Tax Updates 2017 Word

RR 1-2016 as amended by RR 8-2016: - Amends RR 3-2005
On requirement of timely payment of taxes as a precondition for government contracts.
Adds a requirement that government contractors must file through EFPS.

Before the amendment, Tax Clearance is issued only to an applicant who has no delinquent
account (i.e., no pending case for disputed assessment).
Tax Clearance, with a validity period of one (1) year from the date of issuance shall be issued to any
applicant who has satisfied the following criteria:
1. No unpaid registration fee;
2. No open valid stop-filer cases;
3. A regular user of the BIRs Electronic Filing and Payment System (eFPS) for at least two (2) consecutive
months prior to the application for Tax Clearance;
The required two (2) consecutive months usage of eFPS shall only apply to new applicants. For
those which were previously issued Tax Clearance for bidding purposes, the requested Tax
Clearance shall only be issued if they are found to be regular eFPS users from the time of
enrollment up to the time of application.
4. Not tagged as Cannot Be Located taxpayer;
5. No pending criminal information has been filed in any court of competent jurisdiction arising from any
tax or tax related cases; and
6. No delinquent account.
Delinquent account shall refer to the outstanding tax liabilities arising from either self-assessed
taxes (i.e., unpaid second installment of income tax due per income tax return filed,
unredeemed dishonored check, tax payments using expired Tax Debit Memo and any unpaid tax
due as declared in the tax return filed) or a result of an audit or third party information thru the
issuance of an assessment notice which was not validly protested within the prescribed period.
If a tax delinquency arises within one year of issuance of tax clearance, the taxpayer shall be
notified and may settle the liability within 30 days, otherwise the tax clearance will cease to be
valid.
Verification of tax clearance
A Tax Clearance obtained must be verified for authenticity through the BIR website (www.bir.gov.ph) ,
by accessing Tax Clearance under announcement, then choose the applicable period for issuance.
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Those Tax Clearances which have been revoked for valid reasons are also posted in the BIR website.
RR 8-2016 Amends RR 1-2016, adds additional requirements on Tax Clearance for government
contractors
Tax assessments timely protested administratively and/or elevated to CTA or to higher court within the
prescribed period, and where the collection of the assessments are not yet considered final, executory
and demandable, shall not be considered delinquent account.
Timeliness in the filing of the administrative protest and/or the elevation of the case to the
competent court must be certified by the handling office and this certification shall form part of
the documentary requirements in the filing of an application for Tax Clearance.
[Removed under RR 8-2016]
RR 3-2016: Prescribes policies in adoption of credit/debit/prepaid card payments
General Policies
1. Payment of taxes by credit/debit/prepaid card shall be voluntary or optional on the part of the
taxpayer. As such, the taxpayer shall bear the convenience fee and other fees being charged by
banks and/or credit card companies for the use of this payment facility; and, that such fees,
including the "Merchant Discount Rate" (MDR), shall, in no case, be deducted from any amount
of tax due to the BIR.
2. In the payment of taxes, thru credit/debit/prepaid card, the taxpayer has the option to choose
from the available online payment facilities provided by the EPSP for the processing of
its/his/her tax payments.
3. The authority to accept tax payments, thru credit/debit/prepaid cards, and act as Acquirers shall
be limited to AABs only.
4. The BIR shall neither have any responsibility nor liability on any issues concerning the taxpayer-
cardholder and the card issuer, including, but not limited to, "charge back", erroneous posting
or charging, non-payment of the taxpayer-cardholder to the issuer, and other issues.
5. In case the taxpayer-cardholder made erroneous tax payment transactions through this
prescribed payment mode, the same shall not give rise to any automatic "charge back" to the
taxpayer-cardholder's account. In meritorious cases, the taxpayer shall apply for refund/tax
credit with the BIR in accordance with existing revenue issuances.
6. Only the Philippine-issued credit/debit/prepaid cards under the name of the taxpayer-
cardholder shall be used in payment of its/his/her tax liabilities.
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RR 2-2017 amending RR 3-2016: Payment deemed made on date and time in confirmation receipt
Re when the payment of taxes through credit/debit/prepaid card is deemed made and the liability of
the Authorized Agent Bank (AAB)Acquirer in case of non-payment.
When Payment is Deemed Made. The payment of taxes through credit/debit/prepaid card, shall be
deemed made on the date and time appearing in the system-generated payment confirmation receipt
issued to the taxpayer-cardholder by the AAB-Acquirer. provided that payment is actually received by
the BIR pursuant to these Regulations.
However, in case of late remittance or non-remittance of taxes to the BIR, despite the timely
issuance of a valid confirmation receipt by the AAB-Acquirer to the taxpayer-cardholder, the
liability to pay the tax rests upon the AAB-Acquirer considering that from the time of issuance of
valid confirmation receipt to the taxpayer-cardholder, the AAB-Acquirer becomes the trustee of
the government with the obligation to remit the payment on time to the BIR.
RR 5-2016: Additional criteria for accreditation of printers of ORs, OSIs, etc., amending RR 5-2012
1. Added criteria that it has no record of any criminal complaint with the BIR for tax offense
2. Printer has not been indicated as cannot be located taxpayer in the BIR system
3. Not tagged as inactive taxpayer
4. Accreditation shall have a validity of five years from the date of issuance of certificate of
accreditation
RR 7-2016: Tax incentives available for Tourism Enterprises duly registered with the Tourism
Infrastructure and Enterprise Zone Authority (TIEZA) under RA 9593
Fiscal incentives for RTEs within TEZs (Tourism Enterprise Zones).
Income Tax Holiday
Grant of six years Income Tax Holiday to Greenfield and Brownfield TEZs
Greenfield: Six years, extendible once for another six

Brownfield: Non-extendible six years if there is a substantial expansion, meaning substantial
CAPEX actually spent to upgrade physical assets /upgrade rooms and classification (ex: 3-star to
5-star)
Alternatively, in lieu of ITH, can be taxed at 5% of Gross Income (GI), remitted 1/3 each to the
LGU, national government and TIEZA
GI similar definition as GI for PEZA enterprises in RR 11-05
Allowable deductions direct costs with similar enumeration to RR 11-05 for PEZA. But see CTA
East Asia Utilities v. CIR (2014), not exclusive
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Fiscal incentives for RTEs within TEZs.
Net Loss Carry Over allowed as a deduction for 6 consecutive years after incurring the loss; covering
NOL incurred after start of business operations and TIEZA registration. Registered and non-registered
activities to be accounted for separately for NOLCO deduction computation.
Exemption from taxes on importation of capital investment and equipment, transportation

equipment and spare parts, subject to certain conditions.
Note: Requires prior TIEZA approval for importation and subsequent disposition. Subsequent
disposition, if made within 5 years, to be granted only:
To another RTE enjoying similar exemption

For reasons of proven technical obsolescence
For replacement to improve and/or expand RTE operations
In cases of withdrawal or cessation from operations
Goods and Service Incentives
Exemption from VAT and excise tax on importation of goods necessary to carry out registered
activities, provided it is not for the purpose of operating a wholesale or retail establishment in
competition with
Duty Free Philippines
Tax credit on national internal revenue taxes paid on all locally source goods and services used
by the RTE for services pursuant to its registered activity which are actually rendered within the
TEZ.
Social Incentive: Entitlement to a tax deduction of up to 50% of amounts spent for the following
activities performed in surrounding areas with prior TIEZA approval:
o Environmental activities
o Cultural heritage preservation activities
o Sustainable livelihood programs for local communities in the surrounding areas of the
enterprise or the TEZ
o Other similar activities as may be determined by the TIEZA Board.
o Activities should have prior approval of TIEZA and do not comprise and are not ancillary
to the registered activities of the RTE
Fiscal incentives for RTEs not within TEZs.
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Income Tax Holiday (same)
Exemption from taxes on importation of capital investment and equipment
Net loss carry over
RR 7-2016: Tax incentives available for Tourism Enterprises duly registered with the Tourism Infra and
Enterprise Zone Authority (TIEZA) under RA 9593
Other Provisions
Required to obtain from TIEZA a Certificate of Entitlement (CE) of incentives on an annual basis.
TEZs are not considered separate customs territories
RR 10-2016: Amends RR 17-2011, Implementing the Early Withdrawal Penalty of RA 9505 or the PERA
Act
Modifies early withdrawal penalties which had included all income taxes in addition to the 5% tax credit
availed by the Contributor, to a single flat rate of 20% based on the total income earned from time of
opening to withdrawal
RR 1-2017: Prescribing Regulations for VAT Refund under Sec 112 prior to RMC 54-2014
RMC 54-2014: Provides that the Commissioner shall have 120 days from date of submission of complete
documents to grant or deny claim for refund. Inaction shall be deemed a denial.
RMC 54-2014 was being given retroactive effect because pending claims were deemed denied upon the
expiration of the 120-day period from the date the claims were filed even though the taxpayer-
claimants are still in the process of submitting the complete documents which was allowed in the
previous RMC [RMC 49-2003].
Administrative claim (Re issuance of a Tax Credit Certificate or refund of creditable input tax due or paid
attributable to such sales) must be made within 2 years after the close of the taxable quarter when sales
were made
Documents must be completed within the 2-year period

Pending administrative claims prior to the effectivity of RMC 54-2014 shall be processed by the
concerned offices based on available documents submitted within the 2-year period.
Claims not covered:
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1. Those claims filed beyond the 2-year prescriptive period
2. Those denied in writing by approving authority
3. Those approved/granted fully or partially by the approving authority
4. Those already appealed to and pending with the CTA unless there is proof of withdrawal of the case
filed with the CTA.
RR 3-2017 MICRO FINANCE NGOs ACT
REVENUE REGULATIONS NO. 3-2017 issued on February 24, 2017 implements the tax provisions of
Republic Act (RA) No. 10693, otherwise known as Microfinance NGOs Act.
The Act aims to encourage non-government microfinance institutions to work with the
government to pursue community development and improvement in the socio-economic
welfare of the poor and other basic and marginalized sectors through financially inclusive and
pro-poor financial and credit policies and mechanisms, such as microfinance and its allied
services.
Microfinance Non-Government Organizations (NGOs) must secure a Certificate of Accreditation
from the Microfinance NGO Regulatory Council (Council) as a condition for the availment of the
incentives of RA No. 10693.
As required under the said Act, a Microfinance NGO must be a non-stock, non-profit corporation
with a capital contribution of at least One Million Pesos (P 1,000,000.00) and must conform to
the following requirements:
o a. The word Microfinance shall be included in the corporate and trade name of the
Microfinance NGO; and
o b. Its Articles of Incorporation and By-Laws shall specifically state that:
i. It is non-stock and non-profit;
ii. It has the primary purpose of implementing a microenterprise development
strategy and providing microfinance programs, products, and services for the
poor;
iii. It shall specifically provide that upon dissolution, the net assets shall be
distributed to another NGO organized for similar purposes, or the State for
public purpose/s or as may be determined by a competent court of justice;
iv. No part of the property or income shall inure to the benefit of any member,
officer, organizer or any individual person;
v. The trustees shall not receive any compensation or remuneration, except
reasonable per diem;
vi. The level of administrative expenses shall not exceed thirty percent (30%) of
the total expenses for the taxable year; and
vii. Other requirements which the Council may deem necessary.
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Only Microfinance NGOs with duly issued Certificates of Accreditation from the Council shall be
eligible to avail of the two percent (2%) Gross Receipts Tax on income from microfinance
operations.
Microfinance NGOs which have been certified by the SEC to have no derogatory information and
are deemed accredited as Microfinance NGOs for a period of one (1) year from the effectivity of
RA No. 10693, unless sooner revoked, shall be entitled to avail of the 2% Gross Receipts Tax on
its income from microfinance operations.
A duly registered and accredited Microfinance NGO shall pay a 2% tax based on its gross receipts
from microfinance operations in lieu of all national taxes.
Provided, that preferential tax treatment shall be accorded only to NGOs whose primary
purpose is microfinance and only on their microfinance operations catering to the poor and low-
income individuals.
Provided, further, that the Certificate of Accreditation issued by the Council or the Certificate of
No Derogatory Information issued by the SEC, as the case may be, shall be an essential
requirement for granting the 2% preferential tax treatment of Microfinance NGOs.
The preferential rate of 2% tax based on gross receipts from microfinance operations should
only refer to lending activities and insurance commission which are bundled and forming
integral part of the qualified lending activities of the Microfinance NGOs.
All other income by the Microfinance NGOs which are not generated from the lending activities and
insurance commissions shall be subject to all applicable taxes, which shall include but not limited to the
following:
Interest income derived from loans other than those extended to qualified borrowers under RA
No. 10693;
Commission fees and other charges on the provision of electronic payment system such as
mobile or any innovative digital platforms or channels;
Commission fees and other charges on the provision of money transfer and other related
remittance services;
Interest income from any currency bank deposit, yield or any other monetary benefit from
deposit substitutes and from trust funds and similar arrangements including a depository bank
under the expanded foreign currency deposit system;
Royalties;
Prizes and other winnings;
Cash and/or property dividends;
Capital gains from the sale or dispositions of real property;
Capital gains tax on the sale, barter, exchange or other disposition of shares of stock in a
domestic corporation;
Stock transaction tax on the sale, barter, or exchange of shares of stock listed and traded
through the local stock exchange;
All other forms of income not related to microfinance operations (lending activities and
insurance commission) catering to the poor and low-income individuals.
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The availment of the benefits under RA No. 10693 by Microfinance NGOs for their microfinance
operations shall be evaluated in conjunction with their other lines of business in order to determine the
appropriate tax treatment of revenues derived from those other activities. The Microfinance NGOs shall
be constituted as a withholding agent for the government if they act as employer and any of their
employees received compensation income subject to compensation withholding tax, or if they make
payments to individuals or corporations subject to the Withholding Taxes at source as required. The
Microfinance NGOs books of accounts and other pertinent records shall be subject to periodic
examination by revenue enforcement officers of the BIR. Duly registered and accredited Microfinance
NGOs must update their registration with their concerned Revenue District Offices to reflect their
accreditation as Microfinance NGOs. Moreover, their clients shall likewise be required to have a
Taxpayer Identification Number (TIN).
RR 4-2017 Authority to Release Imported Goods (ATRIG)
RR 2-2016: ATRIG issuance for imported vehicles which reiterated the strict requirement of ATRIG
(authority to release imported goods) and gives the presumption that without ATRIG, taxes on imported
vehicles have not been paid properly.
The vehicle may be detained by any revenue officer, and if warranted, subsequently forfeited.
The person/s responsible for the same shall be held liable for unlawful possession or removal without
payment of tax pursuant to Section 263.
All imported automobiles found to have been released from customs custody after March 31,
2016 without the required ATRIG shall be subject to seizure.
REVENUE REGULATIONS NO. 4-2017 issued on March 7, 2017 amends certain provisions of RR. 2-2016
particularly in the issuance of Authority to Release Imported Goods (ATRIGs) for imported automobiles
already released from customs custody.
Foreign embassies and recognized international organizations are exempt from securing ATRIG
pursuant to the principle of reciprocity and international agreements to which the Philippines is
a signatory, respectively.
In cases where automobiles are subsequently sold, transferred or exchanged in the Philippines
to non-exempt persons or entities, including the introduction and re-introduction into customs
territory of automobiles intended for exclusive use within the freeport zones, the purchaser or
transferee, owner/possessor of the automobiles shall be considered as the importer, and shall
be liable for the Excise Tax due on such importation.
For foreign embassies and recognized international organizations, a one-time ruling confirming
exemption from ATRIG on importation of automobiles shall first be secured from the
International Tax Affairs Division of the BIR to be presented to the Bureau of Customs (BOC)
prior to release of imported automobiles from customs custody. An annual report of all
importations shall be submitted by the said embassies/organizations to the BIRs Excise Large
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Taxpayers Regulatory Division on or before the fifth (5th) day of January of the following year,
indicating the name, address and TIN of importer; quantity/no. of unit; description of imported
article(s) (year model, brand and Vehicle Identification Number/Chassis No.); Bill of
Lading/Airway Bill Number, date of issue; name of vessel/carrier and Flight/Voyage Number;
value of importation (in US Dollars); purpose of importation; and date released from BOC.
RR 5-2017
REVENUE REGULATIONS NO. 5-2017 issued on April 20, 2017 prescribes the rules and regulations
implementing Republic Act (RA) No. 10754 [An Act Expanding the Benefits and Privileges of Persons
with Disability (PWD)] relative to the tax privileges of persons with disability and tax incentives for
establishments granting sales discount, and the guidelines for the availment thereof, amending Revenue
Regulations (RR) No. 1-2009.
Qualified PWD shall be entitled to claim at least Twenty Percent (20%) discount from the
following establishments relative to the sale of goods and services, for their exclusive use and
enjoyment or availment of the PWD:
o a. Hotels and similar lodging establishments; restaurants and recreation centers;
o b. Theaters, cinema houses, concert halls, circuses, carnivals and other similar places of
culture, leisure and amusement;
o c. All drugstores regarding purchase of generic and branded medicine;
o d. Medical and dental services including diagnostic and laboratory fees (e.g., xrays,
computerized tomography scans and blood tests) and professional fees of attending
doctors in all government facilities or all private hospitals and medical facilities subject
to the guidelines to be issued by the DOH, in coordination with the Philippine Health
Insurance Corporation (PhilHealth);
o e. Domestic air and sea transportation based on the actual fare. For promotional fares,
the PWD can avail the establishments offered discount or the 20% discount provided
herein, whichever is higher and more favorable;
o f. Land transportation privileges based on the actual fare, such as public utility buses or
jeepneys (PUBs/PUJs), taxis, Asian Utility Vehicles (AUVs), shuttle services and public
railways such as Light Rail Transit (LRT), Metro Rail Transit (MRT), Philippine National
Railways (PNR), and such other similar infrastructure that will be constructed,
established and operated by public or private entity; and
o g. Funeral and burial services for the death of the PWD. Provided, that the beneficiary or
any person who shall shoulder the funeral and burial expenses of the deceased PWD
shall claim the discount under this rule for the deceased PWD upon presentation of the
death certificate and PWD Identification Card (ID) or, in its absence, the original or
certified true copy of the proof of registration from the issuing local government unit.
Such expenses shall cover the purchase of casket or urn, embalming, hospital morgue,
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transport of the body to intended burial site in the place of origin, but shall exclude
obituary publication and the cost of the memorial lot.
All other goods and services sold by the foregoing establishments not included in the above
enumeration expressly provided by law shall not be considered for the 20% discount privilege
notwithstanding that the same are for the exclusive use and enjoyment or availment of the PWD.
All establishments, which granted sales discounts on their sale of goods and/or services to PWD
may claim the said discount as deduction from the gross income for the same taxable year that
the discount is granted. Provided that, the name of PWD and the PWD ID No. are reflected in
the required record of sales for PWD.
The total amount of the claimed tax deduction net of Value-Added Tax (VAT), if applicable, shall
be included in their gross sales receipt for tax purposes, and shall be subject to proper
documentation and to the provisions of National Internal Revenue Code, as amended. Thus, if
there are no names of PWD and PWD Identification Card
(PWD ID) Nos. in the records of sales, the sales discount claimed as deduction by business
establishments shall be disallowed.
For percentage taxpayer, the amount of sales discounts shall be excluded for purposes of
computing the Three Percent (3%) Percentage Tax but shall be included as part of the gross
sales/receipts for income tax purposes.
The sales discount granted shall then be accounted as deduction from the gross income of the
establishment for the same taxable year that the discount was granted. Only that portion of the
gross sales exclusively used, consumed or enjoyed by the PWD shall be eligible for the
deductible sales discount.
The seller must record its sales inclusive of the discount granted, not as a reduction of sales to
arrive at net sales, but as a deduction from its gross income (sales less cost of sales). The sales
discount shall be treated as a necessary and ordinary expense duly deductible from the gross
income of the seller (falling under the category of itemized deductions) for the same taxable
year that it is granted, and shall not be accounted as deductible expense for taxpayers availing
the Optional Standard Deduction. The gross selling price and the sales discount must be
separately indicated in the official receipt or sales invoice issued by the establishment for the
sale of goods or services to the PWD.
Only the actual amount of the sales discount granted or a sales discount not exceeding 20% of
the gross selling price or gross receipts can be deducted from the gross income, net of VAT, if
applicable, and shall be subject to proper documentation under pertinent provisions of the Tax
Code of 1997, as amended.
The business establishment giving sales discount to qualified PWD should keep separate and
accurate records of sales, which shall include the name of the person with disability, PWD ID
No., gross sales/receipts, sales discount granted, date of transactions and invoice number for
every sales transaction to PWD.
The privileges granted to PWD shall not be claimed if the said PWD claims a higher discount, as
may be granted by the commercial establishment, and/or under other existing laws or in
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combination with other discount program/s. Thus, a PWD who is at the same time a senior
citizen can only claim one 20% discount on a particular sales transaction. Sales of any goods and
services under Sections 3 of these Regulations to PWD shall be exempt from the VAT. To ensure
the full entitlement of the person with disability to the discount prescribed in the Act, the sellers
are precluded from billing any VAT to the PWD. The sale to a person with disability must follow
the invoicing requirements prescribed under RR No. 16-2005, as amended by RR Nos. 2-2007
and 4-2007 and Revenue Memorandum Order No. 12-2013. If the seller uses a Point of Sale
Machine, Cash Register Machine, e-Invoicing or other receipting software/application in lieu of
the manual sales invoice, the machine/system receipts/invoices must properly segregate the
exempt sales from the taxable sales and must follow the invoicing requirements prescribed
under RR No. 10-2015. The input tax attributable to VAT exempt sale is considered as cost or an
expense account by business establishments and shall not be allowed as an input tax credit. If
there is no name of PWD and PWD ID No. indicated in the records of sales, the input tax
attributable to VAT exempt sale claimed as an expense by business establishments shall be
disallowed.
The exemption herein granted will not cover other indirect taxes that may be passed on by the seller to
a PWD buyer, such as Percentage Tax, Excise Tax, etc. In such a case, the discount must be on the total
cost of the goods or services charged by the seller, exclusive of the VAT. Effective taxable year 2016, a
Benefactor of a qualified PWD may claim the additional exemption of Twenty-Five Thousand Pesos (P
25,000) for each PWD, if such PWD, regardless of age, satisfies all of the following: a. Filipino citizen; b.
within the fourth (4th) civil degree of consanguinity or affinity to the taxpayer/benefactor; c. not
gainfully employed; and d. chiefly dependent upon and living with the taxpayer/benefactor. The total
number of dependents (qualified dependent children and/or qualified dependent PWD), for which
additional exemptions may be claimed by the taxpayer/benefactor, shall not exceed four (4). The
additional exemptions for qualified dependent PWD shall be claimed only by one taxpayer or by one of
the spouses in the case of married individuals. In the case of legally separated spouses, additional
exemptions may be claimed only by the spouse who has custody of the child or children or PWD.
Provided, that the number of additional exemptions that may be claimed by both shall not exceed the
maximum additional exemptions of four (4). The Taxpayer/Benefactor of the persons with disability shall
submit the following documentary requirements to the Revenue District Office (RDO) where he/she is
registered for the first year of claiming the exemption and after three (3) years or upon renewal of the
PWD ID, whichever comes first: a. Duly accomplished BIR Form No. 2305; b. Photocopy of PWD
Identification Card issued by the Persons with Disability Affairs Office (PDAO) or the City/Municipal
Social Welfare and Development Office (C/MSWDO) of the place where the person with disability
resides or the National Council on Disability Affairs (NCDA); c. Sworn Declaration/Identification of
Qualified Dependent PWD, Support and Relationship; d. Birth Certificate of PWD; e. Medical Certificate
attesting to disability issued by in accordance with the Implementing Rules and Regulations of R.A.
10754; and f. Barangay Certification certifying that the PWD is living with the benefactor. The submitted
records of the PWD to the RDO must be used as reference for every taxable year, in order to validate the
claimed additional exemption for the same PWD. Such record must be renewed by Taxpayer/Benefactor
after three (3) years or upon renewal of the PWD ID, whichever comes first. In case of Employee-
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Benefactor, the aforementioned documentary requirements must be submitted to the employer for
record and Withholding Tax purposes. The privileges under the Act and in the Regulations available to
PWD who are Filipino citizens may only be granted upon presentation of any of the following proof of
his/her entitlement thereto: a. An ID issued by the PDAO or C/MSWDO of the place where the PWD
resides; or b. The passport of the PWD concerned with apparent disability; or c. An ID issued by the
NCDA.
Any violation of the Regulations shall be subject to the corresponding penalties under pertinent
provisions of the Tax Code of 1997, as amended, and other applicable regulations issued by the BIR.
Further, any person who violates any provision of RA No.10754 shall suffer the following penalties: a.
For the first violation of any provision of the Act and these Regulations, a fine of not less than Fifty
Thousand Pesos (P 50,000) but not exceeding One Hundred Thousand Pesos (P 100,000) or
imprisonment of not less than six months but not more than two years, or both at the discretion of the
court; b. For any subsequent violation thereto, a fine of not less than P 100,000 but not exceeding P
200,000 or imprisonment for not less than two years but not more than six years, or both at the
discretion of the court. c. Any person who abuses the privileges granted under the Law shall be punished
with imprisonment of not less than six months or a fine of not less than P 5,000, but not more than P
50,000, or both, at the discretion of the court. If the violator is a corporation, organization or any similar
entity, the officials thereof directly involved shall be liable. If the violator is an alien or a foreigner,
he/she shall be deported immediately after service of sentence without further deportation
proceedings. Upon filing of an appropriate complaint, and after due notice and hearing, the proper
authorities may also cause the cancellation or revocation of the business permit, permit to operate,
franchise and other similar privileges granted to any business entity that fails to abide by the provisions
of the Act and these Regulations.
REVENUE MEMORANDUM ORDERS
Compromise Settlement and Abatement
RMO 04-2016
All applications for compromise settlement, abatement or cancellation of internal revenue tax
liabilities that have been reviewed by the Regional Evaluation Board, Large Taxpayer Service (LTS) Sub-
Technical Working Committee or the LTS Evaluation Board, resulting in a recommendation for denial
shall be considered FINAL
The outstanding tax liabilities and/or penalties shall be immediately collected.
Previously, there was a chance that the Commissioner could review or evaluate the substantive
aspects of the case even if the recommendation was a denial.
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The LTS Sub-TWC/EB and all regional TWGs/REBs shall evaluate and release their respective boards
decision within fifteen (15) calendar days from receipt of any application for compromise settlement or
abatement.
Decentralization of receiving and processing certifications of internal revenue tax payments
RMO 07-2016
From the Revenue Accounting Division (RAD)
reassigned as follows:
a) RAD for all TPs for tax payments 1999 and prior years (for payments thru AABs) and 1989 prior year
(for payments thru RCOs)
b) LTS for large TPs for tax payments 2000 and thereafter
c) RDO Collection for TPs under RDO jurisdiction for tax payments not falling under a or b.
Waiver of Statute of Limitations
RMO 14-2016
The waiver may not necessarily be in the form prescribed by RMO 20-90 or RDAO 05-01 provided that
the following conditions are complied with:
1. Must be executed before the expiration of the period to assess or to collect taxes. The date of
execution shall be specifically indicated in the waiver.
2. The waiver shall be signed by the taxpayer himself or his duly authorized representative. In the case
of a corporation, the waiver must be signed by any of its responsible officials;
3. The expiry date of the period agreed upon to assess/collect the tax after the regular three-year period
of prescription should be indicated.
Except for waiver of collection of taxes which shall indicate the particular taxes assessed, the
waiver need not specify the particular taxes to be assessed nor the amount thereof, and it may
simply state "all internal revenue taxes
The taxpayer is charged with the burden of ensuring that the waivers of statute of limitation are
validly executed by its authorized representative.
The waiver may be notarized. However, it is sufficient that the waiver is in writing.
lt shall be the duty of the taxpayer to submit its duly executed waiver to the BIR.
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The waiver can be accepted by the Commissioners authorized representative as prescribed in
existing regulations, the revenue district officer, or the group supervisor designated in the
Letter of Authority for the audit.
The two material dates that need to be present on th waiver are the date of execution of the
waiver by the taxpayer or its authorized representative; and the expiry date of the period the
taxpayer waives the statute of limitations.
Tax-Free Exchange under Sec. 40(C)(2) in relation to Sec. 40(C)(6)(c)
RMO 17-2016
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Specifically, this deals with the number of shares to be issued by the transferee corporation in
exchange for the property received from the transferor.
The value of shares to be issued by reason of exchange should be equal to the fair market value
of the property transferred.
Does not allow recognition of APIC.
RMO 22-2016
All manually-issued CARs that are outstanding and not yet presented to the Registry of Deeds
and other manually-issued expired CARs that are due for revalidation are no longer valid and
shall be cancelled and replaced with an eCAR.
eCARs shall have a validity of one (1) year reckoned from the date of issuance. eCARs may be re-
issued by the RDO in case of expiration.
Under RMO 55-2016, validity of eCARs is 3 years from date of issuance.
Procedure for ECAR
RMO 22-2016
Titled real properties:
One eCAR per property covered by OCT/TCT/CCT.
Untitled real properties:
one eCAR shall be issued for each tax declaration, including the improvements thereon.
Personal properties:
One separate (single) eCAR shall be issued for all personal properties per transfer document
Procedure for Handling Disputed Assessments
RMO 26-2016
Protest against PAN is optional
FLD / FAN will issue 15 days from date of receipt of taxpayer of PAN regardless whether the
same was protested or not.
Within 30 days from receipt of FAN, TP either
a) Pay assessment
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b) File Protest
- If TP opts to File Protest, protest WITHIN 30 DAYS FROM RECEIPT OF FAN in the form of either
a) Request for reconsideration no additional evidence
Unless stated otherwise, all protests deemed as requests for reconsideration.
b) Request for reinvestigation with additional evidence
TP given 60 days to submit evidence from filing of protest.

Only available for issued FAN/FLD. Not available if FDDA is issued.
If protest not acted upon by CIRs authorized representative
a) If protest is by way of request for reconsideration, Appeal to CTA within 30 days from lapse of 180 day
period from filing of protest; or File request for recon with the CIR, appeal to CTA within 30 days from
lapse of 180 days (in case of inaction), or from receipt of the CIRs decision.
b) If protest by way of request for reinvestigation
Appeal to CTA within 30 days from lapse of the 180 day period from end of 60 days to submit
documents.
Or appeal by request for RECON to CIR
- If FDDA is issued by CIRs authorized representative, TP within 30 days from receipt either
a) File request for reconsideration to CIR
If FDDA is issued by CIR, you may file a request for reconsideration but it will NOT TOLL the
running of the 30 day period to appeal to the CTA.
b) Appeal to the CTA
Procedure for Claiming Tax Treaty Benefits for Dividends, Interest and Royalty Income of Nonresident
Income Earners
RMO 27-2016
In lieu of the mandatory tax relief applications (TTRA), preferential treaty rates for dividends,
interests and royalties are granted outright by withholding final taxes at applicable treaty rates.
Withholding agents shall file the appropriate BIR Form 1601-F and 1604-F in accordance with
existing regulations. Incomplete information provided on the form shall lead to the penalties as
provided under Section 8 of this Order.
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Supporting documents to avail of the reduced rate of 15% on intercorporate dividends received
by Non-Resident Foreign Corporation:
o Application letter;
o Authenticated proof of residency;
o A consularized copy of the law of the country of the NRFC expressly stating that the
country in which the NRFC is domiciled allows a credit against the tax due from the
NRFC taxes deemed to have been paid in a foreign country (Philippines) equivalent to
15%;
o Certification from the Corporate Secretary of the domestic corporation stating the
important details of then dividend declaration; and
o Special Power of Attorney, if applicable.
PERA Law
RMO 42-2016
Applications for Accreditation of PERA Administrator need to have a "Qualification Certificate"

issued by the regulatory concerned - BSP, IC or SEC.
The accreditation of a PERA Administrator shall be valid from the date of issuance of the
Certificate of Accreditation until it is suspended or revoked
Tax credits arising from PERA contributions can be used as payment for delinquent accounts but
in no case will it be refundable or convertible into cash or transferrable to any other party
Importer's Clearance Certificate (ICC) and Broker's Clearance Certificate (BCC)
RMO 56-2016
Amends policies, guidelines and procedure in applying for ICC and BCCs.
Issue-based Audit under VAT audit program
RMO 59-2016
Taxpayers with VAT returns reflecting erroneous input tax carry-over are mandatory cases for
issue-based audit.
The priority cases for issue-based audit are the following:
o Taxpayers whose VAT compliance is below the established industry benchmarks;
o Taxpayers with zero-rated and/or exempt sales due to availment of tax incentives or
exemptions;
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o Taxpayers engaged in business where 80%, more or less, of their transactions are on a
cash basis and whose purchases of goods and services do not generate substantial
amount of input tax, such as restaurants, remittance/payment centers, etc.;
o Taxpayers with VATable transactions which were subjected to expanded Withholding
Tax but with no VAT remittance;
o Taxpayers who failed to remit/declare VAT due from purchase of services from
nonresident aliens
o Taxpayers who fail to declare gross sales/receipts subjected to VAT withholding on
purchases of goods/services with waiver of privilege to claim input tax credit
[creditable];
o Taxpayers whose gross sales/receipts per Income Tax returns are greater than gross
sales/receipts declared per VAT returns; and
o Taxpayers filing Percentage Tax returns whose gross sales/receipts exceed the VAT
threshold
Audit Policies
RMO 64-2016
Amends the requirement of securing approval from CIR before TP is audited for the 3rd consecutive
year.
If the taxpayer has been audited for the last two years and has been selected for audit on the
current or 3rd year, the RDO/LTS shall encode the requested audit, and it shall be approved by
the Regional Director/Assistant Commissioner who heads the investigating office.
The deficiency assessment on said cases shall only be imposed with two 5% surcharge unless the
under-declaration of income or overstatement of expenses/deductions reaches 30% or more,
which shall be imposed with 50% surcharge.
Separation Benefits for Causes Beyond
Control of Employees
RMO 66-2016
Devolves to RDO or applicable LT office where ER is registered the processing of requests for tax
exemption of separation benefits received by EE as consequence of separation due to causes beyond its
control, such as, but not limited to,
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RETRENCHMENT,
REDUNDANCY,
INSTALLATION OF LABOR-SAVING DEVICES and
CLOSURE OF BUSINESS.
Separation Benefits
RMO 66-2016
Requirements:
Letter request from the official/employee (or by his heirs) or the employer for the exemption of
separation benefits from income tax and withholding tax;
If Death: Certified true copy of Death Certificate
If Sickness: worn affidavits to be executed by the employer's physician or the employee's
attending physician and the head of office/entity or his representative
Clinical record of the official/employee
Laboratory examination confirming the illness suffered
REVENUE MEMORANDUM CIRCULARS
Renegotiated Philippines-Germany Tax
Treaty
RMC 15-2016
entered into force on 18 December 2015 and shall have effect in respect of taxes covered by said treaty,
including taxes withheld at source, for any taxable period beginning on or the first day of January 2016.
Expanded definition of resident - Article 4
A partnership is deemed to be a resident of Germany if the place of effective management is

situated in Germany.
PE definition Article 5
The Revised Treaty includes a PE provision in which the furnishing of services, including
consultancy services, by an enterprise through employees or other personnel engaged by the
enterprise for such purpose, would create a PE if the service activities continue for the same or a
connected project within a Contracting State for period or periods aggregating more than 6
months within any 12-month period.
Dividends, Interest and Royalties Articles 10, 11 and 12
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Adds a new 5% preferential tax rate on dividends if the beneficial owner is a company (other
than a partnership) which holds directly at least 70% of the capital of the company paying the
dividends.
Generally applies a 10% withholding tax on interest
Provides a fixed 10% withholding tax on royalties.
Allows both countries to impose a 10% tax on branch profit remittances.
Capital gains Article 13
Contracting State may tax gains from the disposition of shares only if the assets of the company
consist, directly or indirectly, principally of immovable property situated in that State.
Elimination of double taxation Article 24
German Tax payable on income will be allowed as tax credit against Phil. Tax payable.
Germany generally applies the exemption method on income derived in the Phil.
- Dividends paid by a PH resident company to German resident company holding directly at least 10% of
the PH company.
Board of Accountancy Resolution No. 3
Applicability
RMC 36-2016
BOA Resolution No. 3 entitled Requiring the submission of Certificate by the Responsible
Certified Public Accountants on the Compilation Services for the Preparation of Financial
Statements and Notes Thereto is not applicable for ITRs covering the calendar year 2015, but
becomes effective only for FS to be submitted for the FY ending 30 June 2016 and subsequent
periods.
Policies for Accounting and Recording Transactions involving "netting" or "offsetting
RMC 61-2016
The practice of offsetting due to/due from and/or payable/receivable transactions of taxpayers and
consequently the accounting and recording of the same and its related transactions in the books of the
parties is strictly prohibited for taxation purposes.
At all times, the accrued receivables or payables arising from sale or lease of goods or properties or the
performance of service shall be recognized at gross for Income and
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Value-Added Tax or Percentage Tax
purposes.
RMC 61-2016
Income payments subject to Creditable or FWT shall be recorded at gross, regardless of whether
the transactions are actually offset or the same provide for net settlement of cash flows.
Any amount offset against the income payments by the payor not subjected to Creditable or
FWT shall not be allowed as deductible expense of the payor.
Passed-on Gross Receipts Tax
RMC 62-2016
All banks, non-bank financial intermediaries performing quasi-banking functions, financing

companies and other financial intermediaries not performing quasi-banking functions doing
business in the Philippines are directly liable for GRT.
GRT passed-on to customers / clients / borrowers should form part of the tax base upon which
the GRT is computed.
The "passed-on" GRT shall be considered as receipt of gross income specified under
Section 32(A) of the Tax Code.
RMC 62-2016
The passed-on GRT is considered as other fees and charges.

Banks and non-bank financial intermediaries can claim the GRT paid as a deductible expense, for
income tax purposes, subject to the actual remittance of the GRT.
Exemption on Certification
RMC 84-2016
Exempts all taxpayers applying for issuance of tax credit/refund based on Writ of Execution issued by
the Court of Tax Appeals and Supreme Court from the requirement of Certifications on Outstanding Tax
Liabilities/Delinquency Verification Slips.
Requirement of TIN for Certificate of Tax Exemption (cooperatives)
RMC 102-2016
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RDOs may process and evaluate the certificate of Tax Exemption of cooperatives that have not
yet submitted the TIN of its members
In lieu thereof, a certification under oath of the list of members and their capital contribution
must be submitted
However, cooperatives are still required to complete and submit to the concerned RDO the TINs
of its members within six months from the issuance of the CTE.
One Time Transactions involving real property
RMC 105-2016
NO LONGER REQUIRED: Certified true copies of the original CAR pertaining to transfer of property prior
to issuance of OCT/TCT or CCT which is subject of the current sale/transfer.
BIR RULINGS
Separation benefits
BIR Ruling No. 231-16 dated June 1, 2016
Separation benefits received by displaced teaching and non-teaching personnel of HEIs brought about
by the implementation of the K to 12 program are not subjected to income tax & withholding tax.
Facts:
Teaching and non-teaching personnel of higher educational institutions (HEIs) were displaced
brought about by the implementation of the K to 12 Program.
Department of Labor and Employment (DOLE) is requesting exemption from income tax, and
consequently from withholding tax, on the early retirement benefits/separation benefits to be
received by the affected employees.
The retrenchment/separation from employment of the personnel by reason of the
implementation of the K to 12 Program falls within the meaning of the phrase "for any cause
beyond the control of the said official or employee considering that the implementation of the
said Program was neither asked for nor initiated by the employees
Retrenchment/separation benefits shall not be subject to income tax, and consequently to the
withholding tax.
Socialized Housing Projects
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Sale by landowner to NHA of real properties to be utilized for low-cost and socialized housing are
exempt from the VAT and CGT. No DST is also due since NHA is exempt from payment of
DST in connection with socialized housing projects pursuant to RMC No. 42-01.
Facts: A construction company is engaged by NHA to undertake construction of 1,000 Housing Units
with its necessary construction components for it Yolanda Housing Project
Urban Development and Housing Act of 1992 (RA 7279) provides for the incentives for private
sector participating in socialized housing, such as, exemption from the payment of project-
related income taxes, CGT and VAT. Thus, the landowner who sells their properties for use in a
socialized housing project is exempt from the payment of the capital gains tax.
The income directly realized by the construction company from the land development and
housing construction shall be exempt from project-related income taxes and VAT.
However, the purchases of goods/articles by the project contractor shall be subject to VAT, even
if the said purchases are to be used for the socialized housing project, since VAT is an indirect
tax which can be passed on by the seller of the goods/services.
NHA is exempted from the payment of DST in connection with socialized housing projects. (RMC
No. 42-01 dated October 5, 2001)
The exemption from documentary stamp tax of NHA in connection with any of its socialized
housing project extends to the other party (either seller or buyer) that deals or transacts with
the NHA.
Consequently, since NHA is a party to the sale, no documentary stamp tax shall be due on such
sale.
Socialized Housing Projects
BIR Ruling No. 234-16 dated June 3, 2016 (similar
ruling as BIR Ruling No. 232-16)
The owner of the raw land is exempt from the payment of capital gains tax or the withholding tax on the
sale of a parcel of land which shall be utilized in a socialized housing project. No DST is also due since
NHA is a party to the sale.
Facts:
NHA acquired a parcel of land to be developed into a residential project under the Community
Initiative Approach Program (CIAP) of the NHA. On various dates, Deeds of Absolute of Sale
(DOAS) were executed by and between the co-owners and the NHA whereby the former sold to
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the latter the above described property to be utilized by the NHA for its socialized housing
project.
The owner of the raw land is exempt from the payment of capital gains tax or the withholding
tax under Revenue Regulations No. 2-98, as amended, on the sale of a parcel of land which shall
be utilized in a socialized housing project. (BIR Ruling No. 066-2011 dated March 9, 2011)
Thus, the sale by the landowners to LHA of the area on which the 365 socialized housing units
shall be constructed is exempt from the payment of CGT or CWT.
No DST is also due since NHA is a party to the sale.
Ruling: Under Section 20 (d) (3) of RA 7279, the sale of a socialized housing as defined therein
shall also be exempt from the payment of value-added tax (VAT).
Thus, the sale by the developer to NHA of the 365 developed lots or parcels of land shall be
exempt from VAT.
However, its purchases of goods/articles shall be subject to VAT, even if the said purchases are
to be used for the socialized housing project, since VAT is an indirect tax which can be passed on
by the seller of the goods/services.
The landowner who sold its property under CMP for use in a socialized housing project are
exempt from the payment of capital gains tax. DST still payable.
The landowner transferred and conveyed 17,770 sq.m. portion of the subject properties to a
homeowners association.
Pursuant to the certification issued by Social Housing Finance Corporation (SHFC), 17,770 sq.m.
out of 19,704 sq.m. covered actually comprises a Community Mortgage Program (CMP) Project
and shall be proportionately distributed to the association's qualified member-beneficiaries.
Pursuant to Section 32 of RA No. 7279, the landowner who sold its property under CMP for use
in a socialized housing project are exempt from the payment of capital gains tax.
However, the documentary stamp tax is not one of the taxes covered by the tax exemption
clause in Sec. 32 of RA 7279.
Accordingly, the landowners are liable to pay the documentary stamp tax on the document
conveying the afore-stated property imposed under Section 196 of the Tax Code of 1997, based
on the consideration contracted to be paid for such realties or their fair market values
determined in accordance with Section 6 (E) of the said Code, whichever is higher.
Income Tax Holiday of BOI-registered enterprises
BIR Ruling No. 347-16 dated August 11, 2016
ITH entitlement for BOI registered projects shall be vested upon compliance with the provisions
of the specific terms and conditions of the corporations BOI registration
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A company is registered with the Board of Investments (BOI) as a New Developer of Low-Cost
Mass Housing Project on a Non-Pioneer status. It has been granted Income Tax Holiday (ITH) by
the BOI for a period of four (4) years from date of BOI certification or actual start of commercial
operations/selling, whichever is earlier but in no case earlier than the date of registration.
Under the specific terms and conditions of its BOI registration, it shall construct and sell 415
units of low-cost mass housing for its housing project in Laguna.
Income payments received by a corporation for a BOI registered project is exempt from
creditable withholding tax (CWT) during the period under which it is granted ITH.
The above exemption from CWT covers only revenues from its registered activity.
Exemption does not cover revenues from units with selling price exceeding PhP2,500,000.00.
Exemptions shall be vested upon compliance with the provisions of the specific terms and
conditions of the corporations BOI registration.
BOI-registered enterprises enjoy no tax exemption/privileges other than those granted under
EO 226. It is clearly granted a 4-year ITH but it remains to be subject to VAT and DST on its sales
of house and lot units pursuant to Sections 106(A0(1)(a) and 196 of the Tax Code of 1997, as
amended.
Sale of housing units with selling price of not more than PhP1,919,500.00 shall be exempt from
VAT pursuant to Section 109(1)(P) of the Tax Code.
Separation pay due to retrenchment
BIR Ruling No. 353- 16 dated October 18, 2016
Separation pay received due to retrenchment exempt from tax
Facts:
The company is engaged in business process outsourcing (BPO). Three of its employees had tom
be separated as a result of the termination of the companys contract with one of its clients. The
workers have been duly notified of their termination.
Ruling:
Section 32(B)(6)(b) of the Tax Code of 1997, as amended, excludes from the computation of
gross income any amount received by an employee from his employer as a consequence of
separation from service due to death, sickness or other physical disability or for any cause
beyond the control of the said employee.
The separation pay that will be received by retrenched employees shall be exempt from income
tax and, consequently, from withholding tax.
The terminal pay shall likewise not be subject to income tax and consequently to withholding
tax, i.e., commutation and payment of monetized unused vacation leave credits not exceeding
10 days. This however is not applicable to sick leave credits.
This exemption does not include payment of salaries, and 13th month pay and other benefits in
excess of Php 82,000.
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Donation to religious corporation
BIR Ruling No. 358-16 dated October 19, 2016
Donation to religious corporation exempt from donors tax and DST
Facts: An individual donated a parcel of land in favor of a religious corporation.
Ruling:
Any donation in favor of a religious corporation is exempt from donors tax pursuant to Section
101 (A) (3) of the National Internal Revenue Code (NIRC) of 1997. The exemption, however,
requires that not more than 30% of the said gift shall be used by the done for administrative
purposes.
For donation of land, the Register of Deeds shall annotate the 30% condition at the back of the
titles because failure to comply with this condition will subject the donation to donors tax. In
addition, conveyance of realties without consideration such as through donation is likewise not
subject to DST as prescribed under Section 196 of the NIRC. Only Php 15.00 DST under Sec. 188
shall be imposed.
Sale of principal residence
BIR Ruling No. 369-16 dated November 3, 2016
Execution of the deed of absolute sale and not the date of notarization constitutes consent for sale of
property for purposes of availing CGT exemption under Section 24(d)(2) of the NIRC. Other documentary
requirements can also be considered by BIR.
Facts:
Deed of Absolute Sale was executed between the seller and the buyer wherein the principal
residence of the seller was sold to the buyer. Date of execution 2 September 2013. Date of
notarization 10 September 2013. Acquisition of new principal residence September 2, 2013
as date of execution and notarization of the Deed of Absolute Sale.
Ruling:
Sale of a principal residence by a natural person may be exempted from capital gains tax under
Section 24(D)(2) of the Tax Code of 1997, provided that all the requirements in the said law as
implemented by RR 13-99 as amended by RR 14- 2000 have been complied with.
The sale or disposition of the principal residence must precede the acquisition of a new principal
residence.
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The acquisition or construction of a new principal residence must be done within eighteen (18)
calendar months from the date of the disposition to be exempt from capital gains tax.
It is provided under RR 13-99 that, in general, the date of sale or disposition of a property
refers to the date of notarization of the document evidencing the transfer of said property.
Art. 1315 of the Civil Code provides that Contracts are perfected by mere consent, and from
that moment the parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their nature, may be in keeping
with good faith, usage and law
The consent of both parties was manifested upon the date of execution of the Deed of Absolute
Sale and thereupon became valid and not on the date of notarization.
In this query, it appears that acquisition of the sellers new residence came after the sale of its
old residence as shown by other documents submitted such as Cashiers Checks (dated in
August 2013) and CARs for both transactions (October for the sale and December 2013 for the
acquisition of new residence). These documents show that the date of sale of the principal
residence was actually made prior to the acquisition of the new residence.
Therefore, the sale shall not be subject to 6% CGT under Section 24 (d) (2) of the NIRC of 1997.
When will an alien be considered a resident of the Philippines
Indefinite stay within the Philippines renders a foreigner a resident. A resident alien is subject to income
tax in the same manner as a Filipino citizen
Facts:
A domestic corporations President is a French citizen who owns approx.. 99.9% of the
outstanding stock of the corporation. He had ben its President since its incorporation in 1989
and he is married to a Filipina since 2000, owns and maintains residence in the Philippines.
This ruling seeks confirmation that the President of the said Company is a resident alien for
Philippine income tax purposes, as defined in Section 22(F) of the Tax Code as amended.
Ruling:
An alien may be considered a resident of the Philippines for income tax purposes if:
1. He/she is not a mere transient or sojourner,
2. He/ she has no definite intention as to his stay, or
3. His/her purpose is of such nature that an extended stay may be necessary for its accomplishment, and
to that end the alien makes his or he home temporarily in the Philippines. (Section 5 RR No. 2)
27
The alien, in this ruling, has shown that there is an intention on his part to stay in the Philippines
indefinitely given the fact that:
a) he invested in the Philippines and served as the companys President;
b) he acquired real property and is actually present most of the time in the Philippines since 1989; and
c) he registered as a taxpayer with the BIR. All of these circumstances show that he is not a mere
transient or sojourner.
Accordingly, it is clear that the alien has acquired residency in the Philippines. When will an alien be
considered a resident of the Philippines
Ruling:
Thus, he is a resident alien and is taxable as a resident alien for income tax purposes for the
duration of his stay in the Philippines. He is subject to income tax in the same manner as a
Filipino citizen. He can also avail of the personal tax deductions and tax exemptions allowed to
Filipino citizens under the Tax Code.
BIR did not confirm that cash dividends that will be receive by TP in the future is subject to 10%
FT, being a hypothetical issue.
Importations of denatured ethyl alcohol not covered by the exemption of excise tax
Importations of denatured ethyl alcohol are not covered by the exemption of excise tax per Section 134
of the Tax Code, and not subject to zero percent (0%) VAT on account of the Companys registration
with PEZA.
Facts:
The Company is duly registered with PEZA as an Ecozone Export Enterprise. It uses denatured
ethyl alcohol in its PEZA-registered activity. However, its request that its importation of
denatured ethyl alcohol be exempt from excise tax and VAT.
Ruling:
The request for exemption from VAT and excise tax is denied for the ff. reasons:
o There is no provision under Section 134 of the Tax Code for exemption covering
importations. Section 134 covers only domestic denatured alcohol. Importations of
denatured alcohol is subject to excise tax under Section 141 of the NIRC.
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o The Companys PEZA certification only mentions VAT-zero rating in its transactions with
its local suppliers of goods, properties, and services in connection with its
PEZAregistered activities. Thus, the Company cannot invoke said certification in claiming
VAT zero-rating on its importations of the denatured ethyl alcohol.
o Its Permit to Buy/Use Denatured Alcohol only allows the Company to use/buy
denatured ethyl alcohol from local suppliers that are duly registered with the BIR.
Noncompliance with or violation of any of the conditions for the grant of the Permit to
Buy/Use Denatured Alcohol shall be a valid ground for the revocation of the same.
Transfer of real property based on a court approved compromise agreement
BIR Ruling No. 423-2016 dated 07 December 2016
A reconveyance of real property based on a compromise agreement duly approved by a court is still
subject to payment of capital gains tax (CGT) and documentary stamp tax (DST).
The transfer of property pursuant to a compromise agreement is covered by the clause other
disposition of real property under Section 24(D)(1) of the Tax Code of 1997 on capital gains tax.
The phrase other disposition includes all kinds of dispositions of real property unless
specifically excluded therefrom or subject to another tax treatment.
The reconveyance of the subject real property is subject to DST under Section 196 of the Tax
Code.
Reversion of property to trustor
BIR Ruling No. 445-2016 dated 19 December 2016
The termination, liquidation and reversion of the property (real or personal) back to the trustor is not
subject to income tax, capital gains tax and withholding tax on the ground that there is no sale or
transfer of property involved in said transaction.
Facts:
An individual (Trustor) entered into a Trust Agreement with a bank (Trustee), by virtue of
which a Trust Account was established where the Trustor conveyed to the Trustee PhP1.7M in
cash, to be held in trust, managed, invested, reinvested and for other purposes for the benefit
of the beneficiaries. Another Trust Account was opened with initial investment of PhP195,000.
With the cash investment, the Trustee purchased two condominium units and registered the
same in the name of the Trustee.
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The trustee bank merged with another bank with the latter being the surviving entity and the
Trust Accounts had new account numbers. The Trustor now wants the properties covered by the
trust to be transferred back to his name.
Ruling:
The transfer of title of the properties by the trustee in favor of the trustor, who is the beneficial owner
thereof is not subject to capital gains tax nor to the creditable withholding tax. The conveyance is merely
to be treated as a continuation and confirmation of title in favor of the ultimate and real beneficiaries of
the properties. The transfer of the properties to the trustor is not also subject to the 12% VAT because
the said property is not held primarily for sale to customers or for lease in the ordinary course of
business. No gift tax is also due.
Non-stock non-profit educational institution
BIR Ruling No. 001-2017 dated 05 January 2017
Facts:
A non-stock and non-profit educational institution with SEC registration dated 7 February 2014
requested for the issuance of a certificate of tax exemption enjoyed by non-stock and non-profit
educational institution under Section 30(H) of the Tax Code of 1997.
In reply, the BIR said that it cannot as yet issue the requested ruling/certificate of tax exemption
because the school has to be proved by actual operation for at least 3 years that it is really a
corporation/association exempt from income tax under Section 30(H) of the Tax Code.
Ruling:
In the meantime, it can file the necessary annual information return instead of an income tax
return on or before the 15th day of the fourth month following the end of its taxable year.
Based on this return, the BIR shall conduct the necessary investigation and the letter of
exemption shall be issued thereafter. For purposes of securing a certificate of exemption after
the three-year period, it is required to submit the documentary requirements enumerated in
Section 2 of RMO 44-2016.
Separation pay subject to withholding tax if separated with cause
Separation pay of an employee who was separated for cause is subject to withholding tax
Facts:
30
An employee in a pharmacy was separated from employment on the ground of Serious
Dishonesty and Willful Disobedience. This ruling seeks to exempt the separation pay given to her
from withholding tax pursuant to Sec 32 (B)(6)(b) of the Tax Code.
Ruling:
The separation of the employee in the case at bar cannot be considered an involuntary
separation within the contemplation of Sec 32 (B)(6)(b) since her separation is for cause, i.e. on
the ground of Serious Dishonesty and Willful Disobedience.
Sale of socialized housing units to qualified beneficiaries
The sale of socialized housing units to qualified beneficiaries shall be exempt from income tax, and
consequently from creditable expanded withholding tax. A project contractor of a socialized housing
project shall also be exempt from the payment of VAT on the project concerned where the price ceiling
per unit is P450,000.00 for house and lots and P180,000.00 for lots only.
Facts:
This ruling refers to a request for a Certificate of Tax Exemption on the sale of socialized housing
units pursuant to RA 7229 or the Urban Development and Housing Act of 1992.
Ruling:
Only the sale of socialized housing units to qualified beneficiaries shall be exempt from income
tax, and consequently from creditable expanded withholding tax.
Developer of socialized housing shall be exempt from VAT. But purchases of goods/articles by
project contractor shall be subject to VAT, even if used for socialized housing projects.
The owner/project developer/seller shall be liable to pay DST on the documents conveying the
properties under Sec 196 of the Tax Code.
Sale of house and lot packages from a landowner/developer to the NHA
The sale of house and lot packages from a landowner/developer to the NHA under the Urban
Development and Housing Act of 1992 is exempt from the payment of the capital gains tax, project-
related income taxes, and consequently from withholding tax pursuant to Sec20 of RA 7279. The sale is
also exempt from VAT.
Facts:
31
The landowner/developer of properties sold 312 developed lots to NHA at an agreed price of
around Php34M. The purchased developed lots and completed housing units shall be financed
through the Community Initiative Approach of the NHA for Php220,000.00 for every developed
lot and completed housing unit per family.
Ruling:
The sale of 312 house and lot packages by the landowner/developer t are exempt from the
payment of the capital gains tax, project-related income taxes, and consequently from
withholding tax pursuant to Sec20 of RA 7279.
The sale from landowner to NHA of the house and lot packages are likewise exempt from DST
imposed under Sec196 of the Tax Code pursuant to RMC No. 42-01.
The exemption from DST of NHA in connection with any of its socialized housing project extends
to the other party that deals or transacts with the NHA.
Moreover, the sale of the 312 house and lot packages shall be exempt from VAT. However,
purchases of goods/articles by the project contractor shall be subject to VAT, even if the said
purchases are to be used for the socialized housing project.
Donation to LGU
Facts:
UNICEF donated a locally-purchased vehicle to the Municipality of Burauen, Leyte, one of the
towns which was badly hit by Yolanda.
Ruling:
Donations made in favor of the Government or any of its agencies which are not conducted for
profit, or to any of its political subdivisions are exempt from the payment of donors tax
pursuant to the provisions of Sections 101(A)(2) and Section 101 (B0(1) of the Tax Code of 1997.
Since the Municipality of Burauen, Leyte is a political subdivision of the National Government,
the donation made by UNICEF in its favor is exempt from the payment of donors tax.
The Deed of Donation is subject to DST of P15.00 imposed under Section 188 of the Tax Code.
SEC ISSUANCES
Corporate Term
SEC Opinion No. 16-24
32
Max term of educational institutions:
Corp Code requires indication of a term
Failure to comply with the requisite to indicate a term results in the term being deemed to have
begun on 01 May 1980.
Consequently, the term of an educational institution incorporated under the Corporation Law
but that did not amend its AOI pursuant to the Corporation Code will be until 01 May 2030.
Stock corporations incorporated under the Corporation Law follow the 50 year term and cannot
be deemed to have a new 50 years starting 01 May 1980.
The 50 year term requirement is not new to stock corporations, unlike with educational
institutions
Stockholder Meetings
Teleconferencing and videoconferencing are not allowed in stockholders meetings.

Under Section 51 of the Corporation Code, all of the stockholders must be in the same physical
place during the meeting.
Quorum in Meetings
Quorum in board meetings cannot be decreased to lower than a majority of the number of
directors or trustees as fixed in the articles of incorporation.
This number may be increased in the articles of incorporation or the by-laws, but it cannot be
reduced.
Quorum in Meetings
Stockholders or members in a stock corporation and non-stock corporation, respectively, who

are entitled to vote, must be present or represented by another person in order to constitute a
quorum.
Directors/Corporate Officers
33
Corporations cannot have alien presidents/chairmen when the corporation is involved in real estate.
Directors/Corporate Officers
Non-stock non-profit organizations are entitled to have alien trustees in its board, and a
foreigner as its President/Chairman provided that the organization is not involved in any
nationalized or partly nationalized business or industry.
Calls for Payment
A call for payment for the balance of subscriptions may be made by installments.
Stock certificates cannot be issued for the equivalent of the shares partially paid in a
subscription. Subscriptions are one, entire, and indivisible contract.
Cash dividends cannot be directly applied to the balance of a non-delinquent subscription.
Neither can stock dividends.
Delinquency Sale
In a delinquency sale, certificates of stock will be issued only upon full amount of the bid price,
together with the interest and expenses
Treasury Shares
Treasury shares may be treated as part of the issued shares as long as they are not cancelled or
retired.
The 25% of the 25% requirement is mandatory only during the pre-incorporation period and
when the corporation undertakes to increase its authorized capital stock.
34
Foreign Equity
Foreign equity participation cannot be allowed in the registration of corporations that intend to
engage in the practice of interior design
Freight Forwarder
An international forwarding company with more than 40% foreign equity can provide trucking
service to its clients through subcontracting to local trucking companies as it is an activity that is
necessary included in, or implied by, its business as an international freight forwarder.
Nationalized Industries
No foreign participation is allowed in corporations, such as a real estate brokerage company,

that will engage in the practice of real estate service.
Advertising agencies that lease out billboard spaces are mass media companies that must be
wholly owned by Filipinos.
An online English school, which will provide formal training courses or programs for a fee and
shall provide Diplomas or Certificates of Program Completion, must comply with the 60-40
Filipino-Foreign equity requirement.
All educational institutes, other than those established by religious orders and mission boards,
and those established for foreign diplomatic personnel and their dependents, and for other
foreign temporary residents, is subject to 40% foreign ownership limitation.
Business process outsourcing is not a nationalized industry. Therefore, foreign nationals may be
appointed as directors of companies that engage in business process outsourcing.
35
Renewable energy companies are engaged in a nationalized industry, therefore foreign

nationals cannot be elected as President.
Control Test
Absent any doubt, the Control Test is used in determining the nationality of a corporation
specially in cases where foreign ownership restrictions apply.
Joint Ventures
Corporations may enter into joint ventures provided that it is line with the business authorized
by their charters.
Representative Offices
Representative offices may engage in information dissemination and other support activities to
the main office, but it must strictly adhere to the restrictions imposed upon it.
Retail
Service centers are not engaged in retail; purchases of replacement parts are merely incidental
to the repair
Sales to the general public, through a single outlet owned by a manufacturer of products
manufactured, processed or assembled in the Philippines is not considered as retail.
The sale of motorbikes to industrial users on a wholesale basis is not retail since it involves
producer goods, not consumer goods for household purposes.
By producer goods, the IRR of the Retail Trade Law means that the consumers of these products
render service to the general public and/or produce or manufacture goods which are then sold
by them.
36
Sales to the government, its agencies and GOCCs are not retail.
Retail
Restaurant operations by a hotel owner are not considered as retail as long as the same is
incidental to the hotel business. This principle holds true even if the restaurant engages in
catering services.
Gift stores in hotels are not considered as engaging in the retail trade as this is merely incidental
to hotel operations.
SEC Memorandum Circulars
Submission to Credit Information Cooperation
SEC Memorandum Circular No. 3
Financing companies are required to submit to the Credit Information Corporation their basic
credit data namely:
(1) their 5-year historical data
(2) their current data on or before 31 August 2016, and are enjoined from attending orientations/road
shows.
Judicial Affidavit Rule
The Judicial Affidavit Rule is applicable in hearings before the SEC.

The JAR will apply in all actions, proceedings and incidents requiring the reception of evidence.
Address in AOI/GIS
Specific addresses must be given for the principal office of the corporation, and of each
incorporator, director, trustee or partner.
37
(Building Unit, Name of Building, Street No., Street Name, Barangay, City)
Certificate of Nationality of Non- Stock Corporations
A certification on the nationality of nonstock corporations shall be issued upon request to the
Commissions Company Registration and Monitoring Department for a fee in the amount of Five
Thousand (Php5,000.00) pesos.
Special Audit Report
Amends Item 2 of Memorandum 06-2012 regarding the submission of a Special Audit Report for
increases in authorized capital stock.
Special Audit Reports are not needed where the payment to the subscription to the increase is
less than Fifty Million Pesos (P50,000.00)
If a special audit report is not needed, then a notarized Subscription Contract among the
stockholder/s, treasurer and president for the corporation stating the number of additional
shares subscribed to and paid for shall be submitted by the corporation.
Certificate of Paid Up Capital
To secure a Certification of Paid Up Capital, the following must be submitted by the corporation:
a. Duly Accomplished Request Form stating the basis of certification
b. Audited F/S as of the last fiscal year
c. Audited Interim Financial Statements
d. Notarized Sec Cert of No Pending Intra- Corporate Dispute; and
e. Monitoring Clearance
New GIS Forms
New GIS forms to be used starting January 2017.
38
Addition of TIN page at the end of the GIS, which will not be uploaded for the privacy of the
corporate officers and stockholders.
Payment of Annual Fees of Capital Market Participants
Guidelines on the applications for Payment of Annual Fees of Capital Market Participants.
Payment of Annual Fees of Capital Market Participants
Guidelines are applicable to SEC-registered/licenses Capital Market Participants, namely:

o Brokers Dealers in Securities,
o Brokers in Securities,
o Dealers in Securities,
o Brokers in Proprietary Shares,
o Voice Brokers,
o Investment Houses,
o Investment Houses
o Engaged in Dealing Government Securities,
o Underwriters of Securities Engaged in Dealing Government Securities,
o Government Securities Eligible Dealers,
o Investment Company Advisers,
o Mutual Fund Distributors, and their respective Associated Persons,
o Compliance Officers,
o Salesmen,
o Fixed Income Market Salesmen,
o Certified Investment Solicitors
Requirements for Financing and Lending Companies
39
Streamlines the documentary requirements for financing and lending companies, by no longer
requiring the submission of:
o SEC Form Q-EPS;
o Certification of the Corporate Secretary on the attendance of Directors to Board
Meetings; and
o Corporate Governance Scorecard.
Code of Corporate Governance
Revised Code of Corporate Governance for Publicly-Listed Companies (the Code).

The Code provides guidelines and recommendations to raise corporate governance standards.
Companies are not required to comply but will be required to explain in their Annual Corporate
Governance Report why it was unable to comply with certain provisions.
All Publicly Listed Companies must submit their 2016 Annual Corporate Governance Report
(ACGR) must be submitted to the SEC on or before 30 May 2017.
Five days from submission to the SEC, the ACGR must be uploaded on the companys website.
Future ACGR submissions will be based on the Code of Corporate Governance (SEC
Memorandum Circular No. 19).
Auditing Standards
The SEC has adopted revised guidelines for auditing standards and standards on assurance
engagements and other related services.
All of the new and revised auditing standards have been adopted by the Auditing and Assurance
Standards Council and approved by the Board of Accountancy and Professional Regulations
Commission and published in the Official Gazette.
TAX REFORM BILL
HB 4774
Income Tax Rates
Tax Schedule effective July 1, 2017 and taxable years 2018 and 2019:
40
Income Tax Rates
For 2020 onwards, the proposed tax brackets are:
Income Tax Rates
Under proposed bill after 2020, the taxable income levels in the above schedules shall be
adjusted once every five years through rules and regulations issued by the DOF, upon
recommendation of the Commissioner of BIR.
Excise Tax on Petroleum Products
Under the bill, the excise tax on petroleum products will increase every year starting 2017 to
2019.
Lubricating oils and greases - from P4.50 to P7 in 2017, P9 in 2018 and P10 in 2019
Processed gas, per liter of volume capacity - from P0.05 to P3 in 2017, P5 in 2018 and P6 in 2019
Waxes and petrolatum, per kilogram - from P3.50 to P7 in 2017, P9 in 2018 and P10 in 2019
41
Denatured alcohol to be used for motive power, per liter of volume capacity - from P0.05 to P3
in 2017, P5 in 2018 and P6 in 2019
Reduce estate and donors tax to 6%
The bill provided that there shall be levied, assessed and collected and paid upon the transfer of
the net estate, whether resident or non-resident of the Philippines, a six percent (6%) tax based
on the value of such net estate.
The bill added that the donors tax for each calendar year shall be six percent (6%) and shall be
computed on the basis of the total net gifts made during the calendar year, provided that
annual net gifts not exceeding P100,000 shall be exempt.
ESTATE TAX AMNESTY
HB 3010/ HB 4814
Estate Tax Amnesty
Per HB 3010:
o Cover all unpaid estate taxes as of the time the Act shall have taken effect and those
due within (3) years henceforth.
Proposed tax table is as follows per HB 3010:
Update: HB 4814 passed 13 February 2017
Estate tax amnesty within (2) years from the issuance of IRR
Fixed rate of 6 % of the decedents net estate
NATIONAL REVENUE
AUTHORITY BILL
HB 695
42
National Revenue Authority Bill
Creates a public organization known as National Revenue Authority

Attached to the DOF
Responsible for the implementation of internal revenue laws
Primary responsibility and objective is to raise revenues to finance government operations.
It shall give effect to and administer the supervisory and police powers conferred to the BIR by
the Code and other laws.
Employees of the Authority shall be hired on a fixed term performance-based contracts.
(Source: TAX UPDATES 2017 by Atty. Maria Theresa C. San Pablo-Llamado, CAZLA Law, PICPA Seminar 15 February 2017)
43

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RR 1-2016 as amended by RR 8-2016: - Amends RR 3-2005

On requirement of timely payment of taxes as a precondition for government contracts.

Adds a requirement that government contractors must file through EFPS.

1. No unpaid registration fee;

2. No open valid stop-filer cases;

4. Not tagged as Cannot Be Located taxpayer;

Verification of tax clearance

[Removed under RR 8-2016]

RR 3-2016: Prescribes policies in adoption of credit/debit/prepaid card payments

Fiscal incentives for RTEs within TEZs (Tourism Enterprise Zones).

Income Tax Holiday

Greenfield: Six years, extendible once for another six

Exemption from taxes on importation of capital investment and equipment, transportation

To another RTE enjoying similar exemption

Goods and Service Incentives

Duty Free Philippines

Fiscal incentives for RTEs not within TEZs.

Documents must be completed within the 2-year period

Claims not covered:

2. Those denied in writing by approving authority

3. Those approved/granted fully or partially by the approving authority

RR 3-2017 MICRO FINANCE NGOs ACT

RR 4-2017 Authority to Release Imported Goods (ATRIG)

REVENUE MEMORANDUM ORDERS

Compromise Settlement and Abatement

The outstanding tax liabilities and/or penalties shall be immediately collected.

Decentralization of receiving and processing certifications of internal revenue tax payments

From the Revenue Accounting Division (RAD)

Waiver of Statute of Limitations

Tax-Free Exchange under Sec. 40(C)(2) in relation to Sec. 40(C)(6)(c)

Procedure for ECAR

Titled real properties:

One eCAR per property covered by OCT/TCT/CCT.

Untitled real properties:

Procedure for Handling Disputed Assessments

Protest against PAN is optional

Within 30 days from receipt of FAN, TP either

a) Request for reconsideration no additional evidence

Unless stated otherwise, all protests deemed as requests for reconsideration.

b) Request for reinvestigation with additional evidence

TP given 60 days to submit evidence from filing of protest.

If protest not acted upon by CIRs authorized representative

b) If protest by way of request for reinvestigation

a) File request for reconsideration to CIR

b) Appeal to the CTA

Applications for Accreditation of PERA Administrator need to have a "Qualification Certificate"

Importer's Clearance Certificate (ICC) and Broker's Clearance Certificate (BCC)

Issue-based Audit under VAT audit program

Separation Benefits for Causes Beyond

REVENUE MEMORANDUM CIRCULARS

Renegotiated Philippines-Germany Tax

Expanded definition of resident - Article 4

A partnership is deemed to be a resident of Germany if the place of effective management is

Dividends, Interest and Royalties Articles 10, 11 and 12

Capital gains Article 13

Elimination of double taxation Article 24

Board of Accountancy Resolution No. 3

Policies for Accounting and Recording Transactions involving "netting" or "offsetting

Passed-on Gross Receipts Tax

All banks, non-bank financial intermediaries performing quasi-banking functions, financing

Section 32(A) of the Tax Code.

The passed-on GRT is considered as other fees and charges.

Requirement of TIN for Certificate of Tax Exemption (cooperatives)

One Time Transactions involving real property