Special InTAX: March 2022 Issue 2 | Volume 1

 

Bureau of Internal Revenue

 

The Bureau of Internal Revenue (BIR) issued RMC No. 23-2022 on 09 March 2022 to provide clarifications and guidance on the suspension of the income tax incentives granted to Registered Business Enterprises (RBEs) for violating the work-from-home (WFH) threshold as prescribed by the Fiscal Incentives Review Board (FIRB).

This Circular shall cover all RBEs in the Information Technology – Business Process Management (IT-BPM) sector who opted to continue implementing WFH arrangements amidst COVID-19 pandemic. Salient points of the RMC are as follows:

• Based on FIRB Resolution No. 19-2021 and 23-2021, non-compliance of all IT-BPM entities under WFH arrangement of the conditions prescribed under the said resolutions shall be meted with suspension of the income tax incentive on the revenue corresponding to the months of non-compliance. Hence, RBE shall pay the income tax using the regular rate of either 25% or 20% based on the taxable net income corresponding to the months the RBE has violation.

• For RBEs with no existing transactions subject to the regular income tax rate, BIR Form No. 1702-MX shall be used for voluntary payment of the income tax due on the months with reported violation. However, for RBEs which have existing transactions subject to regular income tax rate, the voluntary payment shall be made through BIR Form No. 0605 and a bank validated copy of which shall be attached in the Annual Income Tax Return (AITR) to be filed. In both cases, the computation of the income tax due shall be:

 

Particulars	Amount
Net Taxable Income* for the year / 12 months	xxxx.xx
Multiply by: Applicable tax rate (20% or 25%)	xx%
Income Tax Due	xxxx.xx

 

*Computed based on existing policies which is net of allowable deductions

•  In the absence of voluntary payment by RBEs or if the voluntary payments made are not sufficient, the RBE shall be subjected to an audit pursuant to a Letter of Authority (LOA).

• For uniform understanding of the term "total workforce", the Circular likewise clarifies that it shall refer to the total employees that are directly or indirectly engaged in the registered project or activity of the RBE, but excludes third-party contractors, if any, such as service contractors rendering janitorial or security services and other similar services.

• For this purpose, the FIRB shall endorse the monthly reports (Annex "A") submitted by Investment Promotion Agencies (lPAs) regarding violations committed by concerned RBEs to the BIR, addressed to the Assessment Service, Attention: Audit lnformation, Tax Exemption and lncentives Division (AITEID) or thru email (aiteid_ies@bir.gov.ph).

 

Procedures

A.        AITEID

In the Annex “A” endorsed by FIRB, AITEID shall first verify the corresponding Revenue District Office (RDO) code of the RBEs listed therein. AITEID shall then accomplish columns A to Q of Annex “B” per RDO jurisdiction. Upon accomplishment, AITEID shall forward Annex “B” to the concerned RDO/Large Taxpayers Service (LTS) within 10 days from receipt of the last monthly report that completes the RBEs’ respective accounting periods. AITEID shall then provide the FIRB of the action taken on the violations committed by the RBEs within 60 days from the statutory filing of AITRs for taxable years 2021 and 2022.

B.        RDO/LTS

Upon receipt of the partially accomplished Annex “B” from AITEID, the concerned RDO/LTS shall verify if the RBE voluntarily paid the regular income tax due on the months it has reported violation and evaluate if the payment is correct based on the declared data per AITR and Audited Financial Statements (AFS) (sourced from BIR’s database). If none was paid or the payment is not sufficient/correct, the RDO/LTS shall recommend the issuance of LOA for the conduct of audit covering all internal revenue taxes.

The RDO/LTS shall complete the Annex “B” within 45 days from receipt thereon and revert the same to AITEID with an indication of the result of their examination.

 

Effectivity

This RMC shall take effect immediately until 31 March 2022 pursuant to FIRB Resolution No. 19-2021.

 

Attached are the full texts of the issuances.

Revenue Memorandum Circular No. 23-2022

Revenue Memorandum Circular No. 23-2022 Annexes