Tax Bulletin - September 2012

1
Tax Bulletin
September 2012
2 Tax Bulletin
Highlights
BIR Rulings
Thetransferofrealpropertybywayofpublicauctionpursuanttoacourtorderis
subjecttocapitalgainstax(CGT)anddocumentarystamptax(DST).(Page 3)
ABOI-registereddeveloperofalow-costmasshousingprojectisexemptfrom
incometax/creditablewithholdingtax(CWT)onrevenuesfromitsBOI-registered
activity.Thisexemptionshallnotextendtosalesofunitswithsellingprice
exceedingP3,000,000.Inthecomputationoftheincometaxholiday(ITH)
incentive,interestincomefromin-housefnancingshallnotbeconsideredas
revenuegeneratedfromtheregisteredactivity.
ABOI-registereddeveloperofalow-costmasshousingprojectissubjecttoVAT
andDSTonitssalesofhousingunits.However,specifcallyforVATpurposes,
thesaleofaresidentiallotvaluedatP1,919,500andbelow,orahouseandlot
orotherresidentialdwellingsvaluedatP3,199,200andbelow,isVAT-exempt.
(Page 4)
BIR Issuances
RevenueMemorandumCircular(RMC)No.50-2012requirestheissuanceof
aCertifcateofTaxClearancetopublictransportoperatorsasapre-requisite
foracceptancebytheLandTransportationFranchisingandRegulatoryBoard
(LTFRB)ofanapplicationforapprovalofsaleandtransferofaCertifcateof
PublicConvenience(CPC).(Page 4)
RMCNo.51-2012amendsRMCNo.47-2012onthedeadlinefortheflingof
applicationsformonetizationofVATtaxcreditcertifcates(TCCs).(Page 5)
RevenueMemorandumOrder(RMO)No.19-2012prescribestherulesand
proceduresintheconductofVATauditsfortheLargeTaxpayersService(LTS).
(Page 5)
RMONo.21-2012prescribesthepolicies,guidelines,andproceduresinthe
acceptance,processing,evaluation,approvalofapplicationsformonetizationand
issuanceofNoticeofPaymentSchedule(NPS)ofoutstandingVATTCCsissuedby
theBIR,andthoseissuedjointlywiththeOne-StopShopInter-AgencyTaxCredit
andDutyDrawbackCenteroftheDepartmentofFinance(DOF-OSSCenter).
(Page 7)
BOC Issuance
CustomsMemorandumOrder(CMO)No.10-2012prescribestheguidelinesfor
theimplementationofDepartmentOrderNo.57-2011,whichexemptsimported
booksfromcustomsdutyandVAT.(Page 13)
PEZA Issuance
ThedeadlineforsubmissionofPEZAsreportorialrequirementsfor2010and
2011isonOctober5,2012.(Page 14)
BOI Issuance
TheBOIissuestheimplementingrulesandregulations(IRR)ofthe2012IPP.
(Page 15)
3
BSP Issuances
CircularNo.767amendstheUnitInvestmentTrustFunds(UITFs)Regulations.
(Page 39)
CircularNo.768amendstheRisk-BasedCapitalAdequacyFrameworkfor
Banks/Quasi-BanksontheDefnitionofQualifyingCapitalInstruments.
(Page 42)
SEC Issuances
SECMCNo.7adoptsmeasuresontheflingofFinancialStatements(FS)of
companieswhosefscalyearendsonDecember31,2012.(Page 43)
Inamergeroftwoforeigncorporations,thesurvivingcorporationcannot
continueoperatingthebranchoffceoftheabsorbedcorporation.Itmustfleits
ownlicensetodobusinessinthePhilippines.(Page 44)
Thesurvivingcorporationinamergermaynotbeautomaticallyconsidereda
memberofacondominiumcorporation.(Page 45)
Court Decision
TheirrevocabilityruleunderSection76oftheTaxCodeappliesonlytothe
optiontocarryoverexcessCWTandnottotherefundoption.(Page 46)
BIR Rulings
BIR Ruling No. 521-2012 dated August 23, 2012
Facts:
Mr.Cownedfourparcelsoflandwhichwereleviedandsoldatpublicauction
pursuanttoacourtorder.Mr.Cfailedtoredeemthepropertiesfromthewinning
bidderswithintheone-yearredemptionperiod,andthepropertiesweretransferred
tothewinningbidders.
Issue:
IsthetransferofpropertybywayofpublicauctionsubjecttoCGTandDST?
Ruling:
Yes.UnderSection24(D)(1)oftheTaxCode,thesale,exchangeorotherdisposition
ofrealpropertylocatedinthePhilippines,classifedascapitalassets,including
pacto de retrosalesandotherformsofconditionalsales,byindividuals,shallbe
subjecttothe6%CGTbasedonthegrosssellingpriceorcurrentfairmarketvalue
asdeterminedinaccordancewithSection6(E)oftheTaxCode.Thetermother
dispositionincludesallkindsofdispositionsofrealproperty,unlessspecifcally
excludedorsubjecttoanothertaxtreatmentunderadifferentprovisionoftheTax
Code.
Moreover,RRNo.9-2012datedMay31,2012providesthatthetransferof
unredeemedforeclosedorauctioned-offpropertiessoldduringinvoluntarysales,
regardlessofthetypeofproceedings,issubjecttoCGT,orCWTandVAT,asthe
casemaybe,andDST.
Thetransferofrealpropertybyway
ofpublicauctionpursuanttoacourt
orderissubjecttoCGTandDST.
4 Tax Bulletin
BIR Ruling No. 547-2011 dated August 31, 2012
Facts:
FCo.isregisteredwiththeBOIasadeveloperofalow-costmasshousingproject.
TheBOIgrantedFCo.afour-yearITHonitsrevenuesfromtheregisteredproject.
Issues:
1. IsFCo.exemptfromCWTonrevenuesgeneratedfromtheproject?
2. IsFCo.sentitlementtoITHautomatic?
3. IsFCo.alsoexemptfromVATandDST?
4. IsFCo.subjecttoanyotheradministrativerequirement?
Ruling:
1. Yes.UnderSection2.57.5(B)(2)ofRRNo.2-98,asamended,theCWTshall
notapplytoincomepaymentstopersonsenjoyingexemptionfromincome
taxpursuanttotheOmnibusInvestmentCode(ExecutiveOrderNo.226),
suchasBOI-registeredenterprises.However,theexemptioncoversonlythe
revenuesgeneratedfromFCo.sregisteredproject,andshallnotextendto
thesaleofunitswithsellingpriceexceedingP3,000,000.Furthermore,inthe
computationoftheITHincentive,interestincomefromin-housefnancingshall
notbeconsideredasrevenuesgeneratedfromtheregisteredactivity.
2. No.EntitlementtotheITHisnotautomatic,asFCo.stillhastocomplywith
Section8(a)oftheSpecifcTermsandConditionsofitsBOIregistration,thus:
a. Secureendorsement/certifcationfromtheHousingandLandUse
RegulatoryBoard(HLURB)thatithasfaithfullycompliedwiththe
approveddevelopmentplanandaCertifcateofGoodHousekeeping;
b. FileanapplicationwiththeBOIIncentivesDepartmentwithinonemonth
fromtheflingofitsfnalincometaxreturn(ITR)withtheBIRtovalidate
theclaimforincometaxexemption.Theapplicationshallbeaccompanied
byacertifcationbytheSocialSecuritySystem(SSS)thatthefrmisin
goodstandingintheremittanceoftheSSScontributionsofitsemployees;
c. SecureaCertifcateofITHEntitlement(CoE)fromtheBOISupervisionand
MonitoringDepartmentpriortoflingtheITRwiththeBIR.Otherwise,the
ITHforthatparticularyearwithoutaCoEshallbeforfeited.
3. No.SinceaBOI-registeredenterpriseenjoysnotaxexemption/privilegesother
thanthosegrantedundertheOmnibusInvestmentCodeandthetermsand
conditionsforBOIregistration,FCo.willremainsubjecttoVATandDSTon
itssalesofhousingunitspursuanttoSection106(A)(1)(a)and196oftheTax
Code.ForVATpurposes,Section109(1)(P)oftheTaxCodeprovidesthatonly
thesaleofresidentiallotvaluedatP1,919,500andbelow,orahouseand
lotandotherresidentialdwellingsvaluedatP3,199,200andbelow,isVAT-
exempt.
4. Yes.FCo.isrequiredtofleonorbeforethe15
th
dayofthe4
th
monthfollowing
thecloseofitsaccountingperiodaProftandLossStatementandBalance
SheetwithAnnualInformationReturnunderoath,statingitsgrossincome
andexpensesincurredduringthetaxableyear.Furthermore,FCo.sbooksof
accountsandotherpertinentrecordsshallbesubjecttoperiodicexamination
bytheBIRforthepurposeofascertainingwhetherithasbeencomplyingwith
theconditionsfortaxexemptionorincentives.
ABOI-registereddeveloperofalow-
costmasshousingprojectisexempt
fromincometax/CWTonrevenues
fromitsBOI-registeredactivity.This
exemptionshallnotextendtosales
ofunitswithsellingpriceexceeding
P3,000,000.Inthecomputationof
theITHincentive,interestincome
fromin-housefnancingshallnotbe
consideredasrevenuegeneratedfrom
theregisteredactivity.
ABOI-registereddeveloperofalow-
costmasshousingprojectissubject
toVATandDSTonitssalesofhousing
units.However,specifcallyforVAT
purposes,thesaleofaresidentiallot
valuedatP1,919,500andbelow,or
ahouseandlotorotherresidential
dwellingsvaluedatP3,199,200and
below,isVAT-exempt.
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BIR Issuances
Revenue Memorandum Circular No. 50-2012 dated June 28, 2012
PublictransportoperatorsshallfrstsecureaCertifcateofTaxClearance
(CTC)fromtheBIRRevenueDistrictOffce(RDO)wherehe/itisregistered
beforeflinganapplicationfortheapprovalofthesaleandtransferofaCPC
withtheLTFRB.
PriortotheissuanceoftheCTC,theRDOwherethepublictransport
operatorisregisteredshallensurethefollowing:
1. Theoperatorhasnooutstandingdelinquentaccounts,whichshallmean
anunpaidself-assessedtaxoranunpaiddefciencyassessmentwhich
hasbecomefnalandexecutory;
2. Theoperatorhasnostop-flercases;and
3. Theoperatorhasfledthefollowingreturns:
a. Quarterlyandannualincometaxreturns,aswellasallpercentage
taxreturns,forthetaxableyearpriortotheyearofthesale/
transferoftheCPC;and
b. Quarterlyincometaxreturnsandmonthlypercentagetaxreturns
fortheconcernedperiodsofthecurrentyearpriortothedateof
sale/transferoftheCPC.
Revenue Memorandum Circular No. 51-2012 dated August 31, 2012
Asamended,thedeadlinefortheflingofanyApplicationforVATTCC
Monetizationshallbeasfollows:
Type of TCC Filing Period
ForrevalidatedandunexpiredTCCs
originallyissuedin2002and2003
July17,2012uptoSeptember15,
2012ortheexpirationoftheTCC,
whichevercomesfrst
Forunexpiredand/orrevalidated
TCCsoriginallyissuedin2004until
April11,2012
July17,2012uptoOctober17,2012
Revenue Memorandum Order No. 19-2012 dated July 31, 2012
Coverage
ThisRMOshallcovertheaudit/investigationofVATreturnsofLargeTaxpayers
Service(LTS)taxpayersclassifedunderthefollowingselectioncriteria:
1. High-Risk Taxpayers
a. Factors/RiskCharacteristicsresultinginunder-reportingVATliabilities
andnon-remittanceofVATcollection:
Taxpayerswithsignificantincreaseinexempt/zero-ratedsales
revenues;
RMCNo.50-2012requiresthe
issuanceofaCertifcateofTax
Clearancetopublictransportoperators
asapre-requisiteforacceptancebythe
LTFRBofanapplicationforapprovalof
saleandtransferofaCPC.
RMCNo.51-2012amendsRMCNo.
47-2012onthedeadlineforthefling
ofapplicationsformonetizationofVAT
taxcreditcertifcates.
RMONo.19-2012prescribestherules
andproceduresintheconductofVAT
auditsfortheLTS.
6 Tax Bulletin
TaxpayerswhoseVATreturnsreflectsubstantialinputtaxes,suchas
whenthetotalinputtaxesclaimedexceed75%ofthetotaloutputtax;
Taxpayerswithhistoryofdeclaringexcessinputtaxcarry-over;
TaxpayersfilingVAT-exempttaxreturnsduetoavailmentoftax
incentivesortaxexemptions;
Taxpayerswithhistoryoffilingclaimsforrefundand/orrequestsfor
issuanceoftaxcreditcertificates;
Taxpayerswithsubstantialsalesbutreportingnetloss;
Taxpayerswithdrasticdecreaseinreportedsales/VATpaymentsor
withmarkeddeviationfromindustrytrends;and
TaxpayersidentifiedasHighRiskbasedontheresultsoftheLTS
ComplianceRiskMatrixAnalysis
b. ComplianceRiskCharacteristicsduetonon-compliancewithadministrative
requirements:
TaxpayerswithacquisitionsofmorethanP1millionincapitalassets
andfailedtoamortizetheinputtaxasrequired;
Taxpayerswhoarenon-compliantinthesubmissionofSummary
ListofPurchases,SummaryListofSalesandothermandatory
requirements;
Taxpayerswhoarenon-compliantwithRMONo.12-2012the
ElectronicSalesReporting;
Taxpayerstransactingwiththegovernmentoranyofitspolitical
subdivisions,instrumentalitiesoragencies,includinggovernment-
ownedorcontrolledcorporations.
2. Medium Risk Taxpayers
a. BusinessIssueRisks/ComplexIndustriesduetoindustryissuesandchange
inthestatus/registrationofbusiness;
b. Taxpayerswithcomplexcorporatestructures,includingmergers/
consolidations/split-upordown/spin-offsandothertypesofcorporate
reorganizations;
c. Taxpayerswithapplicationforcessation/retirementofbusiness;
d. Taxpayerswithmultiplebranches/outletsalloverthePhilippinesbut
reportedlowsales;
e. Taxpayerswithsaleortransferofbusiness;
f. Taxpayerswithmultiplelinesofbusinesseswithdifferentbasisfor
computationofVATliabilities.
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Rules and Procedures
a. TheVATAuditProgramshallbeimplementedinSeptember2012intheLTS.A
VATAuditTeamshallbecreatedandwillbecomposedoftwoVATAuditTeam
Headsandfveauditgroups.
b. TheVATAuditTeamshallinvestigatetheVATreturnsofLTStaxpayers.
Theywillpreparealistoftaxpayersrecommendedforauditbasedonthe
selectioncriteriaspecifedinthisRMO,andsubmitthesametotheAssistant
Commissioner,(ACIR)-LTSforapproval.
c. Onee-LetterofAuthority(eLA)shallbeissuedforeachtaxablequarter/
semesterdulyapprovedbytheACIR-LTSupontherecommendationoftheVAT
AuditTeamHeads.However,ifthereisadefciencyforthecurrentperiodunder
audit,andapossibilitythatthetaxissuethatgaverisetodefciencywouldalso
bepresentinpriorperiod/s,aneLAcouldalsobeissuedforthesaidperiod/s.
d. ThebasicauditproceduresprescribedinRevenueAuditMemorandumOrder
(RAMO)No.1-99andotherissuances,particularlythosewithimpacton
VATaudit,shallbestrictlyobserved.Moreover,RevenueOffcers(ROs)must
thoroughlyunderstandthebusinessoperationofthetaxpayerandadetailed
discussionmustbeincludedinthememorandumreport.
e. IfataxpayerhasalreadybeenissuedaneLAforallinternalrevenuetax
liabilitiesforaparticularperiodandasignifcantfnding/sonVATwas
uncovered,itshouldbecommunicatedtotheVATAuditTeamforpossiblerisk
identifcationinthecurrentperiodunderaudit.
f. IfaneLAhasalreadybeenissuedundertheVATAuditProgramandthe
taxpayerbecomesacandidateforregularauditintheconcerneddivisionbased
ontheselectioncriteriaundertheannualauditprogram,therequestforeLA
shouldnotincludetheVATliabilityofthetaxpayer.
g. TheissuanceofPreliminaryAssessmentNotice(PAN)andFinalAssessment
Notice(FAN)fordefciencyVATliabilitiesasaresultoftheauditwillbein
accordancewithexistingregulations/issuances.
h. Ifthetaxpayerfailstosettle/paytheVATassessmentorfailstofleaprotest
withintheprescribedperiodfromreceiptofthePAN,theVATAuditTaskforce
shallrecommendtheissuanceof,andprepare,theFANtobeapprovedand
signedbytheACIR-LTS.
i. AllauditreportsshallbeapprovedbytheACIR-LTSthrutheconcernedVAT
AuditTeamHead.
Anydeviationfromtheabovepoliciesshallbeallowedonlyuponpriorwritten
authorizationfromtheCommissioner,asrecommendedbytheACIR-LTS.
Revenue Memorandum Order No. 21-2012 dated August 9, 2012
Coverage
ThefollowingVATTCCsthatwereissuedpriortoApril12,2012:
a. ThoseissuedsolelybytheBIRpursuanttotheprovisionsofSection112(A)of
theTaxCode;and
RMONo.21-2012prescribesthe
policies,guidelines,andprocedures
intheacceptance,processing,
evaluation,approvalofapplications
formonetizationandissuanceofNPS
ofoutstandingVATTCCsissuedby
theBIR,andthoseissuedjointlywith
theOne-StopShopInter-AgencyTax
CreditandDutyDrawbackCenterof
theDepartmentofFinance(DOF-OSS
Center).
8 Tax Bulletin
b. ThosejointlyissuedbytheBIRandtheDOF-OSSCenterpursuanttothe
provisionsofSection112oftheTaxCode.
Defnition of Terms
VAT TCC Monetization Programreferstoamechanismadoptedbythe
governmenttogivequalifedVAT-registeredpersonsthecashequivalentsof
theirrespectiveoutstandingVATTCCs,eitherthroughadiscountingfacilityof
participatingGovernmentFinancialInstitutions(GFIs),orredemptionofthefull
cashvalueoftheoutstandingVATTCCbalanceswiththeBIRuponreaching
thespecifedmaturitydatesthereof.
Outstanding VAT TCCsconsistofallVATTCCswithunutilizedbalances,
whetherinthenameoftheoriginalgrantee(s)ortheirrespectivetransferee(s)
asapprovedbytheBIR.
Outstanding VAT TCC Balanceistheunutilizedbalancerefectedattheback
portionoftheVATTCCandintheBIRsIntegratedTaxSystemTaxCreditand
RefundSystem(ITS-TCRS).
Refundable AmountreferstotheoutstandingbalanceoftheVATTCC,after
deductingthetaxpayersoutstandingtaxliability/ies,exceptwithholdingtaxes.
MonetizationreferstotheconversionoftheoutstandingbalanceofVATTCC
intocashpursuanttotheVATTCCMonetizationProgram.
Notice of Payment Schedule (NPS)isacertifcatetobeissuedbytheBIRto
thetaxpayer/holderoftheVATTCCwhoenrolledintheVATTCCMonetization
Programafterconfrmationofthetaxpayersentitlementtomonetization.
Thisdocumentshows,amongothers,thenameofthetaxpayer-recipientof
thecashrefund,thenetrefundableamount,thedateofissuance,andits
correspondingmaturitydate.
VAT TCC Holder-ApplicantshallrefertoanytaxpayerholderoftheVAT
TCC,whetherastheoriginalgranteeorastransferee/assigneethereof,who
signifedtheintentiontoenrollintheVATTCCMonetizationProgram.
Original VAT TCC Issuing Offcereferstotheoffcethatoriginallyprocessedthe
claimfortaxcredit/refundand/ortheoffcethatissuedtheoriginalVATTCC,
priortoitstransferorrevalidation.
Receiving OffcereferstotheBIROffceconcernedthatisdesignatedto
conductinitialprocessingandevaluationoftheApplicationforVATTCC
Monetization.
VAT TCC Monetization-Processing Offcereferstotheoffcedesignatedunder
thisRMOtoconductfnalreviewandevaluationoftheApplicationforVAT
TCCMonetization,aswellasthepreparationandissuanceoftheNPS,after
theinitialevaluationofthesaidapplicationhasbeenconductedbyReceiving
Offce.
Maturity DatereferstothedatespecifedintheNPSwhenthefullcashvalue
ofthenetrefundableamountshallbepaidbytheBIRtotheVATTCCHolder-
Applicant.
Outstanding Tax Liability (OTL)referstothetaxassessmentoranyunpaid
delinquentaccountwherethecollectionthereofisalreadyconsideredfnal,
executoryanddemandable.
9
Participating Government Financial Institution (GFI)referstoanygovernment
bankdulydesignatedbytheDOFtoserveasatrusteebankforpurposesof
monetizingtheoutstandingVATTCCscoveredbythisRMO.
Policies and Guidelines
TheCollectionService(CS),throughtheCollectionProgramsDivision(CPD),
theLargeTaxpayersService(LTS),LargeTaxpayerDistrictOffces(LTDOs)of
MakatiandCebu,andalltheRevenueDistrictOffces(RDOs)underRevenue
RegionNo.8(MakatiCity)shallsendletterstoallVATTCCHoldersunder
theirjurisdictionwithunutilizedVATTCCbalances,inordertoensurethat
theseVATtaxpayersareinformedandawareoftheVATTCCMonetization
Program.
ForVATTCCsthatwerejointlyissuedbytheDOF-OSSCenterandtheBIR,the
notifcationlettersshallbesentbytheBIR.
AllapplicationsforenrollmentintheVAT-TCCMonetizationProgramshallbe
submittedtothefollowingReceivingOffces:
Description Receiving Offces
TCCsoriginallyissuedandsignedbythe
RegionalDirector
RevenueDistrictOffce(RDO)
DeputyCommissioner-OperationsGroup
(DCIR-OG)ortheAssistantCommissioner
(ACIR)-AssessmentService
AssessmentService
CommissionerofInternalRevenue(CIR)or
theACIR-LTS
LTRAD1-3,LTEAD1&2,
LTDOsMakatiandCebu
DCIR,LegalandInspectionsGroup(DCIR-
LIG)ortheACIR-LegalService-forcases
decidedbytheCourtofTaxAppeals(CTA)
ortheSupremeCourtofthePhilippines
AppellateDivision
TCCsthatweretransferredand/or
revalidated,issuedandsignedbyDCIR-OG
orACIR-CollectionService
CollectionProgramsDivision
(CPD)
TCCsoriginallyissuedbytheDOF/OSS
CenterandtheBIR
DOF-OSSCenter
ApplicationsforVATTCCmonetizationshallbefledwiththedesignated
issuingoffcesnotlaterthanOctober17,2012.However,forVATTCCsthat
areexpiringin2012and2013,theapplicationsformonetizationshallbe
fledbytheconcernedVATTCCHolder-Applicantonorbeforetheexpiration
oftheVATTCCsorSeptember15,2012,whichevercomesearlier,as
providedunderRMCNo.47-2012,asamendedbyRMCNo.51-2012.
ThefollowingReceivingOffcesshallconducttherequiredpre-evaluation
oftheapplicationtoverifytheauthenticity,validity,andaccuracyof
theoutstandingbalanceoftheTCCappliedformonetization,aswellas
verifcationonwhetherornottheconcernedVATTCCHolder-Applicanthas
anyoutstandingtaxliability/ies(OTL),forpurposesofdeterminingthenet
refundableamountthatisduetotheapplicantundertheProgram:
10 Tax Bulletin
Offces to Receive Applications Extent/Scope of Verifcation
RDO

AuthenticityoftheVATTCC
ValidityperiodoftheTCCand
whetherornottheVATTCChasbeen
previouslyrecommendedforcash
conversionandincludedinthelistof
lostorcancelledTCCs
AccuracyoftheTCCsoutstanding
balance
ExistenceofanyOTLbytheVATTCC
Holder.
AssessmentService

lostorcancelledTCCs
LTRAD1-3,LTEAD1&2,LTDOs
MakatiandCebu

lostorcancelledTCCs
balance
ExistenceofanyOTLbytheVATTCC
Holder
AppellateDivision

lostorcancelledTCCs.
CPD AuthenticityoftheVATTCC
lostorcancelledTCCs
balance
ExistenceofanyOTLbyVATTCC
Holder.
DOF-OSSCenter

lostorcancelledTCCs
balance.
Thepre-evaluationoftheapplicationforVATTCCMonetizationProgram
anddelinquencyverifcationshallbemadebytheReceivingOffcewithin10
calendardaysfromreceiptoftheapplication.
11
AlltheReceivingOffcesshalldocumenttheresultsofthepre-evaluationand
arerequiredtosubmitcertifcationsdependingonthepre-evaluationstobe
conducted.
Theresultsofthepre-evaluationandcertifcations,togetherwiththeoriginal
VATTCCcasedockets,shallbeforwardedtotheCPDforfurtherevaluationand
processingwithin5calendardaysaftertheconductofthepre-evaluationhas
beencompleted.
ForVATTCCsjointlyissuedbytheDOF-OSSCenterandtheBIR,theapplication
forVATTCCMonetizationshallberecommendedforapproval/disapprovalby
theDOF-OSSCenter,withtheconcurrenceoftheACIR-AssessmentService.
ForVATTCCsthatwereissuedduetothepromulgationofthedecisionbythe
CTAortheSupremeCourt,therecommendationmadebytheAppellateDivision
mustbeartheconcurrenceoftheACIR-LegalService.
If,uponpre-evaluationoftheapplicationforVATTCCmonetization,itis
determinedthatthesamecouldnotbegivenfavorableaction,theNoticeof
DenialofApplicationforVATTCCMonetizationforsignaturebytheHead
ofOffceshallbeimmediatelypreparedandsenttotheconcernedVATTCC
Holder-ApplicantbythedesignatedReceivingOffce.Asattachmenttothe
saidNotice,theoriginalcopy/iesoftheVATTCCsthatwerenotapprovedfor
monetizationshallbeimmediatelyreturnedtotheVATTCC-Holder-Applicant.
AllapplicationsforVATTCCMonetization,irrespectiveoftheVATTCC-Issuing
Offce,shallbesubjecttoreviewbytheACIR-CSpriortoapproval/disapproval
thereofbytheDCIR-OG.
VATTCCsissuedwhichremainunutilizedafterfveyearsfromthedateofissue,
unlessrevalidatedbeforetheendoftheffthyearpursuanttoRRNo.5-2000,
shallnotbeallowedformonetization.Accordingly,onlyvalidandunexpired
TCCsshallbeeligibleforenrollmentinthisProgram.
AnyoutstandingVATTCCasofApril11,2012thatwassubmittedforthe
purposeofmonetizationunderthisOrdershouldnolongerbeallowedto
beusedaspaymentfortheTCCholderstaxliabilitiesorallowedforcash
conversioninaccordancewiththeprovisionsofRRNo.5-2000.
IftheVATTCCHolder-ApplicanthasOTLs,exceptforwithholdingtaxes,aTax
DebitMemo(TDM)shallbeissuedinpaymentofthesaidliabilitypursuant
toSection5.dofRRNo.5-2000priortotheissuanceoftheNPS.Allunpaid
withholdingtaxliabilitiesandcompromisepenaltiesduefromtheVATTCC
Holder-Applicantshallfrstbefullysettledbythetaxpayer-applicantbeforean
NPScanbedulyissued.
IftheVATTCCHolder-Applicanthasapendingapplicationforcompromise
settlementand/orabatementofitstaxliability/iespursuanttoSections204(A)
and204(B)oftheTaxCode,respectively,orifthesaidOTLiscoveredbya
validprotest,his/her/itsrequestforVATTCCmonetizationmaybegranted
andanNPSmaybeissued,providedthatthereis/arestillTCC/swithavailable
balancethatis/aresuffcienttoguaranteethepaymentoftheamountofthe
OTLunderprotestortheamountappliedforcompromisesettlement/abatement
ofpenalties,includingthedelinquencypenaltiesduethereonunderSections
248(A)(3)and249(C)oftheTaxCode,incaseofadversedecisiononthe
protestordenialordisapprovaloftheapplicationforcompromisesettlementor
abatementofpenalties.
12 Tax Bulletin
IftheVATTCCHolder-ApplicantisfoundtohaveanOTL,he/she/itshallbe
immediatelyinformedbytheconcernedRDOhavingjurisdictionoverthetaxpayer-
applicantontheexistenceofthesaidOTL.TheRDOmustimmediatelyadvisethe
taxpayertopaythesaidOTL,eitherthrucashorthroughTDM,asthecasemay
be,uponreceiptoftheApplicationforMonetizationoftheVATTCCdirectlyfrom
thetaxpayer-applicant,oruponreceiptoftheRequestforDelinquencyVerifcation
fromtheCPD.IftheVATTCCHolder-ApplicantrefusestofullysettletheOTL,
includingthedelinquencypenalties,he/she/itshalllikewisebeoffciallyinformed
thatnon-paymentofthesaidOTLisagroundforthedenialoftheapplicationfor
VATTCCmonetization.
ApplicationforpartialmonetizationofanyVATTCCshallnotbeallowed.Incase
thetaxpayerstotalOTL,includingalltheapplicabledelinquencypenalties,is
lessthantheamountoftheVATTCCappliedformonetizationandtheVATTCC
Holder-Applicantrefusestofullysettlethesaidtaxliability/iesuponflingofthe
applicationforVATTCCmonetization,thesaidapplicationshouldnotbegivendue
courseandtheconcernedtaxpayermustbeoffciallyinformedofthesaiddenial,
clearlystatingallthereasonstherefor.
ForVATTCCsexpiringfromJuly17,2012toDecember31,2013,anapplication
formonetizationpriortotheirexpirationshallbeautomaticallyconsideredan
applicationforrevalidation.AccordinglyandsubjecttotheprovisionsofSection
IV.3ofthisOrder,theconcernedVATTCCHolder-Applicantshallnolongerbe
requiredtoapplyforTCCrevalidationpursuanttoSection230(B)ofRRNo.
5-2000.
AllapprovedapplicationsforVATTCCmonetizationshallbecoveredbyNPS.For
TCCsscheduledformonetizationin2012,therefundshallbemadeuponchecks
drawnbytheCommissionerofInternalRevenue(CIR)orbyhisdulyauthorized
representative.However,forVATTCCsscheduledformonetizationfrom2013to
2016,theVATTCCHolder-Applicantcanelecttoexerciseeitherofthefollowing
options:
ImmediatelypresenttheNPStoaparticipatingGFIformonetizationata
discount,inaccordancewiththeratesdeterminedbytheSecretaryofFinance
andtheparticipatingGFIswithinthesetperiod;or
HoldtheNPSuntilitsmaturitydateandpresentthesametotheBIRfor
paymentofthefullcashvalueoftheNPS,inaccordancewiththefollowing
schedule:
TCCsoriginallyissuedin2008andprioryears 2013
TCCsoriginallyissuedin2009 2014
TCCsoriginallyissuedin2010 2015
TCCsoriginallyissuedin2011and2012 2016
Forpurposesoffairnessandequity,theassignmentoftheNPSmaturitydates
shallbeasfollows:
ForVATTCCsissuedinyears2009and2010,theoriginalmonthsanddaysof
theissuancethereofshallbethematuritydatesoftheNPStobeissued;and
ForVATTCCsissuedfrom2004upto2008,andfrom2011toApril11,2012,
theCPDshallrationalizetheassignmentthereofbyequitablyspreadingthe
maturitiesthereofoverthe12-monthperiodsin2013and2016,takinginto
considerationthatVATTCCsissuedearliershalltakeprecedenceintermsof
paymentscheduleoverotherVATTCCsissuedinlatermonthsand/oryears.
13
Exceptincasesofcorporatemergerandconsolidation,allNPSissued,in
general,shallnotbetransferabletoanyperson.Ifsuchcorporatereorganization
occurredandthetaxpayeroptedtoholdtheVATTCCuntilitsmaturityfor
paymentbytheBIR,nonewNPSshallbeissuedinthenameofthesurviving/
newentity.However,thesaidentityshallpresentadequatedocumentaryproofs
ofsuchreorganizationtotheFinancialService,insupportofitsrequestforcash
redemptionoftheNPSuponthematuritydatethereof.
TheNPSmustbepresentedbytheholder-claimantforpaymentbytheBIRwithin
30calendardaysbeforematuritydate.Ifthelastdayforthepresentationofthe
NPSfallsonaSaturday,Sunday,holiday(regularorspecial)oradeclarednon-
workingdayduetoforcemajeure,theNPSshallbepresentedforpaymentonthe
succeedingbusinessday.
AnyNPSnotpresentedtotheBIRforpaymentwithin30calendardaysbefore
maturitydatethereofshallbeconsideredascancelledandthesameshallbe
forfeitedinfavorofthegovernmentwithoutanypriornotice.
AnyholderofaVATTCCqualifedunderthisProgramwhofailsordoesnot
intendtoenrollintheProgramshallretainthefollowingrights:
CredithisVATTCCsagainsttaxliabilities,inaccordancewithexistingrules
onTCCutilization;or
Apply,subjecttoconditionsofthelawandpertinentrulesandregulations,
forTCCrevalidationunderSection230(B)oftheTaxCodeand/ortaxrefund
(cashconversion)underSection204(C)ofthesameCode,subjecttothe
availabilityoffunds,incaseofthelatter.
Transitory Provisions
AllVATTCCholderswithapplicationsforcashconversionofoutstanding
VATTCCs,pursuanttoSection204(C)oftheTaxCode,thatarestillpending
processingbytheBIRcanstillapplyforVATTCCmonetizationbywithdrawing
thepreviouslyfledapplicationforcashconversionfromtheconcernedoffce
havingphysicalpossessionofthesaidapplication,andflinganewapplicationfor
enrollmentintheVATTCCMonetizationProgramwiththeconcernedReceiving
Offces.
AllrequestsforcashconversionofVATTCCsthatarealreadyinthepossession
oftheBIRasoftheeffectivityofExecutiveOrderNo.68,datedMarch27,2012,
andDOF-DBM-BIRJointCircularNo.2-2012,datedMay31,2012,maystillbe
processedpursuanttoSection5(b)ofRRNo.5-2000,regardlessoftheissuance
datesofthecoveringTCCs,subjecttotheavailabilityoffunds.
BOC Issuance
Customs Memorandum Order No. 10-2012 dated August 30, 2012
Allimportedbooks,whetherforcommercialorpersonaluse,areexemptfrom
customsdutyandVAT.
ThecustomsdutyandVATexemption,however,doesnotapplytoimported
bookspublishedbyorforaprivatecommercialenterpriseessentiallyfor
advertisingpurposesasstatedinAnnexAoftheFlorenceAgreement
(AgreementontheImportationofEducational,ScientifcandCulturalMaterials).
CMONo.10-2012prescribesthe
guidelinesfortheimplementationof
DepartmentOrderNo.57-2011,which
exemptsimportedbooksfromcustoms
dutyandVAT.
14 Tax Bulletin
Forbooksimportedincommercialquantities,theimportermustpresentan
endorsementfromtheDOFRevenueOffcefordutyandVATexemptionprior
toreleaseofthebooksormaterialsfromcustoms.Theendorsementshallbe
issueduponsubmissionofthefollowingdocuments:
1. BillofLading/AirwayBill/PostalRegistryNoticewithBOCTentative
AssessmentSheet
2. CommercialInvoice
3. Packinglistwithtitleofthebooks
4. Authorityofrepresentative(inlieuofconsignee)
5. Affdavitattestingthattheshipmentconsistsofbooks
6. FordonatedbooksDeedofDonation,dulyauthenticatedbythe
Philippineconsulateabroad,andDeedofAcceptance
7. CertifcationfromtheUnitedNationsEducationalScientifcandCultural
Organization(UNESCO)OffceinthePhilippinesattestingthatthe
importationiscoveredbytheFlorenceAgreement
8. CertifcateofRegistrationwiththeNationalBookDevelopmentBoardas
bookimporterorpublisher.
Theaboveendorsementshallnotberequiredforbooksimportedaspersonal
effectsorforpersonaluse,whethertransportedasbaggage,throughcouriers
orthepostoffces.Saidimportations,however,shouldbeclearedandreleased
throughtherequireddeclarationofgoodsasprovidedunderexistingrulesand
regulations.
AllotherissuancesinconsistentwiththisCMOarerevoked,repealedor
modifedaccordingly.
CMONo.10-2012shalltakeeffectimmediately.
PEZA Issuance
Memorandum Circular No. 2012-025 dated September 25, 2012
Reportorial Requirements and Submission Deadline
AllPEZA-registeredEnterprisesandEcozone/ITEcozoneDevelopers-Operators
arerequiredtosubmitthefollowingreportorialrequirementsfor2010and
2011notlaterthan5October2011:
CopyofAuditedFinancialStatements(AFS)for2010and2011,duly
stampedReceivedbytheBIR;
CopyofITRsfor2010and2011,togetherwithschedulessubmittedtothe
BIR,dulystampedReceivedbytheBIR;
DetailsofOtherIncomefor2010and2011;
DataonRevenuesandTaxesPaidfor2010and2011;and
BreakdownofSalesperRegisteredActivityfor2010and2011.
AsprovidedinPEZAMemorandumCircularNo.2007-11,thesedocuments
mustbesubmittedtoPEZAwithin30daysfromtheprescribedlastdayoffling
oftheITR/AFSwiththeBIR
Sanctions
UnderRuleXXV,Section8.BofPEZAsRulesandRegulations,PEZAmay
suspend,withhold,disapproveorrevokeanypermit,authority,orincentive/s
ThedeadlineforsubmissionofPEZAs
reportorialrequirementsfor2010and
2011isonOctober5,2012.
15
beingadministeredbyPEZAforfailuretocomplywiththePEZArulesandwith
thetermsoftheirRegistrationAgreementwithPEZA
UnderRuleXXV,Section8.AofthesameRulesandRegulations,lateflingof
reportorialrequirementsshallbesubjecttoanadministrativefneofP500
basicfneplusP50/daydelayinsubmissionoftherequiredreports
BOI Issuance
Implementing Rules and Regulations (IRR) of the
2012 Investments Priorities Plan (IPP) dated 28 September 2012
Defnitions
Existing Projectreferstoaprojectofanexistingenterprisethathasstarted
commercialoperationatthetimeofapplicationwiththeBoard.
Expansion Projectreferstoaprojectofanexistingenterprisethatwould
involvetheinstallationofadditionalfacilities/equipmentthatwillresultin
increaseincapacityofthesame/similaractivitywithinthesameexisting
plant/facilitiesoftheenterprise.Projectsthatdonotqualifyasnewshallbe
consideredanexpansion.
Fulfllment House/Centerreferstoafacilitythatofferstostore,receivethe
orders,packageandthenshiptheordereditemtotheendconsumer,onbehalf
oftheproductowner.
Government Guaranteereferstotherateofreturngrantedbytheregulating
agencytoincludeproftandtherecoveryofcapitalexpenditure(guaranteed
rateofreturn),assuredpaymentwhetherornotservices/productswere
produced/delivered(takeorpayprovision),andassurancetolenderbya
governmentagencythatafnancialobligationwillbehonorediftheborrower
isunabletorepaythedebt.
Government Subsidyreferstothefnancialcontributionbythenational
governmentoranyofitsagenciestodefray,payorshoulderaportionofthe
projectcostortheexpensesandcostsinoperatingormaintainingtheproject.
Job Generationreferstothenumberofjobsdirectlygeneratedbytheproject.
Measured Capacityreferstotheestimatedadditionalvolumeofproduction/
servicewhichtheBoarddeterminestobedesirableineachpreferredareaof
investment,takingintoaccounttheexportpotentialoftheproduct.Formass
housingprojects,theestimatedhousingbackloginthecountryshallbethe
basisofmeasuredcapacity.
Modernization Projectreferstotheprojectofanexistingenterprisethatwould
involveimprovementsinsystems,processes,equipmentand/orfacilitiesthat
mustresultinanyofthefollowing:
1. Atleast25%substantialreductionofproductioncost/costofprovisionof
theservice;or
2. Upgradingofproduct/servicequalityorclassifcationofthefacility
(e.g.hospitals,hotels,resorts)toahigherclassinaccordancewith
accreditationstandardsapplicabletotheindustryconcerned.
TheBOIissuestheIRRofthe2012IPP.
16 Tax Bulletin
Multiplier Effectreferstotheincreaseineconomicactivityandinterrelationships
generatedandstimulatedbytheinvestment.
New Plantation Areareferstothenewhectarageofplantationorlandsthathave
beenidleforatleastoneyear,orthoseinvolvingchangeofcrops/varietyto
achievehigheryield,orshiftsintheproductionsystemsuchasorganicfarming.
New Projectreferstotheproject/activitylistedintheIPPthathasnotstarted
commercialoperationundertakenby:
1. Anewlyorganized/formedenterprisethat:
Hasnocommonstockholdersinanyexistingenterprise;or
Hascommonstockholdersintheexistingenterprisebutwhowillown
notmorethan50%ofequityinthenewenterprise;or
Hascommonstockholdersbutwillengageinanentirelydistinctand
separateactivity;or
Hascommonstockholders(regardlessofpercentageofcommon
ownership)andwillengageinthesameactivityasthatoftheexisting
enterprise,butwilllocateinadifferentmunicipality,provinceorregion.
2. Anexistingenterprisethatshallengagein:
Anentirelydistinctanddifferentactivityfromitsexistingbusiness
operations;or
Thesameactivityprovideditshallestablishanewfacilityinanarea
notcontiguoustothepremisesofitsexistingprojectandwithnew
investments.
3. AnenterpriseinvolvingthemanufactureofproductsutilizinglocalResearch
&Development(R&D).ApplicationsforregistrationutilizinglocalR&D
mustbeendorsedbytheDepartmentofScienceandTechnology(DOST),
statingthatthiswasundertakeninthePhilippinesandhasnotyetbeen
commercialized.
4. Forindustrialtreeplantations,anenterpriseinvolvedinthedevelopment
ofanypublicorprivatelandtoplantationoftimberandnon-timberspecies
tosupplytherawmaterialrequirementsofforest-basedindustries.Italso
includesplantationwithexistingtreecrops,whichhavenotyetreached
commercialharvest.
Net Value-Addedreferstothevalueoffnalproduct/servicelessthevalueof
inputs.Theprojectsnetvalue-addedshouldbeatleast25%exceptforprojects
dependentonimportedrawmaterials/supplies.
Upgradingreferstotheimprovementofthefacility/infrastructurebyadding
orreplacingcomponents.Thismaybetreatedasanexpansion/modernization
project.
Equity Requirement
25%oftheprojectcost,unlessexemptedunderanyofthefollowing:
1. Projectsofapplicantswithgoodtrackrecordinimplementingregistered
projects;
2. Projectsofpublicly-listedcompanies;
3. Projectsnotentitledtoincometaxholiday(ITH).
17
Forlargeprojectswithagestationperiodofmorethanoneyear,the25%
equityrequirementshallbebasedontheannualcapitalrequirementofthe
project,providedthatthetotalequityrequirementof25%iscompliedwithin
thefrstyearofITHavailment
Locational Restriction in the National Capital Region (NCR)
TheBOIshalllimitincentivestofrmsthatlocateincongestedurbancenters
(NCR).
Exemptionsfromthelocationalrestrictionmaybegiventothefollowing:
1. Projectsingovernmentindustrialestatesdeclaredbynationallawor
presidentialproclamationpriorto1January1989,unlesssubsequently
privatized
2. Projectsthatwillengageinservicetypeactivities
3. Expansionofexport-orientedprojects
Effectedwithinthefirmsexistingpremises;
Enterprisehasagoodtrackrecordofexportsandhasnorecord
ofviolationofthetermsandconditionsgoverningitsexisting
registration(s)specifically,theearlierprojectexceededitsprojected
exportcommitmentinthepast3years
4. Modernizationprojects
5. Strategicactivities
[Editors Note: Projects of small and micro enterprises and relocation of oil
terminals under the 2011 IPP IRR are no longer exempted from the locational
restriction.]
Export of products in short domestic supply
Theexportcommitmentofaregisteredenterprisemaybesuspendedtosatisfy
nationalinterestorinanemergencysituation.
ITH Availment
TheextentofaprojectsITHentitlementshallbebasedonthefollowing
parameters:
1. Projectsnetvalue-added
2. Jobgeneration
3. Multipliereffect
4. Measuredcapacity
Iftheregisteredenterprisefailstoimplementtheprojectasrepresentedin
itsprojectapplication,theBOImayopttoreducetheprojectsITHavailment
proportionatetotheactualperformance(e.g.,investments,employment
generation,productionandsales,timetable)oftheenterprise.
TheincomequalifedforITHshallbelimitedtotheincomedirectlyattributable
totherevenuegeneratedfromtheregisteredproject.
NetincomequalifedforITHavailmentshallnotbearesultofgrossrevenues
exceeding10%oftheprojectedgrossrevenuerepresentedbythefrminits
application.
18 Tax Bulletin
Wheretheprojectsactualrevenuesexceedtheprojectionsinitsapplication
duetonewmarkets/orders,additionalemployment/shifts,additional
investments,theBOImayincreasetheprojectsITHavailmentproportionately.
Requestsforadjustmentsofprojectedrevenuemustbefledbeforethefling
ofapplicationforITH.[Editors Note: New Provision]
Incaseofprojectsintendedforownuse,ITHshallonlybeapplicableto
revenuesonsalesgeneratedorservicesrenderedtootherenterprises.
Onlynetincomefromtheoperationofregisteredactivity,ascertifedunder
oathbythefrmsCEOorCFO,shallbeentitledtoITH.
Enterpriseswithmultipleregistrationsand/orseveralactivities(whetherBOI-
registeredornot)shallsubmitalistofcostitemsthatarecommonwiththe
qualifedprojectandtheircostallocationtoensureproper,fairandequitable
allocationofcommoncost(overheadandadministrativecosts).
Base Figure and Rate of Exemption
ITHofexpansionprojectsaresubjecttoabase-fgureequivalenttothe
enterpriseshighestsalesvolumeinthecaseofhomogenousproducts,orsales
valueinthecaseofheterogeneousproducts,inthelastthreeyearspriortothe
flingoftheapplicationforregistrationoftheproject.
Projectsregisteredunderthemodernizationprogramwithoutincreasein
capacitymaybeentitledtothreeyearsITHandotherincentiveswithout
prejudicetocompliancewithotherrequirements.
Projects with Government Guarantee
Projectswithgovernmentguarantee/subsidyarenotentitledtoITHexcept
incaseswhereITHhasbeenconsideredinthegrantofratesapprovedbythe
regulatoryagencyconcerned.
TheITHisdeemedtohavebeenimputedinthegrantofthegovernment
guarantee/subsidyiftheITHwasincorporatedinthebiddocumentsofthe
projectproponent/contractwithgovernmentontheproject,ortheITHwas
includedinthefnancialmodelbytheregulatoryagencyinapprovingthe
projectstariffs/rates.Inthelattercase,theavailmentofITHshallbesubjectto
acertifcationbytheconcernedregulatoryagency.
Preferred Activities
A. Agriculture/Agribusiness and Fishery
Includescommercialproductionandcommercialprocessingofagricultural,
herbalandfsheryproducts,andagricultureandfsheryrelatedactivities,
suchasirrigation,post-harvest,coldstorage,blastfreezingandthe
productionoffertilizersandpesticides.
ProjectsthatcostatleastthePhilippinePesoequivalentofUSD200,000
maybegrantedpioneerstatus.
Applicationsforregistrationmustbeendorsedbytheapplicable
governmentagency.
19
Commercial Production
1. Productionofagricultural(crops,poultryandlivestock)andfishery
productsandintercroppingofhighvaluecropsasidentifiedbythe
DepartmentofAgriculture(DA).
2. Cropproductionshouldinvolvenewplantationareastoqualifyfor
registration.
Commercial Processing
1. Conversionofagriculturalandfisheryproducts,theirby-productsand
wastestoaformreadyforfurtherprocessingorfinalconsumption.
2. Extractionofhigher-valuesubstancesfromagriculturalandforest-
basedrawmaterialsthroughbio-processing,asendorsedbythe
concernedgovernmentagency.
3. Productionofanimalandaquafeeds,excludingthoseforgame
animals,fowlsandotherspeciesforpet/leisurepurposes.
4. Processingofagriculturalproductsshouldinvolvedomestically
producedraworsemi-processedagriculturalproducts,unlesstheyare
notlocallyproducedornotinsufficientquantity.
5. Ifusingimportedraworsemi-processedagriculturalproductsthatare
locallyproducedorinsufficientquantity,theprojectmayqualifyfor
registrationprovidedthatthefinished/finalprojectisforexportorthe
projectqualifiesforpioneerstatus.
[Editors Note: The production of iodized salt, refned sugar, cooking oil and
rice has been deleted from the 2012 IPP IRR.]
Irrigation
1. Irrigationsystemprimarilyintendedtorenderservicetoagricultural
farms.
2. Irrigationsystemincludeswatersource,distributionlinesandcontrol
mechanism,primemover,pump,generatorandtransformer.System
capacityisexpressedintermsofcubicmetersofirrigationwaterper
year.
3. Onlyrevenuesgeneratedfromservicesrenderedtootheragricultural
farmsmaybeentitledtoITH.
Harvesting Services
1. Mechanicalharvestingservices.
Post Harvest Facilities
1. Establishmentandoperationofcoldstorage,freezing,bulkhandling,
packinghouse,storagefacilitiesandtradingcenter.
2. IceplantsthatwilllocateinLessDevelopedAreas(LDAs).
3. Onlyrevenuesgeneratedfromservicesrenderedtootheragricultural
enterprisesmaybeentitledtoITH.
B. Creative Industries/Knowledge Based Services
Business/knowledgeprocessing.
Non-voicebusinessprocessingoperations(undertakingofoutsourced
servicessuchasadministrativeandbusinessservices,transcription
services,engineeringandarchitecturalservices).
20 Tax Bulletin
Creativeandknowledge-basedserviceswithoriginalcontent(software
development,animation,engineeringandarchitecturaldesign,product
design,gameandapplicationsdevelopment,andsoftwaredevelopment)
maybegrantedpioneerstatus,providedthattheprojectcostisatleast
thePhilippinePesoequivalentofatUSD200,000(excludingcostofland
andbuilding)tobeputupduringthefrstyearofoperations.
C. Shipbuilding
Constructionandrepairofships/boats,shipbreakingandshiprecycling.
Qualifcationsforpioneerstatus:
1. Shipbuildingorshiprepairfacilitieswithaminimumliftingcapacityof
20,000DWT.
2. Shipbuildingorshiprepairfacilitieswithaminimumberthingcapacity
of7,500DWT.
3. ProjectsthatcostatleastthePhilippinePesoequivalentofUSD100
million.
Generalrequirements:
1. Minimumrequiredpaid-upcapital,capitalequipmentandtechnical
andskilledmanpowerasspecifiedbyMARINA.
2. CompliancewithDOLEDepartmentCircularNo.1,seriesof2009,on
theGuidelinesofOccupationalSafetyandHealthintheShipbuilding,
ShipRepairandShipbreakingIndustryandsecureacopyofaDENR-
issuedEnvironmentComplianceCertificate.
3. Submissionofacopyofitslicense/authorizationoritsequivalent
fromMARINAorotherconcernedagencypriortostartofcommercial
operation.
Ship/BoatbuildingRequirements:
1. Mustbeatleast500GT
Shipbreaking/ShiprecyclingRequirements:
1. Drydockingordismantlingshipwithaminimumcapacityof1,500
DWT.
2. CompliancewiththerequirementsoftheHongKongInternational
ConventionfortheSafeandEnvironmentallySoundRecyclingof
Ships,includingthepreparationofaShipRecyclingFacilityPlanand
theTechnicalGuidelinesfortheEnvironmentallySoundManagement
oftheFullandPartialDismantlingofShips.
D. Mass Housing
Developmentoflowcosthousingandmanufactureofmodularhousing
componentspreferablyusingindigenousmaterials.
Modularhousingcomponentsusingindigenousmaterialsincluderoof/
framingsystems,wall/partitionsystems,fooringsystems,door/window
systemsandfnishing/ceilingsystems.
21
Inmodularhousingcomponents,thefrmmustsellatleast50%oftotal
annualproductiontomasshousingprojects.
Generalrequirements:
1. SellingpriceofeachhousingunitshallbemorethanPHP400,000but
notexceedingPHP3million.[Editors Note: In the 2011 IPP IRR, the
cap was PHP 2.5 million.]
2. Mustbeneworexpandinglow-costmasshousingproject.
3. Minimumof20livabledwellingunitsinasinglesiteorbuilding.
4. ProjectsconformwiththedesignstandardsintheRulesand
RegulationstoimplementBPNo.330/PDNo.957andotherrelated
laws.
5. Alllow-costmasshousingprojectsmustcomplywiththesocialized
housingrequirementbydevelopinganareaforsocializedhousing
equivalenttoatleast20%ofthetotalsubdivisionarea,ortotal
subdivisionprojectcostforhorizontalhousing,or20%ofthetotal
floorareaofqualifiedsaleablelowcosthousingunitsforvertical
housingprojects,throughanyofthefollowingmodes:
Developmentofanewsettlementdirectlyundertakenbythe
registeredentity;
Developmentofanewsettlementthroughjointventure
agreementswitheither:alocalgovernmentunit(LGU),anon-
governmentorganizationaccreditedbytheBOI,asubsidiaryof
theBOI-registeredentityoradeveloperaccreditedbytheHLURB.
TheBOI-registeredentityisrequiredtoprovideproofoffunds
transferredtotheimplementingagency.
Slumupgradingorrenewalofareasthroughzonalimprovement
programsorprojectsthatwilldirectlyaddresstheproblemof
informalsettlersalongthemainriversystems.
6. Compliancewiththesocializedhousingrequirementmust
becompletedwithintheITHavailmentperiod,andshouldbe
proportionatetothenumberoflow-costhousingunitsbeingapplied
forITHforthetaxableyear.[Editors Note: New provision.]
Horizontalhousingprojectsrequirements:
1. Masshousingprojectsmustbelocatedinareaszonedandclassified
forresidentialuse/purposesinconformitywiththeapproved
ComprehensiveLandUsePlanandZoningoftheLGUconcerned.
Verticalhousingprojectsrequirements:
1. Atleast51%ofthetotalfloorarea,excludingcommonfacilitiesand
parkingareas,mustbedevotedtohousingunits.
2. Inlieuofthemodesforcompliancewiththesocializedhousing
requirement,donationmaybeallowedprovidedthat:
ThedonationismadetoaBOI-accreditedNGO.
22 Tax Bulletin
Theamounttobedonatedshallbeequivalentto30%of20%of
thebuildingconstructioncostbasedontheactualnumberor
equivalenttotalfoorareaofqualifedsaleablelowcosthousing
units,ornotlessthan40%oftheestimatedITH.Equivalent
totalfoorareareferstothesumtotalofthefoorareaofallthe
registeredlow-costmasshousingunits.
Anyofthefollowingcanbeconsideredanexpansionproject:
1. Unfinishedprojects,theconstructionofwhichhadstoppedforatleast
oneyear.Onlytheunsoldunitsmayqualifyforregistration.
2. Conversiontolow-costorsocializedhousingprojectofabuilding
originallyintendedforcommercial,officespaces,orexclusive
condominiums.
3. Constructionofadditionalfloorsorannexesintendedformasshousing
units.
Aprojectshallbeconsideredasanexpansionifitwilllocateadjacentor
contiguoustoanexistingmasshousingprojectownedbythesameentity
andshallsharecommonfacilitieswiththeexistingproject.
Projectsthathavealreadybeencompletedandhaveincurredsales
(bookedsales)ofhousingpackagesshallnotqualifyforregistration.
EligibleprojectsinNCR,MetroCebuandMetroDavaoshallbeentitledto
threeyearsITH.[Editors Note: New provision.]
Incasesofunincorporatedjointventuresandsimilararrangements
betweenlandowneranddeveloperwherethesharingschemeisthe
numberoflotsorunitsbuilt,onlytheshareofthedevelopermayqualify
forregistration.
Interestincomearisingfromin-housefnancingshallnotbeentitledtoITH.
E. Iron and Steel[Editors Note: New provision]
Basicironandsteelproducts,longsteelproducts(billetsandreinforcing
steelbars)andfathot/cold-rolledproducts,refnedironoreandprimary
steelproducts,manufactureoffatproducts,longproductsandfabrication
ofmachinery,equipmentandimplements.
AllironandsteelproductsmustbecompliantwiththeapplicablePhilippine
NationalStandardsorinternationalstandards.
ProjectsthatcostatleastthePhilippinePesoequivalentofUSD500
millionmaybegrantedpioneerstatus.
F. Energy
Exploration,developmentand/orutilizationofenergyresourcesadopting
environmentally-friendlytechnologies.
Onlypowerplantsutilizingenvironmentally-friendlyenergysourcesand
technologiesmayqualifyforITH.
23
Projectsthatutilizerawmaterialsorsemi-processedrawmaterialsthat
arenotlocallyproducedornotinsuffcientquantityareexemptfromnet
value-addedrequirement.
Onlyprojectsthathaveachievedfnancialclosingfortheprojectare
qualifedtoapplyforregistration.
1. Powersupplyprojectslocatedinmissionaryareasoroff-gridareas
thatarenotreceivingsubsidiesfromthePSALM.
2. ProjectsthatcostatleastthePhilippinePesoequivalentofUSD1.5
millionpermegawatt.
3. Projectswithnetvalue-addedofatleast30%
Forpowergenerationprojects,onlyrevenuesfrompowergeneratedand
soldtothegrid,otherentitiesand/orcommunitiesmaybeentitledtoITH.
Powerprojectsthatarebuiltcontiguoustoexistinggeneratingfacilities
shallbeconsideredasexpansionprojects.However,iftheexistingbase
loadplanthasconsistentlydispatchedatleast80%oftheirregistered
capacityforthepastthreeyears,theprojecttoberegisteredmaybe
considerednew.
TheamountofITHtobegrantedshallnotexceed10%ofthetotalrevenue
ofgeneratedpower.
ApplicationsforregistrationmustbeendorsedbytheDepartmentof
Energy(DOE).
G. Infrastructure
Transport,water,logistics,wastemanagementfacilities,physical
infrastructure(tollways,railwaysandtelecommunicationfacilities)andPPP
projects.
Air Transport:
1. Passengerand/orcargooperation.
2. Leasewithoptiontopurchaseaircraftmaybeallowed.Purelease
maybeallowedprovidedthataleasecontractisforaminimumoffive
years.
3. Acquisitionofadditionalaircraftmayberegisteredasnew.
4. Aircraftmustnotbemorethan14yearsoldfromdateofproduction
tothedateoffilingtheapplication.[Editors Note: New requirement.]
1. Projectsservingthemissionary/developmentalroutes,asindicatedin
theCertificateofPublicConvenienceandNecessity(CPCN).
2. Projectsinvolvingpurchase/lease-purchaseofbrandnewaircraft.For
lease-purchase,theoptiontopurchaseshouldbeexercisedbeforethe
endofthefourthyearofITHavailment.
24 Tax Bulletin
3. Allapplicationsforregistrationincludingtheroutestobeservedmust
beendorsedbytheCivilAeronauticsBoard(CAB),whenapplicable.
4. Priortothestartofcommercialoperationofeachaircraft,the
registeredenterprisemustsubmitaCertificateofAirworthinessissued
bytheCivilAviationAuthorityofthePhilippines(CAAP).
Water Transport
Domestic/Inter-Island Shipping
Purecargo,passengerandpassenger-cargovesseloperations
includingROROterminalsystemoperations
Qualifcationsforregistration:
1. PhilippineshippingenterpriseaccreditedwiththeMARINA;
2. VesselmustberegisteredandoperatedunderthePhilippine
fag;
3. Compliancewithagerequirements;
4. Tankers,high-speedcraft,ROROvesselsservingprimary
routesandpassenger/cargovesselsmusthaveagrossweight
of150GTandabove;
5. Tankersmustbedouble-hulled.
ROROoperators/enterprisesservingmissionaryroutesasindicated
intheCPCissuedbyMARINAmayqualifyforpioneerstatus.
Overseas Shipping
1. PhilippineshippingenterpriseaccreditedwiththeMARINA;
2. VesselmustberegisteredandoperatedunderthePhilippine
Flag;
3. Vesselsmustbeatleast1,000GTandmustnotbemorethan
15yearsold.
Acquisitionofbrandnewvesselsmayqualifyforpioneerstatus.
Acquisitionforadditionalvessel/smayberegisteredasnew
project.
Leaseorcharterofforeign-ownedvesselwithoptiontopurchase
maybeallowed.Pureleaseorbareboatchartermaybeallowed
providedtheleasecontractisforaminimumofoneyear.Any
replacementofthevesselshallbecoveredbytheenterprises
existingregistrationinvolvingtheleasedvessel,whichshallbe
validforatleastoneyear.
AllvesselsmustbeseaworthyandmustobtainvalidClassand
StatutoryCertifcatesasrequiredbytheMARINA.
Modernizationofshipsmaybeallowed,withentitlementto
ITHlimitedtoinvestmentsinsafetyandnavigationdevicesand
equipment.
AllapplicationsforregistrationmustbeendorsedbyMARINA.
25
Water Supply and/or Distribution
Bulksupplyprojectsandneworupgradingofwaterdistribution
systems.
Applicationscoveringbothsupplyanddistributionprojectsshallbe
unbundledshowingtherevenueandcoststructureofeach.
Incasesofupgradingofexistingprojects,onlyrevenuesthatare
derivedfromincrementalvolumeshallbeeligibleforITH.
Supplyofwatershallbelimitedtotreatedwaterandshouldbein
accordancewiththePhilippineNationalStandardofDrinkingWater.
AcopyoftheWaterPermitand/orCPCmustbesubmitted.
Projectsinvolvinganyoftheforegoingareasofwateroperations
dedicatedtoaparticularindustrialestate,industrialcommunityor
subdivisionarenotqualifedforregistration.
Logistics
Ports,terminals(passenger/intermodalterminals,cargoterminals,
containeryards,LNG/CNGstorageterminals,naturalgasrefueling,
stationsandchargingstationsforelectricvehicles),warehousesand
relocationofoilterminals.
Ports
1. Developmentandoperationofairportsandseaports.
2. AllapplicationsforregistrationmustbeendorsedbytheCAAPor
thePhilippinePortsAuthority(PPA),whicheverisapplicable.
Passenger/Intermodal Terminals
1. Qualifcationsforregistration:
Caterstoshippinglinesorairlinesand/ordifferentland
transportationsystems(railsystem,buses,taxis,etc.)
Musthavenewfacilitieswithparking,comfortrooms,ticketing
andreservationoffce,air-conditionedwaitingareaand
provideshuttleservices.
Musthaveasystemofingressandegresstoprevent
traffcbuild-up/obstructionofthoroughfaresona24-hour
basisascertifedbyDepartmentofTransportationand
Communications(DOTC),MetroManilaDevelopmentAuthority
(MMDA),and/orotherconcernedagency.
2. Busterminalsthatwillintegrateallbuslinesoperatingwithina
particularmunicipalityorcityshallbeeligibleforregistration.
Thefacilitiesshallhaveampleparkingspaces,comfortrooms,
andwaitingareas.Projectsofthisnatureundertakeninhighly
urbanizedcitiesshallbegrantedpioneerstatus.[Editors Note :
New provision.]
26 Tax Bulletin
Cargo Terminals/Container Yards
Qualificationsforregistration:
1. Musthavenewfacilities;and
2. Musthaveasystemofingressandegresstopreventtraffcbuild-
up/obstructionofthoroughfaresona24-hourbasisascertifedby
DOTC,MMDAand/orotherconcernedagency.
LNG/CNG storage, distribution and marketing
1. Establishmentandoperationofstorage,distributionandmarketing
facilitiesforthebulkhandling/saleofnaturalgasinaccordancewith
relevantPhilippineNationalStandards.
2. Establishmentandoperationofnaturalgasrefuelingstationsand
relatedinfrastructuresandfacilitiesinaccordancewithrelevant
PhilippineNationalStandard.
3. Formarketing,distributionandrefuelingstations,theregistered
enterprisemustsubmitacopyofitsPermittoOperateandSupply
NaturalGasissuedbytheDOEpriortothestartofcommercial
operation.
4. Forstorage,theregisteredenterprisemustsubmitacopyofits
PermittoOperateissuedbytheDOEpriortothestartofcommercial
operation.
5. ProjectsthatcostatleastPHP1billionmaybegrantedpioneerstatus
Charging stations for electric vehicles
1. Establishmentofchargingstationsforelectricvehicles.Thecharging
stationscouldrefertoaservicestationdesignedtosimultaneously
fastchargemultiplevehiclessimilartogasoline/dieselstationsora
networkofatleastfivechargingstands.
2. Allapplicationsforregistrationmustbeendorsedbytheconcerned
agency.
Warehouses
1. Establishmentofautomatedwarehousingfacilitieswithautomated
retrievalsystems,conveyors,cranesandothercargohandling
equipment.
2. Distributionorfulfillmentcentersofatleast50%ofitsrevenues
derivedfromservingothercountriesshallbegrantedpioneerstatus.
3. Onlyrevenuesgeneratedfromservicesrenderedtootherenterprises
maybeentitledtoITH.
Relocation and putting up of a new oil terminal
1. ProjectsthatcostatleastPHP1billionmaybegrantedpioneer
status.
27
2. AllapplicationsforregistrationmustincludeaDOEendorsement
andproofoftheprojectscompliancewithappropriatelanduse/
zoneplans,includingsafetyandsecuritymeasuresprescribedby
theLGU/agencythatapprovedthesame.
Waste Management Facilities
1. Establishmentoftoxicandhazardouswastetreatmentfacilities.
2. Qualificationsforregistration:
Involvestreatment,storageanddisposal
Capableofhandlingtoxicandhazardouswaste
Handlesonlylocally-generatedwaste
3. Priortostartofcommercialoperation,theregisteredenterprise
mustsubmitacopyofitsTreatment,StorageandDisposal
RegistrationCertificateissuedbytheEMBoftheDENR.
4. Ifhandlingradioactivewastes,theregisteredenterprisemust
submitaLicensetoOperateaRadioactiveWasteManagement
FacilityfromthePhilippineNuclearResearchInstitute(PNRI)
oftheDOST,inadditiontotheTreatment,Storageanddisposal
RegistrationCertificateissuedbytheEMBoftheDENR.
Tollways and Railways
1. Development,rehabilitation,upgradingand/orexpansionand/or
operationoftollwaysandrailways.
2. Upgradingofphysicalinfrastructuremayberegisteredasanew
projectprovidedthatthecostofupgradingalreadyapproximates
atleast90%oftheprevailingcostofconstructinganewphysical
infrastructure,ascertifiedbytheconcernedagency.
3. Ifthecostislessthan90%oftheprevailingcostofconstructing
anewphysicalinfrastructure,theprojectmayberegisteredasa
modernizationactivitybutnotentitledtoITH.
4. Forprojectsthatwillinvolvethedevelopmentandoperationof
physicalinfrastructuretobeundertakenbyseparateentities,
boththedeveloperandoperatormayqualifyforregistration.
However,thedevelopermayonlybeentitledtoincentiveon
capitalequipmentdirectlyneededfortheoperationofthephysical
infrastructure.
5. ProjectsthatcostatleastthePhilippinePesoequivalentofUSD
100millionmaybegrantedpioneerstatus.
Telecommunication Infrastructure
1. Establishmentofnewtelecommunicationinfrastructureinthe
provinces,particularlyintheruralareas,asendorsedbythe
NationalTelecommunicationsCommission(NTC)andutilizingat
leastfiberoptictechnology.
28 Tax Bulletin
2. ProjectsthatcostatleastthePhilippinePesoequivalentofUSD100
PPP Projects[Editors Note: New provision]
1. ProjectsunderthePublic-PrivatePartnership(PPP)Programofthe
government.
2. ApplicationsmustbeendorsedbythePPPCenterorotherconcerned
governmentagency/unit.
H. Research and Development
R&Dactivitiesandtheestablishmentofresearch/testinglaboratories,
CentersofExcellence(COE)andtechnicalvocationaleducationandtraining
institutions.
ProjectsthatcostatleastthePhilippinePesoequivalentofUSD2million
maybegrantedpioneerstatus.
Research and Development
1. AllR&Dactivitiesincludingtheestablishmentofresearch/testing
laboratories(e.g.forpharmaceuticals,electronics,construction).
2. Establishmentandoperationoffacilitiesfortheconductofclinical
trials(e.g.ClinicalResearchOrganizationorCRO)TheregisteredCRO
mustsubmitacopyofPermitforClinicalInvestigationalUseissuedby
theFoodandDrugsAdministration(FDA)beforetheconductofeach
clinicaltrial.
3. ApplicationsforregistrationmustbeendorsedbytheDOSTorother
concernedagency,asmaybedeemednecessary.
Center of Excellence
1. Establishmentofentrepreneurial,technology,businessincubation
centers,commonservicefacilities,andmanufacturing,serviceand
agribusinessentities,includingthoselocatingonthepremisesof
stateuniversitiesandcolleges(SUC)outsideMetroManila,and
withspecialarrangementwiththeSUCtodevelopcompetenciesin
entrepreneurshipandR&D.
Training/Learning Institutions
1. Establishmentofinstitutionsspecializingintechnicalvocational
educationandtraining(e.g.engineering,culinaryarts)insupportof
theactivitieslistedintheIPP.
2. Requirementsforregistration:
TESDA-approvedcurriculumfortrainingcoursesorCHED-
approvedcurriculumfordegreecoursesorothergovernment
agenciesandendorsedbytheappropriateindustryassociation.
Registerededucational/training/learninginstitutionmustprovide
traininglaboratoriesandequipment,ifapplicable.
29
I. Green Projects
Manufacture/assemblyofgoodsandtheestablishmentofenergy
effciency-relatedactivities(suchasdistrictcoolingsystems)the
utilizationofwhichwouldsignifcantlyleadtoeithertheeffcientuseof
energy,naturalresourcesorrawmaterials;orminimize/preventpollution
orreducegreenhousegasemissions.
CoversonlyprojectsotherthanthoselistedintheIPP.
Qualifcationforregistration:Assemblyoperationsmustbeintegrated
withthemanufactureofatleastonepart/componentforuseinthe
assembly.
J. Manufacture of Motor Vehicles
Manufacture/Assembly of Motor Vehicles
1. Manufacture/assemblyofbrandnewmotorvehicleunits(excluding
2-strokemotorcycles)thatarecompliantwiththeprevailingnational
standardsandregulationsontheregistration,useandoperationof
motorvehicles.
2. Qualificationsfornewproject:
Establishmentofafactorycompletewithproductionmachinery/
equipmentandfacilitiessuchasweldingsection,assembly
section,metaltreatmentsection,paintingsection,testingfacility
forroadworthinessandemissionstandardcomplianceandpre-
deliveryinspectionsection.
Projectsofanexistingmotorvehiclemanufacturer/assembler
thatinvolvestheproductionofanewmodelorafullmodel
change,providedthereisnewinvestmentofatleastPHP100
millionforfour-wheelvehiclesandmanufactureofpartsand
components;otherwise,theprojectshallbeconsideredasan
expansion.
3. Qualificationsforpioneerstatus:
Newprojectsundernumber1aboveformanufacture/assembly
ofpassengercarsand/orcommercialvehicleswithinvestments
ofatleastUSD50millionandforthemanufacture/assembly
ofmotorcycleswithinvestmentsofatleastUSD4million.
Investmentsmayincludethecostofacquisitionofexistingassets
orfacilities.
Newprojectsundernumber2abovewithinvestmentsofatleast
USD20millionforpassengercarsand/orcommercialvehicles,
USD1.5millionformotorcycles.
Projectsforthemanufacture/assemblyofalternativefuelvehicle
andelectricvehicles.Alternativefuelvehiclesincludethe
following:
a. Hybridvehiclesthatrunonelectricbatteriesandgasoline/
diesel/otherfuels;
30 Tax Bulletin
b. Electricvehicles;
c. Flexible-fuelvehiclesthatrunongasoline/dieselin
combinationwithalternativefuelssuchasbutnotlimitedto:
1. Bioethanolvehiclesthatrunongasolineandaminimum
ethanolcontent/blendofatleast20%
2. Biodieselvehiclesthatrunondieselandaminimum
biodieselblend/contentofatleast5%
3. Compressednaturalgasvehicles
4. OthervehiclespoweredbyLPG,fuelcellandother
alternativefuels.
Manufacture/assemblyofbrandnewthreeorfour-wheel
Philippineutilityvehiclesforcargosand/orpassengers.
Manufacture of Parts and Components
1. Manufactureofmotorvehiclepartsandcomponentseitherasan
originalequipmentmanufacturer(OEM)orafter-marketproducts.
2. Qualificationsforpioneerstatus:
Manufactureofenginesandtransmissions;
Manufactureoftoolsanddiestoproducechassisandengines;
Establishmentofacommonfacilityforheattreatment,forging,
stampingofmotorvehiclepartsandcomponents;
Productionofelectricmotors,batteriesotherthanleadacid
batteries,controllerassemblyandbatterychargerforelectric
vehicles.
K. Strategic Projects
Projectsthatexhibitveryhighsocialeconomicreturnsthatwill
signifcantlycontributetothecountryseconomicdevelopment,measured
intermsofthefollowing:
1. Consumer-basedbenefits(e.g.price,availability,quantity);
2. Forwardandbackwardlinkageswithexistingindustriesinthecountry;
3. Generationofatleast500directemploymentoruseofhighly-
specializedoradvancedtechnology;
4. GenerationofatleastUSD1millioninforeignexchangesavings,when
applicable;
5. Statureoftheproponentasaglobalplayer,whenapplicable.
Manufactureofpackagingproductsthatwillinvolveproductorprocess
innovationwhichshallleadtosignifcantimprovementsinqualityand
valueofthepackagedproduct.
ManufactureofessentialdrugsandmedicineaslistedinthePhilippine
NationalDrugFormulary.[Editors Note: New provision.]
ProjectsthatcostatleastthePhilippinePesoequivalentofUSD500
StrategicprojectswillbeapprovedupondeterminationbytheBOIin
consultationwiththeDOF,NEDAandotherappropriategovernment
agencies.
31
L. Hospital/Medical Services
Establishmentandoperationofmedicalfacilitiesincludingprimary,
secondary,tertiaryhospitalsandambulatoryfacilities.
Onlyrevenuesfromtheprovisionofmedicalanddiagnosticservicesshall
beentitledtoITH.Revenuesfromoperatingapharmacy,foodserviceor
othernon-treatmentserviceshallnotbeeligibleforITH.
Secondarycarehospitalswithaminimumcapacityof50bedsandan
investmentcostofatleastthePhilippinePesoequivalentofUSD2.5
millionmayqualifyforpioneerstatus.
OnlyfacilitiesoutsideofMetroManilamayqualifyforregistration.
PriortoITHavailment,registeredprojectsmustsubmitcopiesoflicenseto
operateissuedbytheDOHandPhilhealthAccreditation.
M. Disaster Prevention, Mitigation and Recovery Projects
Projectsthatwillpreventormitigateadverseimpactofcalamitiesand
disasters,includingtheinstallationoffoodcontrolsystems,installationof
earlywarningsystemsfortyphoons,earthquakeoccurrences,tsunamiand
volcaniceruptions;manufactureorassemblyofgoodscriticaltodisaster
management;constructionofdikesandsalvagingoperations.
Manufactureandassemblyofequipmentandgoodsthatwillbeused
fordisasters,calamitiesandemergencies,theprovisionofrescueand
retrievalservices,theprovisionofinformationservicesrelatingtodisaster
management,theprovisionofspecializedequipmentandservicesneeded
torestorevitalpublicservicesinafastandeffcientmanner,theprovision
oftrainingservicesforfrstrespondersandanyotheractivitythatwill
contributetothegoalsofmitigatingriskstopublicsafetycausedby
disasters,calamitiesandemergencies.[Editors Note: New provision.]
Salvagingpertainstotherescueofaseriouslydamaged/incapacitatedship
thatmayincluderefoatingandtowingoftheshiptoasafeplace.Italso
pertainstotheremovalofasunkenorwreckedship,derelictorhazards
includingcargoesthereof.
Onlyincomefromsalvagingoperations(excludingincomefromartifacts/
treasurerecoveredfromsunkenvessels/ships)maybeentitledtoITH.
Projectstorehabilitateareasaffectedbycalamitiesanddisasters,which
mayincluderebuildingofroadsandbridgesafterearthquakes/fooding,
volcaniceruptionsandoilsoilclean-up.
Forprojectsthatwillinvolvethedevelopmentandoperationofphysical
infrastructuretobeundertakenbyseparateentities,boththedeveloper
andoperatormayqualifyforregistration.However,thedevelopermay
beentitledonlytoincentiveoncapitalequipmentdirectlyneededforthe
operationofthephysicalinfrastructure.
Thiscoverstrainingfordisasterpreparedness,mitigationorrecovery/
rehabilitation/reconstruction.
32 Tax Bulletin
ProjectsthatcostatleastthePhilippinePesoequivalentofUSD
100,000maybegrantedpioneerstatus.
Disasterprevention,mitigationandrecoveryprojectscoveronly
projectsotherthanthoselistedintheIPP.
Mandatory List
A. Industrial Tree Plantation
Extensiveplantationofforestlandoftreecrops(exceptfruittrees)
forcommercialandindustrialpurposes.
Treecropsincludetimberandnon-timberspeciessuchasrubber,
bamboo,rattan,etc.(excludingfruittrees)forcommercialand
industrialpurposes.
Eachindustrialtreeplantationprojectmusthaveanapprovedand
issuedforestmanagement/developmentagreementsuchas:
1. SocializedIndustrialForestManagementAgreement(SIFMA)
2. IndustrialForestManagementAgreement(IFMA)
3. PrivateForestDevelopmentAgreement(PFDA)
4. Community-basedForestManagementAgreement(CBFMA)
B. Exploration, Mining, Quarrying, and Processing of Materials
Explorationanddevelopmentofmineralresources,mining,
quarryingandprocessingofmetallicandnon-metallicminerals.
Explorationofmineralresourcesincludingthosecoveredbyvalid
andexistingexplorationpermitsormineralagreementsmay
qualifyforpioneerstatus.
MiningandmineralprocessingprojectsarenotentitledtoITH.
[Editors Note: New provision.]
[Editors Note: The following provisions found in the 2011 IPP IRR
have been deleted:
All projects must have a mine life of at least 10 years.
Riverbed operations and cave mining shall not qualify for
registration.
All projects must locate outside the NCR and must have
the necessary permits/licenses from the concerned
agency.]
C. Publication or Printing of Books/Textbooks
Printing,re-printingandpublicationandcontentdevelopmentof
booksortextbooks.
Applicationforregistrationshallbeonaperbookortitlebasisand
mustbeendorsedbytheNBDB.
33
D. Refning, Storage, Marketing and Distribution of Petroleum Products
ForgasolineretailingstationsexceptthoselocatedinLDAs,the
applicantisrequiredtoinvestaminimumcapitalofPHP10millionper
station,excludingland,orsuchamountasmaybejointlydeterminedby
theBOIandDOEforaugmentationpurposes.
ForeignretailersmustcomplywiththeRetailTradeLiberalizationLaw
(RANo.8762)anditsIRR.
Forstorage,marketinganddistribution,onlyinvestmentsofnew
industryparticipantsmaybeentitledtoincentives.Theapplicant
shallsubmitaDOEendorsementcertifyingthattheapplicantisanew
industryparticipantwithnewinvestments.
Forstorage,marketinganddistribution,petroleumproductsexcluding
LPG,shallbesourcedfromthenewindustryparticipantsexceptincases
ofemergencysupplysituation.
Forprojectsthatinvolvemorethanoneactivity(storage,marketingand
distribution),eachmustbeunbundledshowingtherevenuestreamsand
costsforeachactivity.[Editors Note: New provision.]
Blendingofpetroleumproductsalonemayonlybeentitledtocapital
equipmentandothernon-fiscalincentives.
ApplicantenterprisesshallelecttobegovernedbyeithertheOmnibus
InvestmentsCodeof1987ortheDownstreamOilIndustryDeregulation
Actof1998atthetimeoftheirapplicationforregistration.Any
decisiononcemadeshallbefinal.
E. Ecological Solid Waste Management
Establishmentofwasterecyclingfacilitieswhetherornotintegrated
withmanufacturingfacility,usingasinputs100%locallygeneratedsolid
wastematerialsorscrapsfromtherecyclingfacilitytoproducesemi-
finishedorfinishedproduct.
Waterrecyclingprojectswithoutamanufacturing/processingfacilityare
notentitledtoITH.
Establishmentofanintegratedsolidwastemanagementfacilitythat
includesthefollowing:
1. Materialsrecoveryfacilitywithaprocessingcenterthatshallbe
usedtomanufacturegoodsfromrecyclablewastes(biodegradable,
non-biodegradable,recyclableandresidual)astherawmaterials;
2. Categorizedsanitylandfllthatshallaccommodateonlyresidual
wastesthatwerenotrecycledduetotheabsenceofappropriate
technologyforrecycling.[Editors Note: New provision]
Registeredprojectsmayavailofcapitalequipmentincentive. [Editors
Note: New provision]
34 Tax Bulletin
AllapplicationsforregistrationmustbeendorsedbytheEMBofthe
DENR.
F. Clean Water Projects
Establishmentofwastewatertreatmentfacilitiesandsewage
collectionintegratedwithtreatmentfacilitiesandtheadoptionof
waterpollutioncontroltechnology,cleanerproductionandwaste
minimizationundertakenthroughBOTornon-BOTschemes.
Activitiessuchas5SandGoodHousekeepingarenotqualifiedfor
registration.
Wastewatertreatmentfacilitiesandsewagecollectionintegratedwith
treatmentfacilitiesmaybeentitledtoITH.
Projectsadoptingwaterpollutioncontroltechnology,cleaner
productionandwasteminimizationareonlyentitledtocapital
equipmentincentive.
AllapplicationsforregistrationmustbeendorsedbytheDENR,the
LagunaLakeDevelopmentAuthority(LLDA)orotherconcerned
governmentagency.
Projectsthatwillemployneworproprietarytechnologiesshallsubmit
anEnvironmentalTechnologyVerificationissuedbytheDOST
G. Rehabilitation, Self-Development, and Self-Reliance of Persons with
Disability
Manufactureoftechnicalaidsandappliancesfortheuseand/or
rehabilitationofpersonswithdisabilityandtheestablishmentof
specialschools,daycarecenters,homes,residentialcommunities
orretirementvillagessolelytosuittheneedsandrequirementsof
personswithdisability.
Manufactureoftechnicalaidsandappliancesusedbypersonswith
disability,includingbutnotlimitedtothefollowing:
1. Walk-inbathsdesignedforpersonswithdisabilities;
2. Commodechairs;
3. Braillebooks;
4. Hoistsandliftingchairsdesignedforincapacitatedpeople,
includingstairlifts;
5. Wheelchairs,scootersandautomobilesusingspecialcontrolsor
assistivetechnologydesignedforpersonswithdisabilities
6. Hearingaids;
7. Artifciallimbs,orthotics,prostheticsandorthopedicbraces;
8. Automatic/mechanicalliftstobeattachedtomotorvehicle.
AllapplicationsforregistrationmustbeendorsedbytheDSWD.
H. Renewable Energy
Developersofrenewableenergyfacilitiesincludinghybridsystems.
Manufacturers,fabricatorsandsuppliersoflocally-produced
renewableenergy,equipmentandcomponents.
35
Salesofpowergenerationprojectswithfeed-intariffsshallnotbe
entitledtoITHunlesstheITHwasincludedinthefinancialmodel
byERCinapprovingtheprojectspowerrate.[Editors Note: New
provision.]
ApplicationsforregistrationmustsubmitDOECertificateof
Registration/Accreditation/Endorsement,whicheverisapplicable.
ApplicantenterprisesshallelecttobegovernedbyeithertheOmnibus
InvestmentsCodeof1987ortheRenewableEnergyActof2008
atthetimeoftheirapplicationforregistration.UndertheOmnibus
InvestmentsCodeof1987,projectsmayqualifyforpioneerstatus.
[Editors Note: Processing of feedstocks/biomass for use as biofuel has
been deleted.]
I. Tourism
[Editors Note: Tourism used to be a preferred activity in the 2011 IPP; it is
now a mandatory activity in the 2012 IPP.]
Tourismenterprisesthatareoutsidethetourismenterprisezones
(TEZ)andareengagedinthefollowing:
1. Touristtransportservices(land.sea,air)fortouristuse.
2. Establishmentandoperationof:
Accommodationestablishmentssuchasbutnotlimited
tohotels,resorts,apartmenthotels,touristinns,motels,
pensionhouses,privatehomesforhomestay,ecolodges,
condotels,servicedapartments,andbedandbreakfast
facilities;
Conventionandexhibitionfacilitiesormeetings,incentives,
conventionsandexhibition(MICE)facilities;
Amusementparks;
Adventureandecotourismfacilities;
Sportsfacilitiesandrecreationalcenters;
Themeparks;
Healthandwellnessfacilitiessuchasbutnotlimitedtospas,
tertiaryhospitals,andambulatoryclinics;
Agri-tourismfarmsandfacilities;
Tourismtrainingcentersandinstitutes.
3. Developmentofretirementvillages.
4. Restoration/preservationandoperationofhistoricalshrines,
landmarksandstructures[Editors Note: New provision].
AllapplicationsforregistrationmustbeendorsedbytheDOT.
DOTaccreditationmustbesubmittedpriortoITHavailment.Only
incomederivedfromtourism-relatedactivitiesshallbeentitledtoITH.
Tourist Transport
1. Transportserviceswhetherforland,waterandairtransportfor
touristuse.
36 Tax Bulletin
2. Landtransportoperationofbrandnew,worldclassbusesand/or
minibuses/coasters.Thequantityornumberofunitsorvehicles
thatmaybeallowedshallbedeterminedbasedonthenumberof
touristarrivalsintheareaortheratioofhotel/resortfacilities/
rooms.
3. Touristtransportoperatorsmusthavegarage,hangar,or
berthing/dockingfacilities.
4. Applicationsforregistrationofwaterandairtransportoperators
mustbeendorsedbyMARINAorCAAP,respectively.
5. Registeredtouristlandtransportoperatorsmustsubmitacopyof
theirCPC.
Accommodation Facilities
1. Condotel/apartmenthotel/servicedapartment/touristinn/
pensionhouse/motelmustcatertotourists/gueststoqualifyfor
registration.Eachunitmusthaveafullyequippedkitchenand
laundryfacilities.[Editors Note: Tourist inn/pension house/motel
is a new addition to the defnition of accommodation facilities.]
2. Incomearisingfromgamingandmalloperationsarenotqualifed
forITH.[Editors Note: New provision.]
3. Formodernizationprojects,replacementofcarpets,pillows,
mattresses,andothersimilaritemsshallbeexcludedfromthe
computationoftheITHrateofexemption.
4. Qualifcationsforpioneerstatus:
a. Hotelprojects/apartmenthotels/servicedapartments/
condotelsclassifedasfrstclassordeluxebytheDOT
andcostingatleastthePhilippinePesoequivalentofUSD
100,000/room.
b. ResortprojectsclassifedasAAAbytheDOTandwith
projectcostofatleastthePhilippinePesoequivalentofUSD
10million.
c. ProjectslocatedinLDAs.
d. Modernizationofhotelsclassifedasfrstclassordeluxeby
theDOTwithaprojectcostofatleastthePhilippinePeso
equivalentofUSD10,000/room.
e. Amusementparks/themeparkswithminimumprojectcostof
thePhilippinePesoequivalentofUSD10millioninvolvingthe
developmentofsitesorattractionsconsideredasnovelinthe
Philippines.
f. Adventureandecotourismfacilities/agri-tourismfarmsand
facilitieswithaprojectcostofatleastthePhilippinePeso
equivalentofUSD5million.[Editors Note: In the 2011 IPP
IRR, the condition was a minimum lot area of 20 hectares.]
37
Health Spa
1. Establishmentandoperationofdestinationspa,resort/hotel
spa,therapeuticcenters,traditionalhealing(e.g.Philippinehilot,
dagdagay,ventosa)andotheralternativehealingandmedical
careservices.
2. ProjectsthatcostatleastthePhilippinePesoequivalentofUSD
20millionmaybegrantedpioneerstatus.
Tertiary Hospital
1. Tertiaryhospitalswithaminimumof50rooms(suitesandprivate
roomsonly)andwithaminimumprojectcostofatleastthe
PhilippinePesoequivalentofUSD10million.
Ambulatory Clinics
1. Servicessuchaselective(non-emergency)surgicaltreatments
whetherrequiringlocal,regionalorgeneralanesthesiaof
out-patientswhoserecovery,undernormalandroutine
circumstances,willnotrequirein-patientcare.
2. Includescomprehensiveophthalmologicsurgery,dermatology,
cosmeticprocedure,plasticandreconstructivesurgery,cosmetic
dentistryandmedicalcare(diagnosis,observation,treatmentand
rehabilitation).
3. Priortostartofcommercialoperation,theregisteredenterprise
mustsubmitacopyofitsLicensetoOperatefromtheDOH.
Tourism Training Centers and Institutes
Curriculumendorsedbytheappropriateindustryassociation
andapprovedbyeithertheTESDA(trainingcourses)and
CHED(degreecourses)orotherconcernedgovernment
agencies/authority.
Registerededucation/training/learninginstitutionmust
providetraininglaboratories/onthejobfacilitiesand
equipment.
Retirement Village
Minimumoffourhectaresofcontiguousland;
ProjectcostmustbeatleastthePhilippinePesoequivalent
ofUSD10million.
2. Retirementvillageswithaminimumareaof20hectaresmay
qualifyforpioneerstatus.
38 Tax Bulletin
3. LocatorsengagedintheactivitieslistedintheIPPthatarerelated
toretirementbusinessmayberegisteredasaseparateactivity.
4. ApplicationsmustbeendorsedbythePhilippineRetirement
Authority.ItsendorsementmustbesubmittedpriortoITH
availment.
Restoration/Preservation and Operation of Historical Shrines,
Landmarks and Structures(Editors Note: New provision)
Conservation,preservationorrestorationofnationalsitesor
properties.
Nationalshrines,monumentsand/orlandmarks;
Localhistoricalsites/propertiesclassifed,identifedandlisted
intheNationalRegistryofHistoricStructures;
Culturalproperties,treasuresand/orartifacts.
Qualifcationforpioneerstatus:
ResidentialprojectswithaprojectcostofatleastPHP10
million;
OtherstructureswithaprojectcostofatleastPHP20million.
Export Activities
Manufactureofexportproducts,servicesexportsandactivitiesinsupport
ofexporters;
Serviceproviderstoforeignflmandtelevisionproductionprojectsinthe
countryasendorsedbythePhilippineFilmExportServicesOffce.
A. Production and Manufacture of Export Products
Production/manufactureofnon-traditionalexportproductsandwith
exportrequirementofatleast50%ofitsoutput,ifFilipino-owned,orat
least70%,ifforeign-owned.
Exportproductselectronics,garments,textiles(includingbrassieres,
gloves,mittensandinfantwear)footwearandleathergoods,furniture,
jewelry,marineandaquaculture,mineralproductsandothers.
Intheexportofmineralproducts,thePhilippineMiningActshallapply
suppletorily.
B. Services Exports
Serviceactivitiesrenderedtoclientsabroadandpaidforinforeign
currencywithexportrequirementofatleast50%ofitsoutput,if
Filipino-owned,oratleast70%,ifforeign-owned.
Meredeploymentofpeopleorindividualpracticeofprofessionabroad
isnotqualifiedforregistration.
39
Forcontactcenters,projectmusthaveaminimuminvestmentcost
ofthePhilippinePesoequivalentofUSD2,500/seattoqualifyfor
registration.Thisamountcoversthecostofequipment(hardware
andsoftware),officefurnitureandfixture,buildingimprovementand
renovationandotherfixedassetsexceptland,billingandworking
capital.Ifequipmentusedwereleased,thesameshouldbeconverted
toassetsintermsofcommercialinterestratesandamortizedovera
5-yearperiod.Ifequipmentwereconsigned,thesameshouldhavean
assignedvaluetobeconsideredaspartoftheprojectcost.
Inthecaseofcontactcenters,revenuesshallbeunbundledtoshow
thebreakdownofservicingdomesticandoverseasmarkets.[Editors
Note: New provision.]
C. Activities in Support of Exporters
Activitiesdirectlysupportingexportproducers:
1. Manufactureofparts/componentsandmaterialsandsupplies
directly/reasonablyneededintheproductionoftheexport
product;
2. Servicescomprisingaportionofthemanufacturingprocess;
3. Producttestingandinspection;
4. Repairandmaintenance.
Logisticsservices.
BSP Issuances
BSP Circular No. 767 dated September 21, 2012
SubsectionsX410.1and4410Q.1areamendedtoreadasfollows:
SubsectionX410.1/4410Q1.Defnitions
a. Unit Investment Trust Funds.XXX
b. Trust Entity.A(A)BANKORANON-BANKFINANCIALINSTITUTION,
THROUGHITSSPECIFICALLYDESIGNATEDBUSINESSUNITTOPERFORM
TRUSTFUNCTIONS,OR(B)TRUSTCORPORATION,AUTHORIZEDBY
THEBANGKOSENTRALNGPILIPINAS(BSP)TOENGAGEINTRUSTAND
OTHERFIDUCIARYBUSINESSUNDERSECTION79OFR.A.NO.8791
(THEGENERALBANKINGLAWOF2000)ORTOPERFORMINVESTMENT
MANAGEMENTSERVICESUNDERSEC.53OFR.A.NO.8791.
c. Board of Directors.XXX
d. COLLECTIVE INVESTMENT SCHEME.ANINVESTMENTVEHICLEWHERE
FUNDSARESOLICITEDFROMINVESTORSFORCOLLECTIVEINVESTMENT
ANDWHICHAREMANAGEDFORTHEACCOUNTOFSUCHINVESTORS.
e. FEEDER FUND.AUITFUNDSTRUCTURETHATMANDATESTHEFUNDTO
INVESTATLEASTNINETYPERCENT(90%)OFITSASSETSINASINGLE
COLLECTIVEINVESTMENTSCHEME.
CircularNo.767amendstheUnit
InvestmentTrustFunds(UITFs)
Regulations.
40 Tax Bulletin
f. FUND-OF-FUNDS.AUITFUNDSTRUCTURETHATMANDATESTHEFUND
TOINVESTATLEASTNINETYPERCENT(90%)OFITSASSETSINMORE
THANONE(1)COLLECTIVEINVESTMENTSCHEME.
g. TARGET FUND.ALOCALORFOREIGNCOLLECTIVEINVESTMENT
SCHEMEINWHICHTHEUITFUNDINVESTSALLORAPORTIONOFITS
ASSETS.
h. INVESTOR FUND.AUITFUNDCREATEDTOTAKETHEFORMOFA
FEEDERFUNDORAFUND-OF-FUNDSANDISAPPROVEDBYTHEBSP
UNDEREXISTINGBSPREGULATIONS.
i. RELATED PARTY/COMPANY.FORTHEPURPOSEOFTHISSECTION,THE
TERMREFERSTOANOTHERENTITYWHICHISTHETRUSTENTITYS
(A)PARENTORHOLDINGCOMPANYOR(B)SUBSIDIARYORAFFILIATE,
ANDWHOLLYORMAJORITY-OWNEDOR-CONTROLLEDENTITIESOF
SUCHSUBSIDIARIES.
SubsectionsX410.2and4410Q.2areamendedtoprovidethataUITfund
maybeallowedtooperateasafeederfund,orafund-of-funds,providedthat
theplanrulesandrelateddocumentsshallstatethattheUITfundisafeeder
fundorafund-of-funds,andprovideanexplanationorillustrationofsuch
structures.
AnewparagraphisaddedinSubsectionsX410.7and4410Q.7andthese
provisionsnowreadasfollows:
SubsectionX410.7/4410Q.7Minimumdisclosurerequirements.
a. DisclosureofUITFundinvestments.xxxThelistofinvestmentoutlets
shallbeupdatedquarterly.
FORINVESTMENTSOFFEEDERFUNDS/FUND-OF-FUNDS,THETRUSTEE
SHALLLIKEWISEMAKEAVAILABLETOALLUITFUNDCLIENTSALL
RELEVANTINFORMATIONONTHETARGETFUND/S.
SubsectionX410.8/4410Q.8ExposureIimits.xxx
Thislimitationshallnotapplytonon-riskassetsasdefnedbytheBSP.
INTHECASEOFFEEDERFUND/FUND-OF-FUNDS,THEEXPOSURELIMIT
SHALLBEAPPLIEDONTHETARGETFUNDSUNDERLYINGINVESTMENTS.
FURTHERMORE,THEINVESTMENTSINANYONETARGETFUNDSHALLNOT
EXCEEDTENPERCENT(10%)OFTHETOTALNETASSETVALUEOFTHE
TARGETFUND.
IncasetheIimitsPRESCRIBEDABOVEAREbreachedduetothemarking-
to-marketofcertaininvestment/soranyextraordinarycircumstances,e.g.,
abnormalredemptionswhicharebeyondthecontrolofthetrustee,the
trusteeshallbegiventhirty(30)daysfromthetimethelimitisbreached,OR
INTHECASEOFINVESTORFUNDS,30DAYSFROMDATEOFRECEIPTOF
REPORTINDICATINGTHENETASSETVALUEOFTHEFUND,tocorrectthe
same.
41
SubsectionX410.9/4410Q.9Allowable investments and valuation.UIT
Fundinvestmentsshallbelimitedtobankdepositsandthefollowingfnancial
instruments:
(a) SecuritiesissuedbyorguaranteedbythePhilippinegovernment,orthe
BSP;
XXX
(G) UNITS/SHARESINCOLLECTIVEINVESTMENTSCHEMES,I.E.,TARGET
FUNDS,SUBJECTTOTHEFOLLOWING:
1. THEINVESTMENTOBJECTIVESOFTHETARGETFUNDAREALIGNED
WITHTHATOFTHEINVESTORFUND,
2. THEUNDERLYINGINVESTMENTSOFTARGETFUNDSARELIMITED
TOTHEALLOWABLEINVESTMENTOUTLETSSETFORTHINTHIS
SUBSECTION,
3. THETARGETFUNDHASNOINVESTMENTINOTHERCOLLECTIVE
INVESTMENTSCHEMES,AND
4. THETARGETFUNDISSUPERVISEDBYAREGULATORYAUTHORITY,AS
FOLLOWS:
a. ALOCALTARGETFUNDSHALLEITHERBEAPPROVEDBYTHE
BANGKOSENTRALNGPILIPINASORREGISTEREDWITHTHE
SECURITIESANDEXCHANGECOMMISSION.
b. ATARGETFUNDCONSTITUTEDINANOTHERJURISDICTIONSHALL
BEREGISTERED/AUTHORIZED/APPROVED,ASTHECASEMAY
BE,INITSHOMEJURISDICTIONBYAREGULATORYAUTHORITY
THATISAMEMBEROFTHEINTERNATIONALORGANIZATIONOF
SECURITIESCOMMISSIONS(TOSCO).
(H) Suchothertradableinvestmentsoutlets/categoriesastheBSPmayallow.
Provided,thattheinvestmentofthepesoUITFundintradableforeigncurrency-
denominatedfnancialinstrumentsshallbesubjecttoItemseandfof
Subsec.X409.6.
XXX
SubsectionX410.11/44108.11Unit Investment Trust fund administration
support.
a. Backroom operations. x x x
b. Custody of securities. x x x
INVESTMENTSINTARGETFUNDSOFAUITFUNDSTRUCTUREDASAN
INVESTORFUNDSHALLBEHELDFORSAFEKEEPINGBYANINSTITUTION
REGISTERED/AUTHORIZED/APPROVEDBYARELEVANTREGULATORY
AUTHORITYINITSHOMEJURISDICTIONTOACTASTHIRDPARTYCUSTODIAN.
42 Tax Bulletin
SubsectionX410.12/4410Q.12Counterparties.
a. Dealings with related interests / bank proper / holding company /
subsidiaries / affliates and related companies. x x x
CONSISTENTWITHTHEPROVISIONSOFSUBSECTIONX410.4,ATRUSTEE
MAYINVESTTHEFUNDSOFAUITFUNDSTRUCTUREDASANINVESTOR
FUNDINATARGETFUNDTHATISADMINISTEREDBYTHETRUSTEEORITS
RELATEDPARTY/COMPANY,PROVIDED,THAT:
(i) THERESHALLBENOCROSS-HOLDINGBETWEENTHEINVESTOR
FUNDANDTHETARGETFUND,WHERECROSS-HOLDINGREFERS
TOTHEHOLDINGOFSHARES/UNITSOFPARTICIPATIONINONE
ANOTHERBYTWO(2)ORMOREFUNDS;
(ii) ALLINITIALCHARGESONTHETARGETFUNDAREWAIVED;AND
(iii) THETRUST/MANAGEMENTFEESHALLBECHARGEDONLYONCE,
EITHERATTHELEVELOFTHEINVESTORFUNDORATLEVELOF
THETARGETFUND.
b. Accreditation of counterparties. x x x
ThisCircularshalltakeeffect15calendardaysfollowingitspublication
eitherintheOffcialGazetteorinanewspaperofgeneralcirculationinthe
Philippines.
[Editors Note: Circular No. 767 was published in Malaya on September 28, 2012.]
BSP Circular No. 768 dated September 21, 2012
Items1and2ofAppendix63doftheMORBandAppendix46cofthe
MORNBFI,shouldreadasfollows:
1. ForHybridTier1:
XXX
q) Itmusthaveaprovisionthatrequirestheinstrumenttobeeitherwritten
offorconvertedintocommonequityupontheoccurrenceofatrigger
eventasdeterminedbytheBSP.
Theissuanceofanynewsharesasaresultofthetriggereventmustoccur
priortoanypublicsectorinjectionofcapitalsothatthecapitalprovidedby
thepublicsectorisnotdiluted.
XXX
2. ForLowerTier2Capital:
XXX
CircularNo.768amendstheRisk-
BasedCapitalAdequacyFrameworkfor
Banks/Quasi-BanksontheDefnitionof
QualifyingCapitalInstruments.
43
k. Thebankorquasi-bankmustsubmitawrittenexternallegalopinionthat
theabovementionedrequirements,includingthesubordinationandloss
absorptionfeatures,havebeenmet.
l. Itmusthaveaprovisionthatrequirestheinstrumenttobeeitherwritten
offorconvertedintocommonequityupontheoccurrenceofatrigger
eventasdeterminedbytheBSP.
Theissuanceofanynewsharesasaresultofthetriggereventmustoccur
priortoanypublicsectorinjectionofcapitalsothatthecapitalprovidedbythe
publicsectorisnotdiluted.
XXX
EligiblecapitalinstrumentsissuedasHybridTier1orLowerTier2capital
undertheconditionsforeligibilityascapitalinstrumentsprovidedinCircular
No.709,asamendedbyCircularNo.716,shallcontinuetoberecognizedas
qualifyingcapitaluntilsuchtimethattheBSPissuesfurtherguidelines.
ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeither
intheOffcialGazetteorinanewspaperofgeneralcirculation.
[Editors Note: Circular No. 768 was published in BusinessWorld on September 28,
2012.]
SEC Issuances
SEC Memorandum Circular No. 7 dated September 7, 2012
1. Allcorporations,includingbranchoffces,representativeoffces,regional
headquartersandregionaloperatingheadquartersofforeigncorporations,
thatfletheirFSattheCommissionsHeadOffce,Davao,Cebu,Iloilo,and
BaguioExtensionOffcesshall,dependingonthelastnumericaldigitoftheir
SECregistrationorlicensenumber,begovernedbythefollowingschedulein
theflingperiodfor2013:
April15,16,17,18,19 : 1,2
April22,23,24,25,26 : 3,4
April29,30,May2,3 : 5,6
May6,7,8,9,10 : 7,8
May14,15,16,17 : 9,0
2. Theaboveflingscheduleshallnotapplytothefollowingcorporations:
ThosewhosefscalyearendsonadateotherthanDecember31,2012
shallfletheirFSwithin120calendardaysfromtheendofthefscalyear;
ThosewhosesecuritiesarelistedinthePhilippineStockExchangeshall
continuetoobservetheduedateofflingtheirFSasanattachment
totheirAnnualReports(SECForm17-A),inaccordancewiththe
ImplementingRulesandRegulationsoftheSecuritiesandRegulationCode
(SRC);
SECMCNo.7adoptsmeasuresonthe
flingofFSofcompanieswhosefscal
yearendsonDecember31,2012.
44 Tax Bulletin
ThosewhoseFSarebeingauditedbytheCommissiononAudit(COA),
providedthatthefollowingdocumentsareattachedtotheirFS:
a. AnAffidavitsignedbythePresidentandTreasurer(orChiefFinancial
Officer,whereapplicable)attestingtothefactthatthecompanytimely
providedCOAwiththeFSandsupportingdocumentsandthatthe
auditofCOAhasjustbeenconcluded;
b. AletterfromCOAconfirmingtheinformationprovidedintheabove
Affidavit.
3. PriortoApril15,2013,allcorporationsmayfletheirFSregardlessofthelast
numericaldigitoftheirregistrationorlicensenumber.
4. LateflingsshallbeacceptedstartingMay20,2013andshallbesubjecttothe
prescribedpenaltieswhichshallbecomputedfromthedateofthelastdayof
flingschedulestatedinparagraph1above.
5. Anyflingmadebeforeorafterthescheduleddatesshallnotbeaccepted
unlesscoveredbyparagraphs2,3and4.
6. TheFS,otherthantheconsolidatedfnancialstatements,shallhavethe
stampReceivedbytheBIRoritsauthorizedbanks,unlesstheBIRallowsan
alternativeproofofsubmissionforitsauthorizedbanks(e.g.bankslips);
7. Thebasiccomponents,asprescribedunderSRCRule68,asamended,shall
bepresentedforpre-screening.Failuretocomplywithanyoftheformal
requirementsundersaidRule,includingtheprescribedqualifcationsfor
independentauditors,shallbeconsideredasuffcientgroundforthedenialof
thereceiptoftheFS.TheacceptanceandreceiptbytheSECoftheFSshallbe
withoutprejudicetothefnesthatmaybeimposedforanymaterialdefciency
ormisstatementthatmaybefounduponevaluationofthespecifccontents
thereof.
SEC-OGC Opinion No. 12-14 dated August 28, 2012
Facts:
CCo.isacorporationdulyorganizedandexistingunderthelawsoftheUnited
StatesofAmerica(USA).Itssubsidiary,ECo.,isalsoacorporationdulyorganized
andexistingunderthelawsoftheUSA.ECo.wasgrantedalicensetoestablisha
Philippinebranch,ECo.PhilippineBranch.ThemanagementofCCo.andECo.
areplanningtomergethetwocorporationswithCCo.asthesurvivingcorporation.
Ifthemergerproceeds,CCo.planstocontinuetooperateECo.PhilippineBranch.
Issue:
CanCCo.continuethebusinessofECo.inthePhilippinesthroughECo.
PhilippineBranch?
Ruling:
No.InasmuchasCCo.isthesurvivingcorporation,ECo.,whichistheabsorbed
corporation,isineffectdissolvedbecauseofthemerger.Pursuanttoparagraph
2,Section132oftheCorporationCode,ECo.shallflewiththeSECwithin60
daysafterthemergerbecomeseffective,acopyofthearticlesofmergerduly
Inamergeroftwoforeign
corporations,thesurvivingcorporation
cannotcontinueoperatingthebranch
offceoftheabsorbedcorporation.It
mustfleitsownlicensetodobusiness
inthePhilippines.
45
authenticatedbytheproperoffcialoroffcialsofthecountryorstateunderthe
lawsofwhichthemergerwaseffected.Inasmuchastheabsorbedcorporation,E
Co.,istheforeigncorporationdoingbusinessinthePhilippines,itshallatthesame
timefleapetitionforwithdrawalofitslicense.
IfCCo.willcontinuethebusinessofECo.inthePhilippines,itmustfleitsown
applicationforalicensetodobusinessinthePhilippines.Inapplyingforalicense,
CCo.mustcomplywillalltherequirementsprescribedbytheCRMD.Inaddition,a
CertifcationmustbesubmittedtotheCRMDstatingthatthelawsonmergerofthe
foreigncountryprovidesforsubstantiallythesameeffectsasthosementionedin
Section80paragraph4oftheCorporationCode,reproducingtheexactprovisions
oftheapplicableforeignlaw.
SEC-OGC Opinion No. 12-15 dated August 29, 2012
Facts:
AcondominiumunitisregisteredunderthenameofPCo.;hence,PCo.isa
memberofthecondominiumcorporation.PCo.mergedwithECo.,andafterwards
ECo.asthesurvivingcorporationmergedwithBCo.,whichinturnbecamethe
survivingcorporation.
Issue:
IsBCo.automaticallyamemberofthecondominiumcorporation?
Ruling:
TheSECcannotgiveacategoricalopiniononthematter.Asamatterofpolicy,
itrefrainsfromrenderinganopinionwheretheresolutionofthequestionwould
involvethesubstantiveandcontractualrightsofprivatepartieswhowouldinall
probabilitycontestthesameincourtiftheopinionturnsouttobeadversetotheir
interests.
Forguidanceandinformationpurposesonly,Section80oftheCorporationCode
providesthatoneoftheeffectsofmergeristhatallpropertiesoftheabsorbed
corporationaredeemedtransferredtothesurvivingcorporation.Corollaryto
this,Section63ofthesamecodeprovidesthatnotransfershallbevalidexceptas
betweenthepartiesuntilthetransferisrecordedinthebooksofthecorporation
showingthenamesofthepartiestothetransaction,thedateofthetransfer,the
numberofthecertifcatesandthenumberofsharestransferred.TheSupreme
Courthaspreviouslyheldthatatransferofsharesofstocknotrecordedinthe
stockandtransferbookofthecorporationormembershipinthemembership
booksofacondominiumcorporationisnon-existentasfarasthecorporationis
concerned.
Whilethetransferoftheunit(andhencethetransferofmembershipinthe
condominiumcorporation)isvalidbetweenECo.andBCo.,thesamemaynot
bebindingonthecondominiumcorporation,wherethetransferissubjectto
registrationinthemembershipbooksofthecondominiumcorporation.
Furthermore,pursuanttoSection18oftheCondominiumAct,noconveyance
ofcondominiumsshallberegisteredunlessaccompaniedbyacertifcateofthe
managementbodyoftheprojectthatsuchconveyanceisinaccordancewiththe
provisionsofthedeclarationofrestrictionsofsuchproject.Incaseofamerger,the
instrumentthatcouldproveconveyanceofacondominiumunitistheCertifcateof
Merger.
Thesurvivingcorporationinamerger
maynotbeautomaticallyconsidereda
memberofacondominiumcorporation.
46 Tax Bulletin
Court Decision
Stablewood Philippines, Inc. vs. Commissioner of Internal Revenue
CTA(EnBanc)EBNo.751promulgatedSeptember17,2012
Facts:
PetitionerStablewoodPhilippines,Inc.(SPI)fledwithRespondentCommissioner
ofInternalRevenue(CIR)aclaimfortaxcreditorrefundofexcesscreditable
withholdingtax(CWT)fortaxableyear2005.Inits2005annualITR,SPIchose
theoptionTobeissuedaTaxCreditCertifcateforitsexcessCWTforthetaxable
year.InitsquarterlyITRsfor2006,SPIcarriedovertheexcessCWTsfrom2005
butdidnotrefectthecarryoverofsaidexcessCWTsinits2006annualITR.
AstheCIRfailedtoactontheclaim,SPIfledaPetitionforReviewwiththe
CourtofTaxAppeals(CTA).TheCTADivisiondeniedtheclaimsince,despite
initiallyoptingforarefund,SPIcarriedovertheCWTssubjectoftheclaiminthe
succeedingtaxablequartersof2006.
SPIappealedtotheCTAEn Bancandarguedthatits2006and2007annualITRs
clearlyrefectthatthe2005excessCWTwasnotcarriedoverinsaidtaxableyears.
SPIassertsthatits2005ITRindicatingitsrefundoptionshouldbecontrolling.
Issue:
IsSPIentitledtoataxcreditorrefundofexcessCWTfortaxableyear2005?
Ruling:
No.WhileSPIoptedforarefundortaxcreditasdeclaredinits2005annualITR,
thesaiddecisionwasdefeatedbytheactofcarryingoverits2005excesstax
creditstothesucceedingtaxablequartersfor2006.
UndertheirrevocabilityruleinSection76oftheTaxCode,theoptiontocarryover
excessCWTshallbeirrevocableforthetaxableperiodandarefundshallnotbe
allowed.Theirrevocabilityrule,however,appliesonlytotheoptiontocarryover
andnottotherefundoption.TheSupremeCourtrulingsinBelle Corporation vs.
CIR (G.R. No 181298, January 10, 2011), CIR vs. Mirant (Philippines) Operation
Corporation (G.R. Nos. 171742 & 176165, June 15, 2011) and CIR vs. PL
Management International Philippines, Inc. (G.R. No. 60949, April 4, 2011)
establishthatonlytheoptiontocarryoverisirrevocable.
[Editors Note: Presiding Justice Ernesto Acosta and Associate Justice Esperanza
Fabon-Victorino dissented with the majority, and cited the Supreme Court ruling in
Philam Asset Management, Inc. vs. CIR (G.R. Nos. 156637/162004, December 14,
2005) which held that the two options under Section 76 are alternative in nature
and that the choice of one in the annual ITR precludes the other.]
TheirrevocabilityruleunderSection
76oftheTaxCodeappliesonlytothe
optiontocarryoverexcessCWTand
nottotherefundoption.
48 Tax Bulletin
Wewelcomeyourcomments,ideasand
questions.Pleasecontact
Ma.FidesA.Baliliviae-mailat
Ma.Fides.A.Balili@ph.ey.comorat
telephonenumber894-8113and
MarkAnthonyP.Tamayoviae-mailat
Mark.Anthony.P.Tamayo@ph.ey.comor
attelephonenumber894-8391.
SyCip Gorres Velayo & Co.
6760AyalaAvenue,MakatiCity,
Philippines
Telephone:(632) 891-0307
Fax:(632)819-0872
2012SyCipGorresVelayo&Co.
AllRightsReserved.
FEAno.1000052
SGV&Co.maintainsoffcesinMakati,
Cebu,Davao,Bacolod,CagayandeOro,
Baguio,GeneralSantosandCavite.
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Services,pleasevisitourwebsite
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