ReSA The Review School TAXATION of Accountancy ‘Tel. No, 735-9807 & 734-3989 ‘TAMAYO/CAIGA/LIM/MANUEL, ‘TX 1903: PREFERENTIAL TAKATION (1) I — Senior Citizens Law and Magna Carta for Disabled Persons, i ‘Senior Citizens Senior citizen or elderly refers to any 1s a resident of the Phiippines, years old and above. a. Definition of terms It may apply to senior citizens wth “ual catwzenship” status provided they prove trast Filipino cizenshup and have at least 6 months residency in the Phukppines. If the returnable income of a Senior Cuizen 150 the nature of compensation income but fe | qualifies as a minimum waye earner, lr chall be exempt from income tax on the sand Compensation, He 1salzo exronptet foam wicome | taxcif his taxable income doe: not exceed ti personal exemptions, All establishments, supplying certain goods and services for their exclusive use and enjoyment or avaiiment, shall give a discount of 20% b. Exemptions and iscounts | ‘The monthly utikzation of water arid electncity by the Senicr Citzen supplied by public utes | will be subyect to a 5% discount 1). Provided, That the indwvduat metevs for foregoing ubiities are reaisteren tv the nam Of the senior ctizen residing there 2) Prowded, further, That the monthiy ‘consumption does not exceed one hunured kalowatt hours (100 kWh) of electneity and thirty cubic meters (30 m3) of water 3) Pronded, furthermore. That the prwsiege granted per household rayariiess ofthe fhumber of semior ciisans residing there 50% discount for electricity, water and telephone consumption f cor sume. ov a Ser-or Gitizen Center administered by the Geversin Cor domestic NGOs organized and operated | primarily for the purpose of promoting the wel | being of abandoned, neglected, unattached or | homeless Senior Citizens Sale of any goods and services to Setar Citizens | shall be exempt from the value-added 12x (2.5. ‘medicines, professional fees of attendiie physicians and licensed healtn workers, nredicat land dental services, actual fare for ters transportation travel as well 35 ar trensport services and sea shipping vesse!s, utilization of | services in hotels and similar lodging places, | | restaurants and recreation centers, admission: fees charged by theatres, cinema houses, atc | | funeral and burial services for the death of \ | Senior Citizen). e Only one dicount A senior citizen whois also a PUUE* can clam chy | one discount. In the purchase of goods and services which hhave promotional discount, the serio" itn oF PWD can avail of the promotional discoust or the: senor citizen/PWD dsscount, whictyevet 1s higher 4. Higher discount may be availed Persons With Disabilities (PWDs) A person with disability, vinether minor or of legal age, and who 15 a Filipino citizen, who may or may fio! be celated to his benefactor and who 1s ‘ath and dependent upon such benefactor for hs/he ‘support shall qualfy as a dependent (Section 2 , Revenue Regulations No. 1-200) Person wath disability shall refer to an individual suffering from. restriction or diferent abiibes, as 2 rescit of mental, physical or sensory imparment to perform actiuty in a manner or within the range ‘considered normal for human being (Section 2b, Revenue Regulations No. 1-2009) _ If the retumable income of 2 PWD 1s in the nature of ceinpensstion come but he qualifies as a minimum wetje earner, he shall be exempt from income tax on the said compensation, He s also exempted from ‘ome ta4 if his taxable income does not exceed his personal eveptions, Allestablishments, supplying certain goods and services for their exclusive use and enjoyment or avaiiment, shall give a discount of 20%. ws are nat entitle to the 5% discount on onihy utilization of water and electricity Not prowided for PWD Center Sale of any goods and serwces to PDS shall be evemet from the value-added tax (¢.g medicines, profeseronal fees of attending physic.ans and licensed health werkers, medical ano dental senvces act al fate for land transportation travel 3s well os ar transport services and sea shipping vessels, | zation of services in hotels and simiiar lodging places, restaurants and recreation centers, admission. fees charged by theatres, cinema houses, etc fureral and bunal services for the death of PWD) "ow who 6 also a Senior Citizen can claim only ‘ove discount In the purchase of goods and services which have fromstonal discount, the senior ctizen or PWD can avail 0: the promotional discount or the server ‘raven! PWD discount, whichever 1s higher.ReSA: The Review School of Accountancy fe. Treatment of discount for Income tax and VAT purposes {. VAT-exempt sale of * goods with corresponding discount 9. VAT-exempt sale of | services with corresponding discount Th. Proof to submit to 1 avail of the | exemption and | discount TAXATION: PREFERENTIAL TAXATION «bread excluding pa [Oni the actuni amor! of te dict qa (Fa zal, count not lew than the ot ate, whichever 6 glen, aed on the sell price can be dau rt of yaive a ied cy, f apple ani (404 busin reed, for VAL o other pert purposes Medicines, mcd flat ' vaccines, ory sd from the grass for ‘ro sn one wna Goons are insted to base necessities (eee, Corn el ech, fy, deed and canned fet, pork, tet and pouitry eat, egg, fresh and processed nik; vegetables coffee and creamer; sugar, coving al, cal, op, fenoed), hawcoal and cans) Goods are limited to prime commed tis (Hes fruits, flour; died, processed «nd carne pork, beef and poultry (eat, canned sectines aid tuna; noadles, onion garke: genatne dape herbicides; poultry, inn iow! cata feeds, veterinary products tor pauitey, vane and calli ipa shingles, plyboacd and constetction sa batteries, electrical supplies and ligt bubs and | tee wae) Professional fees of tenting jtiysicars, Professional fees of ikenseet prone soma. workers (rot mentee fur PRD»), (On medical and aera laboratory fees, i servers, dagnestK aad ‘Actual fare for land tran portation sn pti: tity buses, jeepneys, tants, AUVs, shultle saraces and public railways, wcluding URT, MRT and PNR; Actual transportation fare for Some transport serv the bho; and sha shuppiy tr and (On the uthization of sercass ws hoes anid suse | Todging estabieshrrents, estates recreation centers; | on admission tes charge ay metres, cinema houses and concen halls, circuses, carnal, aid Caer sila paces Funeral and | Citizen PWD; ID sssued by the Office 3f the Senses Ctizen Affairs (OSCA) of the place were the senior ‘atizen resides. Prowdeo, That the identification ‘card issued by the particular OSCA shaw 9 honored nationwide. a se-wices for death of Se Passport of the senior etizen conceried Other documents that estabish tat the catzen 1 a ctizen of the Repub and arty (60) years of aye as further implementing rules and eegudation- a Page 2 of 6 Only the actual amount of the divceasnt granted oF a Liles die cunt ot less than the statutory rate, whichever vs Ingher, based on the gress wenn gece ‘an be deducted tram the arort wneunne, et oh value added tare t applicable, {or waar tar punpenes, and ftom grat sales oF GroresTevnighs the baraness enterpnie: concen), ta WAL ar athe percentage tar purgere’ Medicines , ncluding influenza and pneumocarcal Conds are lunited to base necesities (908, Con, bread excluding pasines and cakes, fresh, died aod canned fish, pork, beet and poultry roeat, 5% fresh and processied rile; vegetables, coffee and Creamer, sugar; conn en sat, soapy, few, chareoal and candies.) Goods are lmited to pre commnoniies (Hees truats flour; dried, processed and cannes perk, beet and poultry meat; canned sardines and tuna, roadie, Srions;, gate; genatric diapers, herbredes, poultry, mine and cattle feeds, veterinary products for poultry, swine and cattle; nipa shingle, plyboard fand construction nails; battenes; electrical supplies ‘and ight bulls and steel ware.) Professional fees of attending physicians; (On medical and dental service sebioratory foes, siagnortic and ‘Actual fare for land transportation in public tality buses, yeepneys, tans, AUVs, shultle verwces arid publi raihways, including LRT, MPT ands PE etual transportation fare for domestic ai transport seraces and sea sinppang vessels and the ike, On the utization of services in hotels and sir lodging establishments, restaurants and recreation conte (Gn admission fees charged by theatres, cinema houses and concert halls, arouses, carnal, a% other similar places; Funeral and bunal seraces for death of Senor Crzen/owD; "10 wesuee ty the ey or munscipat mayor or the barangay captain of the place of resi Passpor of the PWD ransportation discount fare ID wssued by National Counc for the Welfare of Osabled Persons (NC TX-1901ReSA: The Review School of Accountancy qualified establishments selling goods and Exemption not apply b I1— Special Economic a. Definition of ECOZONES ‘TAXATION: PREFERENTIAL TAXATION Tax incentives for does Fifteen percent (15%) of the total amount pad 15 salaries and wages to sev0F alle allowed as addticnal ¢etucten Conditions for the aliowarce of deduction 2 the emploument “nat! have to continue for a penod of at least srr (6) months b. The annual taxabie income of ihe senor cctizen does not exceed the poverty Establishments grants veles aiscr uat *9 Senor Chuzens (promosonal discours, the *0% discount, the S% arseuuet cr water and electric Conaumpticn, or the 509% Veaunt on electra, water and telephone onsunryiion: by Seruoe ‘Citizen Center) on thar sales of goods and/or servec shall be entitled to deduct the sau sales discounts from their gross income subject t0 ‘certain conditions © 20% final withholding tax oa certan passive tncome 7.5% final wilhokting tax ov wnterest from a depository wank vince: EF" 10% final wihholciny on divderals, suave the ‘net come, etc Capital gains tax from sale of shares of stock not traded 1n the stock ench3 6% captal gains ta, un presumes! c2phai gain on sale of real propesty lassfier as capi2i asset VAT or other Percentage Taves, if ha 1s employed oF engaged 1° business oF practice of profession Donor's Tax Estate Tax xase Tax on certan goods Documentary Stanip Tar Zone Act Page 3 of 6 Private entives that employ disabled persons who ‘eet the required skills or qualifications, ether as regular employee, apprentice or learner, shall be fentited to an additional deduction, from thesr grass income, fequivatent to twenty-five percent (25%) of the total ‘amount pad as salanes and wages to disabled Conditions: 2. That such entities present proof as certiiee by the Department of Lator and Employment that disabled persons are under ther employ b. The disabled employee is accredited with the Department of Labor and Employment and the Department of Health as to his ‘disability, skills and qualifications. Private entiies that improve of modify ther physical facies in order to provide reasonable accommodation for dsabled persons shalt aiso be ‘entitled to an additional deduction trom therr net taxable income, equivalent to fifty percent (50%) of the direct costs of the improvements or modifications. Tins does not apply to improvements oF _mositicabons of facities required under Batas Pambansa Bilang 344 Establishments granting sales discount to PWD (promational discount, the 20% discount) on ther sales of goods and/or service shall be entitied to deduct the said sales discounts from ther gross | income subject to certain conditions, 20% final withholding tax on certain passive come 7.8% final withholding tax on interest from a deposttory bank under EFCOS 10% final withholding on duadends, share m the net sneome, etc: Capital gains tax from sale of shares of stock not traded in the stock exchange 6% captal gains tax on presumed captal gain on ‘sale of real property classified as capital asset VAT or other Percentage Taxes, if he 1s sel employed or engaged im business or practice of profession Donor's Tax Esate Tax Exc Tax on certain goods * Documentary Stamp Tax ECOZONES oF “Special Econom. Zones” (St Z) shall efer to selected areas with highly developed oF whch have the potentiai to be developed sato agirindstnal, ndustnal, tounst, recreational, commercial, banking, investment and finercal centers whose metes and bounds are fixed or delimited by Presidential Proclamations. ‘An ECOZONE may contain ary sail of the folowing: industrial estates (IES), export processing zones | (€P2), free trade zones arid ‘oust recreational centers. om TX-1901 ©ReSA: The Review School of Accountancy Page 4 of 6 b. Policy andthe | The State recognizes the indispensable role of the private sector, encourages private enterprise, and Philippine provides incentives to nceded investments, Economic Zone ‘Authority (PEZA) The State shall promote the preferential us2 of Filpino labor, domestic matenals and locally produces goods and adopt measures that nelp rake them competitive. tn pursuance of thece palises, the gaverranent shall actively encourage, promote, induce and accelerate a sound and balanced industial, ecenonic ana social development of the country n order to provide jobs to the people specialy those i the rural aress, merease their productivty and their individual and family income, and thereby mprove the level ari quality oftheir living condition through the establishment, ‘among others, of speciai economic Zon: in suitable and strategic locations in the country and through ‘measures that shall effectively attract legitimate and productive foreign investmer c. Registration of | Applying and registration of nvestrent with the Board of Tavestinents requires submission of a notanzed investment applcation indicating the type of projets, how the actvty relates to those listed in the Investment Pnonties Plan, the production capacity qvared %: export, the capital structure of the enterprise, and the nationalty of ts investors. In dk.iton, (se company must submit a feasibilty report, containing five-year [| projected fnancia satemnnts _s d. Fiscal incentives to 7 A, Exemption from Dunes ard Taxes on Importation of Merchandise PEZA-registered 1. Importations of Capte: Equipment ‘economic zone 2. Importation of Consirucion Matern's enterprises 3. Importation of Specialized Office Equipment and Furniture 4. Importation of Specialized Vehicles and Other Transportation Equipment 5. lmportation of Professional instruments and Household Effects omone Exemption from Nabena! and \vcal Taxes and Licenses Tax Credit for Inport Substation Exemption fro.n Wharfage Oues, £000 Additional Deduction tor Training sponses. 6, Other Iicentives iter the: Cone | H. Tax Credit on Doerestc Capital Equipment 1. Importation of tracing Stacks and Geneti= Materials 3, Tax Credit on Domest:: Breeding Stock and Geneve Materals |. Additional Deduction for Labor Expense | L Unrestricted Use of Consigned Equipment IM. Incentives Under the Decre= 5, Impost or Fee «Income Tax Holiday | Income Tax Holiday | recom Now Retro Proce Fimc Sw (6) years from commercial operations B New Reystercd Non Paneer Fans four (8) years from commercial operations |__CExpanaing ims = Troe (3) years from commercial operation of the expansion. | f. Kinds of PEZA-———_[.a) ‘Those enjoying incorne tax nolitay (ITH) sncentive registered bb) Those that are taxed at 8% uf yross vncome (GIT) incentive enterprises ___| c) Those that are uraer or opt to be under the 30% regular corporate income tax 1g: Exemption from | AIIPEZA-reaistered economic zone locator enterprises entitled to any or all 3 fiscal incentives (1c. ITH local business incentive, the option to pay the speuial 5% Tax on Gross Income, in lew of all national and local taxes | Ques ofall PEZA- | except real property taxes on lang owned by developers (5% GIT incentive) ; and/or tax and duty-free | registered | importation of machinery and nquipment, raw materials, supphes, spare parts and other production | SSonomic zone | inputs) including Logistics Sences Enterprises, are exempted from securing Local Government Unit locator enterprises | (LGU) permits. (Sec. 13, Rs. No. 721* a5 amendad by RA. ) PEZA tagistered | PED tegtered econ cane iturpeesavaling of TH ae exempted fom payment of alloca cern ram sone, | taxes censes, pos and evs, ent real esate taxes, proved tat these enterprises shal a0 be | Smterprises | 2 acy roc ponent of real proprty Foxes on acinry and equpmert hey aoqure for Use er Ssoon operations, Gunns the fr 3 Yeas use cf such macanery and equipment. (Sec 23, # No rTM ete as amended by RA, No. 8748, At. 78, £0.No, 220) “oancome Tax Fe Regiered Ponce Ems - Sr (6) year rom commercial operations Holiday | New Registered Non-Pionzer Firms - Four (4) years from commercial operations. | | Git) | Expanain Frm Tivee (3) yours from commercial operation ofthe expansion “Fr peae registered Pez regatred evieigeses ov of nS IT neni ae eiemptd from the pyre of | enterprises ‘ational and local taxes, except rnel provesty tax on land owned by developers. (Sec. 24, R.A. No. 7916 availing of the 5% | a¢ amended by R.A. Nu. (748) GIT incentive : _ TAXATION: PREFERENTIAL TAXATION (1) =P TX-1901ReSA: The Review School of Accountancy Page 5 of 6 k. Special Income | Subject to the Rex satwors to be sued Ly the Secretary of Finance, upon the recommendation of the Tax Rate Commissioner of the: Hursau of Internal Revenue, the 5% special micome tax on gross income earned, in lieu ofall taxes (except eal property tax on ‘and ovmed by developer), Pursuant to Section 24 of R.A, No, 7916, as amerdesl, shall se directly pa.c and remitted by registered ECOZONE enterprises as follows 3% to the national government b. 2% to the Treasurer's Ufice of the Municipality or City where the ECOZONE registered enterprise 1s located. (Section 1, IRR, O riibus Investment Code; Revenue Regulations No. 1-2000) In the case the ECOZGNE :5 situated and encompasses the terntorial yunsdicion of more than one (1) caty or municipality , the snare af each city or municipality from the 2% special tax paid by ECOZONE enterprises shail he determined in acccrcance with the implementing PEZA regulations on the subject. The Phtippine Eeoncemic Zone ALth ity (PEZA) shall issue certification as to the exact share of the concerned cities or mnie patties from the 2% tae allocated under the implementing rules of PEZA. Gross income For purpoves of mpiementing ihe tax incentive of registered ECOZONE enterprises, the term "gross defined for income earned’ shail refer to g's sales 0: gross cevenues derived from business activity within the ECOZONE ECOZONE, net of saies discounts, sales returns and allowances and minus costs of sales or direct costs but before any deduction s ade for admuntstative, marketing, seting and/or operating expenses or Lincidental losses during 3 given period. m. Direct costs 1) ECOZONE Export Enterprises, Free Trade Enterpnses and Domestic Market Enterprises. included in the 2. Direct salaries, wages oF lahor esuenses allowable Production Super.ision sabres deductions to Raw matenals usec m the rar tacture of products arrive at gross income earned Decrease :n Goons in Process Account (Intermediate goots} Decrease 1 Finest Goeids Account Supplies and tuvis used m production Depreciaticn of machinery and -quipment used ia production and of that portion of the buikling ‘owned or consiructed that s usea'exclusvely n the producvon of goods Rent and utikty charges associated with bulging, equipment and warehouses used in the pproducton |. Financing charges associated with fined assets used in production the amount of which were not previously captalied | 2) ECOZONE Developer or Operator, Fanities, Uiltes and Tounsm Enterprises: a. Direct salaries, 290s oF lavor © yenses b. Semice supervisor: salaries |G Direct materials, sures 1. Depreciation of machinery and equpment us din rendition of registered services and that | portion of the Lutkanig owned of constructed that 1s used exclusively in the rendition of registered fe. Rent and utiity charges for buldings and capital equipment used in the renditvon of registered services f. Financing charges associated with fixed assets used in registered services of which were not | __prewousty captaizes - 1%. Quarterly and final | Every ECOZONE registered enterpnse cubject tothe 5% special come tay shal file a quarterly come Sajustment income | tax return within sity (G0) ays aftr the clase of each ofthe frst three (3) quarters and a final tax return | adjustment income tax stun covering the enbre taxable year, not later than the fieenth (15") days of | the fourth montnfouleang the cloos of ts taxable year. (Revenue Regulations No. 1-2000) Fo: Requirement to file | Enterprises enjoying fiscal wcenties granted by ether government agencies, required to fle return and return and pay "| pay taxes through eFPS, such as those registered wah taxes through eFPS a) Philippine Economic Zone auttorty (PEZA), +b) Board of Investments (801 ) various zone authonives; 4) Cagayan Special Economic Zone Authontty; @) Export Development Counc £ Tourism Infrastructure anv Enters rise Zone Authonty, and ty. (Revenue Regulations Ho 1-2010) currently under or opting to be under the 30% regular corporate income tax and by the exemption |p. PEZA-registered e | P citities currently | Logistics Services Enterprises are also cove under or opting to bbe under the 30% regular corporate income tax ‘ END Be positive even if others are not. Work hard even it others have quit. Continue to dream big even if others have given up on theirs. - Tamthewise © TX-1901 TAXATION: PREFERENTIAL TAXATION (1)ReSA The Review School of Accountancy ‘@Tel. No. 735-9807 & 734-3989 TAXATION TAMAYO/CAIGA/LIM/MANUEL ‘TK1902: PREFERENTIAL TAXATION (2) IIT- Omnibus Investment Code _ A. Declaration of Investment Policies Declaration of Policy To accelerate the sound development of the rational ecanomy in consonance wth the prmaples and objertrues of ecoraamv. waloralism and un pursuance of a planned teonomically feavble anc! prert ct dispersal of industries and the promotion of small and medium scale yndusires, yevdet conditions whach wall encourage competition ard = discourage monopolies, B._ Declared Policies to All Investment Incentive Schemes TL Encourage private Filipino and. The State shall encourage private ipa and foregn vestments dustry, agri foreign investments forestry, ming, tour:sm and other sectors of the economy which shall: provide txghvficant employtzent apron 2s clave to the amount ofthe caprtal Being nvested. nereace productity of the lard, rinerals, forestry, aquatic and other resources of the | country, and improve tization “the products there mprove tecnica! hs Mh | Beople employed in rhe erterpitse, pravle 2 foundation forthe future development of | Trewsoncmny, mest ine tev sof interauanal competineness, accelerate developrnent of fess deveioped resyons of the coutry, and result m increased volume and value of | __| exports for the econo7y, | 2. Ensure the holistic ‘The State shall ensure the iliac development by safeguarding the wel-being of the development | socir, cultural ano ecniogial Ife of the peapie. For this purpose, consultation with t | affected communities wll be corcucted whenever necessary 3. Extend to projects which will | The State shall extend to proyects when vail ‘sagnificantly contribute to the attainment of | Bosihtantty contribute tothe | these objectives, fcal cores vathout which sar projects may nok be esas | BBblnmene of the objectives the tocales, number ondior pace retiree for pum nauonal econo develcortent | Fiscal incentive system, st2i ie dvised to compensate for market imperfections, 0 ing t- conor development, be cost-efficient and be | reward performance © I {simple to arias 1 Consider the private sector as The State considers th> pave wctor a the pre moves for econo {growth In this |e erect mover for economic | regac, pruate mtalwe ito Be encouraged, wih dereguiton and sf reguahon of | growth | business actutes to be generaly adopted where dictated by urgent socal concerns 5. Play a supportive role The State shall principally play a supoortive role, rather than @ competitive one, prowding the framework, the ekmate ard the mcentves within which business acti 1s to take place. 6. Recognize that there are rere State recognizes tat there are appropriate roles for local and foreign capital to play e ecropriate roles for local and 1m the development of the Pipe aconemy and that We responsbiity of foreign capital Government t define theze roils and orate the chmate for ther entry and grovth. —_. 7. Recognize industri The State recog.izes ths industria! peace is en essential element of economuc growth Recognise iment of economic | and that 1s» owa:pe! resaonaity of the State to ensue that such condtvon prevails. growth | - 8. Extend fiscal incentives to Fiscal iicentives stall be extended to strmalate the establishment and assist inital cater ree icctablishment | operabens ofthe enteprsc, and sal terminate after a period of nek move ah 10 years, Senmatate Tithe operations of | (rom regstraben or tart up of aneration ones a spaciic period ws olen stated the enterprise _ = 13. Formulate and implement Foamulate and mgiement rabonalization programs for certamn industnes whose operation Formulate ion programs for | may resuit a ceca, cercrowing oF meffcent use of resources, Mis impeding | certain industries cronorme grown. For thes purpose. the Board may formulate guidelines for progressive | Shuracterng programs, cal content programs, mandatory sourcing reyurements end | Gopersal of méurtnios. Iv approp rt: caves und upon approval of the President, the peed may teane’ cer otaly oF patil, the emportation of any equipment oF av" | Riatenals oF finches iaducts moved inthe rationalization program a Recvi to he Wreldant of | Tote vt at acts ele he Craton dren 0 Recommend 0 te Pemeron | recommen) re Fis of te Phones, the zens fe tay the Pitippnes the sucpensi | ‘Gg rowed te Cade cra of ASEAN sees ex veces by ASA provided in the Code re eal oe muliateat fmancal mtlutans inciting ther suber nan ets anon oye alte ough eer fanaa or wees | 2 rer cine entered ito the bythe Preadert, and nthe case of roGonal aa the mre 9 pari pod MAC CES 1 266 | | advantace of econorrues of sca. ror th. purpose: of this Act, a multilateral financial | rearmer aos toa are 9 agency Oey, a8 aes Wc 2027 Me aulfixtons: | (1) The mentuben ss ether ovnad or controlled by member countries bu does not possess any netional ‘oertity, (2) the inshtution sources ts funds from capptat stock subscriptions and Ccontnbations by member countries, and {@) The primar, responsi of tr: mattuton sto provide funds for developmental | purposes end itematcnal aconomic stably. } 12. Extend the period of tend the perod of avainvent of acentves by any regstared enterprise, Prowe, That availment of incentives tretotal penta! of avaiment shal! ct zcead ten (10) years, subject to any of the following entersReSA: The Review School of Accountancy Page 2 of 7 12 13. 14. 15, 16. 17. 18, 2 (a) The registered enterpnse has suffered operational force majeure that has Impaired ts wiabilty; he requstered enterpnse has not fully enyoyed the incentives granted to it for easons beyond its contro), (©) The project of the regrstered enterprise has a gestation period which goes beyond the period of avaiiment of needed incentives; and () The operation of the registered enterprise has been subjected to unforeseen changes in government policies, particularly, protectionalism policies of importing counters, and such other supervening factors which would affect the Competitiveness of the registered firm; Regulate the making of | Requiate the making of investments and the doing of business within the Philppines by investments foreigners or business organizations owned in whole or in part by foreigners; Prepare or contract for the Prepare or contract for the preparation of industry and sectoral development programs Preparation of industry and | and gather and compile statistical, technical, marketing, financial and other data required sectoral development | for the effective implementation of this Code, programs ‘Submit annual reports to the | Within four (4) months after the close of the fiscal year, submit annual reports to the President President which shall cover its actives in the administration of this Code, including | recommendations on investment policies; Provide information as may be | Provide, directly or through Philippine Diplomatic Mission of interest to prospective interest to prospective foreign investors; foreign investors such information as may be of Collate, analyze and compile | Coliate, analyze and compile pertinent information and studies concerning areas that pertinent information and have been oF may be declared preferred areas of investments; and studies Enter into agreements with’ Enter into agreements with other agencies of government for the simplification and other agencies of government —faciitation of systems and procedures involves! in the promotion of investments, | operation of reqistered enterprises and other actiities necessary for the effective | implementation of this Code; Exercise all the powers, Generally, exercise all the powers necessary or incidental to attain the purposes of this necessary or incidental to Code and other laws vesting additional functions on the Board attain the purposes of the Code Preferred areas of investments Definition “Preferred areas of investments” shall mean the economic activites that the Board shall have declared as such mn accordance with Article 28 which shall be either non pioneer or pioneer Pioneer and Non-Pioneer Enterprises Pioneer Enterprises “Pioneer enterprise” shall mean a registered enterprise (2) engaged in the manufacture, processing or production, and not merely 10 the assembly or packaging of goods, products, commodities or raw materials that have hot been or are not being produced in the Philippines on a commercial scale or (2) which uses a design, formula, scheme, method, process or system of production or transformation of any element, substance or raw matenals into another raw materia Cr finished goods which 1s new and untried 4n the Philippines or (3) engaged in the pursuit of agncultural, forestry and mining activities and/or service: including the industrial aspects of food processing whenever appropriate, pre determined by the Board, n consultation with the appropnate Department, to 5¢ | feasible and highly essentiai to the attainment of the national goal, in relation t declared specific national food and agricultural program for social benefits of the project or | 4) which produces non-conventional fuels or manufactures equipment which ute nor | conventional sources of energy or uses or converts to coal or other #on- conventional fuels or sources of energy wn its production, manufacturing or processnky ope ati Provided, That the final product 1m any of the foregoing instances, volves o: will involve substantial use and processing of domestic raw matenats, whenever available; taking into account the sks and magnitude of mvestment. ov ue farther, That the foregoing defintions shall not in any way limit the rights ane + incentives granted to less-developed area enterprises provided uncler Tile V_ Book hereot self-sufficency and other Non-Pioneer Enterprises. ' Non-pioneer enterprise” shall include all reqstered producer enterprises jother than proneer enterprises TAXATION: PREFERENTIAL TAXATION (2) : TX-1902ReSA: The Review School of Accountancy Page 3 of 7 D. Investment Priority Plans 1, Investment Priority Plans lot iter than the end of March of every year, the Board of Investments, after ‘onsuitation with the appropriate government agencies and the private sector, shail submit to the Presidcat an Investment Ponies Plan, Provided, however, that the ‘deadline for suomissinn “nay be extended by the President 2. Criterla in Investment Priority to econo actoaty sn! be meluded n the Investment Pronties Plan unless 1s shown Determination to be economically, ‘ecinically and financially sound after thorough investigation ant analyses fv $e Roe 3. Determination of preferred Tite deter nator of preferred areas of investment to be listed in the Investment areas of investment Prion» Plan nal be based on long-run comparative advantage, taking into account the value of cocia! abject vs and empleying economic criteria along with market, technical, and firancial analyses The Boaral shall take unto account the following: (a) Primanily, the econom.: soundness of the specific activity as showin by its economic intern rate of ret, {b) The extent of cont: ution of an actwity to a spectic development goal (c) Ober ndicazors «2 :eampar ative advantage; ‘apas ty a5 defined in Article 20; and larket and tectwncal espects and considerations of the activity proposed to be 4. Board may designate as in any of the deciarec preferred areas of investment, the Board may designate as pioneer pioneer areas the specific ‘reas the specie products anc commodities that meet the requirements of Article 17 of products and commodities this Code and review yearly whether such actvty, as determined by the Board, shalt continue as pronce:, ethetwise, 1 shall be considered as non-proneer and accordingly listed as such un the Lovesimant Prtonties Plan or removed from the Investment Prionties Plan 5. Approval of the Investment |The Picsident shal prociarn the whole or part of such plan as in effect; or alternately, Priorities Plan return the whe 9° part c* he plan to the Board of Investment for revision. Upon the ctfectiity uf the jest portions thercof, the President shall issue all necessary directives toall departioen's, bureaus, agencies or mstrumentalties of the government to ensure the pic aventation of the plan by the agencies concerned in a synchronized and integrated manner. Nn government body shall adapt any policy oF take any course of ‘action contrary t9 oF inconsistent with the plan E._ Registration of investments | Qualifications of a Registered | To be evistled to reaistrabon unde: the Investment Priontes Plan, an applicant rust Enterprise _ satisfy the Board - 1. Applicant is a citizen of the 1 (2) How acitzen Shuuppines, in case the applicant is a natural person, or in case Philippines of a partner typ ce any other assceration, tts organized under Philippine laws and st at ‘east sty percent (69%) of ts Capital 5 owned and controled by ctzens of | the Pulppines; or m case of & corporation oF a cooperative, its organized under Phivpyams ian and that at least sixty percent (60%) of the capital stock outstanding | and entites 's owned and lield by Philippine nationals as defined under Article 15 of this Cade, and at least sixty percent (60%) of the members of the Board of Directors are citizens of the Pilippines. If t does not possess the required degree ‘cf ovinership as mentioned above by Philippine nationals, the following circumstances must be satistactonly established (a) Thal pispeses to engage in a pioneer projects as defined in Article 17 of this, Corie, wivcn, conewiesing the nature and extent of capital requirements, procasics, ta nnical skis and relative business nsks involvet, 1s m the opinion of the Bord of such a nature that the available measured capacity thereof ‘carsiot be rearhly and adequately filled by Philippine nationals; or, Hf the Appliant is exporting at least seventy percent (70%) of is total production, the i 1 ‘expo requsement herein provided may be reduced in mentonous cases under | urn conditions and/or limited incentwes as the Board may determine, | thy That # obligates self to attain the status of a Philippine national, as defined in Article 15, within thurty (30) years from the date of registration or wath such longer pervad as the Board may require taking into account the export potential Prowded, | of the project fat a resyetvo 4 enterpirse which exports one hundred percent (100%) of ts | total production neod not comply wath this requirement, (c) Thats pioneer area it vil engage Wr. $ One that 1S not within the actwrtes i reserwea by the Constitution or other laws of the Philippines to the Philippine 1 iuzew oF cor -orations owned and controlled by Philippine citizens, TAXATION: PREFERENTIAL TAXATION (2) TX-1902ReSA: The Review School of Accountancy Page 4 of 7 2. Applicant is proposing to The apphcant 1s proposing to engage in a preferred project listed or authorized in the | ‘engage ina preferred project current Investment Prortes Plan win 2 reasonable time to be fixed by the Board o,f | | listed or authorized in the not 50 listed, at least ity percent (50%) oft total production is for export ori 1s an current Investment Priorities enstin producer which wil export part of production under such conditions and/or Plan | lumted incentives as the Board may determine; of that the enterprise is engaged or | proposing to engage in the sale abroad of export products bought by i from one or more | export producers, oF the enterprise 1s engaged or proposing to engage in rendering technical, professional or other services or in exporting television and motion pictures and | ‘musical recordings made or produced in the Philippines, either directly or through a registered trader | 3. Applicant is capable of The applicant 1s capable of operating On a sound and efficent basis of contnibuting to the ‘operating on a sound and national development of the preferred area in particular and of the national economy in efficient basis “general, and 4. Appticant has installed or Tf the applicant 1s engaged or proposes to engage in undertakings or activities other than undertakes to install an preferred projects, it has installed or undertakes to mstall an accounting system adequate accounting system adequate to | to identify the investments, revenues, costs, and profts or losses of each preferred identify the investments, project undertaken by the enterprise separately from the aggregate investment, revenues, costs, and profits or | revenues, costs and profits or losses of the whole enterprise or to establish a separate losses of each preferred project | corporation for each preferred project if the Board should so require to faciitate proper | undertaken by the enterprise _ implementation of this Code ! F. Fiscal incentives to BOI-registered enterprises engaged in a preferred area of investment Income Tax Holiday For six (6) years from commercial operation for pioneer firms and four (4) years for nor pioneer fms, new cegstered fms shall be fully exempt from incorne tates levied by the National Government 2. Additional Deduction for Labor” For the fist five (5) years from reqystration a regstered enterprise shall be allowed an Expense adaitional deduction from the taxable income of fity percent (50%) of the wages Corresponding to the increment in the number of drect labor for skied and unskilled workers A the project meets the prescribed rabo of capital equipment to number of workers set by the Board Proved, That this addtional deduction shall be doubled #f the actrty 1s located n less developed areas as defined in Art 40 | 3. Tax and Duty Exemption on ‘within tive (5) years fom the effectrty of this Code, importations of machinery and Imported Capital Equipment equipment and accompanying spare parts of new and expanding requstered enterprises shall be exempt to the extent of one hundred percent (100%6) of the customs duties and national internat revenue tax payable thereon 4. Tax Credit on Domestic Capital” A tax creat equivalent to one hundred percent (100%) of the value of the national revenue Equipment {anes and customs dutes that would have been wawed on the machinery, equipment and Spare parts, had these lems been imported shall be qwven to the new and expanding reqistered Enterprise which purchases machinery, equipmedt an spare parts from 3 domestic manufacturer 5. Simplification of Customs Customs procedures for the umportation of equipment, spare parts, raw materials and Procedures supplies, and exports of processed products by registered enterprises shall be simplified by the Bureau of Customs. 6. Unrestricted Use of Consigned | Promsions of existing laws rotwehstanding, machinery, equipment and spare parts consigned! Equipment to any registered enterperse shall not be subject to restrictions as to period of ase of such machinery, equpment and spare part 7. Employment of Foreign Nationals "Subset 10 the prowrons of Section 29 of Commanwweatth Act Number 612, as amended, a registered enterprise may employ fore«gn nationals supervisory, technical or acsory postions for a pend not exceeding five (5) years trom is regrtration, extendhble for med pends at the dicretion of the Hoard. the penod set forth here 8. Exemption on Breeding Stocks | The imyortation of breeding stocks and gente mater within ten (10) years from the date ‘and Genetic Materials of reqesiration oF commercial operation of the enterprise shal he exempt from all taves and duties: Promded, That such breeding stacks and genetx materia are (1) not locally aval and/or obtamable locally sn comparabe qualty and at reasonable prices; (2) reasonably needed in the registered actrty, and (3) approved by the Board 9. Tax Credit on Domestic Breeding A tax credt equrvalent to one hundred percent (100%) of the value of national internal Stocks and Genetic Materials revenue fares and customs duies that would have been waived on the bree stocks anct genetic materials had these stems been imported shall be given tothe registered enterprise hich purchases breeding stocks and genetic matenals from a domestic producer Provided, 1) That sad breeding stocks and genetic matenals would have qualified for tar and duty fre importation under the preceding paragraph, 2) that the breeding stocks and genetic materia are reasonably needed n the registered activty, 3) that approval of the board has bee ‘obtained by the registered enterprise; and 4) that the purchase 16 made win ten (10) year {rom date of registration or commercial operation of the reqstered enterprise 10, Tax Credit for Taxes and Duties Every registered enterprise shall enjoy a tax credit equivalent to the Notional inte on Raw Materials Revenue taxes and Customs duties paid on the supplies, raw materials and sern manufactured products used n the manufacture, processing oF production offs expo products and forming parts thereof 11. Access to Bonded Registered export onented enterprises shal have access to the utilization of the bonded Manufacturing/Trading warehousing system in all areas required by the project subject to such guidelines 3s may be Warehouse System ‘sued by the Board upon prot consultation with the Bureau of Custom: TAXATION: PREFERENTIAL TAXATION (2) TX-1902ReSA: The Review School of Accountancy Page 5 of 7 'E. Bxemption from Taxes and Duties on Imported Spare Parts. Importation of requved supplies and spare parts for Corioned equipment o those imported] (ax and duty tree oy a registered enterprise wth a bonded manufacturing warehouse shall be exempt from customs dues and national internal revenue tases payable thereon, Provided, ‘However, That at least seventy percent (70%) of production exported; Provided, ther, that such spare parts and supplies are not locally avallable at reasonable prices, sumicent ‘quantity and comparable quality; Provided, naly, That all such spare parts and supplles shall be used ony n te bonded manufacturing warehouse ofthe registered enterprise under such requirements 25 the Bureau of Customs may impose. “Te providons of law to te contrary natwititanding, export By @ regutered eerprse of {ts nombadtionel export produds shal be exempted from any wherfage dues, and any export tx, duty, mipost and fee. a | Subject ti the Regulations to be issued by the Secretary of Finance, upon the | recorunendation ofthe Commissioner of the Bureau of Internal Revenue, the 5% special income tax on gross income eared pursuant to Section 24 of RLA. No. 7916, as amended, shall be directly paid and remitted by registered ECOZONE enterprises as follows: ‘3% to the national government; 29% to the Treasurer's Office of the Municipality or Cty where the ECOZONE registered enterprise ts located. (Secon 1, IRR, Omnibus Investment Code) 1V- Barangay Micro Business Enterprise [A Definition ‘BBE refers io any busivess entity or enterprise engaged in the production, processing | (or manufacturing of products or commodities, induding agro-processing, trading and. | Services, WiGSe tka assets including those arising from loans but exclusive of the land on which the parucular business enbty's office, plant and equipment are situated, shal ‘ot be more than Three Milion Pesos (P3,000,000.00).. 8. Place of registration “The Office of the Treasurer of each aty or municipality shall register BMBES and issue @ Certificate of Authority (CA) to enable the BMBE to avail of incentives under the Act. ‘Only one Certificate of Authority shall be issued for each BMBE and only by the Office of | the Treasurer of the city or municipality that has jurisdiction over the principal place of business of BM3=. (Section 3, IRR Of BMBE) _ C. Who are eligible to register | ’Any person, natural or juridical, such as partnership, corporation, assodation and cooperative, havirig the qualifications and none of the disqualifications shail be eligible ‘tm register as BMBES, (Sec. 4, IRR of BMBE as amended) Services" shah exctude those rendered by any one, who is duly lensed by the government after having passed a government licensure examination, in connection with the exerase of one's profession. (Section 2, IRR of BMBE) DB. Qualification of a MBE "The applicant for BMBE registration shall submit the duly filled up application (BMBE 'A person applying to be registered as a BMBE shall meet the folowing qualifications: '2). With an asset of not more than Three Million Pesos (P3,000,000.00) exctuding land; Engaged in the producton, processing or manufacturing of products or ‘commodioes, «xtuding agro-processing, trading and services; Registered witn the Department of Trade and Industry (DTI) for sole ‘roprietorships, for juridical persons; with Securities and Exchange Commission (SEC) for corporations. » ° Form 01) in tripicate, signed by the owner or manager ofthe entity appiying for registration. (Section 5, IRR of BMBE) _— “The folowing are the procedures when applying for registration as BMBE: ‘2)._An applicant for BMBE shall go to the Office of the Municipal or City Treasurer where the business is located; ‘The applicant shall accomplish BMBE Form 01 in triplicate and submit to the Office of the Mun cipal or Cty Treasurer; | ‘The Municipal or City Treasurer evaluates the application . Application shall be ‘processed within fftzen (15) working days upon submission of complete | ocuments. Otherwise, the BMBEs shall be deemed registered; and A registered MBE shall be issued a CA as proof of registration. (Section 6, IRR for BMBE) (Section 6, IRR of BMBES) » 9 G. Foes and Charges 7. Incentives and benefits granted to BMBES ‘TAXATION: PREFERENTIAL TAXATION (2) ‘The LGU shall issue the CA promptly and free of charge. However, to defray the administrative costs of registering the BMBEs, the LGU may charge a fee not exceeding | One Thousand Pesos (P1,000.00). (Sechon 7, IRR of BMBE) = aif 1) Exemption from income tax for income arising from the operations of the enterprise. | 2) Reduction of or exemption from local taxes, fees and charges | 3) Exemption from the coverage of the Minimum Wage Law 4) Avatment of cedit services from government financing institutions 5) Avaiiment of technology transfer, production, management training programs and | marketing assistance from government entities 6) Avoliment of Development Fund from GOCCS | 7) acess to Trade and Investment Promation 8) Access to One-Stop Business Registration Center TX-1902ReSA: The Review School of Accountancy Page 6 of 7 \V~ DOUBLE TAXATION AGREEMENTS (DTAs) 1, Nature and purpose of OTAs ’2) Avoidance of double taxation ] |_b) Prevention of fiscal evasion with respect to taxes on income - 2. Mariner of giving relief from In order to elminate double taxabon, a tax treaty resorts to several methods. double taxation | First, sets out the respective nghts to tax of the state of source or situs and of the state of residence with regard to certain classes of income or capital In some cases, an exclusive right to tax is conferred on one of the contracting states; however, for other tems of income or capital, both states are given the right to tax, although the amount of tax that may be imposed by the state of source is unlimited. ‘The second method for the elimination of double taxation applies whenever the state of | source s given 2 full or limited night to tax together with the state of residence. In this case, the treabes make # incumbent upon the state of residence to allow relief in ‘otder to avo double taxation, There are two methods of rele 1) the exemption method and 2). the credit method In the exemption method, the income or capital which 1s taxable in the state of source OF situs 1s exempted in the state of residence, although in some instances it may be taken into account in determining the rate of tax applicable to the taxpayer's remaining rncome or capital. (On the other hand, in the credit method, although the income or capital which 1s taxed | in the state of source is sil taxable in the state of residence, the tax paid in the former | 1S Credited against the tax levied n the latter. ‘The basic aiference between the two methods 1s that in the exemption method, the "focus son the income or captal itself, whereas the credit method focuses upon the tax. | 3. Procedure for availment of tax | The taxpayer must secure a ruling from the Bureau of Internal Revenue (BIR) through treaty benefits the International Tax Affars Division (ITAD) that he may avail himself of preferential | rates under easing tax treaties Under RMO 1-2000, taxpayers who wish to avail themselves of tax- treaty relief should accomplish BIR Form 0901—Appcabon for Relief from Double Taxation (replaced by CORTT)~and fle the same together with the supporting documents to the ITAD at feast 15 days before the transaction, .€., payment of royalties, dividends, etc. [RMO 1-2000, however, does not specify the types of documents needed to support an ication for tax-treaty reel 4. New procedure to claim Type of income payment | _ Procedure to caim treaty benefit preferential tax treatment (RMO Dividends, interest and royaties Fig of Tax Treaty Relief Appication No. 8-2017 dated March 28, |(TTRA) sno longer required i 2017) | Other types of ncome Fring of Tax Treaty Relief Appicaton | (TTRA) 1s sil required per RMO No. _ 72-2010 TAXATION: PREFERENTIAL TAXATION (2) TX-1902ReSA: The Review School of Accountancy Page 7 of 7 Ww procedure to Gaim treaty | Non-rekent income eurirs are now required (> submit uly acconplined Certificate | benefits for dividends, Interest | of Residence for Tax Treaty Relief (CORTT) Form to their withholding agents/income. and royatiios payors. | CORTT is the newly created BIR Form that replaces the old 0901 Form intended for tax ‘treaty relief application for dindends, interests and royalties. The CORTT Form shall | serve as proot of residency of nonresidents. The withcdding agent/income payor shall fle BIR Forms 1601 -F and 1604-CF and pay the corresponding withhokiing taxes. | Te wang aeicone sr sa to al py of Bs CORT om © | Intemational Tax Affairs raion (IAD) and Revenue District Office (RDO) No. 39 | | wrbin 30 cays ater payment of te wtkdng tes. ‘The withholding agent/income payor shall submit an updated Part IT of the CORTT Form reflecting payment of the withholding taxes, in the following manner: es he CORTT Form fled wit the ITAD and RDO No, 39s used for ancther ‘raced payment within the prescribed periad of valiéty and | b. Incase of staggered payment of interest and royaty income. For dividers income purposes, the CORT Form shall be valid fortwo (2) years from the | date of issuance. However, if prescribed certficate of residency of the country of | | residence i used, the date of vaidty ofthe latter document wil prevail over the two (2) | ‘year period given. For interest and royalty income purposes, the CORT Form shall be | | valkd per contact. —_ ’2) AS a general rule, the provisions of the Philippine Tax Code (domestic law) shall _appty on the ineame, goin oF prot of any person kable to income tax | 1b) “In case of confic: between the provisions of a tax treaty and domestic aw, the prowsons of the tax treaty generally prevail over the prowsions of the domeste law. | [2 REE be ee fac ns ne ms imposed treaty, the lower tax rate under the domestic kaw shall prevai. | 6. In case of conflict between tax EXD THOT: Be positive even if others are not. Work hard even it others have quit. Continue to dreem big even it others have given up on theirs. - Temthewise 9 TAXATION: PREFERENTIAL TAXATION (2) TX-1 902 ®