Additonal Topics in Taxation.pdf

NEW TOPICS 6.0 TAXATION UNDER THE LOCAL GOVERNMENT CODE 6.1 Scope and different types of local taxes (Limited to Real property tax, local business tax) 6.2 Tax base and tax rates 6.3 Venue and time of filing of tax returns 6.4 Venue and time of payment

NEW TOPICS 7.0 PREFERENTIAL TAXATION 7.1 Senior Citizens Law 7.1.1 Exemption from income tax of qualified senior citizens 7.1.2 Tax incentives for qualified establishments selling goods and services to senior citizens 7.2 Magna Carta for Disabled Persons 7.2.1 Tax incentives for qualified establishments selling goods and services to disabled persons

NEW TOPICS 7.3 Special Economic Zone Act 7.3.1 Policy and the Philippine Economic Zone Authority (PEZA) 7.3.2 Registration of investments 7.3.3 Fiscal incentives to PEZA-registered economic zone enterprises

NEW TOPICS 7.4 Omnibus Investments Code (Book 1 of Executive Order No. 226) 7.4.1 Policy and the Board of Investment (BOI) 7.4.2 Preferred areas of investment 7.4.3 Investments Priority Plan 7.4.4 Registration of investments 7.4.5 Fiscal incentives to BOI registered enterprises

NEW TOPICS 7.5 Barangay Micro Business Enterprises (BMBEs) Act 7.5.1 Registration of BMBEs 7.5.2 Fiscal Incentives to BMBEs 7.6 Double Taxation Agreements (DTA) 7.6.1 Nature and purpose of DTAs 7.6.2 Manner of giving relief from double taxation 7.6.3 Procedure for availment of tax treaty benefits

NEW TOPICS 8.0 TARIFF AND CUSTOMS CODE 8.1 Functions of the Bureau of Customs 8.2 Functions of the Tariff Commission 8.3 Nature of tariff and customs duties 8.4 Basis of assessment of duty 8.5 Documents required for importation of goods 8.6 Documents required for export of goods 9.0 EFFECTIVE COMMUNICATION TO STAKEHOLDERS

PREFERENTIAL TAXATION 1. Senior Citizens Law 2. Magna Carta for Disabled Persons 3. Special Economic Zone Act 4. Barangay Micro (BMBEs) Act

Business

Enterprises

SENIOR CITIZENS LAW Coverage: 1. Exemption from income tax of qualified senior citizens 2. Tax incentives for qualified establishments selling goods and services to senior citizens Reference: Revenue Regulations No. 7-2010

EXEMPTION FROM INCOME TAX General Rule: Qualified SCs deriving income during the taxable year, whether from compensation or otherwise, are required to file income tax returns. Exceptions: (1) If the income of SC is compensation and he is a minimum wage earner (MWE), SC is exempt from income tax subject to existing rules on MWE (2) If the aggregate amount of gross income during the taxable year does not exceed his/her personal exemptions (basic and additional), SC is exempt from tax and NOT required to file annual ITR

TAX INCENTIVES TO QUALIFIED ESTABLISHMENTS

Kinds of discounts on qualified goods and services: 1.

Promotional discount

2.

20% discount

3.

5% discount on water and electric consumption by SCs

4.

50% discount on electricity, water and telephone consumption by the Senior Citizen Center

TAX INCENTIVES TO QUALIFIED ESTABLISHMENTS

TAX TREATMENT OF DISCOUNTS: - ordinary and necessary expenses

- deductible from the gross income of the seller falling

under the category of itemized deductions

- can be only claimed if the seller does not opt for

optional standard deduction during the taxable year.

CONDITIONS FOR DEDUCTION 1. Only that portion of the gross sales exclusively

used, consumed or enjoyed by the SC shall be eligible for the deductible sales discount;

2. The gross selling price and the sales discount

must be separately indicated in the official receipt or the sales invoice issued by the establishment

CONDITIONS FOR DEDUCTION 3. Only the actual amount of the discount granted or a sales discount not less than the statutory rate (20%, 5% and 50% when applicable), whichever is higher, based on the gross selling price can be deducted from the gross income, if applicable, for income tax purposes, and from the gross sales or gross receipts of the business enterprise concerned, for VAT or OPT purposes

CONDITIONS FOR DEDUCTION 4. The seller must record its sales inclusive of the discount granted 5. The discount can only be allowed as a deduction from gross income for the same taxable year the discount is granted 6. The business establishment giving sales discount to qualified SCs is required to keep a separate and accurate record of sales, which shall include the name of the SC, the SC ID, gross sales/gross receipts, dates of transactions and invoice numbers for every sale to SCs

CONDITIONS FOR DEDUCTION 7. Only business establishments selling any of the qualified goods and services to SCs where an actual discount was granted may claim the deduction 8. The seller must not opt for OSD

ADDITIONAL DEDUCTION DUE TO COMPENSATION PAID TO SENIOR CITIZENS Private establishments employing SCs shall be entitled to additional deduction from their gross income equivalent to 15% of the total amount paid as salaries and wages to SCs subject to the provisions of Section 34 of the Tax Code and its implementing rules and regulations

CONDITIONS FOR ADDITIONAL DEDUCTION

1. The employment shall have to continue for a period of at least six months 2. The annual taxable income of the SC does not exceed the poverty level as may be determined by the NEDA thru the NSCB. For this purpose, the SC shall submit to his employer a sworn certification that his annual taxable income does not exceed the poverty level.

MAGNA CARTA FOR DISABLED PERSONS Coverage: Tax incentives for qualified establishments selling goods and services to disabled persons

References: Republic Act No. 10754 RMC 104-2016 (Annex A)

PERSONS WITH DISABILITY (PWD) “those suffering from restriction of different abilities, as a result of a mental, physical or sensory impairment, to perform an activity in the manner or within the range considered normal for a human being”. “includes those who have long term physical, mental, intellectual or sensory impairments which in interaction with various barriers may hinder their full and effective participation in society in equal basis with others”

QUALIFIED PWD - refers to an individual with disability who, with reasonable accommodations, can perform the essential functions of the employment position that such individual holds or desires. However, consideration shall be given to the employer’s requirement as to what functions of a job are essential, and if an employer has prepared a written description before advertising or interviewing an applicant for the job, this description shall be considered evidence of the essential functions of the job.

INCENTIVES FOR EMPLOYERS Additional deduction from their gross income equivalent to twenty-five percent (25%) of the total amount paid as salaries and wages to disabled persons. Requirements: 1. Entities must present proof as certified by the Department of

Labor and Employment that disabled persons are under their employ

2. That

the disabled employee is accredited with the Department of Labor and Employment and the Department of Health as to his disability, skills and qualifications.

INCENTIVES FOR EMPLOYERS Private entities that improve or modify their physical facilities in order to provide reasonable accommodation for disabled persons shall also be entitled to an additional deduction from their net taxable income, equivalent to fifty percent (50%) of the direct costs of the improvements or modifications. Note: Not applicable to improvements or modifications of facilities required under BP 344 (An Act to Enhance the Mobility of Disabled Persons by Requiring Certain Buildings, Institutions, Establishments and Public Utilities to install Facilities and Other Devices).

SPECIAL ECONOMIC ZONE ACT

Coverage:

1. Policy and the Philippine Economic Zone Authority 2. Registration of investments 3. Fiscal incentives to PEZA-registered economic zone enterprises

References: R.A. Nos. 7916; 9593 (Tourism Act), IRR of RA7916, Revenue Regulations Nos. 2-2005; 11-2005, 13-2005; 7-2016 (TIEZA)

ECONOMIC ZONES IN THE PHILIPPINES CLASSIFICATION

Manufacturing Economic Zones Information Technology Parks/Centers Agro-Industrial Economic Zones Tourism Economic Zones Medical Tourism Parks/Centers *Source: PEZA (as of October 31, 2016)

NO.

73 243 21 19 2

DECLARATION OF POLICY It is the declared policy of the government to translate into practical realities the following State policies and mandates in the 1987 Constitution, namely: (a)

The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments. (Sec. 20, Art II)

(b)

The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods and adopt measures that help make them competitive. (Sec. 12, Art XII)

REGISTRATION OF INVESTMENTS Registration of Business Enterprises. - Business enterprises within a designated ECOZONE shall register with the PEZA to avail of all incentives and benefits provided for in the PEZA law.

REGISTRATION OF INVESTMENTS Developer / Operator, Domestic Market, Utilities, Facilities, Tourism or Service Enterprises Qualifications-

Applications shall comply with the applicable nationality, control and / or ownership requirements of the working capital thereof in accordance with the pertinent provisions of the Philippine Constitution, Foreign Investments Act of 1991 and other existing laws and regulations.

REGISTRATION OF INVESTMENTS Domestic Enterprise Qualifications – Applicants shall be limited to new or expanding business entities subject to the guidelines that shall be promulgated by the Board in addition to the nationality requirements under existing laws and regulations.

INCENTIVES TO ECOZONE ENTERPRISES New or expanding ECOZONE Developers / Operators, Export, Free Trade, Domestic Market, Utilities, Facilities and Tourism Enterprises, except ECOZONE Service Enterprises shall be entitled to the fiscal incentives provided in Sections 24 (5% Gross Income Taxation) and 42 (Incentive Scheme of ½ of the value of training expenses incurred in developing skilled or unskilled labor or for managerial or other management development programs incurred by enterprises deductible from the national government's share of three percent (3%) of the Act.

INCENTIVES TO ECOZONE ENTERPRISES Additional Incentives to new or expanding ECOZONE Export and Free Trade Enterprises 1.

Exemption from Duties and Taxes on Merchandise

2.

Exemption from National and Local Taxes and Licenses

3.

Tax Credit for Import Substitution

4.

Exemption from Wharfage Dues, Export Tax, Impost or Fee

5.

Additional Deduction for Training Expenses

6.

Incentives Under Presidential Decree 66

A.

INCENTIVES TO ECOZONE DEVELOPERS/OPERATORS

Exemption from National and Local Taxes and Licenses including but not limited to gross receipts tax, Value Added Tax, ad valorem and excise taxes, franchise, common carrier or value added taxes and other percentage taxes on public and service utilities and enterprises.

In lieu thereof, the ECOZONE Developer / Operator Enterprise shall pay a five percent (5%) final tax on gross income.

INCENTIVES TO ECOZONE DEVELOPERS/OPERATORS

B. Additional Deduction of 1/2 of the value of training expenses incurred in developing skilled or unskilled labor or for managerial or other management development programs incurred by an ECOZONE Developer / Operator which may be deducted from the 5% final tax due from the ECOZONE Developer / Operator but not to exceed the national governments share of three percent (3%)

OTHER INCENTIVES UNDER THE CODE 1.

Income Tax Holiday

2.

Tax Credit on Domestic Capital Equipment

3.

Importation Materials

4.

Tax Credit on Domestic Breeding Stock and Genetic Materials

5.

Additional Deduction for Labor Expense

6.

Unrestricted Use of Consigned Equipment

of

Breeding

Stocks

and

Genetic

INCENTIVES TO DOMESTIC MARKET ENTERPRISE 1.

Exemption from national and local taxes in lieu thereof, payment of a special tax rate of five percent (5%) on gross income

2.

Additional Deduction for Training Expenses

3.

Other incentives available under the Code, as may be determined and subject to the conditions that may be prescribed by the Board

INCENTIVES TO FACILITIES, UTILITIES AND TOURISM ENTERPRISE 1. Exemption from national and local taxes and lieu

thereof payment of a special tax rate of five percent (5%) on gross income

2. Additional Deduction for Training Expenses 3. Incentives provided under R.A. 6957 as amended by

R.A. 7718, otherwise known as the Build Operate and Transfer Law

4. Other incentives available under the Code, as may be

determined by the Board

NON-FISCAL INCENTIVE Immigration. – Any investor within the ECOZONE whose initial investment shall not be less than One Hundred Fifty Thousand Dollars ($150,000.00), his/her spouse and dependent children under twenty-one (21) years of age shall be granted permanent resident status within the ECOZONE. They shall have freedom of ingress and egress to and from the ECOZONE without any need of special authorization from the Bureau of Immigration.

NON-FISCAL INCENTIVE ECOZONE Enterprises may employ Foreign Nationals in executive, supervisory, technical and advisory positions. Executive positions shall pertain only to the president, vice-president, treasurer and general manager, or their equivalents

NON-FISCAL INCENTIVE Percentage of Foreign Nationals in supervisory, technical or advisory positions shall not at any time exceed five percent (5%) of its workforce unless expressly authorized by the Secretary of Labor and Employment: Provided, That foreign nationals may be employed in supervisory, technical or advisory positions only if it is certified by the Department of Labor and Employment that no Filipino within the ECOZONE possesses the technical skills required therefor.

KEY TERMINOLOGIES “Customs Territory” shall mean the national territory of the Philippines outside of the proclaimed boundaries of the ECOZONES except those areas specifically declared by other laws and/or presidential proclamations to have the status of special economic zones and / or free ports.

KEY TERMINOLOGIES “Negative List” shall refer to the list of industries drawn up and regularly updated by the PEZA under which ECOZONE Enterprises engaged in any industry listed therein shall not be allowed to sell their products or any portion thereof in the custom territory.

KEY TERMINOLOGIES “Certificate of Registration” shall mean the certificate issued by the PEZA to an ECOZONE Enterprise upon its registration. “Registration Agreement” shall refer to the final agreement executed by the PEZA and the ECOZONE Enterprise setting forth the terms and conditions for the latter's operation of business or engaged of economic activity within the ECOZONE.

KEY TERMINOLOGIES “Date of Registration” shall refer to the date appearing in the certificate of registration. “Start of Commercial Operations” for purposes of the income tax holiday, SCO shall be the date specified in the Registration Agreement or the date when the particular ECOZONE export enterprise actually begins production of the registered product for commercial purposes, whichever comes first, irrespective of phases or modules or schedule of development.

KEY TERMINOLOGIES “Gross Income” refers to gross sales or gross revenues derived from business activity within the ECOZONE, net of sales discounts, sales return and allowances and minus costs of sales or direct costs but before any deduction is made for administrative expenses or incidental losses during a given taxable period. The allowable deductions from “gross income” are specifically enumerated under Section 2, Rule XX of these Rules.

PERSONS SUBJECT TO REGULAR AND LOCAL TAX

All persons (other than enterprises) and services establishments in the ECOZONE shall be subject to national and local taxes under the NIRC and LGC. Service Enterprise” refers to a business entity or concern within the ECOZONE such as but not limited to those engaged in customs brokerage, trucking / forwarding services, parcel services, janitorial services, security services, insurance, and / or banking services, consultancy services, restaurants or such other services within the ECOZONE as may be determined by the Board, duly registered and/or licensed by the PEZA whose income derived within the ECOZONE shall be subject to taxes under the NIRC pursuant to Section 15 of the Act.

GROSS INCOME TAXATION Special Income Tax Rate - the 5% special income tax on gross income earned pursuant to Section 24 of R.A. No. 7916, as amended, shall be directly paid and remitted by registered ECOZONE enterprises as follows: a.

3% to the national government;

b.

2% to the Treasurer's Office of the Municipality or City where the ECOZONE registered enterprise is located (subject to rules on apportionment if an enterprise is situated within the territorial jurisdiction of more than one municipality).

EXPORT, FREE TRADE AND DOMESTIC MARKET ENTERPRISES ALLOWABLE DEDUCTIONS:

Direct salaries, wages or labor expenses Production supervision salaries Raw materials used in the manufacture of products Goods in process (intermediate goods) Finished goods Supplies and fuels used in production Depreciation of machinery/equipment used in production buildings owned/constructed by an ECOZONE Enterprise

and

Rent and utility charges associated with building, equipment and warehouses, or handling of goods Financing charges associated with fixed assets

DEVELOPER/OPERATOR, FACILITIES, UTILITIES ENTERPRISE ALLOWABLE DEDUCTIONS:

Direct salaries, wages or labor expenses Service supervision salaries Direct

materials, Enterprise

supplies

used

or

resold

to

another

Depreciation of machinery, equipment and buildings owned constructed Financing charges associated with fixed assets Rent and utility charges for buildings and capital equipment

ECOZONE and/or

OTHER IMPORTANT CONSIDERATIONS 1. Required to Withhold as Agent of government 2. Scrap sales – even if incidental sales, it is subject to

regular taxes (Commissioner of Internal Revenue vs. Nidec Copal Philippines Corporation, CTA EB No. 25 October 1, 2007 and Hoya Glass Disk Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 8115, March 8, 2016)

3. Royalty – allowable deduction if there is direct relation,

hence subject to 5% GIT. (Commissioner of Internal Revenue vs. Lear Automotive Services (Netherlands) B.V. – Philippine Branch, CTA En Banc Case No. 1346 promulgated 2 June 2015)

TOURISM INFRASTRACTURE AND ENTERPRISE ZONE AUTHORITY Fiscal Incentives of Tourism Enterprises Within Tourism Enterprise Zone. – The following incentives may, in the discretion of the TIEZA Board, be granted to Tourism Enterprises within TEZs: 1. Income Tax Holiday for New Registered Tourism Enterprises and Existing Registered Tourism Enterprises in TEZs. – New RTEs in Greenfield and Brownfield TEZs may be granted an Income Tax Holiday (ITH) for six (6) years from the start of business operations on income from its TIEZA-registered activity/ies which may be extended subject to conditions but not to exceed six (6) years.

GROSS INCOME TAXATION Gross Income Tax. – As an alternative to the ITH incentive, a new Registered Tourism Enterprise may, in lieu of all national internal revenue taxes except real estate taxes and such fees as may be imposed by TIEZA, pay a tax of five percent (5%) on its gross income earned from its registered activity/ies, subject to the compliance with the conditions prescribed by TIEZA and these Rules.

GROSS INCOME "Gross Income" shall refer to gross sales or gross revenues derived by a new Registered Tourism Enterprise, from its registered business activity within a TEZ, net of sales discounts, sales returns and allowances, and minus costs of sales or direct costs, but before any deduction is made for administrative, marketing, selling, and operating expenses or incidental losses during a given taxable period as provided in the National Internal Revenue Code of 1997, as amended, and other pertinent revenue regulations.

ALLOWABLE DEDUCTIONS a. Direct salaries, wages or labor expense b. Service supervision salaries c. Direct materials or supplies used in registered activities d. Depreciation of machinery/equipment used in registered activities, and of that portion of the building owned or constructed that is used exclusively in undertaking the registered activities e. Rent and utility charges for buildings and capital equipment used in undertaking registered activities f. Financing charges associated with fixed assets used in registered activities, the amounts of which were not previously capitalized

DISTRIBUTION OF 5% GROSS INCOME TAX

1/3 LGU

1/3 BIR

1/3 TIEZA

OTHER INCENTIVES Net Loss Carry Over. - The net operating loss of an RTE for any taxable year immediately preceding the current taxable year shall be carried over as a deduction from gross income for the next six (6) consecutive taxable years immediately following the year of such loss: Provided, that such loss has not been previously offset as a deduction from gross income, and it shall cover net operating losses incurred after the start of business operations and registration with TIEZA

OTHER INCENTIVES Net Loss Carry Over. - RTEs enjoying an ITH or the preferential 5% gross income tax rate shall not be allowed a NOLCO deduction

In case of an RTE which is engaged in both TIEZA-registered and unregistered business activities, the net operating loss or losses sustained or incurred by the RTE from its registered activities shall not be allowed as NOLCO deduction from its gross income derived from the unregistered business activities.

OTHER INCENTIVES Exemption from Taxes on Importation of Capital Investment and Equipment Exemption from Taxes on the Importation of Transportation Equipment and Spare Parts Exemption from VAT and excise taxes on the importation of goods A tax credit equivalent to national internal revenue taxes paid including input VAT paid by an RTE shall only be allowed as a credit against its output VAT liability, in accordance with existing rules and regulations.

FISCAL INCENTIVES OUTSIDE TEZs Accommodation establishments 1.

Income Tax Holiday – non-extendible 6 years for substantial expansion

2.

Exemption from Taxes on Importation of Capital Investment and Equipment

3.

Net Loss Carry Over – same with those inside TEZ

AVAILMENT OF TAX INCENTIVES Enterprises availing of incentives under RA No. 9593 are required to obtain from TIEZA, on an annual basis, a Certificate of Entitlement (CE) as proof of their entitlement to such incentives. In availing of incentives, the CE and the TIEZA Certificate of Registration shall be attached to the Income Tax Returns (ITRs) and/or the applicable tax return upon filing of the returns. In the absence of the CE and the TIEZA Certificate of Registration, the BIR shall disallow any claim of incentive.

OTHER IMPORTANT CONSIDERATIONS 1.

Withholding agents

2.

TEZs not treated as separate customs territories

3.

Maintenance of Separate Books of Account for each TIEZAregistered Activity

4.

Compliance with RA No. 10708 (TIMTA)

5.

No Double Availment of Incentives Schemes

6.

Incentive scheme is effective for a period of 10 years from effectivity of RA 9593 – Tourism Act of 2009 (Note: RR 72016 was issued on November 15, 2016)

PAYMENT OF BACK TAXES If the TIEZA registration is down-graded, suspended, revoked, the TIEZA shall order it to pay back taxes in an amount equivalent to the difference between the taxes that it should have paid had it not availed of incentives under RA 9593. The back taxes shall be computed up to three years directly preceding the date of promulgation of the decision or order finding that the enterprise violated the terms of its accreditation. The back taxes shall be distributed in the same manner.

BARANGAY MICRO BUSINESS ENTERPRISES ACT

Coverage:

1. Registration of BMBEs 2. Fiscal Incentives to BMBEs

References: R.A. 9178, DTI Administrative Order 01 Series of 2003

WHO CAN REGISTER? Sole proprietorship Corporation Partnership Cooperative Association

OPERATIONS Engaged in the production, processing or manufacturing of products or commodities, including agro-processing, trading and services, and which activities are barangay-based and micro-business in nature and scope “Services” shall exclude those rendered by: (1)

PRC Licensed professionals

(2)

Juridical persons such as partnerships or corporations engaged in consultancy, advisory and similar services where the performance of such services are essentially carried out through licensed professionals

BARANGAY-BASED A business enterprise shall be considered “barangay-based” if: (i)

the majority of its employees are residents of the municipality where its principal place of business is located; or

(ii)

its principal activity consists in the application/use of a particular skill peculiar to the locality or of raw materials predominantly sourced from the area; or

(iii)

its business operations are confined within the territorial jurisdiction of the municipality or LGU in which its principal place of business is located

BARANGAY-BASED

The enterprise may establish subject to pertinent rules anywhere in the Philippines: 1.

Warehouses

2.

Buying stations

3.

Sales outlets

4.

Booking offices

5.

Administrative offices

MICRO-BUSINESS IN NATURE AND SCOPE It shall be considered “micro-business in nature and scope” if: (i) its principal activity is primarily for livelihood, or

determined by the SMED Council or DTI as a priority area for development or government assistance;

(ii) the enterprise is not a branch, subsidiary, division or

office of a large scale enterprise; and

(iii) its policies and business modus operandi are not

determined by a large scale enterprise or by persons who are not owners or employees of the enterprise.

CERTIFICATE OF AUTHORITY (CA) Issuer

: Office of the City or Municipal Treasurer

Effectivity: Period of two (2) years, and renewable for a period of two (2) years for every renewal. Required Form: BMBE Form 02 The Treasurer shall indicate in the CA the date when the registration of the BMBE commences.

CERTIFICATE OF AUTHORITY (CA) Cost of Registration: 1.

Free of charge; or

2.

Fee not exceeding One Thousand Pesos (P1,000.00) is imposed by the LGU concerned through a properly enacted ordinance.

Requirement: Total assets, real or personal, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, shall not be more than Three Million Pesos (P3,000,000.00)

CANCELLATION OF REGISTRATION a. When the BMBE transfers its place of business to another locality; b. When the value of its total assets as determined pursuant this Order exceeds Three Million Pesos (P3, 000,000.00);

to

c. When the BMBE voluntarily surrenders its Certificate of Authority to the Office of the City or Municipal Treasurer; d. In case of death of the registered individual owner of the BMBE, if it is a sole proprietorship; e. In case of violation or non-compliance with the provisions of R.A. 9178, the Implementing Rules and this Order;

CANCELLATION OF REGISTRATION f. In case of merger or consolidation with an entity which is not eligible to be a BMBE; g. In case of sale or transfer of the BMBE, if it is a sole proprietorship, without prejudice to the transferee applying for registration should it be qualified under the terms of this Order; h. Submission of fake or false or falsified documents; i.

In case of retirement from business, or cessation/suspension of operations for one year; and

j. Making false or omitting required declarations or statements.

CANCELLATION OF REGISTRATION The BMBE shall surrender its Certificate of Authority to the Treasurer. The Treasurer shall immediately notify the BIR of any cancellation of registration of BMBE.

FILING OF CRIMINAL COMPLAINT In cases of: (a) violation or non-compliance with the provisions of

RA 9178,

(b) submission of fake or falsified documents, and/or (c)

making false or omitting required declarations or statements

the City or Municipal Treasurer should initiate the filing of appropriate criminal complaints before the Office of the Public Prosecutor.

FISCAL INCENTIVES Exemption from Income Tax - A duly registered BMBE shall be exempt from income tax on income arising purely from its operations as BMBE

NOT COVERED BY EXEMPTION a. Interest, including those from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements; b. Royalties; c. Prizes and other winnings: d. Cash and/or property dividends; e. Capital gains from the sale of shares of stock not stock exchange;

traded through the

f. Capital gains from the sale or other disposition of real

property;

NOT COVERED BY EXEMPTION g. The share of an individual in the net income after tax of association, a joint account, or a joint venture or consortium; h. The share of an individual in the distributable net taxable partnership of which he is a partner;

an

income after tax of a

i. Income from the practice of profession received directly from the clients or from the professional partnership of which the individual is a partner; j. Compensation; and k. All other forms of passive income and income from revenues not effectively connected with or arising from operations of the BMBEs as such.

DETERMINATION OF ASSET VALUATION ü Not to exceed Php 3 Million ü Include

all kinds of properties, properties and real properties

both

personal

ü Exclude land on which the particular business entity’s

office, plant and equipment are situated

ü Owned and used/to be used, or even if not owned

but used/to be used, by the BMBE and/or its affiliates for the conduct of its/their business/es

AVAILMENT OF TAX INCENTIVES The BMBE shall register with the BIR RDO where the principal office or place of business of the BMBE is located. Its application for registration shall be supported by the following documents: 1. Copy of the BMBE’s Certificate of Authority duly authenticated by the Office of the City or Municipal Treasurer; 2. Latest Audited Financial Statement, or Account Information Form or its equivalent containing data lifted from audited financial statements.

AVAILMENT OF TAX INCENTIVES 3. Sworn Statement of the values of assets owned and/or used/to be used by the BMBE and/or its affiliates reflecting the current values thereof. The Sworn Statement shall be supported by pertinent information and documents such as: a. Acquisition cost, date of acquisition and depreciated value for existing assets b. Invoices and/or official receipts for newly-acquired assets not yet depreciated; c. Duly-notarized copy of Contract of Lease for assets used in the conduct of business covered by lease agreement; and d. Copy of Loan Contract/s, if any, and Duly-Notarized Certification of Amortization Payments on the Loan

AVAILMENT OF TAX INCENTIVES 4. Certified list of branches, sales outlets, places of production, warehouse and storage places, or such other facility owned and/or operated by the BMBE indicating their respective addresses, whether located in the same municipality or city where the principal place of business is located, or elsewhere. 5. Certified list of affiliates, indicating addresses, line of business and responsible officers thereof;

OTHER IMPORTANT CONSIDERATIONS ü For purposes of exemption from the creditable withholding

tax on income payments, the BMBE shall furnish its customers with a certified true copy of its amended BIR registration certificate.

ü If a BMBE is also entitled to exemption from income tax under

other law, it shall so state this fact in its registration form and indicate whether it shall avail itself thereof or the privilege under the BMBE.

ü The choice so made shall bind the BMBE for the entire period

of validity of its registration with the BIR.

OTHER IMPORTANT CONSIDERATIONS ü No BMBE shall be allowed double or multiple

availment of income tax exemption privileges.

ü An annual registration fee in the amount of Five

Hundred Pesos (P500.00) shall be paid by a BMBE upon its registration as such, and every year thereafter on or before the last day of January:

ü BMBE which is in the form of a cooperative or a

marginal income earner shall be exempt from payment of registration fee.

OTHER IMPORTANT CONSIDERATIONS Exemption from Gross Receipts Tax - Interests, commissions and discounts derived from the loans granted by the LBP, DBP, PCFC and SBGFC to dulyregistered BMBEs, as well as loans extended by the GSIS and SSS to their respective member-employees for the purpose of establishing BMBEs, shall be exempt from gross receipts tax (GRT).

OTHER IMPORTANT CONSIDERATIONS Disqualification from GRT Exemption. In case the amount of loan extended by the abovementioned credit institution/s to a BMBE borrower resulted to the BMBE’s total assets exceeding the P3 million asset threshold, the said credit institution/s is/are disqualified to enjoy exemption from GRT.