Tax Bulletin - September 2012

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Tax Bulletin September 2012

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HighlightsBIR Rulings

• Thetransferofrealpropertybywayofpublicauctionpursuanttoacourtorderissubjecttocapitalgainstax(CGT)anddocumentarystamptax(DST).(Page 3)

• ABOI-registereddeveloperofalow-costmasshousingprojectisexemptfromincometax/creditablewithholdingtax(CWT)onrevenuesfromitsBOI-registeredactivity.ThisexemptionshallnotextendtosalesofunitswithsellingpriceexceedingP3,000,000.Inthecomputationoftheincometaxholiday(ITH)incentive,interestincomefromin-housefinancingshallnotbeconsideredasrevenuegeneratedfromtheregisteredactivity.

ABOI-registereddeveloperofalow-costmasshousingprojectissubjecttoVATandDSTonitssalesofhousingunits.However,specificallyforVATpurposes,thesaleofaresidentiallotvaluedatP1,919,500andbelow,orahouseandlotorotherresidentialdwellingsvaluedatP3,199,200andbelow,isVAT-exempt.(Page 4)

BIR Issuances

• RevenueMemorandumCircular(RMC)No.50-2012requirestheissuanceofaCertificateofTaxClearancetopublictransportoperatorsasapre-requisiteforacceptancebytheLandTransportationFranchisingandRegulatoryBoard(LTFRB)ofanapplicationforapprovalofsaleandtransferofaCertificateofPublicConvenience(CPC).(Page 4)

• RMCNo.51-2012amendsRMCNo.47-2012onthedeadlineforthefilingofapplicationsformonetizationofVATtaxcreditcertificates(TCCs).(Page 5)

• RevenueMemorandumOrder(RMO)No.19-2012prescribestherulesandproceduresintheconductofVATauditsfortheLargeTaxpayersService(LTS).(Page 5)

• RMONo.21-2012prescribesthepolicies,guidelines,andproceduresintheacceptance,processing,evaluation,approvalofapplicationsformonetizationandissuanceofNoticeofPaymentSchedule(NPS)ofoutstandingVATTCCsissuedbytheBIR,andthoseissuedjointlywiththeOne-StopShopInter-AgencyTaxCreditandDutyDrawbackCenteroftheDepartmentofFinance(DOF-OSSCenter).(Page 7)

BOC Issuance

• CustomsMemorandumOrder(CMO)No.10-2012prescribestheguidelinesfortheimplementationofDepartmentOrderNo.57-2011,whichexemptsimportedbooksfromcustomsdutyandVAT.(Page 13)

PEZA Issuance

• ThedeadlineforsubmissionofPEZA’sreportorialrequirementsfor2010and2011isonOctober5,2012.(Page 14)

BOI Issuance

►• TheBOIissuestheimplementingrulesandregulations(IRR)ofthe2012IPP.(Page 15)

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BSP Issuances

• CircularNo.767amendstheUnitInvestmentTrustFunds(UITFs)Regulations.(Page 39)

• CircularNo.768amendstheRisk-BasedCapitalAdequacyFrameworkforBanks/Quasi-BanksontheDefinitionofQualifyingCapitalInstruments.(Page 42)

SEC Issuances

• SECMCNo.7adoptsmeasuresonthefilingofFinancialStatements(FS)ofcompanieswhosefiscalyearendsonDecember31,2012.(Page 43)

• Inamergeroftwoforeigncorporations,thesurvivingcorporationcannotcontinueoperatingthebranchofficeoftheabsorbedcorporation.ItmustfileitsownlicensetodobusinessinthePhilippines.(Page 44)

• Thesurvivingcorporationinamergermaynotbeautomaticallyconsideredamemberofacondominiumcorporation.(Page 45)

Court Decision

• TheirrevocabilityruleunderSection76oftheTaxCodeappliesonlytotheoptiontocarryoverexcessCWTandnottotherefundoption.(Page 46)

BIR Rulings

BIR Ruling No. 521-2012 dated August 23, 2012

Facts:

Mr.Cownedfourparcelsoflandwhichwereleviedandsoldatpublicauctionpursuanttoacourtorder.Mr.Cfailedtoredeemthepropertiesfromthewinningbidderswithintheone-yearredemptionperiod,andthepropertiesweretransferredtothewinningbidders.

Issue:

IsthetransferofpropertybywayofpublicauctionsubjecttoCGTandDST?

Ruling:

Yes.UnderSection24(D)(1)oftheTaxCode,thesale,exchangeorotherdispositionofrealpropertylocatedinthePhilippines,classifiedascapitalassets,includingpacto de retrosalesandotherformsofconditionalsales,byindividuals,shallbesubjecttothe6%CGTbasedonthegrosssellingpriceorcurrentfairmarketvalueasdeterminedinaccordancewithSection6(E)oftheTaxCode.Theterm“otherdisposition”includesallkindsofdispositionsofrealproperty,unlessspecificallyexcludedorsubjecttoanothertaxtreatmentunderadifferentprovisionoftheTaxCode.

Moreover,RRNo.9-2012datedMay31,2012providesthatthetransferofunredeemedforeclosedorauctioned-offpropertiessoldduringinvoluntarysales,regardlessofthetypeofproceedings,issubjecttoCGT,orCWTandVAT,asthecasemaybe,andDST.

ThetransferofrealpropertybywayofpublicauctionpursuanttoacourtorderissubjecttoCGTandDST.

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BIR Ruling No. 547-2011 dated August 31, 2012

Facts:

FCo.isregisteredwiththeBOIasadeveloperofalow-costmasshousingproject.TheBOIgrantedFCo.afour-yearITHonitsrevenuesfromtheregisteredproject.

Issues:

1. IsFCo.exemptfromCWTonrevenuesgeneratedfromtheproject?2. IsFCo.’sentitlementtoITHautomatic?3. IsFCo.alsoexemptfromVATandDST?4. IsFCo.subjecttoanyotheradministrativerequirement?

Ruling:

1. Yes.UnderSection2.57.5(B)(2)ofRRNo.2-98,asamended,theCWTshallnotapplytoincomepaymentstopersonsenjoyingexemptionfromincometaxpursuanttotheOmnibusInvestmentCode(ExecutiveOrderNo.226),suchasBOI-registeredenterprises.However,theexemptioncoversonlytherevenuesgeneratedfromFCo.’sregisteredproject,andshallnotextendtothesaleofunitswithsellingpriceexceedingP3,000,000.Furthermore,inthecomputationoftheITHincentive,interestincomefromin-housefinancingshallnotbeconsideredasrevenuesgeneratedfromtheregisteredactivity.

2. No.EntitlementtotheITHisnotautomatic,asFCo.stillhastocomplywithSection8(a)oftheSpecificTermsandConditionsofitsBOIregistration,thus:

a. Secureendorsement/certificationfromtheHousingandLandUseRegulatoryBoard(HLURB)thatithasfaithfullycompliedwiththeapproveddevelopmentplananda“CertificateofGoodHousekeeping”;

b. FileanapplicationwiththeBOIIncentivesDepartmentwithinonemonthfromthefilingofitsfinalincometaxreturn(ITR)withtheBIRtovalidatetheclaimforincometaxexemption.TheapplicationshallbeaccompaniedbyacertificationbytheSocialSecuritySystem(SSS)thatthefirmisingoodstandingintheremittanceoftheSSScontributionsofitsemployees;

c. SecureaCertificateofITHEntitlement(CoE)fromtheBOISupervisionandMonitoringDepartmentpriortofilingtheITRwiththeBIR.Otherwise,theITHforthatparticularyearwithoutaCoEshallbeforfeited.

3. No.SinceaBOI-registeredenterpriseenjoysnotaxexemption/privilegesotherthanthosegrantedundertheOmnibusInvestmentCodeandthetermsandconditionsforBOIregistration,FCo.willremainsubjecttoVATandDSTonitssalesofhousingunitspursuanttoSection106(A)(1)(a)and196oftheTaxCode.ForVATpurposes,Section109(1)(P)oftheTaxCodeprovidesthatonlythesaleofresidentiallotvaluedatP1,919,500andbelow,orahouseandlotandotherresidentialdwellingsvaluedatP3,199,200andbelow,isVAT-exempt.

4. Yes.FCo.isrequiredtofileonorbeforethe15thdayofthe4thmonthfollowingthecloseofitsaccountingperiodaProfitandLossStatementandBalanceSheetwithAnnualInformationReturnunderoath,statingitsgrossincomeandexpensesincurredduringthetaxableyear.Furthermore,FCo.’sbooksofaccountsandotherpertinentrecordsshallbesubjecttoperiodicexaminationbytheBIRforthepurposeofascertainingwhetherithasbeencomplyingwiththeconditionsfortaxexemptionorincentives.

ABOI-registereddeveloperofalow-costmasshousingprojectisexemptfromincometax/CWTonrevenuesfromitsBOI-registeredactivity.ThisexemptionshallnotextendtosalesofunitswithsellingpriceexceedingP3,000,000.InthecomputationoftheITHincentive,interestincomefromin-housefinancingshallnotbeconsideredasrevenuegeneratedfromtheregisteredactivity.

ABOI-registereddeveloperofalow-costmasshousingprojectissubjecttoVATandDSTonitssalesofhousingunits.However,specificallyforVATpurposes,thesaleofaresidentiallotvaluedatP1,919,500andbelow,orahouseandlotorotherresidentialdwellingsvaluedatP3,199,200andbelow,isVAT-exempt.

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BIR Issuances

Revenue Memorandum Circular No. 50-2012 dated June 28, 2012

• PublictransportoperatorsshallfirstsecureaCertificateofTaxClearance(CTC)fromtheBIRRevenueDistrictOffice(RDO)wherehe/itisregisteredbeforefilinganapplicationfortheapprovalofthesaleandtransferofaCPCwiththeLTFRB.

• PriortotheissuanceoftheCTC,theRDOwherethepublictransportoperatorisregisteredshallensurethefollowing:

1. Theoperatorhasnooutstandingdelinquentaccounts,whichshallmeananunpaidself-assessedtaxoranunpaiddeficiencyassessmentwhichhasbecomefinalandexecutory;

2. Theoperatorhasnostop-filercases;and3. Theoperatorhasfiledthefollowingreturns:

a. Quarterlyandannualincometaxreturns,aswellasallpercentagetaxreturns,forthetaxableyearpriortotheyearofthesale/transferoftheCPC;and

b. Quarterlyincometaxreturnsandmonthlypercentagetaxreturnsfortheconcernedperiodsofthecurrentyearpriortothedateofsale/transferoftheCPC.

Revenue Memorandum Circular No. 51-2012 dated August 31, 2012

• Asamended,thedeadlineforthefilingofanyApplicationforVATTCCMonetizationshallbeasfollows:

Type of TCC Filing Period

ForrevalidatedandunexpiredTCCsoriginallyissuedin2002and2003

July17,2012uptoSeptember15,2012ortheexpirationoftheTCC,whichevercomesfirst

Forunexpiredand/orrevalidatedTCCsoriginallyissuedin2004untilApril11,2012

July17,2012uptoOctober17,2012

Revenue Memorandum Order No. 19-2012 dated July 31, 2012

Coverage

ThisRMOshallcovertheaudit/investigationofVATreturnsofLargeTaxpayersService(LTS)taxpayersclassifiedunderthefollowingselectioncriteria:

1. High-Risk Taxpayers

a. Factors/RiskCharacteristicsresultinginunder-reportingVATliabilitiesandnon-remittanceofVATcollection:

• Taxpayerswithsignificantincreaseinexempt/zero-ratedsalesrevenues;

RMCNo.50-2012requirestheissuanceofaCertificateofTaxClearancetopublictransportoperatorsasapre-requisiteforacceptancebytheLTFRBofanapplicationforapprovalofsaleandtransferofaCPC.

RMCNo.51-2012amendsRMCNo.47-2012onthedeadlineforthefilingofapplicationsformonetizationofVATtaxcreditcertificates.

RMONo.19-2012prescribestherulesandproceduresintheconductofVATauditsfortheLTS.

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• TaxpayerswhoseVATreturnsreflectsubstantialinputtaxes,suchaswhenthetotalinputtaxesclaimedexceed75%ofthetotaloutputtax;

• Taxpayerswithhistoryofdeclaringexcessinputtaxcarry-over;

• TaxpayersfilingVAT-exempttaxreturnsduetoavailmentoftaxincentivesortaxexemptions;

• Taxpayerswithhistoryoffilingclaimsforrefundand/orrequestsforissuanceoftaxcreditcertificates;

• Taxpayerswithsubstantialsalesbutreportingnetloss;

• Taxpayerswithdrasticdecreaseinreportedsales/VATpaymentsorwithmarkeddeviationfromindustrytrends;and

• TaxpayersidentifiedasHighRiskbasedontheresultsoftheLTSComplianceRiskMatrixAnalysis

b. ComplianceRiskCharacteristicsduetonon-compliancewithadministrativerequirements:

• TaxpayerswithacquisitionsofmorethanP1millionincapitalassetsandfailedtoamortizetheinputtaxasrequired;

• Taxpayerswhoarenon-compliantinthesubmissionofSummaryListofPurchases,SummaryListofSalesandothermandatoryrequirements;

• Taxpayerswhoarenon-compliantwithRMONo.12-2012–theElectronicSalesReporting;

• Taxpayerstransactingwiththegovernmentoranyofitspoliticalsubdivisions,instrumentalitiesoragencies,includinggovernment-ownedorcontrolledcorporations.

2. Medium Risk Taxpayers

a. BusinessIssueRisks/ComplexIndustriesduetoindustryissuesandchangeinthestatus/registrationofbusiness;

b. Taxpayerswithcomplexcorporatestructures,includingmergers/consolidations/split-upordown/spin-offsandothertypesofcorporatereorganizations;

c. Taxpayerswithapplicationforcessation/retirementofbusiness;

d. Taxpayerswithmultiplebranches/outletsalloverthePhilippinesbutreportedlowsales;

e. Taxpayerswithsaleortransferofbusiness;

f. TaxpayerswithmultiplelinesofbusinesseswithdifferentbasisforcomputationofVATliabilities.

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Rules and Procedures

a. TheVATAuditProgramshallbeimplementedinSeptember2012intheLTS.AVATAuditTeamshallbecreatedandwillbecomposedoftwoVATAuditTeamHeadsandfiveauditgroups.

b. TheVATAuditTeamshallinvestigatetheVATreturnsofLTStaxpayers.TheywillpreparealistoftaxpayersrecommendedforauditbasedontheselectioncriteriaspecifiedinthisRMO,andsubmitthesametotheAssistantCommissioner,(ACIR)-LTSforapproval.

c. Onee-LetterofAuthority(eLA)shallbeissuedforeachtaxablequarter/semesterdulyapprovedbytheACIR-LTSupontherecommendationoftheVATAuditTeamHeads.However,ifthereisadeficiencyforthecurrentperiodunderaudit,andapossibilitythatthetaxissuethatgaverisetodeficiencywouldalsobepresentinpriorperiod/s,aneLAcouldalsobeissuedforthesaidperiod/s.

d. ThebasicauditproceduresprescribedinRevenueAuditMemorandumOrder(RAMO)No.1-99andotherissuances,particularlythosewithimpactonVATaudit,shallbestrictlyobserved.Moreover,RevenueOfficers(ROs)mustthoroughlyunderstandthebusinessoperationofthetaxpayerandadetaileddiscussionmustbeincludedinthememorandumreport.

e. IfataxpayerhasalreadybeenissuedaneLAforallinternalrevenuetaxliabilitiesforaparticularperiodandasignificantfinding/sonVATwasuncovered,itshouldbecommunicatedtotheVATAuditTeamforpossibleriskidentificationinthecurrentperiodunderaudit.

f. IfaneLAhasalreadybeenissuedundertheVATAuditProgramandthetaxpayerbecomesacandidateforregularauditintheconcerneddivisionbasedontheselectioncriteriaundertheannualauditprogram,therequestforeLAshouldnotincludetheVATliabilityofthetaxpayer.

g. TheissuanceofPreliminaryAssessmentNotice(PAN)andFinalAssessmentNotice(FAN)fordeficiencyVATliabilitiesasaresultoftheauditwillbeinaccordancewithexistingregulations/issuances.

h. Ifthetaxpayerfailstosettle/paytheVATassessmentorfailstofileaprotestwithintheprescribedperiodfromreceiptofthePAN,theVATAuditTaskforceshallrecommendtheissuanceof,andprepare,theFANtobeapprovedandsignedbytheACIR-LTS.

i. AllauditreportsshallbeapprovedbytheACIR-LTSthrutheconcernedVATAuditTeamHead.

• AnydeviationfromtheabovepoliciesshallbeallowedonlyuponpriorwrittenauthorizationfromtheCommissioner,asrecommendedbytheACIR-LTS.

Revenue Memorandum Order No. 21-2012 dated August 9, 2012

Coverage

ThefollowingVATTCCsthatwereissuedpriortoApril12,2012:

a. ThoseissuedsolelybytheBIRpursuanttotheprovisionsofSection112(A)oftheTaxCode;and

RMONo.21-2012prescribesthepolicies,guidelines,andproceduresintheacceptance,processing,evaluation,approvalofapplicationsformonetizationandissuanceofNPSofoutstandingVATTCCsissuedbytheBIR,andthoseissuedjointlywiththeOne-StopShopInter-AgencyTaxCreditandDutyDrawbackCenteroftheDepartmentofFinance(DOF-OSSCenter).

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b. ThosejointlyissuedbytheBIRandtheDOF-OSSCenterpursuanttotheprovisionsofSection112oftheTaxCode.

Definition of Terms

• VAT TCC Monetization ProgramreferstoamechanismadoptedbythegovernmenttogivequalifiedVAT-registeredpersonsthecashequivalentsoftheirrespectiveoutstandingVATTCCs,eitherthroughadiscountingfacilityofparticipatingGovernmentFinancialInstitutions(GFIs),orredemptionofthefullcashvalueoftheoutstandingVATTCCbalanceswiththeBIRuponreachingthespecifiedmaturitydatesthereof.

• Outstanding VAT TCCsconsistofallVATTCCswithunutilizedbalances,whetherinthenameoftheoriginalgrantee(s)ortheirrespectivetransferee(s)asapprovedbytheBIR.

• Outstanding VAT TCC BalanceistheunutilizedbalancereflectedatthebackportionoftheVATTCCandintheBIR’sIntegratedTaxSystem–TaxCreditandRefundSystem(ITS-TCRS).

• Refundable AmountreferstotheoutstandingbalanceoftheVATTCC,afterdeductingthetaxpayer’soutstandingtaxliability/ies,exceptwithholdingtaxes.

• MonetizationreferstotheconversionoftheoutstandingbalanceofVATTCCintocashpursuanttotheVATTCCMonetizationProgram.

• Notice of Payment Schedule (NPS)isacertificatetobeissuedbytheBIRtothetaxpayer/holderoftheVATTCCwhoenrolledintheVATTCCMonetizationProgramafterconfirmationofthetaxpayer’sentitlementtomonetization.Thisdocumentshows,amongothers,thenameofthetaxpayer-recipientofthecashrefund,thenetrefundableamount,thedateofissuance,anditscorrespondingmaturitydate.

• VAT TCC Holder-Applicantshallrefertoanytaxpayer–holderoftheVATTCC,whetherastheoriginalgranteeorastransferee/assigneethereof,whosignifiedtheintentiontoenrollintheVATTCCMonetizationProgram.

• Original VAT TCC Issuing Officereferstotheofficethatoriginallyprocessedtheclaimfortaxcredit/refundand/ortheofficethatissuedtheoriginalVATTCC,priortoitstransferorrevalidation.

• Receiving OfficereferstotheBIROfficeconcernedthatisdesignatedtoconductinitialprocessingandevaluationoftheApplicationforVATTCCMonetization.

• VAT TCC Monetization-Processing OfficereferstotheofficedesignatedunderthisRMOtoconductfinalreviewandevaluationoftheApplicationforVATTCCMonetization,aswellasthepreparationandissuanceoftheNPS,aftertheinitialevaluationofthesaidapplicationhasbeenconductedbyReceivingOffice.

• Maturity DatereferstothedatespecifiedintheNPSwhenthefullcashvalueofthenetrefundableamountshallbepaidbytheBIRtotheVATTCCHolder-Applicant.

• Outstanding Tax Liability (OTL)referstothetaxassessmentoranyunpaiddelinquentaccountwherethecollectionthereofisalreadyconsideredfinal,executoryanddemandable.

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• Participating Government Financial Institution (GFI)referstoanygovernmentbankdulydesignatedbytheDOFtoserveasatrusteebankforpurposesofmonetizingtheoutstandingVATTCCscoveredbythisRMO.

Policies and Guidelines

• TheCollectionService(CS),throughtheCollectionProgramsDivision(CPD),theLargeTaxpayersService(LTS),LargeTaxpayerDistrictOffices(LTDOs)ofMakatiandCebu,andalltheRevenueDistrictOffices(RDOs)underRevenueRegionNo.8(MakatiCity)shallsendletterstoallVATTCCHoldersundertheirjurisdictionwithunutilizedVATTCCbalances,inordertoensurethattheseVATtaxpayersareinformedandawareoftheVATTCCMonetizationProgram.

• ForVATTCCsthatwerejointlyissuedbytheDOF-OSSCenterandtheBIR,thenotificationlettersshallbesentbytheBIR.

• AllapplicationsforenrollmentintheVAT-TCCMonetizationProgramshallbesubmittedtothefollowingReceivingOffices:

Description Receiving Offices

TCCsoriginallyissuedandsignedbytheRegionalDirector

RevenueDistrictOffice(RDO)

TCCsoriginallyissuedandsignedbytheDeputyCommissioner-OperationsGroup(DCIR-OG)ortheAssistantCommissioner(ACIR)-AssessmentService

AssessmentService

TCCsoriginallyissuedandsignedbytheCommissionerofInternalRevenue(CIR)ortheACIR-LTS

LTRAD1-3,LTEAD1&2,LTDOsMakatiandCebu

TCCsoriginallyissuedandsignedbytheDCIR,LegalandInspectionsGroup(DCIR-LIG)ortheACIR-LegalService-forcasesdecidedbytheCourtofTaxAppeals(CTA)ortheSupremeCourtofthePhilippines

AppellateDivision

TCCsthatweretransferredand/orrevalidated,issuedandsignedbyDCIR-OGorACIR-CollectionService

CollectionProgramsDivision(CPD)

TCCsoriginallyissuedbytheDOF/OSSCenterandtheBIR

DOF-OSSCenter

• ApplicationsforVATTCCmonetizationshallbefiledwiththedesignatedissuingofficesnotlaterthanOctober17,2012.However,forVATTCCsthatareexpiringin2012and2013,theapplicationsformonetizationshallbefiledbytheconcernedVATTCCHolder-ApplicantonorbeforetheexpirationoftheVATTCCsorSeptember15,2012,whichevercomesearlier,asprovidedunderRMCNo.47-2012,asamendedbyRMCNo.51-2012.

• ThefollowingReceivingOfficesshallconducttherequiredpre-evaluationoftheapplicationtoverifytheauthenticity,validity,andaccuracyoftheoutstandingbalanceoftheTCCappliedformonetization,aswellasverificationonwhetherornottheconcernedVATTCCHolder-Applicanthasanyoutstandingtaxliability/ies(OTL),forpurposesofdeterminingthenetrefundableamountthatisduetotheapplicantundertheProgram:

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Offices to Receive Applications Extent/Scope of Verification

RDO►►►

• AuthenticityoftheVATTCC• ValidityperiodoftheTCCand

whetherornottheVATTCChasbeenpreviouslyrecommendedforcashconversionandincludedinthelistoflostorcancelledTCCs

• AccuracyoftheTCC’soutstandingbalance

• ExistenceofanyOTLbytheVATTCCHolder.

AssessmentService►



LTRAD1-3,LTEAD1&2,LTDOsMakatiandCebu►►►




• ExistenceofanyOTLbytheVATTCCHolder

AppellateDivision►


whetherornottheVATTCChasbeenpreviouslyrecommendedforcashconversionandincludedinthelistoflostorcancelledTCCs.

CPD • AuthenticityoftheVATTCC• ValidityperiodoftheTCCand



• ExistenceofanyOTLbyVATTCCHolder.

DOF-OSSCenter►►



• AccuracyoftheTCC’soutstandingbalance.

• Thepre-evaluationoftheapplicationforVATTCCMonetizationProgramanddelinquencyverificationshallbemadebytheReceivingOfficewithin10calendardaysfromreceiptoftheapplication.

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• AlltheReceivingOfficesshalldocumenttheresultsofthepre-evaluationandarerequiredtosubmitcertificationsdependingonthepre-evaluationstobeconducted.

• Theresultsofthepre-evaluationandcertifications,togetherwiththeoriginalVATTCCcasedockets,shallbeforwardedtotheCPDforfurtherevaluationandprocessingwithin5calendardaysaftertheconductofthepre-evaluationhasbeencompleted.

• ForVATTCCsjointlyissuedbytheDOF-OSSCenterandtheBIR,theapplicationforVATTCCMonetizationshallberecommendedforapproval/disapprovalbytheDOF-OSSCenter,withtheconcurrenceoftheACIR-AssessmentService.

• ForVATTCCsthatwereissuedduetothepromulgationofthedecisionbytheCTAortheSupremeCourt,therecommendationmadebytheAppellateDivisionmustbeartheconcurrenceoftheACIR-LegalService.

• If,uponpre-evaluationoftheapplicationforVATTCCmonetization,itisdeterminedthatthesamecouldnotbegivenfavorableaction,theNoticeofDenialofApplicationforVATTCCMonetizationforsignaturebytheHeadofOfficeshallbeimmediatelypreparedandsenttotheconcernedVATTCCHolder-ApplicantbythedesignatedReceivingOffice.AsattachmenttothesaidNotice,theoriginalcopy/iesoftheVATTCCsthatwerenotapprovedformonetizationshallbeimmediatelyreturnedtotheVATTCC-Holder-Applicant.

• AllapplicationsforVATTCCMonetization,irrespectiveoftheVATTCC-IssuingOffice,shallbesubjecttoreviewbytheACIR-CSpriortoapproval/disapprovalthereofbytheDCIR-OG.

• VATTCCsissuedwhichremainunutilizedafterfiveyearsfromthedateofissue,unlessrevalidatedbeforetheendofthefifthyearpursuanttoRRNo.5-2000,shallnotbeallowedformonetization.Accordingly,onlyvalidandunexpiredTCCsshallbeeligibleforenrollmentinthisProgram.

• AnyoutstandingVATTCCasofApril11,2012thatwassubmittedforthe

purposeofmonetizationunderthisOrdershouldnolongerbeallowedtobeusedaspaymentfortheTCCholder’staxliabilitiesorallowedforcashconversioninaccordancewiththeprovisionsofRRNo.5-2000.

• IftheVATTCCHolder-ApplicanthasOTLs,exceptforwithholdingtaxes,aTaxDebitMemo(TDM)shallbeissuedinpaymentofthesaidliabilitypursuanttoSection5.dofRRNo.5-2000priortotheissuanceoftheNPS.AllunpaidwithholdingtaxliabilitiesandcompromisepenaltiesduefromtheVATTCCHolder-Applicantshallfirstbefullysettledbythetaxpayer-applicantbeforeanNPScanbedulyissued.

• IftheVATTCCHolder-Applicanthasapendingapplicationforcompromisesettlementand/orabatementofitstaxliability/iespursuanttoSections204(A)and204(B)oftheTaxCode,respectively,orifthesaidOTLiscoveredbyavalidprotest,his/her/itsrequestforVATTCCmonetizationmaybegrantedandanNPSmaybeissued,providedthatthereis/arestillTCC/swithavailablebalancethatis/aresufficienttoguaranteethepaymentoftheamountoftheOTLunderprotestortheamountappliedforcompromisesettlement/abatementofpenalties,includingthedelinquencypenaltiesduethereonunderSections248(A)(3)and249(C)oftheTaxCode,incaseofadversedecisionontheprotestordenialordisapprovaloftheapplicationforcompromisesettlementorabatementofpenalties.

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• IftheVATTCCHolder-ApplicantisfoundtohaveanOTL,he/she/itshallbeimmediatelyinformedbytheconcernedRDOhavingjurisdictionoverthetaxpayer-applicantontheexistenceofthesaidOTL.TheRDOmustimmediatelyadvisethetaxpayertopaythesaidOTL,eitherthrucashorthroughTDM,asthecasemaybe,uponreceiptoftheApplicationforMonetizationoftheVATTCCdirectlyfromthetaxpayer-applicant,oruponreceiptoftheRequestforDelinquencyVerificationfromtheCPD.IftheVATTCCHolder-ApplicantrefusestofullysettletheOTL,includingthedelinquencypenalties,he/she/itshalllikewisebeofficiallyinformedthatnon-paymentofthesaidOTLisagroundforthedenialoftheapplicationforVATTCCmonetization.

• ApplicationforpartialmonetizationofanyVATTCCshallnotbeallowed.Incasethetaxpayer’stotalOTL,includingalltheapplicabledelinquencypenalties,islessthantheamountoftheVATTCCappliedformonetizationandtheVATTCCHolder-Applicantrefusestofullysettlethesaidtaxliability/iesuponfilingoftheapplicationforVATTCCmonetization,thesaidapplicationshouldnotbegivenduecourseandtheconcernedtaxpayermustbeofficiallyinformedofthesaiddenial,clearlystatingallthereasonstherefor.

• ForVATTCCsexpiringfromJuly17,2012toDecember31,2013,anapplicationformonetizationpriortotheirexpirationshallbeautomaticallyconsideredanapplicationforrevalidation.AccordinglyandsubjecttotheprovisionsofSectionIV.3ofthisOrder,theconcernedVATTCCHolder-ApplicantshallnolongerberequiredtoapplyforTCCrevalidationpursuanttoSection230(B)ofRRNo.5-2000.

• AllapprovedapplicationsforVATTCCmonetizationshallbecoveredbyNPS.ForTCCsscheduledformonetizationin2012,therefundshallbemadeuponchecksdrawnbytheCommissionerofInternalRevenue(CIR)orbyhisdulyauthorizedrepresentative.However,forVATTCCsscheduledformonetizationfrom2013to2016,theVATTCCHolder-Applicantcanelecttoexerciseeitherofthefollowingoptions:

• ImmediatelypresenttheNPStoaparticipatingGFIformonetizationatadiscount,inaccordancewiththeratesdeterminedbytheSecretaryofFinanceandtheparticipatingGFIswithinthesetperiod;or

• HoldtheNPSuntilitsmaturitydateandpresentthesametotheBIRforpaymentofthefullcashvalueoftheNPS,inaccordancewiththefollowingschedule:

TCCsoriginallyissuedin2008andprioryears 2013

TCCsoriginallyissuedin2009 2014

TCCsoriginallyissuedin2010 2015

TCCsoriginallyissuedin2011and2012 2016

• Forpurposesoffairnessandequity,theassignmentoftheNPSmaturitydatesshallbeasfollows:

• ForVATTCCsissuedinyears2009and2010,theoriginalmonthsanddaysoftheissuancethereofshallbethematuritydatesoftheNPStobeissued;and

• ForVATTCCsissuedfrom2004upto2008,andfrom2011toApril11,2012,theCPDshallrationalizetheassignmentthereofbyequitablyspreadingthematuritiesthereofoverthe12-monthperiodsin2013and2016,takingintoconsiderationthatVATTCCsissuedearliershalltakeprecedenceintermsofpaymentscheduleoverotherVATTCCsissuedinlatermonthsand/oryears.

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• Exceptincasesofcorporatemergerandconsolidation,allNPSissued,ingeneral,shallnotbetransferabletoanyperson.IfsuchcorporatereorganizationoccurredandthetaxpayeroptedtoholdtheVATTCCuntilitsmaturityforpaymentbytheBIR,nonewNPSshallbeissuedinthenameofthesurviving/newentity.However,thesaidentityshallpresentadequatedocumentaryproofsofsuchreorganizationtotheFinancialService,insupportofitsrequestforcashredemptionoftheNPSuponthematuritydatethereof.

• TheNPSmustbepresentedbytheholder-claimantforpaymentbytheBIRwithin30calendardaysbeforematuritydate.IfthelastdayforthepresentationoftheNPSfallsonaSaturday,Sunday,holiday(regularorspecial)oradeclarednon-workingdayduetoforcemajeure,theNPSshallbepresentedforpaymentonthesucceedingbusinessday.

• AnyNPSnotpresentedtotheBIRforpaymentwithin30calendardaysbeforematuritydatethereofshallbeconsideredascancelledandthesameshallbeforfeitedinfavorofthegovernmentwithoutanypriornotice.

• AnyholderofaVATTCCqualifiedunderthisProgramwhofailsordoesnotintendtoenrollintheProgramshallretainthefollowingrights:

• CredithisVATTCCsagainsttaxliabilities,inaccordancewithexistingrulesonTCCutilization;or

• Apply,subjecttoconditionsofthelawandpertinentrulesandregulations,forTCCrevalidationunderSection230(B)oftheTaxCodeand/ortaxrefund(cashconversion)underSection204(C)ofthesameCode,subjecttotheavailabilityoffunds,incaseofthelatter.

Transitory Provisions

• AllVATTCCholderswithapplicationsforcashconversionofoutstandingVATTCCs,pursuanttoSection204(C)oftheTaxCode,thatarestillpendingprocessingbytheBIRcanstillapplyforVATTCCmonetizationbywithdrawingthepreviouslyfiledapplicationforcashconversionfromtheconcernedofficehavingphysicalpossessionofthesaidapplication,andfilinganewapplicationforenrollmentintheVATTCCMonetizationProgramwiththeconcernedReceivingOffices.

• AllrequestsforcashconversionofVATTCCsthatarealreadyinthepossessionoftheBIRasoftheeffectivityofExecutiveOrderNo.68,datedMarch27,2012,andDOF-DBM-BIRJointCircularNo.2-2012,datedMay31,2012,maystillbeprocessedpursuanttoSection5(b)ofRRNo.5-2000,regardlessoftheissuancedatesofthecoveringTCCs,subjecttotheavailabilityoffunds.

BOC Issuance

Customs Memorandum Order No. 10-2012 dated August 30, 2012

• Allimportedbooks,whetherforcommercialorpersonaluse,areexemptfromcustomsdutyandVAT.

• ThecustomsdutyandVATexemption,however,doesnotapplytoimportedbookspublishedbyorforaprivatecommercialenterpriseessentiallyforadvertisingpurposesasstatedinAnnexAoftheFlorenceAgreement(AgreementontheImportationofEducational,ScientificandCulturalMaterials).

CMONo.10-2012prescribestheguidelinesfortheimplementationofDepartmentOrderNo.57-2011,whichexemptsimportedbooksfromcustomsdutyandVAT.

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• Forbooksimportedincommercialquantities,theimportermustpresentanendorsementfromtheDOFRevenueOfficefordutyandVATexemptionpriortoreleaseofthebooksormaterialsfromcustoms.Theendorsementshallbeissueduponsubmissionofthefollowingdocuments:

1. BillofLading/AirwayBill/PostalRegistryNoticewithBOCTentativeAssessmentSheet

2. CommercialInvoice3. Packinglistwithtitleofthebooks4. Authorityofrepresentative(inlieuofconsignee)5. Affidavitattestingthattheshipmentconsistsofbooks6. Fordonatedbooks–DeedofDonation,dulyauthenticatedbythe

Philippineconsulateabroad,andDeedofAcceptance7. CertificationfromtheUnitedNationsEducationalScientificandCultural

Organization(UNESCO)OfficeinthePhilippinesattestingthattheimportationiscoveredbytheFlorenceAgreement

8. CertificateofRegistrationwiththeNationalBookDevelopmentBoardasbookimporterorpublisher.

• Theaboveendorsementshallnotberequiredforbooksimportedaspersonaleffectsorforpersonaluse,whethertransportedasbaggage,throughcouriersorthepostoffices.Saidimportations,however,shouldbeclearedandreleasedthroughtherequireddeclarationofgoodsasprovidedunderexistingrulesandregulations.

• AllotherissuancesinconsistentwiththisCMOarerevoked,repealedormodifiedaccordingly.

• CMONo.10-2012shalltakeeffectimmediately.

PEZA Issuance

Memorandum Circular No. 2012-025 dated September 25, 2012

Reportorial Requirements and Submission Deadline

• AllPEZA-registeredEnterprisesandEcozone/ITEcozoneDevelopers-Operatorsarerequiredtosubmitthefollowingreportorialrequirementsfor2010and2011notlaterthan5October2011:

• CopyofAuditedFinancialStatements(AFS)for2010and2011,dulystamped“Received”bytheBIR;

• CopyofITRsfor2010and2011,togetherwithschedulessubmittedtotheBIR,dulystamped“Received”bytheBIR;

• DetailsofOtherIncomefor2010and2011;• DataonRevenuesandTaxesPaidfor2010and2011;and• BreakdownofSalesperRegisteredActivityfor2010and2011.

• AsprovidedinPEZAMemorandumCircularNo.2007-11,thesedocumentsmustbesubmittedtoPEZAwithin30daysfromtheprescribedlastdayoffilingoftheITR/AFSwiththeBIR

Sanctions

• UnderRuleXXV,Section8.BofPEZA’sRulesandRegulations,PEZAmaysuspend,withhold,disapproveorrevokeanypermit,authority,orincentive/s

ThedeadlineforsubmissionofPEZA’sreportorialrequirementsfor2010and2011isonOctober5,2012.

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beingadministeredbyPEZAforfailuretocomplywiththePEZArulesandwiththetermsoftheirRegistrationAgreementwithPEZA

• UnderRuleXXV,Section8.AofthesameRulesandRegulations,latefilingofreportorialrequirementsshallbesubjecttoanadministrativefineofP500basicfineplusP50/daydelayinsubmissionoftherequiredreports

BOI Issuance

Implementing Rules and Regulations (IRR) of the 2012 Investments Priorities Plan (IPP) dated 28 September 2012

Definitions

• Existing ProjectreferstoaprojectofanexistingenterprisethathasstartedcommercialoperationatthetimeofapplicationwiththeBoard.

• Expansion Projectreferstoaprojectofanexistingenterprisethatwouldinvolvetheinstallationofadditionalfacilities/equipmentthatwillresultinincreaseincapacityofthesame/similaractivitywithinthesameexistingplant/facilitiesoftheenterprise.Projectsthatdonotqualifyasnewshallbeconsideredanexpansion.

• Fulfillment House/Centerreferstoafacilitythatofferstostore,receivetheorders,packageandthenshiptheordereditemtotheendconsumer,onbehalfoftheproductowner.

• Government Guaranteereferstotherateofreturngrantedbytheregulatingagencytoincludeprofitandtherecoveryofcapitalexpenditure(guaranteedrateofreturn),assuredpaymentwhetherornotservices/productswereproduced/delivered(takeorpayprovision),andassurancetolenderbyagovernmentagencythatafinancialobligationwillbehonorediftheborrowerisunabletorepaythedebt.

• Government Subsidyreferstothefinancialcontributionbythenationalgovernmentoranyofitsagenciestodefray,payorshoulderaportionoftheprojectcostortheexpensesandcostsinoperatingormaintainingtheproject.

• Job Generationreferstothenumberofjobsdirectlygeneratedbytheproject.

• Measured Capacityreferstotheestimatedadditionalvolumeofproduction/servicewhichtheBoarddeterminestobedesirableineachpreferredareaofinvestment,takingintoaccounttheexportpotentialoftheproduct.Formasshousingprojects,theestimatedhousingbackloginthecountryshallbethebasisofmeasuredcapacity.

• Modernization Projectreferstotheprojectofanexistingenterprisethatwouldinvolveimprovementsinsystems,processes,equipmentand/orfacilitiesthatmustresultinanyofthefollowing:

1. Atleast25%substantialreductionofproductioncost/costofprovisionoftheservice;or

2. Upgradingofproduct/servicequalityorclassificationofthefacility(e.g.hospitals,hotels,resorts)toahigherclassinaccordancewithaccreditationstandardsapplicabletotheindustryconcerned.

TheBOIissuestheIRRofthe2012IPP.

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• Multiplier Effectreferstotheincreaseineconomicactivityandinterrelationshipsgeneratedandstimulatedbytheinvestment.

• New Plantation Areareferstothenewhectarageofplantationorlandsthathavebeenidleforatleastoneyear,orthoseinvolvingchangeofcrops/varietytoachievehigheryield,orshiftsintheproductionsystemsuchasorganicfarming.

• New Projectreferstotheproject/activitylistedintheIPPthathasnotstartedcommercialoperationundertakenby:

1. Anewlyorganized/formedenterprisethat:

• Hasnocommonstockholdersinanyexistingenterprise;or• Hascommonstockholdersintheexistingenterprisebutwhowillown

notmorethan50%ofequityinthenewenterprise;or• Hascommonstockholdersbutwillengageinanentirelydistinctand

separateactivity;or• Hascommonstockholders(regardlessofpercentageofcommon

ownership)andwillengageinthesameactivityasthatoftheexistingenterprise,butwilllocateinadifferentmunicipality,provinceorregion.

2. Anexistingenterprisethatshallengagein:

• Anentirelydistinctanddifferentactivityfromitsexistingbusinessoperations;or

• Thesameactivityprovideditshallestablishanewfacilityinanareanotcontiguoustothepremisesofitsexistingprojectandwithnewinvestments.

3. AnenterpriseinvolvingthemanufactureofproductsutilizinglocalResearch&Development(R&D).ApplicationsforregistrationutilizinglocalR&DmustbeendorsedbytheDepartmentofScienceandTechnology(DOST),statingthatthiswasundertakeninthePhilippinesandhasnotyetbeencommercialized.

4. Forindustrialtreeplantations,anenterpriseinvolvedinthedevelopmentofanypublicorprivatelandtoplantationoftimberandnon-timberspeciestosupplytherawmaterialrequirementsofforest-basedindustries.Italsoincludesplantationwithexistingtreecrops,whichhavenotyetreachedcommercialharvest.

• Net Value-Addedreferstothevalueoffinalproduct/servicelessthevalueofinputs.Theproject’snetvalue-addedshouldbeatleast25%exceptforprojectsdependentonimportedrawmaterials/supplies.

• Upgradingreferstotheimprovementofthefacility/infrastructurebyaddingorreplacingcomponents.Thismaybetreatedasanexpansion/modernizationproject.

Equity Requirement

• 25%oftheprojectcost,unlessexemptedunderanyofthefollowing:

1. Projectsofapplicantswithgoodtrackrecordinimplementingregisteredprojects;

2. Projectsofpublicly-listedcompanies;3. Projectsnotentitledtoincometaxholiday(ITH).

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• Forlargeprojectswithagestationperiodofmorethanoneyear,the25%equityrequirementshallbebasedontheannualcapitalrequirementoftheproject,providedthatthetotalequityrequirementof25%iscompliedwithinthefirstyearofITHavailment

Locational Restriction in the National Capital Region (NCR)

• TheBOIshalllimitincentivestofirmsthatlocateincongestedurbancenters(NCR).

• Exemptionsfromthelocationalrestrictionmaybegiventothefollowing:

1. Projectsingovernmentindustrialestatesdeclaredbynationallaworpresidentialproclamationpriorto1January1989,unlesssubsequentlyprivatized

2. Projectsthatwillengageinservicetypeactivities3. Expansionofexport-orientedprojects

• Effectedwithinthefirm’sexistingpremises;• Enterprisehasagoodtrackrecordofexportsandhasnorecord

ofviolationofthetermsandconditionsgoverningitsexistingregistration(s)–specifically,theearlierprojectexceededitsprojectedexportcommitmentinthepast3years

4. Modernizationprojects5. Strategicactivities

[Editor’s Note: Projects of small and micro enterprises and relocation of oil terminals under the 2011 IPP IRR are no longer exempted from the locational restriction.]

Export of products in short domestic supply

• Theexportcommitmentofaregisteredenterprisemaybesuspendedtosatisfynationalinterestorinanemergencysituation.

ITH Availment

• Theextentofaproject’sITHentitlementshallbebasedonthefollowingparameters:

1. Project’snetvalue-added2. Jobgeneration3. Multipliereffect4. Measuredcapacity

• Iftheregisteredenterprisefailstoimplementtheprojectasrepresentedinitsprojectapplication,theBOImayopttoreducetheproject’sITHavailmentproportionatetotheactualperformance(e.g.,investments,employmentgeneration,productionandsales,timetable)oftheenterprise.

• TheincomequalifiedforITHshallbelimitedtotheincomedirectlyattributabletotherevenuegeneratedfromtheregisteredproject.

• NetincomequalifiedforITHavailmentshallnotbearesultofgrossrevenuesexceeding10%oftheprojectedgrossrevenuerepresentedbythefirminitsapplication.

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• Wheretheproject’sactualrevenuesexceedtheprojectionsinitsapplicationduetonewmarkets/orders,additionalemployment/shifts,additionalinvestments,theBOImayincreasetheproject’sITHavailmentproportionately.RequestsforadjustmentsofprojectedrevenuemustbefiledbeforethefilingofapplicationforITH.[Editor’s Note: New Provision]

• Incaseofprojectsintendedforownuse,ITHshallonlybeapplicabletorevenuesonsalesgeneratedorservicesrenderedtootherenterprises.

• Onlynetincomefromtheoperationofregisteredactivity,ascertifiedunderoathbythefirm’sCEOorCFO,shallbeentitledtoITH.

• Enterpriseswithmultipleregistrationsand/orseveralactivities(whetherBOI-registeredornot)shallsubmitalistofcostitemsthatarecommonwiththequalifiedprojectandtheircostallocationtoensureproper,fairandequitableallocationofcommoncost(overheadandadministrativecosts).

Base Figure and Rate of Exemption

• ITHofexpansionprojectsaresubjecttoabase-figureequivalenttotheenterprise’shighestsalesvolumeinthecaseofhomogenousproducts,orsalesvalueinthecaseofheterogeneousproducts,inthelastthreeyearspriortothefilingoftheapplicationforregistrationoftheproject.

• ProjectsregisteredunderthemodernizationprogramwithoutincreaseincapacitymaybeentitledtothreeyearsITHandotherincentiveswithoutprejudicetocompliancewithotherrequirements.

Projects with Government Guarantee

• Projectswithgovernmentguarantee/subsidyarenotentitledtoITHexceptincaseswhereITHhasbeenconsideredinthegrantofratesapprovedbytheregulatoryagencyconcerned.

• TheITHisdeemedtohavebeenimputedinthegrantofthegovernmentguarantee/subsidyiftheITHwasincorporatedinthebiddocumentsoftheprojectproponent/contractwithgovernmentontheproject,ortheITHwasincludedinthefinancialmodelbytheregulatoryagencyinapprovingtheproject’stariffs/rates.Inthelattercase,theavailmentofITHshallbesubjecttoacertificationbytheconcernedregulatoryagency.

Preferred Activities

A. Agriculture/Agribusiness and Fishery

• Includescommercialproductionandcommercialprocessingofagricultural,herbalandfisheryproducts,andagricultureandfisheryrelatedactivities,suchasirrigation,post-harvest,coldstorage,blastfreezingandtheproductionoffertilizersandpesticides.

• ProjectsthatcostatleastthePhilippinePesoequivalentofUSD200,000maybegrantedpioneerstatus.

• Applicationsforregistrationmustbeendorsedbytheapplicablegovernmentagency.

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• Commercial Production

1. Productionofagricultural(crops,poultryandlivestock)andfisheryproductsandintercroppingofhighvaluecropsasidentifiedbytheDepartmentofAgriculture(DA).

2. Cropproductionshouldinvolvenewplantationareastoqualifyforregistration.

• Commercial Processing

1. Conversionofagriculturalandfisheryproducts,theirby-productsandwastestoaformreadyforfurtherprocessingorfinalconsumption.

2. Extractionofhigher-valuesubstancesfromagriculturalandforest-basedrawmaterialsthroughbio-processing,asendorsedbytheconcernedgovernmentagency.

3. Productionofanimalandaquafeeds,excludingthoseforgameanimals,fowlsandotherspeciesforpet/leisurepurposes.

4. Processingofagriculturalproductsshouldinvolvedomesticallyproducedraworsemi-processedagriculturalproducts,unlesstheyarenotlocallyproducedornotinsufficientquantity.

5. Ifusingimportedraworsemi-processedagriculturalproductsthatarelocallyproducedorinsufficientquantity,theprojectmayqualifyforregistrationprovidedthatthefinished/finalprojectisforexportortheprojectqualifiesforpioneerstatus.

[Editor’s Note: The production of iodized salt, refined sugar, cooking oil and rice has been deleted from the 2012 IPP IRR.]

• Irrigation

1. Irrigationsystemprimarilyintendedtorenderservicetoagriculturalfarms.

2. Irrigationsystemincludeswatersource,distributionlinesandcontrolmechanism,primemover,pump,generatorandtransformer.Systemcapacityisexpressedintermsofcubicmetersofirrigationwaterperyear.

3. OnlyrevenuesgeneratedfromservicesrenderedtootheragriculturalfarmsmaybeentitledtoITH.

• Harvesting Services

1. Mechanicalharvestingservices.

• Post Harvest Facilities

1. Establishmentandoperationofcoldstorage,freezing,bulkhandling,packinghouse,storagefacilitiesandtradingcenter.

2. IceplantsthatwilllocateinLessDevelopedAreas(LDAs).3. Onlyrevenuesgeneratedfromservicesrenderedtootheragricultural

enterprisesmaybeentitledtoITH.

B. Creative Industries/Knowledge Based Services

• Business/knowledgeprocessing.

• Non-voicebusinessprocessingoperations(undertakingofoutsourcedservicessuchasadministrativeandbusinessservices,transcriptionservices,engineeringandarchitecturalservices).

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• Creativeandknowledge-basedserviceswithoriginalcontent(softwaredevelopment,animation,engineeringandarchitecturaldesign,productdesign,gameandapplicationsdevelopment,andsoftwaredevelopment)maybegrantedpioneerstatus,providedthattheprojectcostisatleastthePhilippinePesoequivalentofatUSD200,000(excludingcostoflandandbuilding)tobeputupduringthefirstyearofoperations.

C. Shipbuilding

• Constructionandrepairofships/boats,shipbreakingandshiprecycling.

• Qualificationsforpioneerstatus:

1. Shipbuildingorshiprepairfacilitieswithaminimumliftingcapacityof20,000DWT.

2. Shipbuildingorshiprepairfacilitieswithaminimumberthingcapacityof7,500DWT.

3. ProjectsthatcostatleastthePhilippinePesoequivalentofUSD100million.

• Generalrequirements:

1. Minimumrequiredpaid-upcapital,capitalequipmentandtechnicalandskilledmanpowerasspecifiedbyMARINA.

2. CompliancewithDOLEDepartmentCircularNo.1,seriesof2009,ontheGuidelinesofOccupationalSafetyandHealthintheShipbuilding,ShipRepairandShipbreakingIndustryandsecureacopyofaDENR-issuedEnvironmentComplianceCertificate.

3. Submissionofacopyofitslicense/authorizationoritsequivalentfromMARINAorotherconcernedagencypriortostartofcommercialoperation.

• Ship/BoatbuildingRequirements:

1. Mustbeatleast500GT

• Shipbreaking/ShiprecyclingRequirements:

1. Drydockingordismantlingshipwithaminimumcapacityof1,500DWT.

2. CompliancewiththerequirementsoftheHongKongInternationalConventionfortheSafeandEnvironmentallySoundRecyclingofShips,includingthepreparationofaShipRecyclingFacilityPlanandtheTechnicalGuidelinesfortheEnvironmentallySoundManagementoftheFullandPartialDismantlingofShips.

D. Mass Housing

• Developmentoflowcosthousingandmanufactureofmodularhousingcomponentspreferablyusingindigenousmaterials.

• Modularhousingcomponentsusingindigenousmaterialsincluderoof/framingsystems,wall/partitionsystems,flooringsystems,door/windowsystemsandfinishing/ceilingsystems.

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• Inmodularhousingcomponents,thefirmmustsellatleast50%oftotalannualproductiontomasshousingprojects.

• Generalrequirements:

1. SellingpriceofeachhousingunitshallbemorethanPHP400,000butnotexceedingPHP3million.[Editor’s Note: In the 2011 IPP IRR, the cap was PHP 2.5 million.]

2. Mustbeneworexpandinglow-costmasshousingproject.

3. Minimumof20livabledwellingunitsinasinglesiteorbuilding.

4. ProjectsconformwiththedesignstandardsintheRulesandRegulationstoimplementBPNo.330/PDNo.957andotherrelatedlaws.

5. Alllow-costmasshousingprojectsmustcomplywiththesocializedhousingrequirementbydevelopinganareaforsocializedhousingequivalenttoatleast20%ofthetotalsubdivisionarea,ortotalsubdivisionprojectcostforhorizontalhousing,or20%ofthetotalfloorareaofqualifiedsaleablelowcosthousingunitsforverticalhousingprojects,throughanyofthefollowingmodes:

• Developmentofanewsettlementdirectlyundertakenbytheregisteredentity;

• Developmentofanewsettlementthroughjointventureagreementswitheither:alocalgovernmentunit(LGU),anon-governmentorganizationaccreditedbytheBOI,asubsidiaryoftheBOI-registeredentityoradeveloperaccreditedbytheHLURB.TheBOI-registeredentityisrequiredtoprovideproofoffundstransferredtotheimplementingagency.

• Slumupgradingorrenewalofareasthroughzonalimprovementprogramsorprojectsthatwilldirectlyaddresstheproblemofinformalsettlersalongthemainriversystems.

6. CompliancewiththesocializedhousingrequirementmustbecompletedwithintheITHavailmentperiod,andshouldbeproportionatetothenumberoflow-costhousingunitsbeingappliedforITHforthetaxableyear.[Editor’s Note: New provision.]

• Horizontalhousingprojectsrequirements:

1. Masshousingprojectsmustbelocatedinareaszonedandclassifiedforresidentialuse/purposesinconformitywiththeapprovedComprehensiveLandUsePlanandZoningoftheLGUconcerned.

• Verticalhousingprojectsrequirements:

1. Atleast51%ofthetotalfloorarea,excludingcommonfacilitiesandparkingareas,mustbedevotedtohousingunits.

2. Inlieuofthemodesforcompliancewiththesocializedhousingrequirement,donationmaybeallowedprovidedthat:

• ThedonationismadetoaBOI-accreditedNGO.

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• Theamounttobedonatedshallbeequivalentto30%of20%ofthebuildingconstructioncostbasedontheactualnumberorequivalenttotalfloorareaofqualifiedsaleablelowcosthousingunits,ornotlessthan40%oftheestimatedITH.Equivalenttotalfloorareareferstothesumtotalofthefloorareaofalltheregisteredlow-costmasshousingunits.

• Anyofthefollowingcanbeconsideredanexpansionproject:

1. Unfinishedprojects,theconstructionofwhichhadstoppedforatleastoneyear.Onlytheunsoldunitsmayqualifyforregistration.

2. Conversiontolow-costorsocializedhousingprojectofabuildingoriginallyintendedforcommercial,officespaces,orexclusivecondominiums.

3. Constructionofadditionalfloorsorannexesintendedformasshousingunits.

• Aprojectshallbeconsideredasanexpansionifitwilllocateadjacentorcontiguoustoanexistingmasshousingprojectownedbythesameentityandshallsharecommonfacilitieswiththeexistingproject.

• Projectsthathavealreadybeencompletedandhaveincurredsales(bookedsales)ofhousingpackagesshallnotqualifyforregistration.

• EligibleprojectsinNCR,MetroCebuandMetroDavaoshallbeentitledtothreeyearsITH.[Editor’s Note: New provision.]

• Incasesofunincorporatedjointventuresandsimilararrangementsbetweenlandowneranddeveloperwherethesharingschemeisthenumberoflotsorunitsbuilt,onlytheshareofthedevelopermayqualifyforregistration.

• Interestincomearisingfromin-housefinancingshallnotbeentitledtoITH.

E. Iron and Steel[Editor’s Note: New provision]

• Basicironandsteelproducts,longsteelproducts(billetsandreinforcingsteelbars)andflathot/cold-rolledproducts,refinedironoreandprimarysteelproducts,manufactureofflatproducts,longproductsandfabricationofmachinery,equipmentandimplements.

• AllironandsteelproductsmustbecompliantwiththeapplicablePhilippineNationalStandardsorinternationalstandards.

• ProjectsthatcostatleastthePhilippinePesoequivalentofUSD500millionmaybegrantedpioneerstatus.

F. Energy

• Exploration,developmentand/orutilizationofenergyresourcesadoptingenvironmentally-friendlytechnologies.

• Onlypowerplantsutilizingenvironmentally-friendlyenergysourcesandtechnologiesmayqualifyforITH.

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• Projectsthatutilizerawmaterialsorsemi-processedrawmaterialsthatarenotlocallyproducedornotinsufficientquantityareexemptfromnetvalue-addedrequirement.

• Onlyprojectsthathaveachievedfinancialclosingfortheprojectarequalifiedtoapplyforregistration.


1. Powersupplyprojectslocatedinmissionaryareasoroff-gridareasthatarenotreceivingsubsidiesfromthePSALM.

2. ProjectsthatcostatleastthePhilippinePesoequivalentofUSD1.5millionpermegawatt.

3. Projectswithnetvalue-addedofatleast30%

• Forpowergenerationprojects,onlyrevenuesfrompowergeneratedandsoldtothegrid,otherentitiesand/orcommunitiesmaybeentitledtoITH.

• Powerprojectsthatarebuiltcontiguoustoexistinggeneratingfacilitiesshallbeconsideredasexpansionprojects.However,iftheexistingbaseloadplanthasconsistentlydispatchedatleast80%oftheirregisteredcapacityforthepastthreeyears,theprojecttoberegisteredmaybeconsiderednew.

• TheamountofITHtobegrantedshallnotexceed10%ofthetotalrevenueofgeneratedpower.

• ApplicationsforregistrationmustbeendorsedbytheDepartmentofEnergy(DOE).

G. Infrastructure

• Transport,water,logistics,wastemanagementfacilities,physicalinfrastructure(tollways,railwaysandtelecommunicationfacilities)andPPPprojects.

• Air Transport:

1. Passengerand/orcargooperation.

2. Leasewithoptiontopurchaseaircraftmaybeallowed.Pureleasemaybeallowedprovidedthataleasecontractisforaminimumoffiveyears.

3. Acquisitionofadditionalaircraftmayberegisteredasnew.

4. Aircraftmustnotbemorethan14yearsoldfromdateofproductiontothedateoffilingtheapplication.[Editor’s Note: New requirement.]


1. Projectsservingthemissionary/developmentalroutes,asindicatedintheCertificateofPublicConvenienceandNecessity(CPCN).

2. Projectsinvolvingpurchase/lease-purchaseofbrandnewaircraft.Forlease-purchase,theoptiontopurchaseshouldbeexercisedbeforetheendofthefourthyearofITHavailment.

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3. AllapplicationsforregistrationincludingtheroutestobeservedmustbeendorsedbytheCivilAeronauticsBoard(CAB),whenapplicable.

4. Priortothestartofcommercialoperationofeachaircraft,theregisteredenterprisemustsubmitaCertificateofAirworthinessissuedbytheCivilAviationAuthorityofthePhilippines(CAAP).

• Water Transport

• Domestic/Inter-Island Shipping

• Purecargo,passengerandpassenger-cargovesseloperationsincludingROROterminalsystemoperations

• Qualificationsforregistration:

1. PhilippineshippingenterpriseaccreditedwiththeMARINA;2. VesselmustberegisteredandoperatedunderthePhilippine

flag;3. Compliancewithagerequirements;4. Tankers,high-speedcraft,ROROvesselsservingprimary

routesandpassenger/cargovesselsmusthaveagrossweightof150GTandabove;

5. Tankersmustbedouble-hulled.

• ROROoperators/enterprisesservingmissionaryroutesasindicatedintheCPCissuedbyMARINAmayqualifyforpioneerstatus.

• Overseas Shipping

►• Qualificationsforregistration:

1. PhilippineshippingenterpriseaccreditedwiththeMARINA;2. VesselmustberegisteredandoperatedunderthePhilippine

Flag;3. Vesselsmustbeatleast1,000GTandmustnotbemorethan

15yearsold.

►• Acquisitionofbrandnewvesselsmayqualifyforpioneerstatus.

►• Acquisitionforadditionalvessel/smayberegisteredasnewproject.

►• Leaseorcharterofforeign-ownedvesselwithoptiontopurchasemaybeallowed.Pureleaseorbareboatchartermaybeallowedprovidedtheleasecontractisforaminimumofoneyear.Anyreplacementofthevesselshallbecoveredbytheenterprise’sexistingregistrationinvolvingtheleasedvessel,whichshallbevalidforatleastoneyear.

►• AllvesselsmustbeseaworthyandmustobtainvalidClassandStatutoryCertificatesasrequiredbytheMARINA.

►• Modernizationofshipsmaybeallowed,withentitlementtoITHlimitedtoinvestmentsinsafetyandnavigationdevicesandequipment.

►• AllapplicationsforregistrationmustbeendorsedbyMARINA.

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►• Water Supply and/or Distribution

►• Bulksupplyprojectsandneworupgradingofwaterdistributionsystems.

►• Applicationscoveringbothsupplyanddistributionprojectsshallbeunbundledshowingtherevenueandcoststructureofeach.

►• Incasesofupgradingofexistingprojects,onlyrevenuesthatarederivedfromincrementalvolumeshallbeeligibleforITH.

►• SupplyofwatershallbelimitedtotreatedwaterandshouldbeinaccordancewiththePhilippineNationalStandardofDrinkingWater.

►• AcopyoftheWaterPermitand/orCPCmustbesubmitted.

►• Projectsinvolvinganyoftheforegoingareasofwateroperationsdedicatedtoaparticularindustrialestate,industrialcommunityorsubdivisionarenotqualifiedforregistration.

►• Logistics

►• Ports,terminals(passenger/intermodalterminals,cargoterminals,containeryards,LNG/CNGstorageterminals,naturalgasrefueling,stationsandchargingstationsforelectricvehicles),warehousesandrelocationofoilterminals.

►• Ports

1. Developmentandoperationofairportsandseaports.

2. AllapplicationsforregistrationmustbeendorsedbytheCAAPorthePhilippinePortsAuthority(PPA),whicheverisapplicable.

►• Passenger/Intermodal Terminals

1. Qualificationsforregistration:

►• Caterstoshippinglinesorairlinesand/ordifferentlandtransportationsystems(railsystem,buses,taxis,etc.)

►• Musthavenewfacilitieswithparking,comfortrooms,ticketingandreservationoffice,air-conditionedwaitingareaandprovideshuttleservices.

►• Musthaveasystemofingressandegresstopreventtrafficbuild-up/obstructionofthoroughfaresona24-hourbasisascertifiedbyDepartmentofTransportationandCommunications(DOTC),MetroManilaDevelopmentAuthority(MMDA),and/orotherconcernedagency.

2. Busterminalsthatwillintegrateallbuslinesoperatingwithinaparticularmunicipalityorcityshallbeeligibleforregistration.Thefacilitiesshallhaveampleparkingspaces,comfortrooms,andwaitingareas.Projectsofthisnatureundertakeninhighlyurbanizedcitiesshallbegrantedpioneerstatus.[Editor’s Note : New provision.]

26 Tax Bulletin

►• Cargo Terminals/Container Yards


1. Musthavenewfacilities;and

2. Musthaveasystemofingressandegresstopreventtrafficbuild-up/obstructionofthoroughfaresona24-hourbasisascertifiedbyDOTC,MMDAand/orotherconcernedagency.

►• LNG/CNG storage, distribution and marketing

1. Establishmentandoperationofstorage,distributionandmarketingfacilitiesforthebulkhandling/saleofnaturalgasinaccordancewithrelevantPhilippineNationalStandards.

2. EstablishmentandoperationofnaturalgasrefuelingstationsandrelatedinfrastructuresandfacilitiesinaccordancewithrelevantPhilippineNationalStandard.

3. Formarketing,distributionandrefuelingstations,theregisteredenterprisemustsubmitacopyofitsPermittoOperateandSupplyNaturalGasissuedbytheDOEpriortothestartofcommercialoperation.

4. Forstorage,theregisteredenterprisemustsubmitacopyofitsPermittoOperateissuedbytheDOEpriortothestartofcommercialoperation.

5. ProjectsthatcostatleastPHP1billionmaybegrantedpioneerstatus

►• Charging stations for electric vehicles

1. Establishmentofchargingstationsforelectricvehicles.Thechargingstationscouldrefertoa“servicestation”designedtosimultaneouslyfastchargemultiplevehiclessimilartogasoline/dieselstationsoranetworkofatleastfivechargingstands.

2. Allapplicationsforregistrationmustbeendorsedbytheconcernedagency.

►• Warehouses

1. Establishmentofautomatedwarehousingfacilitieswithautomatedretrievalsystems,conveyors,cranesandothercargohandlingequipment.

2. Distributionorfulfillmentcentersofatleast50%ofitsrevenuesderivedfromservingothercountriesshallbegrantedpioneerstatus.

3. OnlyrevenuesgeneratedfromservicesrenderedtootherenterprisesmaybeentitledtoITH.

►• Relocation and putting up of a new oil terminal

1. ProjectsthatcostatleastPHP1billionmaybegrantedpioneerstatus.

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2. AllapplicationsforregistrationmustincludeaDOEendorsementandproofoftheproject’scompliancewithappropriatelanduse/zoneplans,includingsafetyandsecuritymeasuresprescribedbytheLGU/agencythatapprovedthesame.

►• Waste Management Facilities

1. Establishmentoftoxicandhazardouswastetreatmentfacilities.


►• Involvestreatment,storageanddisposal►• Capableofhandlingtoxicandhazardouswaste►• Handlesonlylocally-generatedwaste

3. Priortostartofcommercialoperation,theregisteredenterprisemustsubmitacopyofitsTreatment,StorageandDisposalRegistrationCertificateissuedbytheEMBoftheDENR.

4. Ifhandlingradioactivewastes,theregisteredenterprisemustsubmitaLicensetoOperateaRadioactiveWasteManagementFacilityfromthePhilippineNuclearResearchInstitute(PNRI)oftheDOST,inadditiontotheTreatment,StorageanddisposalRegistrationCertificateissuedbytheEMBoftheDENR.

►• Tollways and Railways

1. Development,rehabilitation,upgradingand/orexpansionand/oroperationoftollwaysandrailways.

2. Upgradingofphysicalinfrastructuremayberegisteredasanewprojectprovidedthatthecostofupgradingalreadyapproximatesatleast90%oftheprevailingcostofconstructinganewphysicalinfrastructure,ascertifiedbytheconcernedagency.

3. Ifthecostislessthan90%oftheprevailingcostofconstructinganewphysicalinfrastructure,theprojectmayberegisteredasamodernizationactivitybutnotentitledtoITH.

4. Forprojectsthatwillinvolvethedevelopmentandoperationofphysicalinfrastructuretobeundertakenbyseparateentities,boththedeveloperandoperatormayqualifyforregistration.However,thedevelopermayonlybeentitledtoincentiveoncapitalequipmentdirectlyneededfortheoperationofthephysicalinfrastructure.

5. ProjectsthatcostatleastthePhilippinePesoequivalentofUSD100millionmaybegrantedpioneerstatus.

►• Telecommunication Infrastructure

1. Establishmentofnewtelecommunicationinfrastructureintheprovinces,particularlyintheruralareas,asendorsedbytheNationalTelecommunicationsCommission(NTC)andutilizingatleastfiberoptictechnology.

28 Tax Bulletin


►• PPP Projects[Editor’s Note: New provision]

1. ProjectsunderthePublic-PrivatePartnership(PPP)Programofthegovernment.

2. ApplicationsmustbeendorsedbythePPPCenterorotherconcernedgovernmentagency/unit.

H. Research and Development

►• R&Dactivitiesandtheestablishmentofresearch/testinglaboratories,CentersofExcellence(COE)andtechnicalvocationaleducationandtraininginstitutions.

►• ProjectsthatcostatleastthePhilippinePesoequivalentofUSD2millionmaybegrantedpioneerstatus.

►• Research and Development

1. AllR&Dactivitiesincludingtheestablishmentofresearch/testinglaboratories(e.g.forpharmaceuticals,electronics,construction).

2. Establishmentandoperationoffacilitiesfortheconductofclinicaltrials(e.g.ClinicalResearchOrganizationorCRO)TheregisteredCROmustsubmitacopyofPermitforClinicalInvestigationalUseissuedbytheFoodandDrugsAdministration(FDA)beforetheconductofeachclinicaltrial.

3. ApplicationsforregistrationmustbeendorsedbytheDOSTorotherconcernedagency,asmaybedeemednecessary.

►• Center of Excellence

1. Establishmentofentrepreneurial,technology,businessincubationcenters,commonservicefacilities,andmanufacturing,serviceandagribusinessentities,includingthoselocatingonthepremisesofstateuniversitiesandcolleges(SUC)outsideMetroManila,andwithspecialarrangementwiththeSUCtodevelopcompetenciesinentrepreneurshipandR&D.

►• Training/Learning Institutions

1. Establishmentofinstitutionsspecializingintechnicalvocationaleducationandtraining(e.g.engineering,culinaryarts)insupportoftheactivitieslistedintheIPP.

2. Requirementsforregistration:

►• TESDA-approvedcurriculumfortrainingcoursesorCHED-approvedcurriculumfordegreecoursesorothergovernmentagenciesandendorsedbytheappropriateindustryassociation.

►• Registerededucational/training/learninginstitutionmustprovidetraininglaboratoriesandequipment,ifapplicable.

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I. Green Projects

►• Manufacture/assemblyofgoodsandtheestablishmentofenergyefficiency-relatedactivities(suchasdistrictcoolingsystems)theutilizationofwhichwouldsignificantlyleadtoeithertheefficientuseofenergy,naturalresourcesorrawmaterials;orminimize/preventpollutionorreducegreenhousegasemissions.

►• CoversonlyprojectsotherthanthoselistedintheIPP.

►• Qualificationforregistration:Assemblyoperationsmustbeintegratedwiththemanufactureofatleastonepart/componentforuseintheassembly.

J. Manufacture of Motor Vehicles

►• Manufacture/Assembly of Motor Vehicles

1. Manufacture/assemblyofbrandnewmotorvehicleunits(excluding2-strokemotorcycles)thatarecompliantwiththeprevailingnationalstandardsandregulationsontheregistration,useandoperationofmotorvehicles.

2. Qualificationsfornewproject:

►• Establishmentofafactorycompletewithproductionmachinery/equipmentandfacilitiessuchasweldingsection,assemblysection,metaltreatmentsection,paintingsection,testingfacilityforroadworthinessandemissionstandardcomplianceandpre-deliveryinspectionsection.

►• Projectsofanexistingmotorvehiclemanufacturer/assemblerthatinvolvestheproductionofanewmodelorafullmodelchange,providedthereisnewinvestmentofatleastPHP100millionforfour-wheelvehiclesandmanufactureofpartsandcomponents;otherwise,theprojectshallbeconsideredasanexpansion.

3. Qualificationsforpioneerstatus:

►• Newprojectsundernumber1aboveformanufacture/assemblyofpassengercarsand/orcommercialvehicleswithinvestmentsofatleastUSD50millionandforthemanufacture/assemblyofmotorcycleswithinvestmentsofatleastUSD4million.Investmentsmayincludethecostofacquisitionofexistingassetsorfacilities.

►• Newprojectsundernumber2abovewithinvestmentsofatleastUSD20millionforpassengercarsand/orcommercialvehicles,USD1.5millionformotorcycles.

►• Projectsforthemanufacture/assemblyofalternativefuelvehicleandelectricvehicles.Alternativefuelvehiclesincludethefollowing:

a. Hybridvehiclesthatrunonelectricbatteriesandgasoline/diesel/otherfuels;

30 Tax Bulletin

b. Electricvehicles;c. Flexible-fuelvehiclesthatrunongasoline/dieselin

combinationwithalternativefuelssuchasbutnotlimitedto:

1. Bioethanolvehiclesthatrunongasolineandaminimumethanolcontent/blendofatleast20%

2. Biodieselvehiclesthatrunondieselandaminimumbiodieselblend/contentofatleast5%

3. Compressednaturalgasvehicles4. OthervehiclespoweredbyLPG,fuelcellandother

alternativefuels.

►• Manufacture/assemblyofbrandnewthreeorfour-wheelPhilippineutilityvehiclesforcargosand/orpassengers.

►• Manufacture of Parts and Components

1. Manufactureofmotorvehiclepartsandcomponentseitherasanoriginalequipmentmanufacturer(OEM)orafter-marketproducts.


►• Manufactureofenginesandtransmissions;►• Manufactureoftoolsanddiestoproducechassisandengines;►• Establishmentofacommonfacilityforheattreatment,forging,

stampingofmotorvehiclepartsandcomponents;►• Productionofelectricmotors,batteriesotherthanleadacid

batteries,controllerassemblyandbatterychargerforelectricvehicles.

K. Strategic Projects

►• Projectsthatexhibitveryhighsocialeconomicreturnsthatwillsignificantlycontributetothecountry’seconomicdevelopment,measuredintermsofthefollowing:

1. Consumer-basedbenefits(e.g.price,availability,quantity);2. Forwardandbackwardlinkageswithexistingindustriesinthecountry;3. Generationofatleast500directemploymentoruseofhighly-

specializedoradvancedtechnology;4. GenerationofatleastUSD1millioninforeignexchangesavings,when

applicable;5. Statureoftheproponentasaglobalplayer,whenapplicable.

►• Manufactureofpackagingproductsthatwillinvolveproductorprocessinnovationwhichshallleadtosignificantimprovementsinqualityandvalueofthepackagedproduct.

►• ManufactureofessentialdrugsandmedicineaslistedinthePhilippineNationalDrugFormulary.[Editor’s Note: New provision.]

►• ProjectsthatcostatleastthePhilippinePesoequivalentofUSD500millionmaybegrantedpioneerstatus.

►• StrategicprojectswillbeapprovedupondeterminationbytheBOIinconsultationwiththeDOF,NEDAandotherappropriategovernmentagencies.

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L. Hospital/Medical Services

►• Establishmentandoperationofmedicalfacilitiesincludingprimary,secondary,tertiaryhospitalsandambulatoryfacilities.

►• OnlyrevenuesfromtheprovisionofmedicalanddiagnosticservicesshallbeentitledtoITH.Revenuesfromoperatingapharmacy,foodserviceorothernon-treatmentserviceshallnotbeeligibleforITH.

►• Secondarycarehospitalswithaminimumcapacityof50bedsandaninvestmentcostofatleastthePhilippinePesoequivalentofUSD2.5millionmayqualifyforpioneerstatus.

►• OnlyfacilitiesoutsideofMetroManilamayqualifyforregistration.

►• PriortoITHavailment,registeredprojectsmustsubmitcopiesoflicensetooperateissuedbytheDOHandPhilhealthAccreditation.

M. Disaster Prevention, Mitigation and Recovery Projects

►• Projectsthatwillpreventormitigateadverseimpactofcalamitiesanddisasters,includingtheinstallationoffloodcontrolsystems,installationofearlywarningsystemsfortyphoons,earthquakeoccurrences,tsunamiandvolcaniceruptions;manufactureorassemblyofgoodscriticaltodisastermanagement;constructionofdikesandsalvagingoperations.

►• Manufactureandassemblyofequipmentandgoodsthatwillbeusedfordisasters,calamitiesandemergencies,theprovisionofrescueandretrievalservices,theprovisionofinformationservicesrelatingtodisastermanagement,theprovisionofspecializedequipmentandservicesneededtorestorevitalpublicservicesinafastandefficientmanner,theprovisionoftrainingservicesforfirstrespondersandanyotheractivitythatwillcontributetothegoalsofmitigatingriskstopublicsafetycausedbydisasters,calamitiesandemergencies.[Editor’s Note: New provision.]

►• Salvagingpertainstotherescueofaseriouslydamaged/incapacitatedshipthatmayincluderefloatingandtowingoftheshiptoasafeplace.Italsopertainstotheremovalofasunkenorwreckedship,derelictorhazardsincludingcargoesthereof.

►• Onlyincomefromsalvagingoperations(excludingincomefromartifacts/treasurerecoveredfromsunkenvessels/ships)maybeentitledtoITH.

►• Projectstorehabilitateareasaffectedbycalamitiesanddisasters,whichmayincluderebuildingofroadsandbridgesafterearthquakes/flooding,volcaniceruptionsandoilsoilclean-up.

►• Forprojectsthatwillinvolvethedevelopmentandoperationofphysicalinfrastructuretobeundertakenbyseparateentities,boththedeveloperandoperatormayqualifyforregistration.However,thedevelopermaybeentitledonlytoincentiveoncapitalequipmentdirectlyneededfortheoperationofthephysicalinfrastructure.

►• Thiscoverstrainingfordisasterpreparedness,mitigationorrecovery/rehabilitation/reconstruction.

32 Tax Bulletin

►• ProjectsthatcostatleastthePhilippinePesoequivalentofUSD100,000maybegrantedpioneerstatus.

►• Disasterprevention,mitigationandrecoveryprojectscoveronlyprojectsotherthanthoselistedintheIPP.

►• Mandatory List

A. Industrial Tree Plantation

►• Extensiveplantationofforestlandoftreecrops(exceptfruittrees)forcommercialandindustrialpurposes.

►• Treecropsincludetimberandnon-timberspeciessuchasrubber,bamboo,rattan,etc.(excludingfruittrees)forcommercialandindustrialpurposes.

►• Eachindustrialtreeplantationprojectmusthaveanapprovedandissuedforestmanagement/developmentagreementsuchas:

1. SocializedIndustrialForestManagementAgreement(SIFMA)2. IndustrialForestManagementAgreement(IFMA)3. PrivateForestDevelopmentAgreement(PFDA)4. Community-basedForestManagementAgreement(CBFMA)

B. Exploration, Mining, Quarrying, and Processing of Materials

►• Explorationanddevelopmentofmineralresources,mining,quarryingandprocessingofmetallicandnon-metallicminerals.

►• Explorationofmineralresourcesincludingthosecoveredbyvalidandexistingexplorationpermitsormineralagreementsmayqualifyforpioneerstatus.

►• MiningandmineralprocessingprojectsarenotentitledtoITH.[Editor’s Note: New provision.]

[Editor’s Note: The following provisions found in the 2011 IPP IRR have been deleted:

►• All projects must have a mine life of at least 10 years.►• Riverbed operations and cave mining shall not qualify for

registration.►• All projects must locate outside the NCR and must have

the necessary permits/licenses from the concerned agency.]

C. Publication or Printing of Books/Textbooks

►• Printing,re-printingandpublicationandcontentdevelopmentofbooksortextbooks.

►• ApplicationforregistrationshallbeonaperbookortitlebasisandmustbeendorsedbytheNBDB.

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D. Refining, Storage, Marketing and Distribution of Petroleum Products

►• ForgasolineretailingstationsexceptthoselocatedinLDAs,theapplicantisrequiredtoinvestaminimumcapitalofPHP10millionperstation,excludingland,orsuchamountasmaybejointlydeterminedbytheBOIandDOEforaugmentationpurposes.

►• ForeignretailersmustcomplywiththeRetailTradeLiberalizationLaw(RANo.8762)anditsIRR.

►• Forstorage,marketinganddistribution,onlyinvestmentsofnewindustryparticipantsmaybeentitledtoincentives.TheapplicantshallsubmitaDOEendorsementcertifyingthattheapplicantisanewindustryparticipantwithnewinvestments.

►• Forstorage,marketinganddistribution,petroleumproductsexcludingLPG,shallbesourcedfromthenewindustryparticipantsexceptincasesofemergencysupplysituation.

►• Forprojectsthatinvolvemorethanoneactivity(storage,marketinganddistribution),eachmustbeunbundledshowingtherevenuestreamsandcostsforeachactivity.[Editor’s Note: New provision.]

►• Blendingofpetroleumproductsalonemayonlybeentitledtocapitalequipmentandothernon-fiscalincentives.

►• ApplicantenterprisesshallelecttobegovernedbyeithertheOmnibusInvestmentsCodeof1987ortheDownstreamOilIndustryDeregulationActof1998atthetimeoftheirapplicationforregistration.Anydecisiononcemadeshallbefinal.

E. Ecological Solid Waste Management

►• Establishmentofwasterecyclingfacilitieswhetherornotintegratedwithmanufacturingfacility,usingasinputs100%locallygeneratedsolidwastematerialsorscrapsfromtherecyclingfacilitytoproducesemi-finishedorfinishedproduct.

►• Waterrecyclingprojectswithoutamanufacturing/processingfacilityarenotentitledtoITH.

►• Establishmentofanintegratedsolidwastemanagementfacilitythatincludesthefollowing:

1. Materialsrecoveryfacilitywithaprocessingcenterthatshallbeusedtomanufacturegoodsfromrecyclablewastes(biodegradable,non-biodegradable,recyclableandresidual)astherawmaterials;

2. Categorizedsanitylandfillthatshallaccommodateonlyresidualwastesthatwerenotrecycledduetotheabsenceofappropriatetechnologyforrecycling.[Editor’s Note: New provision]

Registeredprojectsmayavailofcapitalequipmentincentive. [Editor’s Note: New provision]

34 Tax Bulletin

►• AllapplicationsforregistrationmustbeendorsedbytheEMBoftheDENR.

F. Clean Water Projects

►• Establishmentofwastewatertreatmentfacilitiesandsewagecollectionintegratedwithtreatmentfacilitiesandtheadoptionofwaterpollutioncontroltechnology,cleanerproductionandwasteminimizationundertakenthroughBOTornon-BOTschemes.

►• Activitiessuchas5SandGoodHousekeepingarenotqualifiedforregistration.

►• WastewatertreatmentfacilitiesandsewagecollectionintegratedwithtreatmentfacilitiesmaybeentitledtoITH.

►• Projectsadoptingwaterpollutioncontroltechnology,cleanerproductionandwasteminimizationareonlyentitledtocapitalequipmentincentive.

►• AllapplicationsforregistrationmustbeendorsedbytheDENR,theLagunaLakeDevelopmentAuthority(LLDA)orotherconcernedgovernmentagency.

►• ProjectsthatwillemployneworproprietarytechnologiesshallsubmitanEnvironmentalTechnologyVerificationissuedbytheDOST

G. Rehabilitation, Self-Development, and Self-Reliance of Persons with Disability

►• Manufactureoftechnicalaidsandappliancesfortheuseand/orrehabilitationofpersonswithdisabilityandtheestablishmentofspecialschools,daycarecenters,homes,residentialcommunitiesorretirementvillagessolelytosuittheneedsandrequirementsofpersonswithdisability.

►• Manufactureoftechnicalaidsandappliancesusedbypersonswithdisability,includingbutnotlimitedtothefollowing:

1. Walk-inbathsdesignedforpersonswithdisabilities;2. Commodechairs;3. Braillebooks;4. Hoistsandliftingchairsdesignedforincapacitatedpeople,

includingstairlifts;5. Wheelchairs,scootersandautomobilesusingspecialcontrolsor

assistivetechnologydesignedforpersonswithdisabilities6. Hearingaids;7. Artificiallimbs,orthotics,prostheticsandorthopedicbraces;8. Automatic/mechanicalliftstobeattachedtomotorvehicle.

►• AllapplicationsforregistrationmustbeendorsedbytheDSWD.

H. Renewable Energy

►• Developersofrenewableenergyfacilitiesincludinghybridsystems.

►• Manufacturers,fabricatorsandsuppliersoflocally-producedrenewableenergy,equipmentandcomponents.

35

►• Salesofpowergenerationprojectswithfeed-intariffsshallnotbeentitledtoITHunlesstheITHwasincludedinthefinancialmodelbyERCinapprovingtheproject’spowerrate.[Editor’s Note: New provision.]

►• ApplicationsforregistrationmustsubmitDOECertificateofRegistration/Accreditation/Endorsement,whicheverisapplicable.

► ApplicantenterprisesshallelecttobegovernedbyeithertheOmnibusInvestmentsCodeof1987ortheRenewableEnergyActof2008atthetimeoftheirapplicationforregistration.UndertheOmnibusInvestmentsCodeof1987,projectsmayqualifyforpioneerstatus.

[Editor’s Note: Processing of feedstocks/biomass for use as biofuel has been deleted.]

I. Tourism

[Editor’s Note: Tourism used to be a preferred activity in the 2011 IPP; it is now a mandatory activity in the 2012 IPP.]

►• Tourismenterprisesthatareoutsidethetourismenterprisezones(TEZ)andareengagedinthefollowing:

1. Touristtransportservices(land.sea,air)fortouristuse.

2. Establishmentandoperationof:

►• Accommodationestablishmentssuchasbutnotlimitedtohotels,resorts,apartmenthotels,touristinns,motels,pensionhouses,privatehomesforhomestay,ecolodges,condotels,servicedapartments,andbedandbreakfastfacilities;

►• Conventionandexhibitionfacilitiesormeetings,incentives,conventionsandexhibition(MICE)facilities;

►• Amusementparks;►• Adventureandecotourismfacilities;►• Sportsfacilitiesandrecreationalcenters;►• Themeparks;►• Healthandwellnessfacilitiessuchasbutnotlimitedtospas,

tertiaryhospitals,andambulatoryclinics;►• Agri-tourismfarmsandfacilities;►• Tourismtrainingcentersandinstitutes.

3. Developmentofretirementvillages.

4. Restoration/preservationandoperationofhistoricalshrines,landmarksandstructures[Editor’s Note: New provision].

►• AllapplicationsforregistrationmustbeendorsedbytheDOT.

►• DOTaccreditationmustbesubmittedpriortoITHavailment.Onlyincomederivedfromtourism-relatedactivitiesshallbeentitledtoITH.

►• Tourist Transport

1. Transportserviceswhetherforland,waterandairtransportfortouristuse.

36 Tax Bulletin

2. Landtransport–operationofbrandnew,worldclassbusesand/orminibuses/coasters.Thequantityornumberofunitsorvehiclesthatmaybeallowedshallbedeterminedbasedonthenumberoftouristarrivalsintheareaortheratioofhotel/resortfacilities/rooms.

3. Touristtransportoperatorsmusthavegarage,hangar,orberthing/dockingfacilities.

4. ApplicationsforregistrationofwaterandairtransportoperatorsmustbeendorsedbyMARINAorCAAP,respectively.

5. RegisteredtouristlandtransportoperatorsmustsubmitacopyoftheirCPC.

►• Accommodation Facilities

1. Condotel/apartmenthotel/servicedapartment/touristinn/pensionhouse/motelmustcatertotourists/gueststoqualifyforregistration.Eachunitmusthaveafullyequippedkitchenandlaundryfacilities.[Editor’s Note: Tourist inn/pension house/motel is a new addition to the definition of accommodation facilities.]

2. IncomearisingfromgamingandmalloperationsarenotqualifiedforITH.[Editor’s Note: New provision.]

3. Formodernizationprojects,replacementofcarpets,pillows,mattresses,andothersimilaritemsshallbeexcludedfromthecomputationoftheITHrateofexemption.


a. Hotelprojects/apartmenthotels/servicedapartments/condotelsclassifiedasfirstclassordeluxebytheDOTandcostingatleastthePhilippinePesoequivalentofUSD100,000/room.

b. Resortprojectsclassifiedas“AAA”bytheDOTandwithprojectcostofatleastthePhilippinePesoequivalentofUSD10million.

c. ProjectslocatedinLDAs.

d. ModernizationofhotelsclassifiedasfirstclassordeluxebytheDOTwithaprojectcostofatleastthePhilippinePesoequivalentofUSD10,000/room.

e. Amusementparks/themeparkswithminimumprojectcostofthePhilippinePesoequivalentofUSD10millioninvolvingthedevelopmentofsitesorattractionsconsideredasnovelinthePhilippines.

f. Adventureandecotourismfacilities/agri-tourismfarmsandfacilitieswithaprojectcostofatleastthePhilippinePesoequivalentofUSD5million.[Editor’s Note: In the 2011 IPP IRR, the condition was a minimum lot area of 20 hectares.]

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►• Health Spa

1. Establishmentandoperationofdestinationspa,resort/hotelspa,therapeuticcenters,traditionalhealing(e.g.Philippinehilot,dagdagay,ventosa)andotheralternativehealingandmedicalcareservices.


►• Tertiary Hospital

1. Tertiaryhospitalswithaminimumof50rooms(suitesandprivateroomsonly)andwithaminimumprojectcostofatleastthePhilippinePesoequivalentofUSD10million.

►• Ambulatory Clinics

1. Servicessuchaselective(non-emergency)surgicaltreatmentswhetherrequiringlocal,regionalorgeneralanesthesiaofout-patientswhoserecovery,undernormalandroutinecircumstances,willnotrequirein-patientcare.

2. Includescomprehensiveophthalmologicsurgery,dermatology,cosmeticprocedure,plasticandreconstructivesurgery,cosmeticdentistryandmedicalcare(diagnosis,observation,treatmentandrehabilitation).

3. Priortostartofcommercialoperation,theregisteredenterprisemustsubmitacopyofitsLicensetoOperatefromtheDOH.

►• Tourism Training Centers and Institutes


►• CurriculumendorsedbytheappropriateindustryassociationandapprovedbyeithertheTESDA(trainingcourses)andCHED(degreecourses)orotherconcernedgovernmentagencies/authority.

►• Registerededucation/training/learninginstitutionmustprovidetraininglaboratories/onthejobfacilitiesandequipment.

►• Retirement Village


►• Minimumoffourhectaresofcontiguousland;►• ProjectcostmustbeatleastthePhilippinePesoequivalent

ofUSD10million.

2. Retirementvillageswithaminimumareaof20hectaresmayqualifyforpioneerstatus.

38 Tax Bulletin

3. LocatorsengagedintheactivitieslistedintheIPPthatarerelatedtoretirementbusinessmayberegisteredasaseparateactivity.

4. ApplicationsmustbeendorsedbythePhilippineRetirementAuthority.ItsendorsementmustbesubmittedpriortoITHavailment.

►• Restoration/Preservation and Operation of Historical Shrines, Landmarks and Structures(Editor’s Note: New provision)

►• Conservation,preservationorrestorationofnationalsitesorproperties.


►• Nationalshrines,monumentsand/orlandmarks;►• Localhistoricalsites/propertiesclassified,identifiedandlisted

intheNationalRegistryofHistoricStructures;►• Culturalproperties,treasuresand/orartifacts.

►• Qualificationforpioneerstatus:

►• ResidentialprojectswithaprojectcostofatleastPHP10million;

►• OtherstructureswithaprojectcostofatleastPHP20million.

►• Export Activities

►• Manufactureofexportproducts,servicesexportsandactivitiesinsupportofexporters;

►• ServiceproviderstoforeignfilmandtelevisionproductionprojectsinthecountryasendorsedbythePhilippineFilmExportServicesOffice.

A. Production and Manufacture of Export Products

►• Production/manufactureofnon-traditionalexportproductsandwithexportrequirementofatleast50%ofitsoutput,ifFilipino-owned,oratleast70%,ifforeign-owned.

►• Exportproducts–electronics,garments,textiles(includingbrassieres,gloves,mittensandinfantwear)footwearandleathergoods,furniture,jewelry,marineandaquaculture,mineralproductsandothers.

►• Intheexportofmineralproducts,thePhilippineMiningActshallapplysuppletorily.

B. Services Exports

►• Serviceactivitiesrenderedtoclientsabroadandpaidforinforeigncurrencywithexportrequirementofatleast50%ofitsoutput,ifFilipino-owned,oratleast70%,ifforeign-owned.

►• Meredeploymentofpeopleorindividualpracticeofprofessionabroadisnotqualifiedforregistration.

39

►• Forcontactcenters,projectmusthaveaminimuminvestmentcostofthePhilippinePesoequivalentofUSD2,500/seattoqualifyforregistration.Thisamountcoversthecostofequipment(hardwareandsoftware),officefurnitureandfixture,buildingimprovementandrenovationandotherfixedassetsexceptland,billingandworkingcapital.Ifequipmentusedwereleased,thesameshouldbeconvertedtoassetsintermsofcommercialinterestratesandamortizedovera5-yearperiod.Ifequipmentwereconsigned,thesameshouldhaveanassignedvaluetobeconsideredaspartoftheprojectcost.

►• Inthecaseofcontactcenters,revenuesshallbeunbundledtoshowthebreakdownofservicingdomesticandoverseasmarkets.[Editor’s Note: New provision.]

C. Activities in Support of Exporters

►• Activitiesdirectlysupportingexportproducers:

1. Manufactureofparts/componentsandmaterialsandsuppliesdirectly/reasonablyneededintheproductionoftheexportproduct;

2. Servicescomprisingaportionofthemanufacturingprocess;3. Producttestingandinspection;4. Repairandmaintenance.

►• Logisticsservices.

BSP Issuances

BSP Circular No. 767 dated September 21, 2012

►• SubsectionsX410.1and4410Q.1areamendedtoreadasfollows:

“SubsectionX410.1/4410Q1.Definitions

a. Unit Investment Trust Funds.XXX

b. Trust Entity.A(A)BANKORANON-BANKFINANCIALINSTITUTION,THROUGHITSSPECIFICALLYDESIGNATEDBUSINESSUNITTOPERFORMTRUSTFUNCTIONS,OR(B)TRUSTCORPORATION,AUTHORIZEDBYTHEBANGKOSENTRALNGPILIPINAS(BSP)TOENGAGEINTRUSTANDOTHERFIDUCIARYBUSINESSUNDERSECTION79OFR.A.NO.8791(THEGENERALBANKINGLAWOF2000)ORTOPERFORMINVESTMENTMANAGEMENTSERVICESUNDERSEC.53OFR.A.NO.8791.

c. Board of Directors.XXX

d. COLLECTIVE INVESTMENT SCHEME.ANINVESTMENTVEHICLEWHEREFUNDSARESOLICITEDFROMINVESTORSFORCOLLECTIVEINVESTMENTANDWHICHAREMANAGEDFORTHEACCOUNTOFSUCHINVESTORS.

e. FEEDER FUND.AUITFUNDSTRUCTURETHATMANDATESTHEFUNDTOINVESTATLEASTNINETYPERCENT(90%)OFITSASSETSINASINGLECOLLECTIVEINVESTMENTSCHEME.

CircularNo.767amendstheUnitInvestmentTrustFunds(UITFs)Regulations.

40 Tax Bulletin

f. FUND-OF-FUNDS.AUITFUNDSTRUCTURETHATMANDATESTHEFUNDTOINVESTATLEASTNINETYPERCENT(90%)OFITSASSETSINMORETHANONE(1)COLLECTIVEINVESTMENTSCHEME.

g. TARGET FUND.ALOCALORFOREIGNCOLLECTIVEINVESTMENTSCHEMEINWHICHTHEUITFUNDINVESTSALLORAPORTIONOFITSASSETS.

h. INVESTOR FUND.AUITFUNDCREATEDTOTAKETHEFORMOFAFEEDERFUNDORAFUND-OF-FUNDSANDISAPPROVEDBYTHEBSPUNDEREXISTINGBSPREGULATIONS.

i. RELATED PARTY/COMPANY.FORTHEPURPOSEOFTHISSECTION,THETERMREFERSTOANOTHERENTITYWHICHISTHETRUSTENTITY’S(A)PARENTORHOLDINGCOMPANYOR(B)SUBSIDIARYORAFFILIATE,ANDWHOLLYORMAJORITY-OWNEDOR-CONTROLLEDENTITIESOFSUCHSUBSIDIARIES.”

►• SubsectionsX410.2and4410Q.2areamendedtoprovidethataUITfundmaybeallowedtooperateasafeederfund,orafund-of-funds,providedthattheplanrulesandrelateddocumentsshallstatethattheUITfundisafeederfundorafund-of-funds,andprovideanexplanationorillustrationofsuchstructures.

►• AnewparagraphisaddedinSubsectionsX410.7and4410Q.7andtheseprovisionsnowreadasfollows:

“SubsectionX410.7/4410Q.7Minimumdisclosurerequirements.

a. DisclosureofUITFundinvestments.xxxThelistofinvestmentoutletsshallbeupdatedquarterly.

FORINVESTMENTSOFFEEDERFUNDS/FUND-OF-FUNDS,THETRUSTEESHALLLIKEWISEMAKEAVAILABLETOALLUITFUNDCLIENTSALLRELEVANTINFORMATIONONTHETARGETFUND/S.”


“SubsectionX410.8/4410Q.8ExposureIimits.xxx

Thislimitationshallnotapplytonon-riskassetsasdefinedbytheBSP.

INTHECASEOFFEEDERFUND/FUND-OF-FUNDS,THEEXPOSURELIMITSHALLBEAPPLIEDONTHETARGETFUND’SUNDERLYINGINVESTMENTS.FURTHERMORE,THEINVESTMENTSINANYONETARGETFUNDSHALLNOTEXCEEDTENPERCENT(10%)OFTHETOTALNETASSETVALUEOFTHETARGETFUND.

IncasetheIimitsPRESCRIBEDABOVEAREbreachedduetothemarking-to-marketofcertaininvestment/soranyextraordinarycircumstances,e.g.,abnormalredemptionswhicharebeyondthecontrolofthetrustee,thetrusteeshallbegiventhirty(30)daysfromthetimethelimitisbreached,ORINTHECASEOFINVESTORFUNDS,30DAYSFROMDATEOFRECEIPTOFREPORTINDICATINGTHENETASSETVALUEOFTHEFUND,tocorrectthesame.”

41


“SubsectionX410.9/4410Q.9Allowable investments and valuation.UITFundinvestmentsshallbelimitedtobankdepositsandthefollowingfinancialinstruments:

(a) SecuritiesissuedbyorguaranteedbythePhilippinegovernment,ortheBSP;

XXX

(G) UNITS/SHARESINCOLLECTIVEINVESTMENTSCHEMES,I.E.,TARGETFUNDS,SUBJECTTOTHEFOLLOWING:

1. THEINVESTMENTOBJECTIVESOFTHETARGETFUNDAREALIGNEDWITHTHATOFTHEINVESTORFUND,

2. THEUNDERLYINGINVESTMENTSOFTARGETFUNDSARELIMITEDTOTHEALLOWABLEINVESTMENTOUTLETSSETFORTHINTHISSUBSECTION,

3. THETARGETFUNDHASNOINVESTMENTINOTHERCOLLECTIVEINVESTMENTSCHEMES,AND

4. THETARGETFUNDISSUPERVISEDBYAREGULATORYAUTHORITY,ASFOLLOWS:

a. ALOCALTARGETFUNDSHALLEITHERBEAPPROVEDBYTHEBANGKOSENTRALNGPILIPINASORREGISTEREDWITHTHESECURITIESANDEXCHANGECOMMISSION.

b. ATARGETFUNDCONSTITUTEDINANOTHERJURISDICTIONSHALLBEREGISTERED/AUTHORIZED/APPROVED,ASTHECASEMAYBE,INITSHOMEJURISDICTIONBYAREGULATORYAUTHORITYTHATISAMEMBEROFTHEINTERNATIONALORGANIZATIONOFSECURITIESCOMMISSIONS(TOSCO).

(H) Suchothertradableinvestmentsoutlets/categoriesastheBSPmayallow.

Provided,thattheinvestmentofthepesoUITFundintradableforeigncurrency-denominatedfinancialinstrumentsshallbesubjecttoItems“e”and“f”ofSubsec.X409.6.

XXX”


“SubsectionX410.11/44108.11Unit Investment Trust fund administration support.

a. Backroom operations. x x x

b. Custody of securities. x x x

INVESTMENTSINTARGETFUNDSOFAUITFUNDSTRUCTUREDASANINVESTORFUNDSHALLBEHELDFORSAFEKEEPINGBYANINSTITUTIONREGISTERED/AUTHORIZED/APPROVEDBYARELEVANTREGULATORYAUTHORITYINITSHOMEJURISDICTIONTOACTASTHIRDPARTYCUSTODIAN.”

42 Tax Bulletin


“SubsectionX410.12/4410Q.12Counterparties.

a. Dealings with related interests / bank proper / holding company / subsidiaries / affiliates and related companies. x x x

CONSISTENTWITHTHEPROVISIONSOFSUBSECTIONX410.4,ATRUSTEEMAYINVESTTHEFUNDSOFAUITFUNDSTRUCTUREDASANINVESTORFUNDINATARGETFUNDTHATISADMINISTEREDBYTHETRUSTEEORITSRELATEDPARTY/COMPANY,PROVIDED,THAT:

(i) THERESHALLBENOCROSS-HOLDINGBETWEENTHEINVESTORFUNDANDTHETARGETFUND,WHERECROSS-HOLDINGREFERSTOTHEHOLDINGOFSHARES/UNITSOFPARTICIPATIONINONEANOTHERBYTWO(2)ORMOREFUNDS;

(ii) ALLINITIALCHARGESONTHETARGETFUNDAREWAIVED;AND

(iii) THETRUST/MANAGEMENTFEESHALLBECHARGEDONLYONCE,EITHERATTHELEVELOFTHEINVESTORFUNDORATLEVELOFTHETARGETFUND.”

b. Accreditation of counterparties. x x x”

►• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculationinthePhilippines.

[Editor’s Note: Circular No. 767 was published in Malaya on September 28, 2012.]

BSP Circular No. 768 dated September 21, 2012

►• Items1and2ofAppendix63doftheMORBandAppendix46coftheMORNBFI,shouldreadasfollows:

“1. ForHybridTier1:

XXX

q) ItmusthaveaprovisionthatrequirestheinstrumenttobeeitherwrittenofforconvertedintocommonequityupontheoccurrenceofatriggereventasdeterminedbytheBSP.

Theissuanceofanynewsharesasaresultofthetriggereventmustoccurpriortoanypublicsectorinjectionofcapitalsothatthecapitalprovidedbythepublicsectorisnotdiluted.

XXX

2. ForLowerTier2Capital:

XXX

CircularNo.768amendstheRisk-BasedCapitalAdequacyFrameworkforBanks/Quasi-BanksontheDefinitionofQualifyingCapitalInstruments.

43

k. Thebankorquasi-bankmustsubmitawrittenexternallegalopinionthattheabovementionedrequirements,includingthesubordinationandlossabsorptionfeatures,havebeenmet.

l. ItmusthaveaprovisionthatrequirestheinstrumenttobeeitherwrittenofforconvertedintocommonequityupontheoccurrenceofatriggereventasdeterminedbytheBSP.

Theissuanceofanynewsharesasaresultofthetriggereventmustoccurpriortoanypublicsectorinjectionofcapitalsothatthecapitalprovidedbythepublicsectorisnotdiluted.

XXX

►• EligiblecapitalinstrumentsissuedasHybridTier1orLowerTier2capitalundertheconditionsforeligibilityascapitalinstrumentsprovidedinCircularNo.709,asamendedbyCircularNo.716,shallcontinuetoberecognizedasqualifyingcapitaluntilsuchtimethattheBSPissuesfurtherguidelines.

►• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.

[Editor’s Note: Circular No. 768 was published in BusinessWorld on September 28, 2012.]

SEC Issuances

SEC Memorandum Circular No. 7 dated September 7, 2012

1. Allcorporations,includingbranchoffices,representativeoffices,regionalheadquartersandregionaloperatingheadquartersofforeigncorporations,thatfiletheirFSattheCommission’sHeadOffice,Davao,Cebu,Iloilo,andBaguioExtensionOfficesshall,dependingonthelastnumericaldigitoftheirSECregistrationorlicensenumber,begovernedbythefollowingscheduleinthefilingperiodfor2013:

April15,16,17,18,19 : “1”,“2”

April22,23,24,25,26 : “3”,“4”

April29,30,May2,3 : “5”,“6”

May6,7,8,9,10 : “7”,“8”

May14,15,16,17 : “9”,“0”

2. Theabovefilingscheduleshallnotapplytothefollowingcorporations:

►• ThosewhosefiscalyearendsonadateotherthanDecember31,2012shallfiletheirFSwithin120calendardaysfromtheendofthefiscalyear;

►• ThosewhosesecuritiesarelistedinthePhilippineStockExchangeshallcontinuetoobservetheduedateoffilingtheirFSasanattachmenttotheirAnnualReports(SECForm17-A),inaccordancewiththeImplementingRulesandRegulationsoftheSecuritiesandRegulationCode(SRC);

SECMCNo.7adoptsmeasuresonthefilingofFSofcompanieswhosefiscalyearendsonDecember31,2012.

44 Tax Bulletin

►• ThosewhoseFSarebeingauditedbytheCommissiononAudit(COA),providedthatthefollowingdocumentsareattachedtotheirFS:

a. AnAffidavitsignedbythePresidentandTreasurer(orChiefFinancialOfficer,whereapplicable)attestingtothefactthatthecompanytimelyprovidedCOAwiththeFSandsupportingdocumentsandthattheauditofCOAhasjustbeenconcluded;

b. AletterfromCOAconfirmingtheinformationprovidedintheaboveAffidavit.

3. PriortoApril15,2013,allcorporationsmayfiletheirFSregardlessofthelastnumericaldigitoftheirregistrationorlicensenumber.

4. LatefilingsshallbeacceptedstartingMay20,2013andshallbesubjecttotheprescribedpenaltieswhichshallbecomputedfromthedateofthelastdayoffilingschedulestatedinparagraph1above.

5. Anyfilingmadebeforeorafterthescheduleddatesshallnotbeacceptedunlesscoveredbyparagraphs2,3and4.

6. TheFS,otherthantheconsolidatedfinancialstatements,shallhavethestamp“Received”bytheBIRoritsauthorizedbanks,unlesstheBIRallowsanalternativeproofofsubmissionforitsauthorizedbanks(e.g.bankslips);

7. Thebasiccomponents,asprescribedunderSRCRule68,asamended,shallbepresentedforpre-screening.FailuretocomplywithanyoftheformalrequirementsundersaidRule,includingtheprescribedqualificationsforindependentauditors,shallbeconsideredasufficientgroundforthedenialofthereceiptoftheFS.TheacceptanceandreceiptbytheSECoftheFSshallbewithoutprejudicetothefinesthatmaybeimposedforanymaterialdeficiencyormisstatementthatmaybefounduponevaluationofthespecificcontentsthereof.

SEC-OGC Opinion No. 12-14 dated August 28, 2012

Facts:CCo.isacorporationdulyorganizedandexistingunderthelawsoftheUnitedStatesofAmerica(USA).Itssubsidiary,ECo.,isalsoacorporationdulyorganizedandexistingunderthelawsoftheUSA.ECo.wasgrantedalicensetoestablishaPhilippinebranch,ECo.–PhilippineBranch.ThemanagementofCCo.andECo.areplanningtomergethetwocorporationswithCCo.asthesurvivingcorporation.Ifthemergerproceeds,CCo.planstocontinuetooperateECo.–PhilippineBranch.

Issue:

CanCCo.continuethebusinessofECo.inthePhilippinesthroughECo.–PhilippineBranch?

Ruling:

No.InasmuchasCCo.isthesurvivingcorporation,ECo.,whichistheabsorbedcorporation,isineffectdissolvedbecauseofthemerger.Pursuanttoparagraph2,Section132oftheCorporationCode,ECo.shallfilewiththeSECwithin60daysafterthemergerbecomeseffective,acopyofthearticlesofmergerduly

Inamergeroftwoforeigncorporations,thesurvivingcorporationcannotcontinueoperatingthebranchofficeoftheabsorbedcorporation.ItmustfileitsownlicensetodobusinessinthePhilippines.

45

authenticatedbytheproperofficialorofficialsofthecountryorstateunderthelawsofwhichthemergerwaseffected.Inasmuchastheabsorbedcorporation,ECo.,istheforeigncorporationdoingbusinessinthePhilippines,itshallatthesametimefileapetitionforwithdrawalofitslicense.

IfCCo.willcontinuethebusinessofECo.inthePhilippines,itmustfileitsownapplicationforalicensetodobusinessinthePhilippines.Inapplyingforalicense,CCo.mustcomplywillalltherequirementsprescribedbytheCRMD.Inaddition,aCertificationmustbesubmittedtotheCRMDstatingthatthelawsonmergeroftheforeigncountryprovidesforsubstantiallythesameeffectsasthosementionedinSection80paragraph4oftheCorporationCode,reproducingtheexactprovisionsoftheapplicableforeignlaw.

SEC-OGC Opinion No. 12-15 dated August 29, 2012

Facts:AcondominiumunitisregisteredunderthenameofPCo.;hence,PCo.isamemberofthecondominiumcorporation.PCo.mergedwithECo.,andafterwardsECo.asthesurvivingcorporationmergedwithBCo.,whichinturnbecamethesurvivingcorporation.

Issue:

IsBCo.automaticallyamemberofthecondominiumcorporation?

Ruling:

TheSECcannotgiveacategoricalopiniononthematter.Asamatterofpolicy,itrefrainsfromrenderinganopinionwheretheresolutionofthequestionwouldinvolvethesubstantiveandcontractualrightsofprivatepartieswhowouldinallprobabilitycontestthesameincourtiftheopinionturnsouttobeadversetotheirinterests.

Forguidanceandinformationpurposesonly,Section80oftheCorporationCodeprovidesthatoneoftheeffectsofmergeristhatallpropertiesoftheabsorbedcorporationaredeemedtransferredtothesurvivingcorporation.Corollarytothis,Section63ofthesamecodeprovidesthatnotransfershallbevalidexceptasbetweenthepartiesuntilthetransferisrecordedinthebooksofthecorporationshowingthenamesofthepartiestothetransaction,thedateofthetransfer,thenumberofthecertificatesandthenumberofsharestransferred.TheSupremeCourthaspreviouslyheldthatatransferofsharesofstocknotrecordedinthestockandtransferbookofthecorporationormembershipinthemembershipbooksofacondominiumcorporationisnon-existentasfarasthecorporationisconcerned.

Whilethetransferoftheunit(andhencethetransferofmembershipinthecondominiumcorporation)isvalidbetweenECo.andBCo.,thesamemaynotbebindingonthecondominiumcorporation,wherethetransferissubjecttoregistrationinthemembershipbooksofthecondominiumcorporation.

Furthermore,pursuanttoSection18oftheCondominiumAct,noconveyanceofcondominiumsshallberegisteredunlessaccompaniedbyacertificateofthemanagementbodyoftheprojectthatsuchconveyanceisinaccordancewiththeprovisionsofthedeclarationofrestrictionsofsuchproject.Incaseofamerger,theinstrumentthatcouldproveconveyanceofacondominiumunitistheCertificateofMerger.

Thesurvivingcorporationinamergermaynotbeautomaticallyconsideredamemberofacondominiumcorporation.

46 Tax Bulletin

Court Decision

Stablewood Philippines, Inc. vs. Commissioner of Internal RevenueCTA(EnBanc)EBNo.751promulgatedSeptember17,2012

Facts:

PetitionerStablewoodPhilippines,Inc.(SPI)filedwithRespondentCommissionerofInternalRevenue(CIR)aclaimfortaxcreditorrefundofexcesscreditablewithholdingtax(CWT)fortaxableyear2005.Inits2005annualITR,SPIchosetheoption“TobeissuedaTaxCreditCertificate”foritsexcessCWTforthetaxableyear.InitsquarterlyITRsfor2006,SPIcarriedovertheexcessCWTsfrom2005butdidnotreflectthecarryoverofsaidexcessCWTsinits2006annualITR.

AstheCIRfailedtoactontheclaim,SPIfiledaPetitionforReviewwiththeCourtofTaxAppeals(CTA).TheCTADivisiondeniedtheclaimsince,despiteinitiallyoptingforarefund,SPIcarriedovertheCWTssubjectoftheclaiminthesucceedingtaxablequartersof2006.

SPIappealedtotheCTAEn Bancandarguedthatits2006and2007annualITRsclearlyreflectthatthe2005excessCWTwasnotcarriedoverinsaidtaxableyears.SPIassertsthatits2005ITRindicatingitsrefundoptionshouldbecontrolling.

Issue:

IsSPIentitledtoataxcreditorrefundofexcessCWTfortaxableyear2005?

Ruling:

No.WhileSPIoptedforarefundortaxcreditasdeclaredinits2005annualITR,thesaiddecisionwasdefeatedbytheactofcarryingoverits2005excesstaxcreditstothesucceedingtaxablequartersfor2006.

UndertheirrevocabilityruleinSection76oftheTaxCode,theoptiontocarryoverexcessCWTshallbeirrevocableforthetaxableperiodandarefundshallnotbeallowed.Theirrevocabilityrule,however,appliesonlytotheoptiontocarryoverandnottotherefundoption.TheSupremeCourtrulingsinBelle Corporation vs. CIR (G.R. No 181298, January 10, 2011), CIR vs. Mirant (Philippines) Operation Corporation (G.R. Nos. 171742 & 176165, June 15, 2011) and CIR vs. PL Management International Philippines, Inc. (G.R. No. 60949, April 4, 2011)establishthatonlytheoptiontocarryoverisirrevocable.

[Editor’s Note: Presiding Justice Ernesto Acosta and Associate Justice Esperanza Fabon-Victorino dissented with the majority, and cited the Supreme Court ruling in Philam Asset Management, Inc. vs. CIR (G.R. Nos. 156637/162004, December 14, 2005) which held that the two options under Section 76 are alternative in nature and that the choice of one in the annual ITR precludes the other.]

TheirrevocabilityruleunderSection76oftheTaxCodeappliesonlytotheoptiontocarryoverexcessCWTandnottotherefundoption.

48 Tax Bulletin

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Tax Bulletin - September 2012