which is

inconsistent herewith shall be considered repealed, amended, or modified
accordingly.

SECTION 8. Effectivity. —

8.1 General Rule. — In general, the provisions of these Regulations

shall be effective beginning January 1, 1998 pursuant to the
provisions of Section 8 of R.A. No. 8424, otherwise known as
the National Internal Revenue Code of 1997.

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 61
 8.2 Computation of Surcharge and Interest on Deficiency Tax
Assessment. — Any deficiency tax assessment issued beginning
January 1, 1998 shall be governed by the rules prescribed in
these Regulations. cda

8.3 Other Provisions. — Any provision of these Regulations not

otherwise specifically provided in the National Internal
Revenue Code of 1997 shall take effect fifteen (15) days after
publication in any newspaper of general circulation.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

ANNEX A

Preliminary Assessment Notice

ABC Corporation
123 Makati Avenue
Makati City
TIN: 000-000-000-000

Gentlemen :

Please be informed that after investigation there has been found due from you
deficiency income tax for calendar year 1997, as shown hereunder:

Assessment No. _______

Taxable income per return P1,000,000.00

Add: Discrepancies per investigation
1. Undeclared rental income P200,000.00
2. Non-deductible interest expenses 300,000.00
3. Undocumented representation expenses 150,000.00

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 62
 4. Non-deductible bad debt expense 250,000.00 900,000.00
————— —————

Taxable income per investigation P1,900,000.00

—————
Income tax due thereon (35%) P665,000.00
Less: Income tax paid per return 350,000.00
—————
Balance P315,000.00
Add: 50% surcharge for filing of fraudulent return P157,500.00
20% interest per annum from 4-15-96 to 3-15-98 63,000.00 220,500.00*
—————
TOTAL AMOUNT DUE P535,500.00*

*Please note that the interest and the total amount due will have to be adjusted if paid beyond
3-15-98

The complete details covering the aforementioned discrepancies established

during the investigation of this case are shown in the accompanying ANNEX A-1 of this
letter of demand.

The 50% surcharge has been imposed pursuant to the provisions of Section
248(B) of the National Internal Revenue Code, as amended by R.A. No. 8424, which took
effect on January 1, 1998, in view of your failure to report for income tax purposes your
aforementioned rental income. Such omission renders your income tax return filed for the
taxable calendar year 1997 as a false or fraudulent return.

The 20% interest per annum has been imposed pursuant to the provisions of
Section 249(B) of the said Code.

Pursuant to the provisions of Section 228 of the National Internal Revenue Code
of 1997 and its implementing Revenue Regulations, you are hereby given the opportunity
to present in writing your side of the case within fifteen (15) days from receipt hereof. If
we fail to hear from you within the said period, you shall be considered in default, in
which case, a formal letter of demand and assessment notice shall be issued by this Office
calling for payment of your aforesaid deficiency income tax, inclusive of the
aforementioned civil penalty and interest.

We hope that you will give this matter your preferential attention.

Very truly yours,

ANNEX A-1

ABC CORPORATION
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 63
 123 Makati Avenue
Makati City
TIN: 000-000-000-000

DETAILS OF DISCREPANCIES
Assessment No. ________

1. Undeclared rental income (P200,000.00). — Verification disclosed that you

derived this rental income from the lease of your building to XYZ CORPORATION
during the tax year 1997 but the same, without any legal justification, was neither
recorded in your books of accounts nor declared in your income tax return, thereby
resulting to the understatement of your reported taxable income for the said tax year.

2. Non-deductible interest expense (P300,000.00). — Verification disclosed

that this interest expense, claimed as deduction from your gross income for the tax year
1997, was actually incurred in connection with your loan from Mr. JUAN CASTRO. It
was, however, further disclosed that Mr. Castro owns and controls 60% of your
outstanding capital stock. Hence, this interest expense is not a valid deduction from your
gross income, pursuant to Section 34(B)(2), in relation to Section 36(B)(2) of the
National Internal Revenue Code which provides that no deduction shall be allowed in
respect of interest expense incurred between an individual and a corporation more than
fifty percent (50%) in value of the outstanding stock of which is owned, directly or
indirectly, by or for such individual.

3. Undocumented representation expenses (P50,000.00). — Verification

disclosed that this item of deduction from your gross income for the tax year 1997 is in
fact unsubstantiated with any documentary evidence, hence, disallowed in audit.

4. Non-deductible bad debt expense (P250,000.00). — Verification disclosed

that this item of deduction from your gross income for the tax year 1997 was, in fact, a
mere provision for estimated uncollectible accounts from your customers as of the end of
the said year. Under Section 34(E) of the said Code, a mere provision for estimated
uncollectible accounts is not allowable deduction from gross income. In general, for bad
debts to be deductible, the following statutory requisites must have been complied with:

4.1 That, the debts due from your debtor or debtors must have been
ascertained actually worthless as of the end of the taxable year; and

4.2 That, the same have been actually charged or written-off in your
books of accounts as of the end of the said taxable year.

4.3 That, the said accounts receivable have actually been charged
off or written-off the books of accounts as of the end of the taxable year.

The records of this case disclosed that you have not introduced any evidence to
overthrow the validity of our said findings.

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 64
 It is requested that your aforesaid deficiency income tax liability be paid
immediately upon receipt hereof, inclusive of penalties incident to delinquency. This is
our final decision. If you disagree, you may appeal this final decision with the Court of
Tax Appeals within thirty (30) days from date of receipt hereof, otherwise our said
deficiency income tax assessment shall become final, executory and demandable.

Very truly yours,

ANNEX B

FORMAL LETTER OF DEMAND

ABC Corporation
123 Makati Avenue
Makati City
TIN: 000-000-000-000

Gentlemen :

Please be informed that after investigation there has been found due from
you deficiency income tax for calendar year 1997, as shown hereunder:

Assessment No. _______

Taxable income per return P1,000,000.00

Add: Discrepancies per investigation
1. Undeclared rental income P200,000.00
2. Non-deductible interest expenses 300,000.00
3. Undocumented representation expenses 150,000.00
4. Non-deductible bad debt expense 250,000.00 900,000.00
————— —————

Taxable income per investigation P1,900,000.00

—————
Income tax due thereon (35%) P665,000.00
Less: Income tax paid per return 350,000.00
—————
Balance P315,000.00
Add: 50% surcharge for filing of fraudulent return P157,500.00
20% interest per annum from 4-15-96 to 3-15-98 63,000.00 220,500.00*
—————
TOTAL AMOUNT DUE P535,500.00*

*Please note that the interest and the total amount due will have to be adjusted if paid beyond
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 65
 3-15-98

The complete details covering the aforementioned discrepancies established

during the investigation of this case are shown in the accompanying SCHEDULE 1 of this
letter of demand.

The 50% surcharge has been imposed pursuant to the provisions of Section
248(B) of the National Internal Revenue Code, as amended by R.A. No. 8424, which took
effect on January 1, 1998, in view of your failure to report for income tax purposes your
aforementioned rental income. Such omission renders your income tax return filed for the
taxable calendar year 1997 as a false or fraudulent return.

The 20% interest per annum has been imposed pursuant to the provisions of
Section 249(B) of the said Code.

In view thereof, you are requested to pay your aforesaid deficiency income tax
liability through the duly authorized agent bank in which you are enrolled within the time
shown in the enclosed assessment notice.

Very truly yours,

ANNEX C

ABC Corporation
123 Makati Avenue
Makati City
TIN: 000-000-000-000

FINAL DECISION ON DISPUTED ASSESSMENT

Gentlemen :

Referring to your letter dated May 15, 1999, please be informed that your protest
against our calendar year 1997 deficiency income tax assessment in the amount of
P535,500.00, the subject matter of our covering letter of demand dated March 15, 1999, is
hereby denied for lack of factual and legal basis. The aforesaid assessment is premised on
the following:

1. Undeclared rental income (P200,000.00). — Verification disclosed

that you derived income from the lease of your building to XYZ
Corporation during the year 1997 but this was not recorded in your
books of accounts and also not reported in your income tax return.

2. Non-deductible interest expense deduction (P300,000.00). —

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 66
 Verification disclosed that this interest expenses was incurred in
connection with your loan from MR. JUAN CASTRO. It was also
disclosed that Mr. Castro owns 60% of the outstanding stock of ABC
Corporation. Hence the said interest expense is non-deductible in
computing ABC Corporation's taxable income pursuant to Section
34(B)(2)(a), in relation to Section 36(B)(2) of the NIRC, that interest
paid on a loan transaction between an individual and a corporation
more than fifty percent (50%) in value of the outstanding stock of
which is owned, directly or indirectly, by or for such individual shall
be deductible from gross income for income tax purposes.

3. Undocumented representation expenses (P150,000.00). —

Verification disclosed that the veracity of this item of deduction has
not been established, hence, disallowed as a deduction from gross
income.

4. Non-deductible bad debt expense (P250,000.00). — Verification

disclosed that this was a mere provision for estimated collectible
accounts as of the end of the year 1997. Under Section 34(E), NIRC,
a mere provision for estimated uncollectible accounts is not
deductible from gross income. To be deductible, two requisites must
be met:

4.1 That, the debts due from your debtor/s (accounts receivable)
have been ascertained actually worthless as of the end of the
taxable year; and

4.2 That, the said accounts receivable have actually been charged
off or written-off the books of accounts as of the end of the
taxable year.

The records of this case disclosed that you have not introduced any evidence to
overthrow the validity of our said findings.

It is requested that your aforesaid deficiency income tax liability be paid

immediately upon receipt hereof, inclusive of penalties incident to delinquency. This is
our final decision. If you disagree, you may appeal this final decision with the Court of
Tax Appeals within thirty (30) days from date of receipt hereof, otherwise our said
deficiency income tax assessment shall become final, executory and demandable.

Very truly yours,

ANNEX D

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 67
 CONSTRUCTIVE SERVICE OF NOTICE/S

MEMORANDUM FOR:

The Commissioner/Regional Director

Thru Channel

SUBJECT :

Name of Taxpayer: __________________

Address: __________________
T.I.N.: __________________
Kind of Taxes: __________________
Amount: P_________________

This is to report that I/We personally served on the subject taxpayer at the above
given address on ______________, 1999, the formal letter of demand and assessment
notice, dated _______________, 1999, calling for payment of his/its above stated tax
liability. However, the taxpayer refused to acknowledge receipt thereof. I/We also tried to
serve the same on ___________________________________, the taxpayer's duly
authorized representative, but the latter likewise refused to acknowledge receipt thereof.

Due to the foregoing, the said formal letter of demand and assessment notice were
constructively delivered by leaving the same conspicuously at the taxpayer's
residence/place of business at _____________________, on ____________, 1999.

_______________________
Revenue Officer

_________________________ _________________________
Name and Signature of Witness Name and Signature of Witness

_________________________ _________________________
Designation Designation

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 68
 1999

REVENUE REGULATIONS NO. 11-99

SUBJECT : Prescribing the Issuance of Taxpayer Identification

Number (TIN) to All Taxpayers and Qualified Applicants
and the Mandatory Incorporation of TIN Government
Forms, Papers or Documents

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to the provisions of Section 236 in

relation to Section 244 and 245 of the Tax Code of 1997 , this Regulations is
hereby promulgated to prescribed the requirements for the issuance and use of the
Taxpayer Identification Number (TIN) as mandated by Executive Order No. 98
, to define violations thereof and to provide penalties for non-compliance
therewith.

SECTION 2. Policies. — This Regulations is intended to improve

revenue generation by enhancing compliance with the laws of the land pertaining
to the imposition and collection of taxes through the efficient monitoring, via the
TIN system, of transactions which pass through any government office. Toward
this end, the following policies are hereby adopted:

A. The mandatory incorporation of TIN in all government forms

for permits, license, clearance and other official papers or
documents.

B. The BIR shall, within two (2) years from the promulgation of
this Regulations, issue a permanent TIN card to all taxpayers or
qualified applicants therefor unless they opt for the free
cardboard TIN card.

C. Consistent with the idea that taxpayers are entitled to the best of
service from the government, each government unit/office

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 69
 concerned shall, under rules or policies promulgated by the
office concerned, accord priority or preferential action to any
person presenting a duly issued TIN, e.g., express lane.

D. To ensure compliance with this Regulations, violations of the

provisions thereof shall be subject to fines and penalties.

E. The BIR shall make use of any information obtained via the
TIN system to, among others, monitor if correct taxes have been
paid on taxable transactions, build up third party information,
update its data base of taxpayers, and detect non-filers or
stop-filers.

SECTION 3. TIN Application. — All taxpayers required to make,

render or file a return, statement or other document with the BIR shall apply for the
issuance of the TIN. These include new, taxpayers and persons required to present
TIN Cards to government agencies by virtue of E.O. 98 and this Regulations. The
application for the issuance of TIN shall be filed with the Revenue District Office
having jurisdiction over the residence, place of office or place of business of the
applicant.

SECTION 4. Required Documents. — Applicants shall submit their

TIN application form together with photocopies of the following documents:

A. Self-employed individuals/Professionals/Single proprietor —

birth certificate or any document showing name, address and
birth date;

B. Employee — Valid company ID or Certificate of Employment

and birth certificate or any document showing name, address
and birth date;

C. Corporation/Partnership — Certificate of Incorporation;

D. Trust — Trust Agreement;

E. Payor of capital gains tax (stock, real estate) — Deed of sale

and birth certificate or any document showing name, address
and birth date;

F. Payor of transfer tax (donor, estate) — Deed of Donation and

birth certificate or any document showing name, address and
birth date or Notice of Death, where applicable;

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 70
 G. Winnings — Certification from Awarding Company/person;

H. Vehicle Registrant — Cash Invoice or Official Receipt or Deed

of sale and birth certificate or any document showing name,
address and birth date;

I. Immigrant — Passport with visa; and

J. Other Applicants — Birth Certificate or any document showing

name, address and birth date.

SECTION 5. Description of the TIN Card. — The permanent TIN

Card shall contain a computer digitized image (taxpayer picture or company logo),
TIN number, name of taxpayer or company, registered address, birth date or date
of incorporation, date of issue and signature of taxpayer or signature of duly
authorized representative, in case of juridical persons. The cardboard TIN Card
shall contain the same information as the permanent TIN Card except for the
computer digitized image. The TIN number shall comprise a 9 to 12 digit numeric
code wherein the first nine digits is the TIN proper and the last three digits is the
branch code (in case of business entities). Except for the form in which it is issued,
a TIN Card, whether permanent or cardboard, carries the same significance for the
purpose of this Regulations.

SECTION 6. Voluntary Payment of Processing Fee for the Permanent

TIN Card. — The cost of processing the TIN Card shall be charged and collected
from the taxpayer/applicant concerned and which shall be paid upon the filing of
the application therefor. Provided, however, that those who have previously filed
their application prior to the issuance of this Regulations and who wish to be
issued the permanent TIN Card shall pay the fee upon the issuance thereof.
Provided, finally, that a taxpayer/applicant who, for any reason, is unable or does
not want to pay for the cost of the permanent TIN Card, shall be issued the
cardboard TIN Card at no cost.

SECTION 7. TIN to be Indicated in Government Forms. —

Government agencies and instrumentalities, GOCCs, and Local Government Units
(LGUs) shall provide a space for the TIN in all registration and transaction forms
or documents and shall require all applicants for government permit, license and
official papers to indicate their duly issued TIN thereon. As proof of possession of
a valid TIN, the government agency may require the presentation of the TIN Card.
Provided, however, that it shall be sufficient for those who do not yet have TIN
Cards to present his/its application for TIN duly stamped by the BIR (Form 1901,
1902, 1903 & 1904). After the lapse of six (6) months from the date of the
effectivity of this Regulations, no permit, license, clearance or official documents
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 71
 shall be released to an applicant without a duly-issued TIN or without proof of
application therefor.

In particular, TIN shall be indicated in, but not limited to, the following
documents:

a) Sugar quedans, refined sugar release order or similar

instruments to reflect the TIN of the owner or seller of the
sugar,

b) Domestic bills of lading to reflect the TINs of the ships and

consignees of commercial value shipment;

c) Documents to be registered with the Registry of Deeds to reflect

the TINs of persons who are parties to the real property
transactions;

d) Registration certificates to reflect the TINs of owners of

transportation equipment by land, sea or air;

e) Building construction permits to reflect the TINs of owners and

contractors of buildings and civil works;

f) Other documents such as the following:

i) Official receipts, invoices, vouchers required, to be

issued by persons engaged in business d
non-governmental organizations, including non-stock,
non-profit organizations or foundations;

ii) Documents of transfer of untitled properties for issuance

of new tax declarations by the concerned Assessor's
office;

iii) Documents to be filed or registered with the Securities

and Exchange Commission;

iv) Application to open bank account and application for

loan with banks, financial institutions and other financial
intermediaries;

v) Application for business license with the Department of

Trade and industry (DTI) or franchise from the Land
Transportation Office (LTO), Land Franchising

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 72
 Regulatory Board, Maritime Industry Authority and other
government regulatory authorities;

vi) Application for accreditation with the Department of

Education, Culture and Sports and other agencies;

vii) Application for tax exemption and registration as donee

institution;

viii) Application for tax clearance from internal revenue tax

liabilities;

ix) Application for business or travel passport with the

Department of Foreign Affairs of persons who are
gainfully employed;

x) Application for Community Tax Certificate with a local

government unit of persons who are gainfully employed;

xi) Bid forms for government contracts;

xii) Such other documents similar to any of the above or as

may hereafter be required.

SECTION 8. Violations and Penalties. — Unauthorized production of

TIN Cards or the use of spurious TIN by any person shall be subject to criminal
prosecution under Articles 171 and 172 of the Revised Penal Code. Only one
TIN shall be assigned to a taxpayer. Any person who secures and/or uses more
than one TIN shall be criminally liable and shall be punishable by a fine of not
more than One thousand pesos (P1,000.00) or suffer imprisonment of not more
than six (6) months, or both pursuant to Section 275 of the Tax Code of 1997.
Any government employee or official who shall, knowingly or by omission or
negligence, violate or permit the violation of the provision of this Regulations shall
be subject to the same penalty, aside from the administrative or disciplinary
sanctions that may be imposed by the government office concerned.

In particular, the following acts or omissions are covered by the penalties

herein imposed:

a) Neglect to file TIN applications on or before the prescribed

period by taxpayers required under existing regulations or
future issuances; or

b) Falsity, misdeclaration or untruthful narration of material facts

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 73
 in the TIN application; or

c) Non-use of TIN in any transaction with the BIR or other

government offices; or

d) Failure to notify the BIR in case of loss of TIN Card.

e) Use of TIN other than that assigned to the taxpayer or use of

spurious TIN in any transaction with the BIR or other
government office; or

f) Unauthorized printing of TIN Cards or possession of spurious

TIN Cards; or

g) Use of double or multiple TINs by the same taxpayer or

somebody authorized by him.

SECTION 9. Attempt to evade or defeat tax. — Whenever the

abovementioned violations are done with a willful attempt to commit fraud or to
defeat any tax imposed by the NIRC, the offender or taxpayer concerned shall
upon conviction, be liable to the penalties prescribed under Section 254 of
Title X of the Tax Code of 1997.

SECTION 10. General Provisions. — In the case of corporations,

partnerships or associations, the penalty shall be imposed on the president, partner,
general manager, branch manager, treasurer, officer-in-charge and/or employees
responsible for the violation.

SECTION 11. Transitory Provisions. — Government offices are hereby

given a period of six months counted From the date of the effectivity of these
Regulation within which to put in place the system requirement for TIN, after the
expiration of which the penal liabilities cited in the preceding section shall be
mandatorily imposed.

SECTION 12. Repealing Clause. — All rules and regulations and other
revenue issuances or parts thereof inconsistent with the provisions of these
regulations are hereby amended accordingly. cdtech

SECTION 13. Effectivity. — These Regulations shall take effect after

fifteen (15) days from publication in any newspaper of general circulation.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 74
 Department of Finance

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

(9)

June 25, 1999

REVENUE REGULATIONS NO. 10-99

SUBJECT : Rules on the Use of Cash Register and Point-of-Sale

Machines in Lieu of Registered Sales Invoices or Receipts

TO : All Internal Revenue Officers and Others Concerned

SCOPE. Pursuant to the provision of Section 244, in relation to Section 237

of the National Internal Revenue Code , as amended by R.A. No. 8424 ,
these Regulations are hereby promulgated to govern the procedures for the grant of
the permit to use cash registers and point-of-sale (POS) machines and their actual
use, subject to certain conditions herein prescribed.

SECTION 1. Lines of Business That May Qualify for the Issuance of

Permits to Use Cash Register and Point-of-Sale Machines. — The permit to use
cash register and POS machines in lieu of sales invoices or receipts shall be issued
only to proprietors, owners or operators of any of the following lines of business
and other similar establishments:

1. Supermarkets 8. Record Bars and Music stores

2. Department Stores 9. Video shops selling and leasing out
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 75
 cinematographic films
3. Drugstores 10. Garages and other parking spaces.
4. Bookstores 11. Gasoline Stations
5. Groceries 12. Hotels, Motels, Lodging Houses and the like
6. Bakeries 13. Token exchange stations
7. Restaurants, bars, beer 14. Recreational and Amusement Centers
gardens, refreshment parlors
and other eating places.

The Commissioner of Internal Revenue may, in meritorious cases, qualify

other lines of business to use cash register and POS machines, considering modern
business practices.

SECTION 2. Procedures: Application and Grant of Permit. —

2.1 Application. — The application to use cash register and POS machines
shall be in the form of a joint sworn declaration by the applicant and the
distributor/dealer or vendor of the machine (Annex "A"), which shall contain the
following:

(a) Name, address, business name/style and VAT or non-VAT

number of applicant, kind/line of business and the address
where the machine will be used;

(b) Name, business style, address and VAT or non-VAT number of

the distributor/dealer or vendor of the machine;

(c) For cash register machines, brand, model, serial number and
type of all its parts, whether electronic or mechanical, whether
with resettable or non-resettable accumulating grand total, and
whether new or secondhand;

(d) For POS machines, brand, model, serial numbers and type of all
its parts, whether new or second hand, and software to be used;
aisadc

(e) Maximum accumulating sales capacity;

(f) Reset counter number; and

(g) Other essential features.

2.2 Where to File the Application; Attachments. — The application shall

be filed with the Revenue District Officer within whose jurisdiction the business

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 76
 establishment where the machine will be used is located and shall be accepted only
as duly filed if submitted with the following:

(a) A copy of the applicant's current Annual Registration Fee

Return (BIR Form No. 0605).

(b) Copies of the certificate of registration of business name/style

issued by the Bureau of Internal Revenue and Bureau of
Domestic Trade and in case of corporations or partnerships, also
a copy of the certificate of registration with the Securities and
Exchange Commission.

The documents mentioned above shall not be required

from applicants who had already submitted the same with their
previous application to use a cash register or POS machine of
the same kind or configuration;

(c) Sample receipts for a "no sale" transaction identified to the

particular issuing machine legibly showing the heading
(company logo, business name, trade name, proprietor's name if
applicant is a single proprietor, address where the machine is
going to be used including branch identification, VAT or
non-VAT number) consecutive receipt numbers and date;

(d) Sample receipt showing the reading of the accumulated grand

total recorded in the machine and, in case of electronic and POS
machines, the reset counter number;

(e) For machines with resettable accumulating grand total, all the
proprietor's and reset keys: and/or copy of the software to be
used in the actual operation of the POS machines and
customizations made thereto; and

(f) Operating manuals.

2.3 Issuance of the Permit to Use Cash Register and POS Machines. —
The Revenue District Officer shall issue to the applicant the corresponding permit
to use cash register and POS machines (Annex "B") upon receipt of a duly filed
application and proper inspection and evaluation of the Revenue Officer assigned
by the Revenue District Officer; PROVIDED, THAT, it is satisfactorily shown by
the applicant that he/it is provided with a duly registered cash register sales book,
appropriately identified as such to each machine being applied for use, showing the
following columns:

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 77
 a. Date of sale;
b. Inclusive consecutive receipt numbers;
c. Previous reading;
d. Present reading;
e. Sales - VAT;
f. Sales - Non-VAT;
g. Sales over-run or overflow count;
h. Reset counter number; and
i. Remarks

If the applicant is under the jurisdiction of the Large Taxpayers Division

(LTD), the application, together with the proper attachments, is to be filed with the
LTD for proper inspection and evaluation of the Revenue Officer and final
approval of the LTD — Division Chief.

If the business establishment where the machine will be used is in the

city/municipality where the Regional Office is situated, the permit shall be issued
by the Regional Director, except when he has delegated such power to the Revenue
District Officer of the district where the Director's office is located.

2.4 Permits for Different Lines of Business. — A separate permit shall be

issued by the Regional Director or the Revenue District Officer concerned for
every application duly filed, inspected and evaluated.

2.5 Condition for the Issuance of the Permit. — The permit to use cash
register and POS machines shall be granted subject to the following conditions:

(a) The machine shall be used exclusively in the operation of only

one line of business covered by the permit. If the business is
conducted simultaneously with another line of business for
which no cash register permit has been issued, sales made in
such business shall be covered with the corresponding issuance
of registered sales invoices or receipts;

(b) The machine should be equipped with two (2) rollers or its
equivalent, one for the audit journal tape intended for audit and
internal revenue tax purposes and the other for the customers'
tape which are issued as itemized and consecutively numbered
receipts, PROVIDED, THAT, all tape receipts issued is of a
quality that could be preserved for a period within which the
Commissioner is authorized to make an assessment and
collection of the taxes so assessed as prescribed in Sections 203
and 222 of the National Internal Revenue Tax Code, as
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 78
 amended;

(c) When the machine is punched for the purpose of recording a

sale, the amount of sale should automatically be printed on the
customer's receipt and the audit journal tape or its equivalent.
Under no circumstance should the machine be operated without
the corresponding tapes installed on both rollers or its
equivalent;

(d) It must be equipped with a reset counter that advances by one

everytime the total is reset to zero;

(e) The imprint on the customers' and audit journal tapes or its
equivalent should always be legible;

(f) Electronic cash register machines with volatile memory shall at

all times be connected to a power source and shall not be used
at anytime as reserve units (kept for future use) to protect the
memory mechanism/circuits and preserve stored data;

(g) Upon filing of the application, all the proprietor's and reset (z)
keys of machines with resettable accumulating grand total shall
be surrendered to the Revenue District Officer for safekeeping
and control;

(h) Registered machines with resettable accumulating grand total

shall not be reset, except when expressly authorized by the
Revenue District Officer;

(i) The proprietor shall not change his business name or the use of
the registered machine or transfer to another business location,
branch or establishment, or otherwise without prior written
notice to the proper office of the Bureau having jurisdiction
over said machine;

(j) Likewise the proprietor who have been issued a permit to use
cash register or POS machine shall not have the machine
repaired, upgraded, changed, modified, updated, or otherwise
removed without prior written notice to the proper office of the
Bureau having jurisdiction over said machine; LLphil

(k) After repair, upgrade, change, modification, update, or

otherwise and before re-use of the machine, the proprietor and
the person who made the repair shall submit a joint sworn
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 79
 statement to the Revenue District Officer (Annex "C") and the
proprietor shall submit a new application for proper inspection
and evaluation of the Revenue Officer assigned by Revenue
District Officer having jurisdiction over said machine;

(l) Registered machines may be withdrawn from use, either by

retirement or sale, only upon prior application with and
approval by the Regional Director or Revenue District Officer,
as the case may be. Upon receipt of the application, such officer
shall cause the immediate verification of said machine and the
accounting records kept in connection therewith, to insure that
all the sales data registered in the machine up to the last day it
was used are properly recorded for internal revenue purposes.
The approval shall show the following information as of the
date of retirement or sale: namely, the reset counter number,
accumulated grand total sales and the number of the last cash
register receipt issued (Annex "D"). The permit previously
granted shall be recalled for cancellation;

(m) The original permit (Annex "B") should be securely attached to

the back of the machine to which it refers and must be
conspicuously visible to the public. The serial number of the
machine should also be printed in bold figures on the back
thereof to facilitate verification;

(n) In cases where the applicant as enumerated in Section 2 is

engaged in taxable and non-taxable business activities, a permit
for a cash register or POS machine of the type which is capable
of clearly indicating separately in words sales of taxable and
non-taxable items, may be issued.

(o) Data required to be reflected on the register receipts. The cash

register receipts must show among others, the following:

1. Proprietor's business name;

2. Municipal/City address (if the machine is used by a

branch, the receipt should identify the particular branch;
e.g. Branch 1 or Branch 2 Manila, etc.);

3. Proprietor's VAT or non-VAT number,

4. Amount of the transaction; and

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 80
 5. Date of the transaction.

In no case shall a cash register or POS machine be used without

the customer's receipt clearly showing all the data required above,
except in the case of machines, where the proprietor has been
authorized by the Regional Director or the Revenue District Officer
concerned the use thereof pending the completion of the installation of
the tape heading for a period not exceeding thirty (30) days from the
date of such authority.

(p) Receipt Numbering Mechanism/Circuit. — In order to maintain

the consecutive sequence of the numbers imprinted on the
customer's receipts and the audit journal tape, the receipt
numbering mechanism/circuit of a registered machine shall not
be disturbed or tampered with; and

(q) Inspection/Verification of Subsidiary Cash Register Sales Book

and Cash Register Machines. — The subsidiary cash register
sales book shall be kept at all times at the place where the
machine is located and shall be available at any time for
verification by duly authorized internal revenue officers.

Likewise, all cash register and POS machines, whether

registered or not shall be subject to inspection any time by duly
authorized internal revenue officers.

SECTION 3. Procedures in Recording of Sales. — The entries in the

audit journal tape or its equivalent, shall be summarized at the end of the day and
the total transferred to the Cash Register Sales Book. Thereafter, the total sales in
all the registered machines shall be summarized and entered in the Cash Receipts
Book or Columnar Journal not later than twelve o'clock noon of the following
business day. The Cash Receipts Book or Columnar Journal shall have a special
column strictly for sales recorded thru the cash register or POS machines to
properly distinguish sales through the use of registered sales invoices or receipts.
The used portion of the audit journal tape, appropriately identified to the machine
and certified correct by the proprietor or his authorized representative, shall be cut
off from the audit roll at the end of each business day and shall constitute the basic
document to support daily sales entries in the cash register sales book. The cash
register sales book and the used audit journal tape or its equivalent, shall form part
of the accounting records and shall be preserved within the same period prescribed
by applicable laws, rules and regulations. cdta

SECTION 4. Cash Register Machines for Internal Control. — Any

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 81
 proprietor, owner or operator of a business establishment may use a cash register
machine of any type for "internal control purposes", provided that, duly registered
sales invoices or receipts are issued for every sale. However, such proprietor,
owner or operator shall first notify the proper Revenue District Officer of his
intention to use the machine solely for "internal control" and shall secure a poster
from the said Office which shall be securely attached at the back of the machine
conspicuous to the public showing the following:

"WARNING — THIS MACHINE IS NOT AUTHORIZED TO ISSUE

RECEIPT.

ASK FOR SALES INVOICE. REPORT ANY VIOLATION TO THE

B.I.R.

COMMISSIONER OF INTERNAL REVENUE"

(Annex "E")

At no time shall the poster be detached or covered from public view.

However, cash register machines without a built-in receipt dispensing

mechanism or roller on which to mount the customers' roll may be used for internal
control purposes without complying with the foregoing requirements.

SECTION 5. Exemptions. — Persons authorized to use cash register

machines are hereby exempted from showing on the cash register receipt the name,
business style and address of the purchaser and taxpayer identification number in
case where the purchaser is a VAT registered person, regardless of the amount of
sales. This, however, does not preclude the purchaser from requiring a registered
sales invoice or official receipt.

SECTION 6. Registration of Other Kinds/Types of Cash Register

Machines and/or Inclusion of Other Lines of Business. — A cash register machine
with built-in capacity to accumulate sales data of different lines of business may be
authorized by the Commissioner to issue cash register receipts for all such different
lines of business, provided, however, that the distinction of sales by lines of
business shall be clearly shown on the machine tapes in words rather than by code
or symbol.

Application for the above purpose shall be filed with the proper Revenue
District Officer who shall cause the investigation of the veracity and merit of the
applicant's representations on the built-in mechanisms and operating features of the
machine and on the necessity for its use on such other lines of business. The report
thereon shall be submitted to the Regional Director concerned or in case of
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 82
 taxpayers belonging to the LTD shall be submitted to the Large Taxpayers
Division for appropriate action.

6.1 Unmanned bill, coin or token operated machines. — An unmanned

machine capable of dispensing goods and services in exchange for bills, coins or
tokens without the capacity for issuing cash register receipts are required to
register with the proper Bureau office having jurisdiction over the said machine;

SECTION 7. Penal Clause. — Any violation of the provision of these

Regulations shall be considered sufficient ground for the revocation of the permit
to use cash register or POS machine.

If the nature of the violation is equivalent to non-issuance of sales invoice

or receipt; or issuance of an unregistered receipt, such violation shall be dealt with
in accordance with Sec. 264 of the NIRC of 1997.

SECTION 8. Transitory Provisions:

8.1 Inventory of Existing Machines — In order to effectively control all

cash register and POS machines, whether or not registered with the Bureau, all
Regional Directors shall require the submission of inventory of all cash register
and POS machines within their jurisdictions in accordance with the form
prescribed herein (Annex "F"), within (60) sixty days from the effectivity of these
Regulations.

Machines not built with receipt dispensing mechanisms or not equipped

with any roller on which to mount the customer's receipt shall not be included in
the inventory.

8.2 Validity of Prior Permit. — All taxpayers previously granted permits

to use cash register and POS machines issued before the effectivity of these
Regulations shall remain valid within (60) sixty days from the effectivity of these
Regulations and are mandatorily required to reapply for a new permit to use cash
register or POS machines with the proper Bureau office having jurisdiction over
the said machine upon effectivity of these Regulations and thereafter shall be valid
until revoked by the Commissioner of Internal Revenue.

8.3 Registration of Cash Register Sales Book. — The cash register sales
book or its equivalent shall be registered with the proper Revenue District Office
before use. However, in the initial implementation of these Regulations, the cash
register sales book for existing authorized machines shall be registered with the
Bureau within (60) sixty days from the effectivity of these Regulations.

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 83
 SECTION 9. Repealing Clause. — All revenue regulations, circulars,
orders or memoranda or portions thereof which are inconsistent herewith are
hereby repealed or modified accordingly.

SECTION 10. Effectivity. — These Regulations shall take effect

immediately.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

BIR Form No. ______

APPLICATION FOR PERMIT TO USE CASH REGISTER AND/OR POINT OF

SALE MACHINE IN LIEU OF SALE INVOICES/RECEIPTS
Name of Applicant ____________________________
Business Name/Style ____________________________
Address ____________________________
Kind Line of Business ____________________________
Address of Business Using the Machine ____________________________
Source of Machine
(a) Distributor's/Dealer's or Vendor's ____________________________
Name, Business Name and Address ____________________________
(b) Conditions of the Machine New Ž Second-hand Ž
Description of Machine
Brand, Model and Serial No. ____________________________________
Type Mechanical _______ Electronic ___________
Function Resettable ________ Non-resettable _______
Accumulating _______ Accumulating _______
Grand Total _________ Grand Total _______
Maximum Accumulating Sales Capacity __________________________
Reset Counter Number ______________________________________

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 84
 Essential Features of the Machine

1. Equipped with two (2_ rollers for customer's receipt and audit roll.

2. The customer's receipts issued are consecutively numbered.

3. Every sale printed on the customer's receipt is reflected

simultaneously on the audit roll.

4. With reset counter which advances by "I" everytime the cash register
is reset to zero.

5. The reset counter is non-resettable.

We hereby declare that the above information are true and correct.

IN WITNESS WHEREOF, we hereunto affix our signatures this _____ day of

________, 19 ____ at ____________.

______________________ ______________________
Distributor/Dealer/Vendor Applicant

T.I.N. ______________________ T.I.N. ______________________

SUBSCRIBED AND SWORN TO before me this _____ day of ___________, 19

_______, affiants exhibited to their Community Certificate Nos. ____________ and
____________, issued at ____________ and ____________, on _______________, 19
____ and ______________, 19 ___ respectively.
Doc. No. _______
Page No. _______
Book No. _______
Series of _______
______________________________
Officer Authorized to Administer Oath

BIR Form No. ______

REPUBLIC OF THE PHILIPPINES
MINISTRY OF FINANCE
BUREAU OF INTERNAL REVENUE
REVENUE REGION NO. ____
REVENUE DISTRICT OFFICE NO. ___

No. _____________________

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 85
 PERMIT

PERMIT IS HEREBY GRANTED TO ______________________, of

___________________________, to use cash register machine brand ____________,
model _______________________, serial no. ___________, at
____________________________________________________________________
(Business name and address)
____________________________________________________________________
subject to the provisions of the National Internal Revenue Code, as implemented by
Revenue Regulations No. _________, dated ______________.

This permit is valid until revoked by the Commissioner of Internal Revenue.

Date Issued _____________

COMMISSIONER OF INTERNAL REVENUE

By:

_________________________________
Regional Director/Revenue District Officer

________________
Date
The Revenue District Officer
Revenue District No. _______
________________________
Sir:

Pursuant to Revenue Regulations No. _____, dated ______________, please be

informed that Cash Register Machine, Brand ____________, Model ________, Serial
No. _____________, has been repaired. It will be re-used on ______________.

1. Kind of Machine Electronic __________ Mechanical __________

2. Name of taxpayer and/or business using the machine __________

3. Address of taxpayer and/or business where the machine is used

_______________

4. Date repair started and finish ______, 19 __/ ____ 19__

Before Repair After Repair

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 86
 5. Reset Counter No. __________
__________

6. Accumulated grand sales total * P_________

P_________

7. Last and beginning receipt numbers * __________

__________

8. Explanation of variations in the detector or reset counter number and

accumulated sales total in the machine before and after repair, and
also, if the receipt number after repair is not consecutive to the last
receipt number before repair. (Use additional sheet if more space is
needed.)
(1) ________________________ (2) _______________________
Person/Company Repairing Taxpayer-User
TIN ________________ TIN ________________
SUBSCRIBED AND SWORN TO before me this _____ day of _________, 19
___, affiants exhibited to me their Community Tax Certificate Nos. ____________ and
________________, issued at _______________ and __________________, on
____________, 19 ____, and ________________, 19 ________ respectively.

____________________________
Officer authorized to administer oath
Doc. No. ________
Book No. ________
Page No. ________
Series of ________

BIR Form No. ____________

___________________
_________________
_________________
_________________
Sir:

Your request to withdraw from use your Cash Register Machine, as of

___________, described hereunder is hereby granted:
Brand ______________________________________________
Model No. __________________________________________
Serial No. ___________________________________________
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 87
 BIR Permit No. _______________________________________
Verification of the said machine and the accounting records kept in connection
therewith, as of the last day it was used, disclosed the following:
Reset Counter No. __________________
Accumulated Grand Total Sales P_________________
Number of the last receipt issued __________________

Very truly yours,

_____________________
Regional Director/
Revenue District Officer

ANNEX "F"
Republic of the Philippines
Department of Finance
BUREAU OF INTERNAL REVENUE
Revenue Region No. __________
Revenue District No. __________
___________________________
_________________________
Date

INVENTORY OF CASH REGISTER MACHINES

_________________ _________________
Name Business Name/Style
_________________ _________________
Address Line of Business
_________________
T.I.N.
I. MACHINE ACTUALLY USED WITH BIR PERMIT:

If reset-
State if with table are
Resettable the pro-
or Non- prietor's
Reset Resettable and reset
State if Date of Counter Accumu- (z) keys
Brand and Mechanical Date Original Renewal No. lating with
Model No. Serial No. or Electronic Permit Granted Permit* (Present) grand total the B.I.R.

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 88
 ____________________
Owner or Proprietor

* attach copies of the original and renewal permits

II. MACHINES WITHOUT PERMIT AND USED FOR INTERNAL

CONTROL PURPOSES ONLY: (registered sales invoices or receipts
are issued for every sale)

Brand & Model No. Serial No.

III. MACHINES NOT PRESENTLY USED BECAUSE OUT-OF-ORDER

OR UNDER REPAIR.

A. WITH BIR PERMIT :

If reset-
State if with table are
Resettable the pro-
or Non- prietor's
Reset Resettable and reset
State if Date of Counter Accumu- (z) keys
Brand and Mechanical Date Original Renewal No. lating with
Model No. Serial No. or Electronic Permit Granted Permit* (Present) grand total the B.I.R.

* attach copies of the original and renewal permits

B. WITHOUT PERMIT

Brand & Model No. Serial No.

Note: (1) Cash Register machines without built-in receipt-dispensing

mechanisms or roller on which to mount the customer's roll should
not be included in this inventory. Cdpr

(2) Submit this form in quadruplicate.

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 89
 (10)

April 19, 1999

REVENUE REGULATIONS NO. 09-99

SUBJECT : Amending Revenue Memorandum Order No. 30-99

dated March 17, 1999 prescribing the filing of returns by
those individuals exempt from tax as provided under
Section 23 (B) and (C) in relation to Section 51 (A) (2) (d)
and (A) (3) of Republic Act No. 8424 (NIRC of 1997)

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to Section 244 of the Tax Code

of 1997, in relation to Section 23 (B) (C) , Section 51 (A) (2) (d) and (A) (3)
of the same Code, this Regulation is hereby promulgated amending Revenue
Memorandum Order No. 30-99 prescribing the filing of returns by non-resident
citizens, overseas contract workers (OCWs), and seamen. This covers all income
earned by non-resident citizens from abroad beginning January 1, 1998. cdtai

SECTION 2. Pertinent Provisions:

Section 22 (E) "The term 'non resident citizen' means:

(1) A citizen of the Philippines who establishes to the satisfaction of the

Commissioner the fact of his physical presence abroad with a definite
intention to reside therein.

(2) A citizen of the Philippines who leaves the Philippines during the
taxable year to reside abroad, either as an immigrant or for
employment on a permanent basis.

(3) A citizen of the Philippines who works and derives income from
abroad and whose employment thereat requires him to be physically
present abroad most of the time during the taxable year.

(4) A citizen who has been previously considered as non-resident citizen

and who arrives in the Philippines at any time during the taxable year
to reside permanently in the Philippines shall likewise to treated as a

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 90
 non-resident citizen for the taxable year in which he arrives in the
Philippines with respect to his income derived from sources abroad
until the date of his arrival in the Philippines.

The taxpayer shall submit proof to the Commissioner to show his

intention of leaving the Philippines to reside permanently abroad or
to return to and reside in the Philippines as the case may be for the
purpose of this Section."

Section 23 (B) "A non-resident citizen is taxable only on income

derived from sources within the Philippines." cda

Section 23 (C) "An individual citizen of the Philippines who is

working and deriving income abroad as an overseas contract worker is
taxable only on income from sources within the Philippines: Provided, That
a seaman who is a citizen of the Philippines and who receives compensation
for services rendered abroad as a member of the complement of a vessel
engaged exclusively in international trade shall be treated as an overseas
contract worker."

Section 51 (A) (2) (d) "The following individuals shall not be

required to file an income tax return:

(a) . . . ;
(b) . . . ;
(c) . . . ;
(d) An individual who is exempt from income tax pursuant to the
provisions of this Code and other laws, general or special."

Section 51 (A) (3) "The foregoing notwithstanding, any individual

not required to file a return may nevertheless be required to file an
information return pursuant to rules and regulations prescribed by the
Secretary of Finance, upon recommendation of the Commissioner."

Section 244 "Authority of Secretary of Finance to Promulgate Rules

and Regulations — The Secretary of Finance upon recommendation of the
Commissioner, shall promulgate all needful rules and regulations for the
effective enforcement of the provisions of this Code."

SECTION 3. Compliance and Administrative Procedures:

1. Every person classified within the scope of this Revenue Regulations,

shall make an information return by accomplishing BIR Form 1701C or the new
computerized Form 1703 properly labelling among others the appropriate "tax due
space" as EXEMPT .

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 91
 The accomplished BIR Form 1701C or new BIR Form 1703 whichever is
applicable, together with other relevant supporting papers (e.g. Employer's
Declaration of Income Earned, Financial Statements), shall be filed not later than
April 15 following the taxable year, to the Foreign Post or the Revenue District
Office which has jurisdiction over the place of residence of the taxpayer. cdll

2. The Foreign Posts shall in turn forward these returns to the Revenue
District Office No. 51 — Pasay City for compilation/processing purposes.

3. The respective Revenue District Offices receiving similar returns shall

likewise process and file returns within their own premises.

4. The Revenue District Offices concerned shall submit to the Chief,

International Tax Affairs Division, an annual report consisting of statistical
information covering the aforementioned returns for the preceding taxable year, as
follows (Please refer to Annex A for the format of the report):

a. Gross Income per country total and per type of income

b. Number of filers according to the above classification

This report must be submitted not later than July 30 following the taxable
year being reported.

SECTION 4. Transitory Provision. — 1998 returns filed for this

purpose after April 15 but not later than July 15, 1999 shall not be subject for
penalty charges. BIR Form 1701C or 1703 shall be used until such time that a new
form specifically designed for this purpose shall be printed and be made available.
LibLex

SECTION 5. Repealing Clause: All internal revenue issuances, or

parts thereof, which are contrary to or inconsistent with this Regulation are hereby
repealed, amended, or modified accordingly.

SECTION 6. Effectivity: This Regulation shall take effect

immediately.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Recommending Approval:

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 92
 (SGD.) BEETHOVEN L. RUALO
Commissioner
Bureau of Internal Revenue

ANNEX A

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 93
 April 26, 1999

REVENUE REGULATIONS NO. 08-99

SUBJECT : Providing Penalties for Violation of the Requirement that

Output Tax on the Sale of Goods and Services Should Not
Be Separately Indicated in the Sales Invoice or Official
Receipt.

Pursuant to Section 264 , in relation to Section 106 (D)(1) and

Section 108 (C) of the 1997 Tax Code, this Regulation is promulgated to set
the guidelines in the proper invoicing of output tax on the sale of goods and
services.

SECTION 1. Scope. — All VAT-registered taxpayers who are

required under Section 237 of the 1997 Tax Code to issue receipts or
sales or commercial invoices are no longer allowed to separately bill the
value-added tax corresponding thereto. The amount appearing in the sales
invoices/receipts is thus deemed inclusive of the value-added tax due thereon. cdasia

SECTION 2. Penalty. — Failure or refusal to comply with the

requirement in Section 1 hereof shall, upon conviction, for each act or mission, be
punished by a fine of not less than One thousand pesos (P1,000) but not more than
Fifty thousand pesos (P50,000) and suffer imprisonment of not less than two (2)
years but not more than four (4) years.

SECTION 3. Repealing Clause. — All existing rules and regulations

or parts thereof which are inconsistent with the provisions of this regulation are
hereby revoked.

SECTION 4. Effectivity — This Regulation shall take effect fifteen

(15) days after publication in any newspaper of general circulation.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 94
 Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

(11)

February 10, 1999

REVENUE REGULATIONS NO. 07-99

SUBJECT : Amending Further Revenue Regulations No. 7-95, as

Last Amended by Revenue Regulations No. 13-97

TO : All Internal Revenue Officers and Others Concerned

Pursuant to the provisions of Section 245, in relation to Section 6,

both of the National Internal Revenue Code of 1997, these Regulations are hereby
promulgated to further implement Sec. 114 of Title IV of the said Code, and to
further amend Revenue Regulations (RR) No. 7-95, as last amended by RR
No. 13-97.

SECTION 1. Section 4.110-4, Paragraph (4) of RR No. 7-95, as last

amended by RR No. 13-97, is hereby further amended to read as follows:

"For computerized VAT taxpayers, the said Summary Lists of

Sales and Purchases shall be submitted in magnetic form using 3.5-inch
floppy diskettes to the Revenue District Office (RDO) having jurisdiction
over the place of business of the taxpayer or thru electronic Data
Transmission (EDT) to the National Office Information Systems
Operations Service (NO ISOS) on or before the last day of the month

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 95
 immediately following the close of each calendar quarter. The list shall
conform to the magnetic file format prescribed under Annex "A" hereof.
EDT shall be used only in the case of taxpayers that have been specifically
registered by the BIR for this purpose.

Computerized VAT taxpayers refer to taxpayers whose

record-keeping and accounting system on sales and purchases are
computerized."

SECTION 2. Effectivity. — These Regulations shall take effect fifteen

(15) days after publication in a newspaper of general circulation in the Philippines.
cdtai

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner of Internal Revenue

April 15, 1999

REVENUE REGULATIONS NO. 06-99

SUBJECT : Extending the Deadline for Availment of the Economic

Recovery Assistance Payment (ERAP) Program Under
Revenue Regulations No. 2-99, Until July 15, 1999

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 96
 TO : All Internal Revenue Officers and Others Concerned

Pursuant to the provision of Section 6(a), in relation to Section 244 of the

National Internal Revenue Code of 1997, the deadline for availment of the
immunity from audit or investigation of income, VAT and percentage tax returns,
pursuant to Revenue Regulations No. 2-99, is hereby extended until July 15, 1999,
as follows:

1. Income Tax Returns for the Taxable Year 1998 (whether on

calendar year or fiscal year basis), due for filing as of April 15,
1999;

2. Income Tax Returns for the Taxable Year 1998 of corporations

using the fiscal year accounting period which are due for filing
before July 15, 1999;

3. VAT and Percentage Tax Returns covering all quarters of the

calendar year 1998.

Any provision of Revenue Regulations No. 2-99 and other issuances of this
Office, if inconsistent herewith, is hereby considered modified or amended
accordingly.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 97
 (12)

March 10, 1999

REVENUE REGULATIONS NO. 05-99

SUBJECT : Implementing Section 34(E) of the Tax Code of 1997 on the

Requirements for Deductibility of Bad Debts from Gross
Income

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to the provisions of Section 244

of the Tax Code of 1997, these regulations are hereby promulgated to implement
the provisions of Section 34(E) of the same Code on the requirements for
deductibility of bad debts from the gross income of a corporation or an individual
engaged in trade or business or a professional engaged in the practice of his
profession.

SECTION 2. Definition of Terms. — For purposes of these

regulations, the following words and phrases shall have the following meaning,
viz:

a. "Bad debts" — shall refer to those debts resulting from the

worthlessness or uncollectibility, in whole or in part, of amounts
due the taxpayer by others, arising from money lent or from
uncollectible amounts of income from goods sold or services
rendered.

b. "Securities" — shall mean shares of stock in a corporation and

rights to subscribe for or to receive such shares. The term
includes bonds, debentures, notes or certificates, or other
evidence of indebtedness, issued by any corporation, including
those issued by a government or political subdivision thereof,
with interest coupons or in registered form.

c. "Actually ascertained to be worthless" — In general, a debt is

not worthless simply because it is of doubtful value or difficult
to collect. Worthlessness is not determined by an inflexible
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 98
 formula or slide rule calculation but upon the exercise of sound
business judgment. The determination of worthlessness in a
given case must depend upon the particular facts and the
circumstances of the case. A taxpayer may not postpone a bad
debt deduction on the basis of a mere hope of ultimate
collection or because of a continuance of attempts to collect
notes which have long become overdue, and where there is no
showing that the surrounding circumstances differ from those
relating to other notes which were charged off in a prior year.
While a mere hope probably will not justify postponement of
the deduction, a reasonable possibility of recovery will permit
the account to be carried along notwithstanding that the
probabilities are that the debt may not be collected at all. The
creditor may offer evidence to show some expectation that the
debt would have been paid in the intervening years, and that
subsequently, the hope was shattered or appeared to have been
unfounded. If, for example, the creditor could show that during
the years he attempted to collect the debt, the debtor had
property the title of which was in dispute but which would
enable him to pay his debts when the title was cleared, the
creditor would be entitled to defer the deduction on the ground
that there was no genuine ascertainment of worthlessness.

Thus, accounts receivable, the amount whereof is

insignificant and the collection of which through court action
may be more costly to the taxpayer, may be written-off as bad
debts even without conclusive evidence that the taxpayer's
receivable from a debtor has definitely become worthless.

Good faith does not require that the taxpayer be an

"incorrigible optimist" but on the other hand, he may not be
unduly pessimistic. Creditors do not have to wait until some
turn of the wheel of fortune may bring their debtors into
affluence. The taxpayer may strike a middle course between
pessimism and optimism and determine debts to be worthless in
the exercise of sound business judgment based upon as
complete information as is reasonably ascertainable. The
taxpayer need not have perfect discernment.

d. "Actually charged off from the taxpayers books of accounts" —

This phrase means that the amount of money lent by the
taxpayer (in the course of his business, trade or profession) to

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 99
 his debtor had been recorded in his books of account as a
receivable has actually become worthless as of the end of the
taxable year, that the said receivable has been cancelled and
written-off from the said taxpayer's books of account. A mere
recording in the taxpayer's books of account of estimated
uncollectible accounts does not constitute a write-off of the said
receivable, hence, shall not be a valid basis for its deduction as
a bad debt expense. In no case may any bad debt deduction be
allowed unless the facts pertaining to the money or property lent
and its cancellation or write-off from the taxpayer's accounting
records, after having been determined that the same has actually
become worthless, have been complied with by the taxpayer.

SECTION 3. Requisites for Valid Deduction of Bad Debts From Gross

income. — General Rule. — In general, the requisites for deductibility of bad
debts are:

(1) There must be an existing indebtedness due to the taxpayer

which must be valid and legally demandable;

(2) The same must be connected with the taxpayer's trade, business
or practice of profession;

(3) The same must not be sustained in a transaction entered into

between related parties enumerated under Sec. 36(B) of the Tax
Code of 1997 ;

(4) The same must be actually charged off the books of accounts of
the taxpayer as of the end of the taxable year; and

(5) The same must be actually ascertained to be worthless and

uncollectible as of the end of the taxable year.

Before a taxpayer may charge off and deduct a debt, he must ascertain and
be able to demonstrate with reasonable degree of certainty the uncollectibility of
the debt. The Commissioner of Internal Revenue will consider all pertinent
evidence, including the value of the collateral, if any, securing the debt and the
financial condition of the debtor in determining whether a debt is worthless, or the
assigning of the case for collection to an independent collection lawyer who is not
under the employ of the taxpayer and who shall report on the legal obstacle and the
virtual impossibility of collecting the same from the debtor and who shall issue a
statement under oath showing the propriety of the deductions thereon made for
alleged bad debts. Thus, where the surrounding circumstances indicate that a debt

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 100
 is worthless and uncollectible and that legal action to enforce payment would in all
probability not result in the satisfaction of execution on a judgment, a showing of
those facts will be sufficient evidence of the worthlessness of the debt for the
purpose of deduction.

Exception: In the case of banks, however, in lieu of requisite No. 5 above,

the Bangko Sentral ng Pilipinas (BSP), thru its Monetary Board, shall ascertain the
worthlessness and uncollectibility of the bad debts and it shall approve the writing
off of the said indebtedness from the banks' books of accounts at the end of the
taxable year. The bank though should still comply with requisites Nos. 1-4 as
enumerated above before it can avail of the benefit of deduction.

Also, in no case may a receivable from an insurance or surety company be

written-off from the taxpayer's books and claimed as bad debts deduction unless
such company has been declared closed due to insolvency or for any such similar
reason by the Insurance Commissioner.

SECTION 4. Tax Benefit Rule. — The recovery of bad debts

previously allowed as deduction in the preceding year or years shall be included as
part of the taxpayer's gross income in the year of such recovery to the extent of the
income tax benefit of said deduction. Example: If in the year the taxpayer claimed
deduction of bad debts written-off, he realized a reduction of the income tax due
from him on account of the said deduction, his subsequent recovery thereof from
his debtor shall be treated as a receipt of realized taxable income. Conversely, if
the said taxpayer did not benefit from the deduction of the said bad debt
written-off because it did not result to any reduction of his income tax in the year
of such deduction (i.e. where the result of his business operation was a net loss
even without deduction of the bad debts written-off), then his subsequent recovery
thereof shall be treated as a mere recovery or a return of capital, hence, not treated
as receipt of realized taxable income.

SECTION 5. Securities Becoming Worthless. — If securities, as

defined under Sec. 2(b) hereof, held as capital asset, are ascertained to be
worthless and charged off within the taxable year, the loss resulting therefrom shall
be considered as a loss from the sale or exchange of capital asset made on the last
day of such taxable year. The taxpayer, however, has to prove through clear and
convincing evidence that the securities are in fact worthless.

This rule, however, is not true in the case of banks or trust companies
incorporated under the laws of the Philippines, a substantial part of whose business
is the receipt of deposits.

SECTION 6. Repealing Clause. — The provision of any revenue

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 101
 regulations, revenue memorandum order, revenue memorandum circular or any
other revenue issuances inconsistent with these Regulations are hereby repealed,
amended, or modified accordingly.

SECTION 7. Effectivity Clause. —These Regulations shall take effect

fifteen (15) days after publication in any newspaper of general circulation.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Recommending Approval:

(SGD.)BEETHOVEN L. RUALO
Commissioner
Bureau of Internal Revenue

March 9, 1999

REVENUE REGULATIONS NO. 04-99

SUBJECT : Further Amending Revenue Memorandum Order No. 29-86

dated September 3, 1986, as Amended by Revenue
Memorandum Order No. 16-88 dated April 18, 1988,
as Further Amended by Revenue Memorandum Order No.
27-89 dated April 18, 1989, and as Last Amended by
Revenue Memorandum Order No. 6-92 dated January
15, 1992 Relative to the Payment of Capital Gains Tax and
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 102
 Documentary Stamp Tax on Extra-Judicial Foreclosure
Sale of Capital Assets Initiated by Banks, Finance and
Insurance Companies

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to Section 244 of the Tax Code

of 1997, in relation to Sections 24(D)(1) and 27(D)(5) of the same Code, these
Regulations are hereby promulgated amending Revenue Memorandum Order No.
29-86, as last amended by Revenue Memorandum Order No. 6-92 and other
relevant revenue regulations and issuances regarding the payment of capital gains
tax and documentary stamp tax on extrajudicial foreclosure sale of capital assets
initiated by banks, finance and insurance companies.

SECTION 2. Foreclosure of Mortgage Provision Under Presidential

Decree No. 1529 , Otherwise Known as "Property Registration Decree". —
Section 63 of P.D. No. 1529, otherwise known as the "Property Registration
Decree" provides as follows:

"SEC. 63. Foreclosure of Mortgage. — (a) If the mortgage was

foreclosed judicially, a certified copy of the final order of the court
confirming the sale shall be registered with the Register of Deeds. If no
right of redemption exists, the certificate of title of the mortgagor shall be
cancelled, and a new certificate issued in the name of the purchaser.

"Where the right of redemption exists, the certificate of title of the

mortgagor SHALL NOT BE CANCELLED, but the certificate of sale and
the order confirming the sale shall be registered by a BRIEF
MEMORANDUM thereof made by the Register of Deeds upon the
certificate of title. In the event the property is redeemed, the certificate or
deed of redemption shall be filed with the Register of Deeds, and a brief
memorandum thereof shall be made by the Register of Deeds on the
certificate of title of the mortgagor.

"If the property is not redeemed, the final deed of sale executed by
the sheriff in favor of the purchaser at a foreclosure sale shall be registered
with the Register of Deeds; whereupon the title of the mortgagor shall be
cancelled, and a new certificate issued in the name of the purchaser.

"(b) If the mortgage was foreclosed extrajudicially, a certificate of

sale executed by the officer who conducted the sale shall be filed with the
Register of Deeds who shall make a brief memorandum thereof on the
certificate of title.

"In the event of redemption by the mortgagor, the same rule

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 103
 provided for in the second paragraph of this section shall apply.

"In case of non-redemption, the purchaser at foreclosure sale shall

file with the Register of Deeds, either a final deed of sale executed by the
person authorized by virtue of the power of attorney embodied in the deed
of mortgage, or his sworn statement attesting to the fact of
non-redemption; whereupon, the Register of Deeds shall issue a new
certificate in favor of the purchaser after the owner's duplicate of the
certificate has been previously delivered and cancelled."

It is clear from the above provision of the "Property Registration Decree"

that where the right of redemption of the mortgagor exists, the certificate of title of
the mortgagor shall not be cancelled yet even if the property had already been
subjected to foreclosure sale, BUT INSTEAD only a brief memorandum shall be
annotated at the back of the certificate of title, and the cancellation of the title and
the subsequent issuance of a new title in favor of the purchaser/highest bidder
depends on whether the mortgagor shall redeem or not the mortgaged property
within one year from the issuance of the certificate of sale. Thus, no transfer of
title to the highest bidder can be effected yet until and after the lapse of the
one-year period from the issuance of the said certificate of sale.

SECTION 3. Capital Gains Tax. —

(1) In case the mortgagor exercises his right of redemption within one year
from the issuance of the certificate of sale, no capital gains tax shall be imposed
because no capital gains has been derived by the mortgagor and no sale or transfer
of real property was realized. A certification to that effect or the deed of
redemption shall be filed with the Revenue District Office having jurisdiction over
the place where the property is located which certification or deed shall likewise be
filed with the Register of Deeds and a brief memorandum thereof shall be made by
the Register of Deeds on the Certificate of Title of the mortgagor.

(2) In case of non-redemption, the capital gains tax on the foreclosure sale
imposed under Secs. 24(D)(1) and 27(D)(5) of the Tax Code of 1997 shall become
due based on the bid price of the highest bidder but only upon the expiration of the
one-year period of redemption provided for under Sec. 6 of Act No. 3135 ,
as amended by Act No. 4118 , and shall be paid within thirty (30) days from
the expiration of the said one-year redemption period.

SECTION 4. Documentary Stamp Tax. —

(1) In case the mortgagor exercises his right of redemption, the transaction
shall only be subject to the P15.00 documentary stamp tax imposed under Sec. 188
of the Tax Code of 1997 because no land or realty was sold or transferred for
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 104
 a consideration.

(2) In case of non-redemption, the corresponding documentary stamp tax

shall be levied, collected and paid by the person making, signing, issuing,
accepting, or transferring the real property wherever the document is made, signed,
issued, accepted or transferred where the property is situated in the Philippines;
Provided, That whenever one party to the taxable document enjoys exemption from
the tax, the other party thereto who is not exempt shall be the one directly liable for
the tax. The tax return prescribed under the Code shall be filed within ten (10) days
after the close of the month following the lapse of the one-year redemption period,
and the tax due under Sec. 196 of the Tax Code of 1997 shall be paid based
on the bid price at the same time the aforesaid return is filed.

SECTION 5. Tax Clearance Certificate/Certificate Authorizing

Registration. — In case of non-redemption, a tax clearance certificate (TCC) or
Certificate Authorizing Registration (CAR) in favor of the purchaser/highest
bidder shall only be issued upon presentation of the capital gains and documentary
stamp taxes returns duly validated by an authorized agent bank (AAB) evidencing
full payment of the capital gains and documentary stamp taxes due imposed under
Secs. 3 and 4 of these Regulations on the sale of the property classified as capital
asset. The AAB must be located at the Revenue District Office having jurisdiction
over the place where the property is located.

SECTION 6. Repealing Clause. — The provisions of any revenue

regulations, revenue memorandum order, revenue memorandum circular or any
other revenue issuance inconsistent with these Regulations are hereby repealed,
amended, or modified accordingly.

SECTION 7. Effectivity Clause. — These Regulations shall take effect

fifteen (15) days after publication in any newspaper of general circulation.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 105
 (13)

January 22, 1999

REVENUE REGULATIONS NO. 03-99

SUBJECT : Further Amending Section 2 of Revenue Regulations No.

12-98

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to the provisions of Section 244, in

relation to Section 57 (B) of the National Internal Revenue Code (NIRC) of 1997,
these regulations further amends Section 2 of Revenue Regulations No. 12-98
to streamline and make more efficient the collection of the creditable
withholding tax on income payments to medical practitioners.

SECTION 2. Amendments. — Section 2 of Revenue Regulations No.

12-98, is hereby further amended to read as follows:

"SEC. 2. Amendment. — Income payments subject to creditable

withholding tax and rates prescribed thereon. — Except as otherwise
provided, there shall be withheld a creditable income tax at the rates herein
specified for each class of payee from the following items of income
payments to persons residing in the Philippines:

"xxx xxx xxx

"1. Professional fees paid to medical practitioners. — Any amount

collected for and paid to medical practitioners by hospitals and
clinics or paid directly to the medical practitioners by patients who
were admitted and confined to such Hospitals or Clinics.

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 106
 "a) It shall be the duty and responsibility of the hospital
or clinic to remit taxes withheld from the following:

"1. Professional fees paid directly to Hospitals

or Clinics by patients.

"2. Professional fees paid by patients directly to

medical practitioners where the 10%
expanded withholding tax shall in turn be
given by medical practitioners directly to the
Accounting Office of the Hospitals or
Clinics.

"b) Exception — The withholding tax herein prescribed

shall not apply whenever no professional fee has
been charged by the medical practitioner and paid
by his patient.

"c) Hospitals and Clinics shall submit the names and

addresses of medical practitioners in the following
classifications, every 15th day after the end of each
calendar quarter, to the Collection Division of the
Revenue Region where such Hospital or Clinic is
located, using "Annex A":

"i. Medical Practitioners whose professional fee

was paid by patients directly to the hospital
or clinic.

"ii. Medical Practitioners whose professional fee

was paid to them directly by the patients and
the 10% withholding tax was given by such
practitioner to the Accounting Office of the
Hospital or Clinic.

"iii. Medical Practitioners whose professional fee

was paid to them directly by the patients but
the 10% withholding tax was not given by
such practitioners to the Accounting Office
of the Hospital or Clinic.

"iv. Medical Practitioners who did not charge

any professional fee from their patients.

"d) The rules herein prescribed shall likewise apply to

rendering of medical services by medical

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 107
 practitioners through a duly registered professional
partnership for the practice of the medical
profession, provided, however, that the rate of the
withholding tax to be imposed shall be at five
percent (5%) pursuant to the provisions of this
Section."

"e) Hospitals or clinics shall be responsible for the

accurate computation of professional fees paid
directly to hospitals and clinic and timely remittance
of the 10% expanded withholding taxes. The
deadline of the remittance of the withholding tax
collected whether paid directly to hospitals or clinic
or directly to medical practitioners is on or before
the 10th day of the following month from January to
November and January 25th for the month of
December, to the accredited agent Bank (AAB) of
the Bureau of Internal Revenue. Failure to remit the
same at the prescribed dates shall be subjected to
penalties prescribed by the NIRC.

Likewise, the hospitals or clinics shall issue a Certificate of

Creditable Tax Withheld at Source (BIR Form No. 2307), to medical
practitioners who were subjected to withholding, every 20th day following
the close of the taxable quarter. The names of medical practitioners shall
be included in the Alphabetical List of Income Recipients attached to the
Annual Information Return (BIR Form No. 1604).

SECTION 3. Repealing Clause. — All rules and regulations or any

part thereof inconsistent with the provisions of these Regulations are hereby
amended or repealed accordingly.

SECTION 4. Effectivity. — These Regulations shall take effect fifteen

(15) days after publication in the official gazette or in a newspaper of general
circulation.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

RECOMMENDING APPROVAL:

(SGD.) BEETHOVEN L. RUALO

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 108
 Commissioner
Bureau of Internal Revenue

ATTACHMENT

LIST OF MEDICAL PRACTITIONERS

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 109
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 110
 (14)

February 7, 1999

REVENUE REGULATIONS NO. 02-99

SUBJECT : Economic Recovery Assistance Payment (ERAP) Program,

Granting Immunity from Audit and Investigation of Income
Tax, VAT and Percentage Tax Returns for the Taxable Year
1998 Under Certain Conditions

TO : All Internal Revenue Officers and Others Concerned

Pursuant to Sec. 6 (a) in relation to Section 244 of the National

Internal Revenue Code of 1997, these Regulations are hereby promulgated to
establish the policy and procedures governing the availment of immunity from
audit and investigation of income tax, VAT and percentage tax returns filed by
certain taxpayers for the taxable year 1998.

POLICY STATEMENT

In preparation for the full implementation of a computerized tax

administration, there is a necessity to clean the Bureau's backlog of unaudited tax
returns in order to keep updated and be focused with the most current accounts.
Toward this end, and considering the scarcity of financial and human resource as
well as the time constraints within which the Bureau has to implement such an
endeavor, these Regulations providing for last priority in audit and investigation of
tax returns is hereby adopted to accomplish this objective without however
compromising the revenue collection that would have been generated from audit
and enforcement activities.

In promulgating these Regulations, policy considerations of this Bureau to

maximize revenue collection with least administration costs, to encourage

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 111
 voluntary tax compliance, and to maintain a harmonious relation with taxpayers by
minimizing inconvenience relative to investigation were given due weight. The
taxpaying public are hereby granted the opportunity to assist in the economic
recovery by voluntarily paying their taxes through the ERAP return in accordance
with the rules herein provided.

SECTION 1. Scope and Objective. — The immunity from audit and

investigation herein granted shall apply only to income tax, VAT and percentage
tax returns covering the taxable year 1998, except withholding tax returns (whether
for income, VAT, or percentage tax purposes). The term "Taxable Year 1998"
shall include any Fiscal Year ending on the last day of any month from July 31,
1998 up to June 30, 1999.

SECTION 2. Condition for the Privilege of Immunity from Audit and

Investigation. —

2.1 In order to avail of the immunity from audit and investigation

for 1998 tax returns, the taxpayer shall pay or shall have paid
TWENTY PERCENT (20%) or more than the tax paid in 1997
for income tax, VAT and/or percentage taxes, including basic
deficiency taxes paid (in cases already audited).

For example, for the calendar year 1997:

Income tax due per return P1,000

Less: Creditable Withholding Tax 300
———
Tax paid (and receipted) P700
======

1998 Income tax payment must be at least P1,200 "normal

income tax" to qualify for immunity from audit and investigation.

Assuming that the corporation is liable for minimum corporate

income tax in the amount of P2,000 in filing its calendar year 1998
final adjustment income tax return, the total amount due shall be
P2,200 computed as follows:

Additional tax (P1,000 x 20%) P200

Add: MCIT 2,000
———
Total amount due P2,200
======

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 112
 For example, VAT payments for the 1st quarter 1997:

1st quarter return 1997, net of input taxes - P10,000

1st quarter return 1998, net of input taxes, must be at least
P12,000 to qualify.

2.2 Provided, however, that, where the tax payment for 1998 for
either the income, VAT or percentage tax does not exceed that
of 1997 by 20% or more, the taxpayer shall be accorded
immunity from audit and investigation only with respect to that
tax return which complies with the 20% requirement. In such a
case, the return which fails to comply with the said requirement
shall still be subject to audit and investigation. For example, a
taxpayer made the following payments:

Type of Tax 1997 1998 % of increase

Normal Income Tax 100,000 125,000 25%

VAT 100,000 105,000 5%
Percentage 100,000 115,000 15%

In the above illustration, his VAT and percentage tax returns

shall not qualify for immunity from audit and investigation
because the increase in his tax payment did not meet the 20%
requirement herein prescribed. Hence, only his 1998 income tax
return qualify for immunity from audit and investigation.

2.3 In computing the 20% increase, amendments in the 1997

income, VAT or percentage tax returns as well as deficiency tax
payments shall be included in the computation of the 20% for
purposes of the availment of this privilege. Provided, however,
that with respect to deficiency tax payments, only the basic tax
shall be included in the computation. Interest, surcharges and
other penalties shall not be included.

Illustration:

Taxable Year 1997

Income Tax Paid P100,000

Deficiency Tax Payment (basic tax only) 27,500
————
Total Payment in 1997 P127,500

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 113
 ========

Taxable Year 1998

To qualify for immunity from audit and investigation, the 1998

tax payment must be at least P153,000 computed as follows:

Total Payment in 1997 P127,500

Increase in payment (P127,500 x 20%) 25,500
————
Total Payment to qualify P153,000
========

2.4 In case no tax was paid per the taxpayer's return for the year
1997, his 1998 tax return may qualify for immunity from audit
and investigation, provided, such taxpayer complies with the
following conditions:

a. For income tax purposes, the taxpayer shall pay an

amount equivalent to one-half of one percent (½ of 1%)
based on his gross sales or receipts during the taxable
year (in case of individuals) and to 2% (in case of
corporations);

b. For VAT and/or percentage tax purposes, since the

quarterly VAT and/or percentage tax returns have
already been filed as of January 25, 1999, covering the
prior year 1998, the taxpayer may qualify for immunity
from audit and investigation of the said returns, provided
such taxpayer pays an additional amount of 20% based
on the VAT and/or percentage tax paid per the said
quarterly returns filed.

SECTION 3. Payment of Additional Tax(es) to Comply with the 20%

Requirement. —

3.1 Taxpayers whose 1998 tax returns already filed as of the

effectivity date of these regulations but who want to avail of the
immunity from audit and investigation herein granted, may still
avail of the privilege by paying additional tax(es) to cover for
the 20% requirement not later than June 30, 1999 (e.g., VAT
return for the 4th quarter 1998 already filed last January 25,
1999; Final adjustment income tax return for the fiscal year
ended September 30, 1998 which was already filed as of
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 114
 January 15, 1999; etc.).

3.2 Taxpayers whose 1998 tax returns to be filed on or after the

effectivity date of these regulations shall pay the additional
tax(es) herein required at the same time such return is filed.

3.3 If the additional tax herein required to be paid amounts to Five

Million Pesos (P5,000,000) but not more than Ten Million
Pesos (P10,000,000), the same may be paid in two (2) equal
installments. The first installment shall be paid at the time the
return is filed, and the second installment within one (1) month
thereafter. If such additional tax is more than Ten Million
Pesos, the same may be paid in three (3) equal monthly
installments. Provided, however, that prior approval of the
Commissioner shall be secured for the installment payment of
the additional tax(es) in excess of three installments.

SECTION 4. Mechanics for Availment. —

4.1 Having complied with the conditions under Sections 2 and 3

hereof, he shall signify his intention to avail of immunity from
audit and investigation by filing his application in a BIR Form
to be prescribed by the Commissioner, inclusive of the
following attachments:

For Income Tax

a. Income Tax Returns filed for the year 1997 and 1998;

b. In case of deficiency tax paid for 1997, a copy of the

Authority to Accept Payment (ATAP)/Payment Form
evidencing payment thereof.

For VAT and/or Percentage Tax Return

a. VAT and/or percentage tax returns filed during the year

1997 and 1998;

b. In case of deficiency tax paid for 1997, a copy of the

ATAP/Payment Form evidencing payment thereof.

4.2 For those paying additional tax(es) to comply with the 20%
requirement, the taxpayer shall use BIR Payment Form (BIR
Form No. 0605) for the payment thereof.

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 115
 4.3 The required availment form referred to in Sec. 4.1 shall be
filed with the Revenue District Office having jurisdiction over
the taxpayer's principal place of business.

4.4 Upon verification of the correctness of the taxpayer's availment

of immunity from audit and investigation, he shall be issued
with a Certificate of Qualification for the privileges herein
granted.

SECTION 5. Penalty Clause. —

Any taxpayer who violates the provisions of these regulations shall be

subjected to immediate investigation, the provisions of these regulations to the
contrary notwithstanding, in addition to the imposition of penalties pursuant to the
National Internal Revenue Code and other applicable laws.

SECTION 6. Effectivity. —

These Regulations shall take effect fifteen (15) days after publication in the
Official Gazette or in any newspaper of general circulation.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

RECOMMENDING APPROVAL:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

ATTACHMENT

PRESS STATEMENT
February 8, 1999

Upon the President's instructions, the Bureau of Internal Revenue (BIR) and the
Department of Finance (DOF) have come up with a Revenue Regulations that gives
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 116
 qualified taxpayers an exemption from tax audit and investigation from their returns on
the following taxes:

1. Income Tax
2. VAT
3. Percentage Tax

To qualify, a taxpayer must pay for taxable year 1998, an increment of at least
20% of what it paid for 1997. The taxpayer will then file an ERAP RETURN. ERAP
stands for ECONOMIC RECOVERY ASSISTANCE PAYMENT (ERAP) PROGRAM.
The taxpayer will then be issued a certificate of qualification, which will exempt him
from tax audit and investigation for the taxable year.

The objectives of this new measure are:

1. To increase tax collections by providing taxpayers with incentives to

voluntarily declare and pay a higher income tax.

2. Reduce administrative costs from investigations conducted by the

BIR which contribute only an additional 3% in annual BIR
collections.

3. Reduce fiscal leakages by encouraging taxpayers to pay to the coffers

of the government rather than to fill the pockets of unscrupulous BIR
officials.

(15)

January 6, 1999

REVENUE REGULATIONS NO. 01-99

SUBJECT : Rules and Regulations Implementing the Tax Incentives

Provided Under Section 3 (b) and (d) of Republic Act No.
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 117
 8502 Otherwise Known as the "Jewelry Industry
Development Act of 1998"

TO : All Internal Revenue Officers and Others Concerned

RULE 1. COVERAGE

Pursuant to Section 6 of Republic Act No. 8502, this Revenue Regulations

is hereby promulgated for the effective implementation of the tax incentives under
Section 3 (b) and (d) of RA No. 8502, as follows:

"SEC. 3. Development Incentives. — The following incentives

shall be available to Qualified Jewelry Enterprises in the jewelry industry:

a) ...

b) Exemption from the imposition of excise tax on all goods

commonly or commercially known as jewelry, whether real
or imitation pearls, precious and semi-precious stones and
imitations thereof; all goods made of, or ornamented,
mounted or fitted with precious metals or imitations
thereof, as specifically mentioned in Section 150(a) of the
National Internal Revenue Code of the Philippines, as
amended;

c) ...

d) Additional deduction from taxable income of fifty percent

(50%) of expenses incurred in training schemes approved
by the appropriate agency and which shall be deductible
during the financial year the expenses were incurred;

xxx xxx xxx."

RULE 2. DEFINITION OF TERMS

For purposes of these Revenue Regulations, the terms as used herein shall
have the following meaning:

(a) "Fine jewelry" — means

(1) Articles of personal adornment made of precious metals,

stones, pearls or combinations thereof: (e.g., rings,
bracelets, necklaces, brooches, earrings, watch-chains,
fobs, pendants, tie, pins, cuff links, combs, tiaras,
dress-studs, religious or other medals or insignia).
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 118
 (2) Articles made of precious metals, with or without stones
for personal use of a kind normally carried in the pocket,
handbag or (in one's person: e.g., cigarette cases, powder
boxes, chain purses, cachou boxes).

(b) "Gemstone" — means diamond, ruby, emerald, sapphire, opal,

amethyst, beryl, topaz, garnet and all other gems and stones that
are used in jewelry making.

(c) "Imitation Jewelry" — means articles falling either under a(1)

or a(2) in the preceding paragraph but made of base metals
and/or materials other than precious metals; of imitations of
gemstones, of natural materials; and/or combination thereof.
Base metals refer to iron and steel, copper, nickel, aluminum,
lead, zinc, tin and articles thereof, and other base metals and
their articles as defined in Section XV of the Tariff and
Customs Code of the Philippines, as amended.

(d) "Imitations of Precious Metals" — means non-precious metals

electroplated to simulate precious metals.

(e) "Imitations of Gemstones" — means any man-made

reproduction, copy, imitation, likeness and semblance of any of
the aforementioned stones, processed, manufactured, or done in
any method or procedure.

(f) "In-house Training" — refers to a delivery system of technical

and vocational education which is carried out within the
business premises or in the production plant of a qualified
jewelry enterprise. The conduct of the training by the accredited
jewelry enterprise is normally tied up with a private or
government training institution.

(g) "Precious Metals" — means precious metals which include

gold, silver, platinum, palladium, rhodium, ruthenium, iridium
and osmium. This includes alloys of precious metals, solders
and plating chemicals such as rhodium and palladium plating
solutions and potassium gold cyanide (minimum 68.3% gold)
and potassium silver cyanide (approximately over 68% silver)
and silver cyanide (over 54% silver) in salt solution.

(h) "Qualified Jewelry Enterprise" — means an enterprise engaged

in any aspect in the manufacturing of jewelry and in particular
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 119
 though not exclusively:

(1) in the manufacture of fine jewelry;

(2) in the manufacture of imitation jewelry;
(3) cutting and polishing, forming of gemstones or in
producing imitations thereof;
(4) pearl farming, pearl culturing, and in the production of
imitation pearls;
(5) refining and/or forming of precious metals and/or
imitations of precious metals;
(6) manufacture of articles made of precious metals utilizing
goldsmithing and/or silversmithing techniques;
(7) the manufacture and/or processing of other raw materials
and parts used in the manufacture of jewelry; and
(8) activities in support of jewelry enterprise, such as:
electroplating; gemstone appraisal and certification;
assaying and refining; and import consolidator.

It must be duly registered and accredited by the Board of Investment (BOI),

for the current year, as evidenced by a valid Certificate of Accreditation issued by
the BOI. A Qualified Jewelry Enterprise is categorized by BOI, based on its total
assets, as either:

Micro enterprise - with total assets of less than P1,500,000

Small enterprise - with total assets of P1,500,001 to P15,000,000
Medium scale enterprise - with total assets of P15,000,001 to P60,000,000
Large scale enterprise - with total assets of over P60,000,000

(i) "Training schemes" — refer to an organized activity primarily

designed for the systematic development of knowledge, skill
and behavior pattern required for the adequate performance of a
given job or task and conducted by a training institution.

RULE 3. IMPLEMENTATION OF THE EXCISE TAX EXEMPTION OF

QUALIFIED JEWELRY ENTERPRISES PURSUANT TO SECTION
3(b) of RA 8502

SECTION 1. Exemption from Excise Tax. — A Qualified Jewelry

Enterprise shall be exempt from excise tax on its manufacture and removal of
jewelry from its place of production or factory for sale, consumption or for any
other disposition. It shall also be exempt from excise tax on its importation of raw
materials and supplies, such as but not limited to gemstone and precious metals, or
imitations thereof, for use in its manufacture or production of fine or imitation
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 120
 jewelry, or for disposition to another Qualified Jewelry Enterprise for the latter's
use in the manufacture or production of fine or imitation jewelry, subject to the
provisions of the joint Department of Finance-Bureau of Customs (DOF-BOC)
Order implementing the provisions of R.A. No. 8502 on the importation made by
such Qualified Jewelry Enterprise. In general, manufactured or produced jewelry,
if shown to have been purchased from a Qualified Jewelry Enterprise, shall be
presumed exempt from the excise tax, provided for under this Section, in the hands
of the purchaser or the possessor thereof.

Provided, however, that such Qualified Jewelry Enterprise shall be liable to

the Value Added Tax and such other applicable internal revenue taxes on its sale,
barter, exchange or other transactions, pursuant to the provisions of the National
Internal Revenue Code of 1997.

Provided, further, that the Qualified Jewelry Enterprise shall submit to the
Bureau of Internal Revenue (BIR) a certified true copy of its Certificate of
Accreditation as a Qualified Jewelry Enterprise, issued by the Board of Investment
(BOI), in order to avail of the exemption from excise tax herein provided.

SECTION 2. Registration of the Factory or Place of Manufacture. —

Pursuant to Section 154 of the NIRC of 1997, the jewelry manufacturing plant of
the Qualified Jewelry Enterprise shall, before commencing operations, be first
registered with the Revenue District Office having jurisdiction over the area where
such manufacturing plant is located. The Revenue District Officer concerned shall
accordingly issue a Permit to Operate the Jewelry Manufacturing Plant.

For Qualified Jewelry Enterprises that are already operational prior to their
accreditation with BOI, submission of a copy of the Permit previously issued by
the BIR would suffice.

SECTION 3. Requirements and Procedures for Importations. —

1. The importer must register with the Revenue District Office

having jurisdiction over the importer's principal place of
business in accordance with existing regulations. For every
importation, he must file a written application for Permit to
Import with the Revenue District Office where his principal
place of business is registered, which shall be accompanied by
the following documents:

a. BIR Certificate of Exemption from Excise Tax;

b. Name and Address of Supplier(s)/Consignors;
c. List of Jewelries (with description) to be imported; and

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 121
 d. Pro-Forma Invoice.

2. Upon arrival of the goods in Custom's Custody, the importer

shall apply for Authority to Release Imported Goods (ATRIG)
with the Revenue District Office having jurisdiction over the
port of entry which shall be accompanied by the following
documents:

a. Permit to Import;
b. Commercial Invoice, Letter of Credit (LC), Bill of
Lading, Packing List, and other importations documents,
where applicable; and
c. Import Entry and Internal Revenue Declarations.

3. Upon issuance of the ATRIG, the concerned RDO shall assign

Revenue Officer(s) to supervise the release of imported goods
from Custom's Custody and shall submit a report thereafter.

4. Permit to Import and Authority to Release Imported Goods

(ATRIG) for raw materials and supplies which are exempt from
excise tax pursuant to Section 1 of the Rule 3 hereof shall be
stamped "EXCISE TAX EXEMPT".

5. Revenue District Officers charged with the processing of all

applications for Permit to Import and/or ATRIG shall compile a
list of approved application, which must tally with the
withdrawal certificate/gate pass or other documents issued by
the Bureau of Customs upon release of the imported goods. Any
discrepancy noted must immediately be reconciled and an
assessment of additional excise tax, if warranted, shall be issued
immediately.

SECTION 4. Manufacturer's or Producer's or Importer's Sworn

Statement. — The provisions of Section 130 (C) of the NIRC of 1997 to the
contrary notwithstanding, every Qualified Jewelry Enterprises shall file with the
Commissioner of Internal Revenue or his duly authorized representative every
January 15th and July 15th of each year a sworn semestral report showing, among
other information, the products manufactured, produced or imported during the
period and their corresponding gross selling price or the market value thereof. The
term "gross selling price" means the total amount of money or its equivalent which
the purchaser pays or is obligated to pay to the seller in consideration of the sale,
barter or exchange made by such Enterprise, excluding the value added tax
thereon. Provided, however, that for purposes of the value added tax, sales
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 122
 discount granted and indicated in the sales invoice at the time of sale and the grant
of which does not depend upon the happening of a future event, may be excluded
in computing for such gross selling price, pursuant to the provisions of Section 106
of the NIRC of 1997.

RULE 4. IMPLEMENTATION OF THE ADDITIONAL DEDUCTION OF

FIFTY PERCENT FOR TRAINING EXPENSES INCURRED BY A
QUALIFIED JEWELRY ENTERPRISE PURSUANT TO SEC. 3(d)
OF RA 8502

SECTION 1. Additional Deduction For Training Expense. — A

Qualified Jewelry Enterprise providing training to its employees may avail of the
additional deduction equivalent to fifty percent (50%) of the expenses incurred in
training schemes for the purpose of computing the taxable income. The additional
deduction of fifty percent (50%) shall be in addition to the allowable ordinary and
necessary expenses on training which are fully deductible as a business expense in
accordance with the provision of the NIRC of 1997. Provided, however, that the
benefit arising from the said 50% additional deduction shall not be treated as a
taxable income of the Enterprise in computing for its taxable income.

SECTION 2. Conditions for Availment of the Tax Incentive. —

(a) A Qualified Jewelry Enterprise must submit a certified true

copy of its Certificate of Accreditation issued by the BOI
Managing Head or his duly authorized representative to the
BIR.

(b) The training scheme must be approved by the Technical

Education and Skills Development Authority (TESDA).

The TESDA must certify as to the description (objectives, type of training

to be given, course syllabus, among others) and the cost of the training program.
The TESDA must likewise certify that the training program was actually
conducted and was instrumental to the acquisition of appropriate skills by recipient
trainees employed in the accredited jewelry enterprise. A certification from the
TESDA as to the accreditation of, and the actual conduct of, the training program
must be secured and submitted to the BIR.

In-house training conducted by the qualified jewelry enterprise should also

be accredited and approved by the TESDA. A certification from the TESDA must
likewise be submitted to the BIR in cases of in-house training.

SECTION 3. Period Considered for Tax Deduction. — The additional

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 123
 deduction for training expenses shall be claimed in the taxable year in which the
training expenses have been incurred.

SECTION 4. Documentary Requirements. — The tax deduction may

be availed of by the Qualified Jewelry Enterprise upon filing of the quarterly/final
income tax return accompanied with the following supporting documents to the
BIR:

(a) Certified true copy of BOI accreditation;

(b) Certifications from TESDA as to registration of training

program and actual conduct of training; and

(c) Official Receipts of Training Expenses.

RULE 5. REQUIREMENT TO KEEP BOOKS OF ACCOUNTS AND OTHER

ACCOUNTING RECORDS

All Qualified Jewelry Enterprises availing of tax incentives under RA 8502

shall keep books of accounts and other pertinent records pursuant to the provisions
of Title IX, Chapter 1, Section 235 of the National Internal Revenue Code of 1997.
These records shall be subject to inspection and verification by any duly authorized
revenue officer for the purpose of ascertaining compliance with the conditions
under which they have been granted the tax incentives, and their tax liability, if
any.

RULE 6. PENAL PROVISION

Any Qualified Jewelry Enterprise which shall make fraudulent claims,

submit incorrect information, keep false records of transactions or operations shall
be liable to the pertinent penalties provided under Title X — Statutory Offenses
and Penalties of the National Internal Revenue Code of 1997 without prejudice to
prosecution for any other acts punishable under existing laws.

RULE 7. REPEALING CLAUSE

All administrative orders, rules and regulations, or parts thereof which are
inconsistent with the provisions of these Rules and Regulations are hereby
repealed, amended, or modified accordingly.

RULE 8. EFFECTIVITY

These Regulations shall take effect fifteen (15) days after its publication in
the Official Gazette or in any newspaper of general circulation provided, however,

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 124
 that the right of a Qualified Jewelry Enterprise to the fiscal incentives herein
provided shall commence on the date of its accreditation, but not earlier than July
9, 1998 (date of effectivity of R.A. 8502) as a Qualified Jewelry Enterprise
pursuant to R.A. 8502 and its implementing Rules and Regulations.

Approved this 6th day of January, 1999 at Manila, Philippines.

(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance

RECOMMENDING APPROVAL:

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 125
 Endnotes

1 (Popup - Popup)
RA 8424

2 (Popup - Popup)
RA 8424

3 (Popup - Popup)
RA 8424

4 (Popup - Popup)
RA 7227

5 (Popup - Popup)
Revenue Regulations No. 25-03
RA 8424

6 (Popup - Popup)
Annex A

7 (Popup - Popup)
RA 8424

8 (Popup - Popup)
Annex A
Annex A-1
Annex B
Annex C
Annex D

9 (Popup - Popup)
Annex F

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 126
 10 (Popup - Popup)
Annex A

11 (Popup - Popup)
RA 8424

12 (Popup - Popup)
RA 8424

13 (Popup - Popup)
Attachment

14 (Popup - Popup)
Attachment

15 (Popup - Popup)
RA 8502

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 127