Special InTAX: December 2021 Issue 1 | Volume 6
InTAX is an official publication of R.G. Manabat & Co.'s Tax Group
InTAX is an official publication of R.G. Manabat & Co.'s Tax Group
Bureau of Internal Revenue
The Bureau of Internal Revenue (BIR) issued the following:
Revenue Memorandum Circular (RMC) No. 120-2021, 13 December 2021, to circularize the following amendments and addition to the implementing rules and regulations (IRR) of Title XIII of Republic Act (RA) No. 8424 otherwise known as the “National Internal Revenue Code of 1997”, as amended by Republic Act No. 11534 or the “Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act”:
A. Amendments
Coverage |
Amendments |
Rule 2 |
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SECTION 4. Customs Duty Exemption on Importation of Capital Equipment, Raw Materials, Spare Parts, or Accessories. |
Registered Export and Domestic Market Enterprises shall enjoy exemption from custom duties on their importation of capital equipment, raw materials, spare parts, and accessories for their registered project or activity for a maximum period of 17 years and 12 years from the date of registration, respectively, unless otherwise extended under the SIPP; provided, that the following conditions are complied with: xxx xxx xxx |
SECTION 5. Value-added Tax (VAT) zero-rating and exemption. |
The VAT exemption on importation and VAT zero-rating on local purchases shall only apply to goods and services directly and exclusively used in the registered project or activity of a registered export enterprises, for a maximum period of 17 years from the date of registration, unless otherwise extended under the SIPP. The direct and exclusive use for the registered project or activity refers to raw materials, inventories, supplies, equipment, goods, packaging materials, services, including provision of basic infrastructure, utilities, and maintenance, repair and overhaul of equipment, and other expenditures directly attributable to the registered project or activity without which the registered project or activity cannot be carried out; Provided, that the VAT zero-rating on local purchases shall be granted upon the endorsement of the concerned IPA, in addition to the documentary requirements of the BIR. |
SECTION 8. Taxation after the expiration of the period of availment of incentives. |
All registered business enterprises shall pay all applicable taxes at the regular rates under the Code and other laws after the expiration of the period of incentives of their registered project or activity, unless otherwise provided in these rules. |
Rule 3 |
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xxx xxx xxx Qualified expansion projects or activities defined under Rule 1, Section 4(U), may be granted 3 years ITH followed by the enhanced deductions or SCIT, as applicable. The expansion project or activity may also be entitled to duty exemption, VAT exemption on importation and VAT zero rating on local purchases under Rule 2, Sections 4 and 5, respectively. Provided, that the application for tax incentives for a qualified expansion project or activity shall be approved by the FIRB or concerned IPA, as the case may be, based on the amount of investment capital of the expansion project or activity under Rule 5, Section 1. |
Rule 17 |
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SECTION 2. Entitlement to Duty Exemption on Importation of Capital Equipment, Raw Materials, Spare Parts or Accessories. |
Existing RBEs with valid Certificate of Authority to Import (CAI) or Admission Entry whose capital equipment, raw materials, spare parts or accessories were ordered, as reflected in the date of the purchase order or on the date of the opening of the corresponding letters of credit; or loaded, as reflected in the bill of lading date; or are still in transit during the effectivity of Executive Order 85, Series of 2019, shall qualify for the duty exemption until the expiration of the CAI/ Admission Entry. |
Rule 18 |
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SECTION 5. Non-income related tox incentives. |
All registered export and domestic market enterprises that will continue to avail of their existing tax incentives subject to Sections 1, 2 and 3 of this Rule, may continue to enjoy the duty exemption, VAT exemption on importation, and VAT zero-rating on local purchases as provided in their respective IPA registrations; Provided, that the duty exemption, VAT exemption on importation and VAT zero-rating on local purchases shall only apply to goods and services directly attributable to and exclusively used in the registered project or activity of said registered export enterprises located inside the ecozones and freeports until the expiration of the transitory period; Provided, further, that importation of capital equipment, spare parts, and accessories by existing export enterprises and domestic market enterprises registered with the BOI prior to the effectivity of this act shall continue to be subject to duty exemption for a period of 5 years from date of registration. |
B. Addition
Coverage |
Addition |
Rule 18 |
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Section 6. Transitory rules for offshore gaming licensees and accredited service providers. |
Notwithstanding the provisions of Republic Act No. 11590, an offshore gaming licensee or an accredited service provider defined under Sections 22 (II) and 27 (G) of the Code, as amended, duly registered with, and enjoying incentives granted by an IPA under its charter prior to the effectivity of this Act, shall continue to enjoy said incentives until the expiration of the transitory period in Section 311 of the Code, as implemented by Sections 1, 2, and 3 of this Rule, or the expiry of the license or accreditation of the registered enterprise, whichever comes earlier; Provided that, said offshore gaming licensees and accredited service providers shall thereafter be subject to the applicable taxes under Republic Act No. 11590 and its Implementing Rules and Regulations. |
The RMC shall take effect immediately upon publication in a newspaper of general circulation.
RMC No. 121-2021, 14 December 2021, to clarify the taxability of the interest paid by Cooperatives to its member’s deposit or fixed deposits (otherwise known as share capital).
Section 11 of RMC No. 12-10, which circularizes the Joint Rules and Regulations Implementing Articles 60, 61 and 144 of Republic Act No. 9520 (Philippine Cooperative Code of 2008) in relation to RA No. 8424 (National Internal Revenue Code or NIRC, as amended), provides that all members of cooperatives shall be liable to pay all the necessary internal revenue taxes under the NIRC, as amended, except for “any tax and fee, including but not limited to final tax on member's deposits or fixed deposits (otherwise known as share capital) with cooperatives, and documentary tax on transactions of members with the cooperative”, among others. Member's deposit refers to savings and time deposits of both regular and associate members while share capital refers to member's paid-up capital.
Based on the abovementioned provisions, members of the cooperative are not liable to pay any tax and fee on the interest earned on member's deposits and fixed deposits (share capital). Hence, cooperatives are also not liable to withhold tax on the aforesaid interest payments to its members.
RMC No. 122-2021, 14 December 2021, to clarify the tax treatment of integrating the Domestic Passenger Service Charge (DPSC) and International Passenger Service Charge (lPSC), commonly referred to as terminal fees, into airline tickets at the point of sale.
The provisions of RMC No. 34-2012 shall also govern the invoicing and recording of integrated IPSC in the books of airline companies and airport authorities. Applying the guidelines laid down in the said RMC, the following are the rules for IPSC collected by Airline Company for Airport Authority:
Process |
Guidelines |
Collection of IPSC from passengers |
The Domestic Airline Companies shall collect the IPSC from passengers and shall include the IPSC in the official receipt to be issued by the Airline Company to the passenger. The VATable and VAT exempt components of IPSC shall be separately reflected in the official receipt. The share of the Airport Authority in the IPSC should be shown in the Airline Company's official receipt as part of receipts subject to VAT while the Aviation Security Fee and other fees (PD 1957) should be reflected as VAT exempt. Lastly, the VAT component of the IPSC should be included in the total VAT. However, for International Airline Companies, the collected IPSC from the passengers shall likewise be reflected in its official receipts. The share of the Airport Authority, Aviation Fee and other fees (PD 1957) should be reflected as VAT exempt. The accounts to record the IPSC (Share of Airport Authority, Aviation Security Fee and fees under PD 1957) may be shown in the financial statements as other income/expense. |
Remittance of lPSC by Airline Company to Airport Authority |
The lPSC collected by the Airline Company shall be paid to the Airport Authority, which in turn, shall issue an official receipt to the Airline Company. The official receipt shall indicate the full amount of the IPSC. |
Payment of Service Fees by Airport Authority to Airline Company |
Payment of service fees by Airport Authority to Airline Company shall be governed by the rules on government money payments and be subject to Creditable Withholding VAT (CVAT) at the rate of 5% and Creditable Withholding Tax (CWT) of 2% of gross payments. The Airline Company shall issue a VAT Official Receipt to acknowledge receipt of the service fees from the Airport Authority. However, payment of service fees by Airport Authority to international Airline Company shall be treated as other income subject to Corporate Income Tax. The Airport Authority shall remit the five percent (5%) CVAT and the two percent (2%) CWT on payment for service fees and issue the corresponding Certificate of Creditable Tax Withheld at Source (BlR Form 2307) in the name of the domestic airline company or the international airline company that is a resident foreign corporation, as the income recipient. |
Section 6 of Revenue Regulations (RR) No. 15-2013 to the contrary notwithstanding, International Carriers exempt under Section 109 of the Tax Code shall be allowed to register for VAT purposes in relation to IPSC, being unrelated to the transport of passengers and cargo.
Moreover, the collection of taxes on IPSC specified under the RMC should be treated independently from the Gross Philippines Billings (GPB) Tax imposed under Section 28(A)(3) of the Tax Code and the 3% Common Carrier's Tax imposed under Section 118 of the Tax Code, as the GPB refers to the amount of gross revenue derived from carriage of persons, excess baggage, cargo, and mail originating from the Philippines in a continuous and uninterrupted flight, while the Percentage Tax on International Carriers in Section 118 pertains to gross receipts derived from transport of cargo from the Philippines to another.
Considering that the IPSC is a service charge for services performed within the Philippines, then justifiably, it should be treated independently from the taxes imposed on the mentioned revenue from carriage of persons, excess baggage, cargo, and mail originating from the Philippines.
Should the airline company opt to remit the IPSC to the Airport Authority net of the Service Fees charged, the same rules as above shall apply. The Airport Authority shall still issue a VAT Official Receipt to the airline company for the full amount of lPSC and, at the same time, the airline company shall likewise issue a VAT Official Receipt to the airport authority for the service fees. However, to comply with the withholding requirements, the tax to be withheld on the service fees, whether CVAT, CWT, or Final Withholding Tax (FWT), shall be paid back to the Airport Authority for remittance to the BlR.
The recording of collection of IPSC from passengers; remittance of IPSC by Airline Company to Airport Authority; and payment of service fees by Airport Authority to Airline Company are illustrated in the Circular.
Attached are the full texts of the issuances.
Revenue Memorandum Circular No. 122-2021
Revenue Memorandum Circular No. 121-2021
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