National Internal Revenue Code of 1997 (Tax Code)

1. Manila and other cities P 2,400

2. Provincial 1,200 Public utility bus – Not exceeding 30 passengers P 3,600 Exceeding 30 but not exceeding 50 passengers 6,000 Exceeding 50 passengers 7,200 Taxis -

1. Manila and other cities P 3,600

2. Provincial 2,400 Car for hire (with chauffer) P 3,000 Car for hire (without chauffer) 1,800 SEC. 118 Percentage Tax on International Carriers. – [120] (A) International air carriers doing; business in the Philippines on their gross receipts derived from transport of cargo from the Philippines to another country shall pay a tax of three percent (3%) of their quarterly gross receipts. (B) International shipping carriers doing business in the Philippines on their gross receipts derived from transport of cargo from the Philippines to another country shall pay a tax equivalent to three percent (3%) of their quarterly gross receipts. SEC. 119. Tax on Franchises. - Any provision of general or special law to the contrary notwithstanding, there shall be levied, assessed and collected in respect to all franchises on radio and/or television broadcasting companies whose annual gross receipts of the preceding year do not exceed Ten million pesos (P10,000.00), subject to Section 236 of this Code, a tax of three percent (3%) and on gas and water utilities, a tax of two percent (2%) on the gross receipts derived from the business covered by the law granting the franchise: Provided, however, That radio and television broadcasting companies referred to in this Section shall have an option to be registered as a value-added taxpayer and pay the tax due thereon: Provided, further, That once the option is exercised, said option shall not be irrevocable. [119] The grantee shall Sle the return with, and pay the tax due thereon to the Commissioner or his duly authorized representative, in accordance with the provisions of Section 128 of this Code, and the return shall be subject to audit by the Bureau of Internal Revenue, any provision of any existing law to the contrary notwithstanding. SEC. 120. Tax on Overseas Dispatch, Message or Conversation Originating from the Philippines. - https://www.bir.gov.ph/index.php/tax-code.html Page 96 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (A) Persons Liable. - There shall be collected upon every overseas dispatch, message or conversation transmitted from the Philippines by telephone, telegraph, telewriter exchange, wireless and other communication equipment service, a tax of ten percent (10%) on the amount paid for such services. The tax imposed in this Section shall be payable by the person paying for the services rendered and shall be paid to the person rendering the services who is required to collect and pay the tax within twenty (20) days after the end of each quarter. (B) Exemptions. - The tax imposed by this Section shall not apply to: (1) Government. - Amounts paid for messages transmitted by the Government of the Republic of the Philippines or any of its political subdivisions or instrumentalities; (2) Diplomatic Services. - Amounts paid for messages transmitted by any embassy and consular oZces of a foreign government; (3) International Organizations. - Amounts paid for messages transmitted by a public international organization or any of its agencies based in the Philippines enjoying privileges, exemptions and immunities which the Government of the Philippines is committed to recognize pursuant to an international agreement; and (4) News Services. - Amounts paid for messages from any newspaper, press association, radio or television newspaper, broadcasting agency, or newstickers services, to any other newspaper, press association, radio or television newspaper broadcasting agency, or newsticker service or to a bona Sde correspondent, which messages deal exclusively with the collection of news items for, or the dissemination of news item through, public press, radio or television broadcasting or a newsticker service furnishing a general news service similar to that of the public press. SEC. 121. Tax on Banks and Non-Bank Financial Intermediaries Performing Quasi- Banking Functions. - There shall be collected a tax on a gross receipt derived from sources within the Philippines by all banks and non-bank Snancial intermediaries in accordance with the following schedule: (a) On interest, commissions and discounts from lending activities as well as income from Snancial leasing, on the basis of remaining maturities of instruments from which such receipts are derived: Maturity period is Sve years or less 5% Maturity period is more than Sve years 1% (b) On dividends and equity shares and net income of subsidiaries 0% (c) On royalties, rentals of property, real or personal, proSts, from exchange and all other items treated as gross income under Section 32 of this Code 7% (d) On net trading gains within the taxable year on foreign currency, debt securities, derivatives, and other similar Snancial instruments. 7% Provided, however, That in case the maturity period referred to in paragraph (a) is shortened thru pre-termination, then the maturity period shall be reckoned to end as of the date of pre-termination for purposes of classifying the transaction and the correct rate of tax shall be applied accordingly. https://www.bir.gov.ph/index.php/tax-code.html Page 97 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Provided, 9nally, That the generally accepted accounting principles as may be prescribed by the Bangko Sentral ng Pilipinas for the bank or non0bank Snancial intermediary performing quasi-banking functions shall likewise be the basis for the calculation of gross receipts. [121] Nothing in this Code shall preclude the Commissioner from imposing the same tax herein provided on persons performing similar banking activities. SEC. 122. Tax on Other Non-Bank Financial Intermediaries. [122]- There shall be collected a tax of Sve percent (5%) on the gross receipts derived by other non-bank Snancial intermediaries doing business in the Philippines, from interests, commissions, discounts and all other items treated as gross income under this code.: Provided, That interests, commissions and discounts from lending activities, as well as income from Snancial leasing, shall be taxed on the basis of the remaining maturities of the instruments from which such receipts are derived, in accordance with the following schedule: Maturity period is Sve years or less 5% Maturity period is more than Sve years 1% Provided, however, That in case the maturity period is shortened thru pre-termination, then the maturity period shall be reckoned to end as of the date of pre-termination for purposes of classifying the transaction and the correct rate of tax shall be applied accordingly. Provided, 9nally, That the generally accepted accounting principles as may be prescribed by the Securities and Exchange Commission for other non-bank Snancial intermediaries shall likewise be the basis for the calculation of gross receipts. [123] Nothing in this Code shall preclude the Commissioner from imposing the same tax herein provided on persons performing similar Snancing activities. SEC. 123. Tax on Life Insurance Premiums. - There shall be collected from every person, company or corporation (except purely cooperative companies or associations) doing life insurance business of any sort in the Philippines a tax of two percent (2%) [124] of the total premium collected, whether such premiums are paid in money, notes, credits or any substitute for money; but premiums refunded within six (6) months after payment on account of rejection of risk or returned for other reason to a person insured shall not be included in the taxable receipts; nor shall any tax be paid upon reinsurance by a company that has already paid the tax; nor upon doing business outside the Philippines on account of any life insurance of the insured who is a nonresident, if any tax on such premium is imposed by the foreign country where the branch is established nor upon premiums collected or received on account of any reinsurance , if the insured, in case of personal insurance, resides outside the Philippines, if any tax on such premiums is imposed by the foreign country where the original insurance has been issued or perfected; nor upon that portion of the premiums collected or received by the insurance companies on variable contracts (as deSned in Section 232(2) of Presidential Decree No. 612), in excess of the amounts necessary to insure the lives of the variable contract workers. ‘Cooperative companies or associations’ are such as are conducted by the members thereof with the money collected from among themselves and solely for their own protection and not for proSt. SEC. 124. Tax on Agents of Foreign Insurance Companies. - Every Sre, marine or miscellaneous insurance agent authorized under the Insurance Code to procure policies of insurance as he may have previously been legally authorized to transact on risks located in the Philippines for companies not authorized to transact business in the Philippines shall pay a tax equal to twice the tax imposed in Section 123: Provided, That the provision of this Section shall not apply to reinsurance: Provided, https://www.bir.gov.ph/index.php/tax-code.html Page 98 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 however, That the provisions of this Section shall not affect the right of an owner of property to apply for and obtain for himself policies in foreign companies in cases where said owner does not make use of the services of any agent, company or corporation residing or doing business in the Philippines. In all cases where owners of property obtain insurance directly with foreign companies, it shall be the duty of said owners to report to the Insurance Commissioner and to the Commissioner each case where insurance has been so effected, and shall pay the tax of Sve percent (5%) on premiums paid, in the manner required by Section 123. SEC. 125. Amusement Taxes. - There shall be collected from the proprietor, lessee or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, Jai-Alai and racetracks, a tax equivalent to: (a) Eighteen percent (18%) in the case of cockpits; (b) Eighteen percent (18%) in the case of cabarets, night or day clubs; (c) Ten percent (10%) in the case of boxing exhibitions: Provided, however, That boxing exhibitions wherein World or Oriental Championships in any division is at stake shall be exempt from amusement tax: Provided, further, That at least one of the contenders for World or Oriental Championship is a citizen[s] of the Philippines and said exhibitions are promoted by a citizen/s of the Philippines or by a corporation or association at least sixty percent (60%) of the capital of which is owned by such citizens; (d) Fifteen percent (15%) in the case of professional basketball games as envisioned in Presidential Decree No. 871: Provided, however, That the tax herein shall be in lieu of all other percentage taxes of whatever nature and description; and (e) Thirty percent (30%) in the case of Jai-Alai and racetracks - of their gross receipts, irrespective, of whether or not any amount is charged for admission. For the purpose of the amusement tax, the term ‘gross receipts’ embraces all the receipts of the proprietor, lessee or operator of the amusement place. Said gross receipts also include income from television, radio and motion picture rights, if any. A person or entity or association conducting any activity subject to the tax herein imposed shall be similarly liable for said tax with respect to such portion of the receipts derived by him or it. The taxes imposed herein shall be payable at the end of each quarter and it shall be the duty of the proprietor, lessee or operator concerned, as well as any party liable, within twenty (20) days after the end of each quarter, to make a true and complete return of the amount of the gross receipts derived during the preceding quarter and pay the tax due thereon. SECTION 125-A Gaming Tax on Services Rendered by Offshore Gaming Licensees. - Any provision of existing laws, rules or regulations to the contrary notwithstanding, the entire gross gaming revenue or receipts or the agreed predetermined minimum monthly revenue or receipts from gaming, whichever is higher, shall be levied, assessed, and collected a gaming tax equivalent to (5%), in lieu of all other direct and indirect internal revenue taxes and local taxes, with respect to gaming income: Provided, That the gaming tax shall be directly remitted to the Bureau of Internal Revenue not later than the 20th day following the end of each month: Provided, further, That the Philippine Amusement and Gaming Corporation or any special economic zone authority or tourism zone authority or freeport authority may impose regulatory fees on offshore gaming licensees which shall not cumulatively exceed two percent (2%) of the gross gaming revenue or receipts derived from gaming operations and similar related activities of all offshore gaming licensees or a predetermined minimum guaranteed fee, whichever is higher: https://www.bir.gov.ph/index.php/tax-code.html Page 99 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Provided, furthermore, That for purposes of this Section, gross gaming revenue or receipts shall mean gross wages less payouts: Provided, Snally, That the taking of wagers made in the Philippines and the grave failure to cooperate with the third- party auditor shall result in the revocation of the license of the offshore gaming licensee. “The Philippine Amusement and Gaming Corporation or any special economic zone authority or tourism zone authority or freeport authority shall engage the services of a third-party audit platform that would determine the gross gaming revenues or receipts of offshore gaming licensees. To ensure that the proper taxes and regulatory fees are levied, periodic reports about the results of the operation showing, among others, the gross gaming revenue or receipts of each offshore gaming licensee shall be submitted to the Bureau of Internal Revenue by the Philippine Amusement and Gaming Corporation or any special economic zone authority or tourism zone authority or freeport authority as certiSed by their third-party auditor: Provided: That the third-party auditor shall be independent, reputable, internationally-known, and duly accredited as such by an accreditor similar agency recognized by industry experts: Provided, Snally, That nothing herein shall prevent the Bureau of Internal Revenue and the Commission on Audit from undertaking a post-audit or independent veriScation of the gross gaming revenues determined by the third-party auditor. [20] SEC. 126. Tax on Winnings. - Every person who wins in horse races shall pay a tax equivalent to ten percent (10%) of his winnings or 'dividends', the tax to be based on the actual amount paid to him for every winning ticket after deducting the cost of the ticket: Provided, That in the case of winnings from double, forecast/quinella and trifecta bets, the tax shall be four percent (4%). In the case of owners of winning race horses, the tax shall be ten percent (10%) of the prizes. The tax herein prescribed shall be deducted from the 'dividends' corresponding to each winning ticket or the 'prize' of each winning race horse owner and withheld by the operator, manager or person in charge of the horse races before paying the dividends or prizes to the persons entitled thereto. The operator, manager or person in charge of horse races shall, within twenty (20) days from the date the tax was deducted and withheld in accordance with the second paragraph hereof, Sle a true and correct return with the Commissioner in the manner or form to be prescribed by the Secretary of Finance, and pay within the same period the total amount of tax so deducted and withheld. SEC. 127. Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded through the Local Stock Exchange or through Initial Public Offering. - (A) Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded through the Local Stock Exchange. [4] - There shall be levied, assessed and collected on every sale, barter, exchange, or other disposition of shares of stock listed and traded through the local stock exchange other than the sale by a dealer in securities, a tax at the rate of six-tenths of one percent (6/10 of 1%) [125] of the gross selling price or gross value in money of the shares of stock sold, bartered, exchanged or otherwise disposed which shall be paid by the seller or transferor. (B) Repealed under Section 6 of Republic Act No. 11494, otherwise known as the "Bayanihan to Recover As One Act." (C) Return on Capital Gains Realized from Sale of Shares of Stocks. – (1) Return on Capital Gains Realized from Sale of Shares of Stock Listed and Traded in the Local Stock Exchange.- It shall be the duty of every stock broker who effected the sale subject to the tax imposed herein to collect the tax and remit the same to the Bureau of Internal Revenue within Sve (5) banking days from the date of collection thereof and to submit on https://www.bir.gov.ph/index.php/tax-code.html Page 100 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Mondays of each week to the secretary of the stock exchange, of which he is a member, a true and complete return which shall contain a declaration of all the transactions effected through him during the preceding week and of taxes collected by him and turned over to the Bureau Of Internal Revenue. (2) Return on Public Offerings of Shares of Stock.- In case of primary offering, the corporate issuer shall Sle the return and pay the corresponding tax within thirty (30) days from the date of listing of the shares of stock in the local stock exchange. In the case of secondary offering, the provision of Subsection (C) (1) of this Section shall apply as to the time and manner of the payment of the tax. (D) Common Provisions. - any gain derived from the sale, barter, exchange or other disposition of shares of stock under this Section shall be exempt from the tax imposed in Sections 24(C), 27(D)(2), 28(A)(8)(c), and 28(B)(5)(c) of this Code and from the regular individual or corporate income tax. Tax paid under this Section shall not be deductible for income tax purposes. SEC. 128. Returns and Payment of Percentage Taxes. [126] - (A) Returns of Gross Sales, Receipts or Earnings and Payment of Tax. [4] - (1) Persons Liable to Pay Percentage Taxes. - Every person subject to the percentage taxes imposed under this Title shall Sle a quarterly return of the amount of his gross sales, receipts or earnings and pay the tax due thereon within twenty-Sve (25) days after the end of each taxable quarter: Provided, That in the case of a person whose VAT registration is cancelled and who becomes liable to the tax imposed in Section 116 of this Code, the tax shall accrue from the date of cancellation and shall be paid in accordance with the provisions of this Section. (2) Person Retiring from Business. - Any person retiring from a business subject to percentage tax shall notify the nearest internal revenue oZcer, Sle his return and pay the tax due thereon within twenty (20) days after closing his business. (3) Determination of Correct Sales or Receipts. - When it is found that a person has failed to issue receipts or invoices, or when no return is Sled, or when there is reason to believe that the books of accounts or other records do not correctly rebect the declarations made or to be made in a return required to be Sled under the provisions of this Code, the Commissioner, after taking into account the sales, receipts or other taxable base of other persons engaged in similar businesses under similar situations or circumstances, or after considering other relevant information may prescribe a minimum amount of such gross receipts, sales and taxable base and such amount so prescribed shall be prima facie correct for purposes of determining the internal revenue tax liabilities of such person. (B) Where to File. - Except as the Commissioner otherwise permits, every person liable to the percentage tax under this Title may, at his option, Sle a separate return for each branch or place of business, or a consolidated return for all branches or places of business with the authorized agent bank, Revenue District OZcer, Collection Agent or duly authorized Treasurer of the city or municipality where said business or principal place of business is located, as the case may be. << Back to NIRC Outline >> TITLE VI EXCISE TAXES ON CERTAIN GOODS [4] https://www.bir.gov.ph/index.php/tax-code.html Page 101 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 CHAPTER I GENERAL PROVISIONS SEC.129. Goods and Services Subject to Excise Taxes. - Excise taxes apply to goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition and to things imported as well as services performed in the Philippines.[127] The excise tax imposed herein shall be in addition to the value-added tax imposed under Title IV. For purposes of this Title, excise taxes herein imposed and based on weight or volume capacity or any other physical unit of measurement shall be referred to as 'speciSc tax' and an excise tax herein imposed and based on selling price or other speciSed value of the good or service performed [127] shall be referred to as 'ad valorem tax.' SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products. – (A) Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax. - (1) Persons Liable to File a Return.- Every person liable to pay excise tax imposed under this Title shall Sle a separate return for each place of production setting forth, among others the description and quantity or volume of products to be removed, the applicable tax base and the amount of tax due thereon: Provided, however, That in the case of indigenous petroleum, natural gas or liqueSed natural gas, the excise tax shall be paid by the Srst buyer, purchaser or transferee for local sale, barter or transfer, while the excise tax on exported products shall be paid by the owner, lessee, concessionaire or operator of the mining claim. Should domestic products be removed from the place of production without the payment of the tax, the owner or person having possession thereof shall be liable for the tax due thereon. (2) Time for Filing of Return and Payment of the Tax. - Unless otherwise speciScally allowed, the return shall be Sled and the excise tax paid by the manufacturer or producer before removal of domestic products from place of production: Provided, That the excise tax on locally manufactured petroleum products and indigenous petroleum levied under Sections 148 and 151(A)(4), respectively, of this Title shall be paid within ten (10) days from the date of removal of such products for the period from January 1, 1998 to June 30, 1998; within Sve (5) days from the date of removal of such products for the period from July 1, 1998 to December 31, 1998; and, before removal from the place of production of such products from January 1, 1999 and thereafter: Provided, further, That the excise tax on nonmetallic mineral or mineral products, or quarry resources shall be due and payable upon removal of such products from the locality where mined or extracted, but with respect to the excise tax on locally produced or extracted metallic mineral or mineral products, the person liable shall Sle a return and pay the tax within Sfteen (15) days after the end of the calendar quarter when such products were removed subject to such conditions as may be prescribed by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner. For this purpose, the taxpayer shall Sle a bond in an amount which approximates the amount of excise tax due on the removals for the said quarter. The foregoing rules notwithstanding, for imported mineral or mineral products, whether metallic or nonmetallic, the excise tax due thereon shall be paid before their removal from customs custody. (3) Place of Filing of Return and Payment of the Tax. - Except as the Commissioner otherwise permits, the return shall be Sled with and the tax paid to any authorized agent bank or Revenue Collection OZcer, or duly authorized City or Municipal Treasurer in the Philippines. https://www.bir.gov.ph/index.php/tax-code.html Page 102 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (4) Exceptions. - The Secretary of Finance, upon recommendation of the Commissioner may, by rules and regulations, prescribe: (a) The time for Sling the return at intervals other than the time prescribed in the preceding paragraphs for a particular class or classes of taxpayers after considering factors such as volume of removals, adequate measures of security and such other relevant information required to be submitted under the pertinent provisions of this Code; and (b) The manner and time of payment of excise taxes other than as herein prescribed, under a tax prepayment, advance deposit or similar schemes. In the case of locally produced of extracted minerals and mineral products or quarry resources where the mine site or place of extraction is not the same as the place of processing or production, the return shall be Sled with and the tax paid to the Revenue District OZce having jurisdiction over the locality where the same are mined, extracted or quarried: Provided, however, That for metallic minerals processed abroad, the return shall be Sled and the tax due thereon paid to the Revenue District OZce having jurisdiction over the locality where the same are mined, extracted or quarried. (B) Determination of Gross Selling Price of Goods Subject to Ad Valorem Tax. - Unless otherwise provided, the price, excluding the value-added tax, at which the goods are sold at wholesale in the place of production or through their sales agents to the public shall constitute the gross selling price. If the manufacturer also sells or allows such goods to be sold at wholesale in another establishment of which he is the owner or in the proSts of which he has an interest, the wholesale price in such establishment shall constitute the gross selling price. Should such price be less than the cost of manufacture plus expenses incurred until the goods are Snally sold, then a proportionate margin of proSt, not less than ten percent (10%) of such manufacturing cost and expenses, shall be added to constitute the gross selling price. (C) Manufacturer's or Producer's Sworn Statement. - Every manufacturer or producer of goods or products subject to excise taxes shall Sle with the Commissioner on the date or dates designated by the latter, and as often as may be required, a sworn statement showing, among other information, the different goods or products manufactured or produced and their corresponding gross selling price or market value, together with the cost of manufacture or production plus expenses incurred or to be incurred until the goods or products are Snally sold. (D) Credit for Excise tax on Goods Actually Exported. - When goods locally produced or manufactured are removed and actually exported without returning to the Philippines, whether so exported in their original state or as ingredients or parts of any manufactured goods or products, any excise tax paid thereon shall be credited or refunded upon submission of the proof of actual exportation and upon receipt of the corresponding foreign exchange payment: Provided, That the excise tax on mineral products, except coal and coke, imposed under Section 151 shall not be creditable or refundable even if the mineral products are actually exported. SEC. 131. Payment of Excise Taxes on Imported Articles. – (A) Persons Liable. - Excise taxes on imported articles shall be paid by the owner or importer to the Custom OZcers, conformably with the regulations of the Department of Finance and before the release of such articles from the customs house, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption. In the case of tax-free articles brought or imported into the Philippines by persons, entities, or agencies exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entitles, the purchasers or recipients shall be considered the importers thereof, and shall be liable for the duty and internal revenue tax due on such https://www.bir.gov.ph/index.php/tax-code.html Page 103 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 importation. The provision of any special or general law to the contrary notwithstanding, the importation of cigars and cigarettes, distilled spirits, fermented liquors and wines into the Philippines, even if destined for tax and duty free shops, shall be subject to all applicable taxes, duties, charges, including excise taxes due thereon. This shall apply to cigars and cigarettes, distilled spirits, fermented liquors and wines brought directly into the duly chartered or legislated freeports of the Subic Special Economic and Freeport Zone, created under Republic Act No. 7227; the Cagayan Special Economic Zone and Freeport, created under Republic Act No. 7922; and the Zamboanga City Special Economic Zone, created under Republic Act No. 7903,and such other freeports as may hereafter be established or created by law: Provided, further, That nothwithstanding the provisions of Republic Act Nos. 9400 and 9593, importations of cigars and cigarettes, distilled spirits, fermented liquors and wines made directly by a government-owned and operated duty-free shop, like the Duty-Free Philippines (DFP), shall be exempted from all applicable duties only: Provided, still further, That such articles directly imported by a government-owned and operated duty- free shop like the Duty-Free Philippines, shall be labeled ‘duty-free’ and ‘not for resale’: Provided, Snally, That the removal and transfer of tax and duty-free goods, products, machinery, equipment and other similar articles other than cigars and cigarettes, distilled spirits, fermented liquors and wines, from one freeport to another freeport, shall not be deemed an introduction into the Philippine customs territory. [89] Cigars and cigarettes, distilled spirits and wines within the premises of all duty-free shops which are not labeled as herein above required, as well as tax and duty-free articles obtained from a duty free shop and subsequently found in a non duty-free shop to be offered for resale shall be conSscated, and the perpetrator of such non-labeling or re-selling shall be punishable under the applicable provisions of this Code. Articles conSscated shall de destroyed using the most environmentally friendly method available in accordance with the rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioners of Customs and Internal Revenue. The tax due on any such goods, products, machinery, equipment or other similar articles shall constitute a lien on the article itself, and such lien shall be superior to all other charges or liens, irrespective of the possessor thereof. (B) Rate and Basis of the Excise Tax on Imported Articles. - Unless otherwise speciSed imported articles shall be subject to the same rates and basis of excise taxes applicable to locally manufactured articles. SEC. 132. Mode of Computing Contents of Cask or Package. - Every fractional part of a proof liter equal to or greater than a half liter in a cask or package containing more than one liter shall be taxed as a liter, and any smaller fractional part shall be exempt; but any package of spirits, the total content of which are less than a proof liter, shall be taxed as one liter. CHAPTER II EXEMPTION OR CONDITIONAL TAX-FREE REMOVAL OF CERTAIN ARTICLES SEC. 133. Removal of Wines and distilled Spirits for Treatment of Tobacco Leaf.- Upon issuance of a permit from the Commissioner and subject to the rules and regulations prescribed by the Secretary of Finance, manufacturers of cigars and cigarettes may withdraw from bond, free of excise local and imported wines and distilled spirits in speciSc quantities and grades for use in the treatment of tobacco leaf to be used in the manufacture of cigars and cigarettes; but such wines and distilled spirits must Srst be suitably denatured. https://www.bir.gov.ph/index.php/tax-code.html Page 104 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 134. Domestic Denatured Alcohol. - Domestic alcohol of not less than one hundred eighty degrees (180O) proof (ninety percent (90%) absolute alcohol) shall, when suitably denatured and rendered unSt for oral intake, be exempt from the excise tax prescribed in Section 141: Provided, however, That such denatured alcohol shall be subject to tax under Section 106(A) of this Code: Provided, further, That if such alcohol is to be used for motive power, it shall be taxed under Section 148(d) of this Code: Provided, Snally, That any alcohol, previously rendered unSt for oral intake after denaturing but subsequently rendered St or oral intake after undergoing fermentation, dilution, puriScation, mixture or any other similar process shall be taxed under Section 141 of this Code and such tax shall be paid by the person in possession of such reprocessed spirits. SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax: (a) International carriers of Philippine or foreign registry on their use or consumption outside the Philippines: Provided, That the petroleum products sold to these international carriers shall be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner; (b) Exempt entities or agencies covered by tax treaties, conventions and other international agreements for their use of consumption: Provided, however, That the country of said foreign international carrier or exempt entities or agencies exempts from similar taxes petroleum products sold to Philippine carriers, entities or agencies; and (c) Entities which are by law exempt from direct and indirect taxes. SEC. 136. Denaturation, Withdrawal and Use of Denatured Alcohol. - Any person who produces, withdraws, sells, transports or knowingly uses, or is in possession of denatured alcohol, or articles containing denatured alcohol in violation of laws or regulations now or hereafter in force pertaining thereto shall be required to pay the corresponding tax, in addition to the penalties provided for under Title X of this Code. SEC. 137. Removal of Spirits Under Bond for RectiQcation.- Spirits requiring rectiScation may be removed from the place of production to another establishment for the purpose of rectiScation without prepayment of the excise tax: Provided, That the distiller removing such spirits and the rectiSer receiving them shall Sle with the Commissioner their joint bond conditioned upon the payment by the rectiSer of the excise tax due on the rectiSed alcohol: Provided, further, That in cases where alcohol has already been rectiSed either by original and continuous distillation or by re-distillation, no loss for rectiScation and handling shall be allowed and the rectiSer thereof shall pay the excise tax due on such losses: Provided, Snally, That where a rectiSer makes use of spirits upon which the excise tax has not been paid, he shall be liable for the payment of the tax otherwise due thereon. SEC. 138. Removal of Fermented Liquors to Bonded Warehouse. - Any brewer may remove or transport from his brewery or other place of manufacture to a bonded warehouse used by him exclusively for the storage or sale in bulk of fermented liquors of his own manufacture, any quantity of such fermented liquors, not less than one thousand (1,000) liters at one removal, without prepayment of the tax thereon under a permit which shall be granted by the Commissioner. Such permit shall be aZxed to every package so removed and shall be cancelled or destroyed in such manner as the Commissioner may prescribe. Thereafter, the manufacturer of such fermented liquors shall pay the tax in the same manner and under the same penalty and liability as when paid at the brewery. SEC. 139. Removal of Damaged Liquors Free of Tax. - When any fermented liquor has become sour or otherwise damaged so as to be unSt for use as such, brewers may sell and after securing a special permit from the Commissioner, under such conditions as may be prescribed in the rules and regulations prescribed by the Secretary of Finance, remove the same without https://www.bir.gov.ph/index.php/tax-code.html Page 105 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 the payment of tax thereon in cask or other packages, distinct from those ordinarily used for fermented liquors, each containing not less than one hundred seventy-Sve (175) liters with a note of their contents permanently aZxed thereon. SEC. 140. Removal of Tobacco Products without Prepayment of Tax. - Products of tobacco entirely unSt for chewing or smoking may be removed free of tax for agricultural or industrial use, under such conditions as may be prescribed in the rules and regulations prescribed by the Secretary of Finance. Stemmed leaf tobacco, Sne-cut shorts, the refuse of Sne-cut chewing tobacco, scraps, cuttings, clippings, stems, or midribs, and sweepings of tobacco may be sold in bulk as raw material by one manufacturer directly to another without payment of the tax, under such conditions as may be prescribed in the rules and regulations prescribed by the Secretary of Finance. 'Stemmed leaf tobacco,' as herein used, means leaf tobacco which has had the stem or midrib removed. The term does not include broken leaf tobacco. CHAPTER III EXCISE TAX ON ALCOHOL PRODUCTS SEC. 141. Distilled Spirits. - [36] On distilled spirits, subject to the provisions of Section 133 of this Code, an excise tax shall be levied, assessed and collected based on the following schedules: (A) Effective January 1, 2020 (1) An ad valorem tax equivalent to twenty-two percent (22%) of the net retail price (excluding the excise tax and the value-added tax) per proof; and (2) In addition to the ad valorem tax herein imposed, a speciSc tax of Forty-two pesos (P42.00) per proof liter. (B) Effective January 1, 2021 (1) An ad valorem equivalent to twenty-two percent (22%) of the net retail price (excluding the excise tax and the value-added tax) per proof; and (2) In addition to the ad valorem tax herein imposed, the speciSc tax of Forty-seven pesos (P47.00) per proof liter. (C) Effective January 1, 2022 (1) An ad valorem equivalent to twenty-two percent (22%) of the net retail price (excluding the excise tax and the value-added tax) per proof; and (2) In addition to the ad valorem tax herein imposed, the speciSc tax of Fifty-two pesos (P52.00) per proof liter. (D) Effective January 1, 2023 (1) An ad valorem equivalent to twenty-two percent (22%) of the net retail price (excluding the excise tax and the value-added tax) per proof; and https://www.bir.gov.ph/index.php/tax-code.html Page 106 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (2) In addition to the ad valorem tax herein imposed, the speciSc tax of Fifty-nine pesos (P59.00) per proof liter. (E) Effective January 1, 2024 (1) An ad valorem equivalent to twenty-two percent (22%) of the net retail price (excluding the excise tax and the value-added tax) per proof; and (2) In addition to the ad valorem tax herein imposed, the speciSc tax of Sixty-six pesos (P66.00) per proof liter. (F) In addition to the ad valorem tax herein imposed, the speciSc tax imposed under this Section shall be increased by six percent (6%) every year thereafter, effective January 1, 2025, through revenue regulations to be issued by the Secretary of Finance. Medicinal preparations, bavoring extracts, and all other preparations, except toilet preparations, of which, excluding water, distilled spirits form the chief ingredient, shall be subject to the same tax as such chief ingredient. This tax shall be proportionally increased for any strength of the spirits taxed over proof spirits, and the tax shall attach to this substance as soon as it is in existence as such, whether it be subsequently separated as pure or impure spirits, or transformed into any other substance either in the process of original production or by any subsequent process. 'Spirits or distilled spirits' is the substance known as ethyl alcohol, ethanol or spirits of wine, including all dilutions, puriScations and mixtures thereof, from whatever source, by whatever process produced, and shall include whisky, brandy, rum, gin and vodka, and other similar products or mixtures. 'Proof spirits' is liquor containing one-half (1/2) of its volume of alcohol of a speciSc gravity of seven thousand nine hundred and thirty-nine thousandths (0.7939) at Sfteen degrees centigrade (15˚C). A 'proof liter' means a liter of proof spirits. ‘Net retail price’ shall mean the price at which the distilled spirit is sold on retail in at least Sve (5) major supermarkets in Metro Manila, excluding the amount intended to cover the applicable excise tax and the value-added tax. For distilled spirits which are marketed outside Metro Manila, the ‘net retail price’ shall mean the price at which the distilled spirits is sold in at least Sve (5) major supermarkets in the region excluding the amount intended to cover the applicable excise tax and the value- added tax. This shall initially be validated by the Bureau of Internal Revenue through a price survey. Major supermarkets , as contemplated under this Act, shall be those with the highest annual gross sales in Metro Manila or the region, as the case may be, as determined by the Bureau of Internal Revenue, and shall exclude retail outlets or kiosks, convenience or sari-sari stores, and others of a similar nature: Provided, That no two (2) supermarkets in the list to be surveyed are aZliated and/or branches of each other: Provided, Snally, That in case a particular distilled spirit is not sold in major supermarkets, the price survey can be conducted in retail outlets where said distilled spirit is sold in Metro Manila or the region, as the case maybe, upon determination of the Commissioner of the Internal Revenue. The net retail price shall be determined by the Bureau of Internal Revenue (BIR) through a biannual price survey under oath. The methodology and all pertinent documents used in the conduct of the latest price survey shall be submitted to the Congressional Oversight Committee on the Comprehensive Tax Reform Program (COCCTRP) created under Republic Act No. 8240. https://www.bir.gov.ph/index.php/tax-code.html Page 107 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Understatement of the suggested net retail price by as much as Sfteen percent (15%) of the actual net retail price shall render the manufacturer or importer liable for additional excise tax equivalent to the tax due and difference between the understated suggested net retail price and the actual net retail price. Distilled spirits introduced in the domestic market after the effectivity of this Act shall be initially taxed according to their suggested net retail prices. ‘Suggested net retail price’ shall mean the net retail price (excluding the excise tax and the value-added tax) at which locally manufactured or imported distilled spirits are intended by the manufacturer or importer to be sold on retail in major supermarkets or retail outlets in Metro Manila for those marketed nationwide, and in other regions, for those with regional markets. At the end of three (3) months from the product launch, the Bureau of Internal Revenue shall validate the suggested net retail price of the new brand against the net retail price as deSned herein and initially determine the correct tax on a newly introduced distilled spirits. After the end of nine (9) months from such validation, the Bureau of Internal Revenue shall revalidate the initially validated net retail price against the net retail price as of the time of revalidation in order to Snally determine the correct tax on a newly introduced distilled spirits. All distilled spirits existing in the market at the time of the effectivity of this Act shall be taxed according to the tax rates provided above based on the latest price survey of the distilled spirits conducted by the Bureau of Internal Revenue. The methodology and all pertinent documents used in the conduct of the latest price survey shall be submitted to the Congressional Oversight Committee on the Comprehensive Tax Reform Program created under Republic Act No. 8240. Manufacturers and importers of distilled spirits shall, within thirty (30) days from the effectivity of this Act, and within the Srst Sve (5) days of every third month thereafter, submit to the Commissioner a sworn statement of the volume of sales and removals for each particular brand of distilled spirits sold at his establishment for the three-month period immediately preceding. Any manufacturer or importer who, in violation of this Section, misdeclares or misrepresents in his or its sworn statement herein required any pertinent data or information shall, upon Snal Sndings by the Commissioner that the violation was committed, be penalized by a summary cancellation or withdrawal of his or its permit to engage in business as manufacturer or importer of distilled spirits. Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be Sned treble the amount of deSciency taxes, surcharges and interest which may be assessed pursuant to this Section. Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. Any person who willfully aids or abets in the commission of any such act or omission shall be criminally liable in the same manner as the principal. If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence, without further proceedings for deportation. SEC. 142. Wines. - [36] On wines, there shall be levied, assessed and collected effective on January 1, 2020, an excise tax equivalent to Fifty pesos (P50.00) per liter. The rate of tax imposed under this Section shall be increased by six percent (6%) every year thereafter, effective January 1, 2021, through revenue regulations issued by the Secretary of Finance. https://www.bir.gov.ph/index.php/tax-code.html Page 108 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Manufacturers and importers of wines shall, within thirty (30) days from the effectivity of this Act, and within the Srst Sve (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume of sales and removals for each particular brand of wines sold at his establishment for the three-month period immediately preceding. Any manufacturer or importer who, in violation of this Section, misdeclares or misrepresents in his or its sworn statement herein required any pertinent data or information shall, upon Snal Sndings by the Commissioner that the violation was committed be penalized by a summary cancellation or withdrawal of his or its permit to engage in business as manufacturer or importer of wines. Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be Sned treble the amount of deSciency taxes, surcharges and interest which may be assessed pursuant to this Section. Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. Any person who willfully aids or abets in the commission of any such act or omission shall be criminally liable in the same manner as the principal. If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence, without further proceedings for deportation. Sec. 143. Fermented Liquor. - [36] There shall be levied, assessed and collected an excise tax on beer, lager beer, ale, porter and other fermented liquors regardless if manufactured in factories or sold and brewed at micro-breweries or small establishments such as pubs and restaurants, except tuba, basi, tapuy and similar domestic fermented liquors in accordance with the following schedule: Effective on January 1, 2020, the tax shall be Thirty-Sve pesos (P35.00) per liter; Effective on January 1, 2021, the tax shall be Thirty-seven pesos (P37.00) per liter; Effective on January 1, 2022, the tax shall be Thirty-nine pesos (P39.00) per liter; Effective on January 1, 2023, the tax shall be Forty-one pesos (P41.00) per liter; and Effective on January 1, 2024, the tax shall be Forty-three pesos (P43.00) per liter. The rates of tax imposed under this Section shall be increased by six percent (6%) every year thereafter effective on January 1, 2025, through revenue regulations issued by the Secretary of Finance. Every brewer, manufacturer or importer of fermented liquor shall, within thirty (30) days from the effectivity of this Act, and within the Srst Sve (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume of sales and removals for each particular brand of fermented liquor sold at his establishment for the three-month period immediately preceding. Any brewer, manufacturer or importer who, in violation of this Section, misdeclares or misrepresents in his or its sworn statement herein required any pertinent data or information shall, upon Snal Sndings by the Commissioner that the violation was committed, be penalized by a summary cancellation or withdrawal of his or its permit to engage in business as brewer, manufacturer or importer of fermented liquor. https://www.bir.gov.ph/index.php/tax-code.html Page 109 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be Sned treble the amount of deSciency taxes, surcharges and interest which may be assessed pursuant to this Section. Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. Any person who willfully aids or abets in the commission of any such act or omission shall be criminally liable in the same manner as the principal. If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence, without further proceedings for deportation. CHAPTER IV EXCISE TAX ON TOBACCO PRODUCTS SEC. 144. Tobacco Products, Heated Tobacco Products, and Vapor Products. [36] - There shall be collected an excise tax of One peso and seventy-Sve centavos (P1.75) effective on January 1, 2013 on each kilogram of the following products of tobacco: (A) Tobacco Products. - There shall be collected an excise tax of One peso and seventy-Sve centavos (P1.75) effective on January 1, 2013 on each kilogram of the following products of tobacco: (a) Tobacco twisted by hand or reduced into a condition to be consumed in any manner other than the ordinary mode of drying and curing; (b) Tobacco prepared or partially prepared with or without the use of any machine or instruments or without being pressed or sweetened except as otherwise provided hereunder; and (c) Fine-cut shorts and refuse, scraps, clippings, cuttings, stems and sweepings of tobacco except as otherwise provided hereunder. Stemmed leaf tobacco, tobacco prepared or partially prepared with or without the use of any machine or instrument or without being pressed or sweetened, Sne-cut shorts and refuse, scraps, clippings, cuttings, stems, midribs, and sweepings of tobacco resulting from the handling or stripping of whole leaf tobacco shall be transferred, disposed of, or otherwise sold, without any prepayment of the excise tax herein provided for, if the same are to be exported or to be used in the manufacture of cigars, cigarettes, or other tobacco products on which the excise tax will eventually be paid on the Snished product, under such conditions as may be prescribed in the rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner. On tobacco specially prepared for chewing so as to be unsuitable for use in any other manner, on each kilogram, One peso and Sfty centavos (P1.50) effective on January 1, 2013. The rates of tax imposed under this Section shall be increased by four percent. (4%) every year thereafter effective on January 1, 2014, through revenue regulations issued by the Secretary of Finance. https://www.bir.gov.ph/index.php/tax-code.html Page 110 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 No tobacco products manufactured in the Philippines and produced for export shall be removed from their place of manufacture or exported without posting of an export bond equivalent to the amount of the excise tax due thereon if sold domestically: Provided, however, That tobacco products for export may be transferred from the place of manufacture to a bonded facility, upon posting of a transfer bond, prior to export. Tobacco products imported into the Philippines and destined for foreign countries shall not be allowed entry without posting a bond equivalent to the amount of customs duty, excise and value-added taxes due thereon if sold domestically. Manufacturers and importers of tobacco products shall, within thirty (30) days from the effectivity of this Act, and within the Srst Sve (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume of sales for each particular brand of tobacco products sold for the three-month period immediately preceding. Any manufacturer or importer who, in violation of this Section, misdeclares or misrepresents hi his or its sworn statement herein required any pertinent data or information shall, upon Snal Sndings by the Commissioner that the violation was committed, be penalized by a summary cancellation or withdrawal of his or its permit to engage in business as manufacturer or importer of cigars or cigarettes. Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be Sned treble the amount of deSciency taxes, surcharges and interest which may be assessed pursuant to this Section. Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. Any person who willfully aids or abets in the commission of any such act or omission shall be criminally liable in the same manner as the principal. If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence, without further proceedings for deportation. (B) Heated Tobacco Products. [36] - There shall be levied, assessed and collected on heated tobacco products an excise tax at the rate prescribed below: Effective on January 1, 2020, Twenty-Sve pesos (P25.00) per pack of twenty (20) units or packaging combinations of not more than twenty (20) units; Effective on January 1, 2021, Twenty-seven pesos and Sfty centavos (P27.50) per pack of twenty (20) units or packaging combinations of not more than twenty (20) units; Effective on January 1, 2022, Thirty pesos (P30.00) per pack of twenty (20) units or packaging combinations of not more than twenty (20) units; and Effective on January 1,2023, Thirty-two pesos and Sfty centavos (P32.50) per pack of twenty (20) units or packaging combinations of not more than twenty (20) units. The rates of tax imposed under this Subsection, shall be increased by Sve percent (5%) every year effective on January 1, 2024 through revenue regulations issued by the Secretary of Finance. Heated tobacco products shall only be packed in twenties and other packaging combinations of not more than twenty (20) units. https://www.bir.gov.ph/index.php/tax-code.html Page 111 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 No heated tobacco products manufactured in the Philippines and produced for export shall be removed from their place of manufacture or exported without posting of an export bond equivalent to the amount of the excise tax due thereon if sold domestically: Provided, however, That heated tobacco products for export may be transferred from the place of manufacture to a bonded facility, upon posting of a transfer bond, prior to export. Heated tobacco products imported into the Philippines and destined for foreign countries shall not be allowed entry without posting a bond equivalent to the amount of customs duty, excise and value-added taxes due thereon if sold domestically. Manufacturers, distributors, and importers of heated tobacco products shall, within thirty (30) days from the effectivity of this Act, and within the Srst Sve (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume of sales and removals for each particular brand of heated tobacco products sold for the three-month period immediately preceding. Any manufacturer, distributor, or importer who, in violation of this Section, misdeclares or misrepresents in his or its sworn statement herein required any pertinent data or information shall, upon Snal Sndings by the Commissioner that the violation was committed, be penalized by a summary cancellation or withdrawal of his/her or its permit to engage in business as manufacturer, distributor, or importer of heated tobacco products. Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be Sned treble the amount of deSciency taxes, surcharges and interest which may be assessed pursuant to this Section. Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. Any person who willfully aids or abets in the commission of any such act or omission shall be criminally liable in the same manner as the principal. If the offender is not a citizen of the Philippines, he/she shall be deported immediately after serving the sentence, without further proceedings for deportation. The Food and Drug Administration (FDA) shall periodically determine and regulate, consistent with evolving medical and scientiSc studies, the manufacture, importation, sale, packaging, advertising, and distribution of heated tobacco products, including banning the sale to nonsmokers or persons below twenty-one (21) years old. Selling heated tobacco products to persons below twenty-one (21) years old shall he prohibited, and shall be punished with a Sne of Ten thousand pesos (P10,000.00) and imprisonment of thirty (30) days. Unit packets and any outside wrapping of heated tobacco products and other similar products shall carry a health warning compliant with Republic Act No. 10643, otherwise known as ‘The Graphic Health Warnings Law’. Manufacturers, distributors, importers, and sellers of heated tobacco products are given a period of eighteen (18) months from the effectivity of the implementing rules and regulations (IRR) of this Act to comply with the requirements under such IRR. Eighteen (18) months after the effectivity of this Act, no person or legal entity shall sell or commercially distribute or display any heated tobacco product without ensuring that the labels and packages, as well as any other container used in displaying the said products meet the requirements under this Act. Any violation of the foregoing provisions on health warnings shall be punishable with the same penalties provided for in Republic Act No. 10643, otherwise known as ‘The Graphic Health Warnings Law’. https://www.bir.gov.ph/index.php/tax-code.html Page 112 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 The Bureau of Internal Revenue is mandated to issue a revenue regulation prescribing the boor price or the minimum price of heated tobacco product taking into account the sum of the excise and value- added taxes as provided herein. (C) Vapor Products. [36] - There shall be levied, assessed and collected on vapor products an excise tax at the rates prescribed below: (1) Nicotine Salt or Salt Nicotine. - There shall be levied, assessed and collected on any liquid substance, regardless of nicotine content, including nicotine-free liquids or any similar product, further classiSed as nicotine salt or salt nicotine, an excise tax based on the following schedules: Effective on January 1, 2020, Thirty-seven pesos (P37.00) per milliliter or a fraction thereof; Effective on January 1, 2021, Forty-two pesos (P42.00) per milliliter or a fraction thereof; Effective on January 1, 2022, Forty-seven pesos (P47.00) per- milliliter or a fraction thereof; and Effective on January 1, 2023, Fifty-two pesos (P52.00) per milliliter or a fraction thereof. Provided, That the rates of tax imposed under this Subsection shall be increased by Sve percent (5%) every year effective on January 1, 2024, through revenue regulations issued by the Secretary of Finance. (2) Conventional 'Freebase' or 'Classic' Nicotine. - There shall be levied, assessed and collected on any liquid substance, regardless of nicotine content, including nicotine-free liquid or any similar product, further classiSed as conventional 'freebase' or 'classic' nicotine an excise tax based on the following schedules: Effective on January 1, 2020, Forty-Sve pesos (P45.00) per ten (10) milliliters or a fraction thereof; Effective on January 1, 2021, Fifty pesos (P50.00) per ten (10) milliliters or a fraction thereof; Effective on. January 1, 2022, Fifty-Sve pesos (P55.00) per ten (10) milliliters or a fraction thereof; and Effective on January 1, 2023, Sixty pesos (P60.00) per ten (10) milliliters or a fraction thereof. Provided, That the rates of tax imposed under this Subsection shall be increased by Sve percent (5%) every year effective January 1, 2024, through revenue regulations to be issued by the Secretary of Finance. Manufacturers, distributors, and importers of vapor products shall be required to indicate on the package the actual volume in milliliters of the liquid solutions and gels. No vapor products manufactured in the Philippines and produced for export shall be removed from their place of manufacture or exported without posting of an export bond equivalent to the amount of the excise tax due thereon if sold domestically: Provided, however, That vapor products for export may be transferred from the place of manufacture to a bonded facility, upon posting of a transfer bond, prior to export. Vapor products imported into the Philippines and destined for foreign countries shall not be allowed entry without posting a bond equivalent to the amount of customs duty, excise and value-added taxes due thereon if sold domestically. https://www.bir.gov.ph/index.php/tax-code.html Page 113 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Manufacturers, distributors, and importers of vapor products shall, within thirty (30) days from the effectivity of this Act, and within the Srst Sve (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume of sales for each particular brand of vapor products sold for the three-month period immediately preceding. Any manufacturer, distributor, or importer who, in violation of this Section, misdeclares or misrepresents in his/her or its sworn statement herein required any pertinent data or information shall, upon Snal Sndings by the Commissioner that the violation was committed, be penalized by a summary cancellation or withdrawal of his/her or its permit to engage in business as manufacturer, distributor, or importer of vapor products. Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be Sned treble the amount of deSciency taxes, surcharges and interest which may be assessed pursuant to this Section. Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. Any person who willfully aids or abets in the commission of any such act or omission shall be criminally liable in the same manner as the principal. If the offender is not a citizen of the Philippines, he/she shall be deported immediately after serving the sentence, without further proceedings for deportation. The FDA shall periodically determine and regulate, consistent with evolving medical and scientiSc studies, the manufacture, importation, sale, packaging, advertising, and distribution of vapor products, including banning the sale to nonsmokers or persons below twenty-one (21) years old, and banning of bavorings. Provided, That vapor products which exceed sixty-Sve milligrams of nicotine per milliliter (65mg/ml) of liquid or gel, or which does not exceed this limit but seeks to make health claims, shall be subject to additional requirements as the DOH and the FDA may impose: Provided, however, That this shall not diminish the regulatory powers of the FDA over vapor products, regardless of nicotine content. Selling vapor products to persons below twenty-one (21) years old shall be prohibited, and shall be punished with a Sne of Ten thousand pesos (P10,000.00) and imprisonment of (30) days. The manufacture, importation, sale and distribution of vapor products with bavoring other than plain tobacco or plain menthol, shall be prohibited. Unit packets and any outside wrapping of vapor products and other similar products shall carry a health warning compliant with Republic Act No. 10643, otherwise known as ‘The Graphic Health Warnings Law’. Manufacturers, distributors, importers, and sellers of vapor products are given a period of eighteen (18) months from the effectivity of the IRR of this Act to comply with the requirements under such IRR. Eighteen (18) months after the effectivity of this Act, no person or legal entity shall sell or commercially distribute or display any vapor product without ensuring that the labels and packages, as well as any other container used in displaying the said products meet the requirements under this Act. Any violation of the foregoing provisions on health warning shall be punishable with the same penalties provided for in Republic Act No. 10643, otherwise known as ‘The Graphic Health Warnings Law’. https://www.bir.gov.ph/index.php/tax-code.html Page 114 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Notwithstanding the provisions of this Act on heated tobacco products and vapor products, this Act acknowledges the need for further scientiSc evidence on the health impact of these products. The Bureau of Internal Revenue is mandated to issue a revenue regulation prescribing the boor price or the minimum price of vapor products taking into account the sum of the excise tax and value-added tax as provided herein. SEC. 145. Cigars and Cigarettes. - (A) Cigars. - There shall be levied, assessed and collected on cigars an excise tax in accordance with the following schedule: (1) Effective on January 1, 2013 (a) An ad valorem tax equivalent to twenty percent (20%) of the net retail price (excluding the excise tax and the value-added tax) per cigar; and (b) In addition to the ad valorem tax herein imposed, a speciSc tax of Five pesos (P5.00) per cigar. (2) In addition to the ad valorem tax herein imposed, the speciSc tax rate of Five pesos (₱5.00) imposed under this Subsection shall be increased by Sve percent (5%) effective on January 1, 2024 [129] through revenue regulations issued by the Secretary of Finance. ‘Net-retail price’ shall mean the price at which the cigar is sold on retail in at least Sve (5) major supermarkets in Metro Manila (for brands of cigar marketed nationally), excluding the amount intended to cover the applicable excise tax and the value- added tax. For cigars which are marketed only outside Metro Manila, the ‘net retail price’ shall mean the price at which the cigar is sold in at least Sve (5) major supermarkets in the region excluding the amount intended to cover the applicable excise tax and the value-added tax. This shall be provided by the manufacturer or importer through a sworn statement and shall be validated by the Bureau of Internal Revenue (BIR) through a price survey. Major supermarkets, as contemplated under this Act, shall be those with the highest annual gross sales in Metro Manila or the region, as the case may be, as determined by the BIR, and snail exclude retail outlets or kiosks, convenience or sari-sari stores, and others of a similar nature: Provided, That no two (2) supermarkets in the list to be surveyed are aZliated and/or branches of each other: Provided, Snally, That in case a particular cigar is not sold in major supermarkets, the price survey can be conducted in retail outlets where said cigar is sold in Metro Manila or the region, as the case may be, upon determination of the Commissioner of Internal Revenue. The net retail price shall be validated by the BIR through a biannual price survey under oath. The methodology and all pertinent documents used in the conduct of the latest price survey shall be submitted to the Congressional Oversight Committee on the Comprehensive Tax Reform Program created under Republic Act No. 8240.[130] (B) Cigarettes Packed by Hand. - There shall be levied, assessed and collected on cigarettes packed by hand an excise tax based on the following schedules: Effective on January 1, 2020, Forty-Sve pesos (₱45.00) per pack; Effective on January 1, 2021. Fifty pesos (₱50.00) per pack; https://www.bir.gov.ph/index.php/tax-code.html Page 115 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Effective on January 1, 2022, Fifty-Sve pesos (₱55.00) per pack; Effective on January 1, 2023, Sixty pesos (₱60.00) per pack;[131] The rates of tax imposed under this Subsection shall be increased by Sve percent (5%) [132] every year effective on January 1, 2024,[133] through revenue regulations issued by the Secretary of Finance. Duly registered cigarettes packed by hand shall only be packed in twenties and other packaging combinations of not more than twenty (20).[134] ‘Cigarettes packed by hand’ shall refer to the manner of packaging of cigarette sticks using an individual person’s hands and not through any other means such as a mechanical device, machine or equipment. (C) Cigarettes Packed by Machine. – There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates prescribed below: Effective on January 1,2020, Forty-Sve pesos (₱45.00) per pack; Effective on January 1, 2021, Fifty pesos (₱50.00) per pack; Effective on January 1. 2022, Fifty-Sve pesos (₱55.00) per pack; Effective on January 1, 2023, Sixty pesos (₱60.00) per pack;[135] The rates of tax imposed under this Subsection shall be increased by Sve percent (5%) [132] every year effective on January 1, 2024,[133] through revenue regulations issued by the Secretary of Finance. Duly registered cigarettes packed by machine shall only be packed in twenties and other packaging combinations of not more than twenty (20). Understatement of the suggested net retail price by as much as Sfteen percent (15%) of the actual net retail price shall render the manufacturer or importer liable for additional excise tax equivalent to the tax due and difference between the understated suggested net retail price and the actual net retail price. No tobacco products manufactured in the Philippines and produced for export shall be removed from their place of manufacture or exported without posting of an export bond equivalent to the amount of the excise tax due thereon if sold domestically: Provided, however, That tobacco products for export may be transferred from the place of manufacture to a bonded facility, upon posting of a transfer bond, prior to export. Tobacco products imported into the Philippines and destined for foreign countries shall not be allowed entry without posting a bond equivalent to the amount of customs duty, excise and value-added taxes due thereon if sold domestically. Manufacturers and importers of cigars and cigarettes shall, within thirty (30) days from the effectivity of this Act and within the Srst Sve (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume of sales and removals for cigars and/or cigarettes for the three-month period immediately preceding. https://www.bir.gov.ph/index.php/tax-code.html Page 116 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Any manufacturer or importer who, in violation of this Section, misdeclares or misrepresents in his/her or its sworn statement herein required any pertinent data or information shall, upon Snal Sndings by the Commissioner that the violation was committed, be penalized by a summary cancellation or withdrawal of his/her or its permit to engage in business as manufacturer or importer of cigars or cigarettes. Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be Sned treble the aggregate amount of deSciency taxes, surcharges and interest which may be assessed pursuant to this Section. Selling of tobacco products at a price lower than the combined excise and value-added taxes imposed under the law shall be prohibited. The seller of such products shall be punished with a Sne of not less than ten (10) times the amount of excise plus value-added taxes due but not less than Two hundred thousand pesos (₱200:000.00) nor more than Five hundred thousand pesos (500,000.00), and imprisonment of not less than four (4) years but not more than six (6) years. The BIR is mandated to issue a revenue regulation prescribing the cigarette boor price or the minimum cigarette price taking into account the sum of the excise and value-added taxes as provided herein. Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. Any person who willfully aids or abets in the commission of any such act or omission shall be criminally liable in the same manner as the principal. If the offender is not a citizen of the Philippines, he/she shall be deported immediately after serving the sentence, without further proceedings for deportation.[136] SEC. 146. Inspection Fee. - For inspection made in accordance with this Chapter, there shall be collected a fee of Fifty centavos (₱0.50) for each thousand cigars or fraction thereof; Ten centavos (₱0.10) for each thousand cigarettes or fraction thereof; Ten centavos (₱0.10) for each thousand unit of heated tobacco products; One centavo (₱0.01) for each milliliter of liquid used in vapor products;[137] Two centavos (₱0.02) for each kilogram of leaf tobacco or fraction thereof; and Three centavos (₱0.03) for each kilogram or fraction thereof, of scrap and other manufactured tobacco. The inspection fee on leaf tobacco, scrap, cigars, cigarettes and other tobacco products as deSned in Section 147 of this Code shall be paid by the wholesaler, manufacturer, producer, owner or operator of redrying plant, as the case may be, immediately before removal thereof from the establishment of the wholesaler, manufacturer, owner or operator of the re- drying plant. In case of imported leaf tobacco and products thereof, the inspection fee shall be paid by the importer before removal from customs' custody. Fifty percent (50%) of the tobacco inspection fee shall accrue to the Tobacco Inspection Fund created by Section 12 of Act No. 2613, as amended by Act No. 3179, and Sfty percent (50%) shall accrue to the Cultural Center of the Philippines. SEC. 147. DeQnition of Terms. - When used herein and in statements or oZcial forms prescribed hereunder, the following terms shall have the meaning indicated: (a) 'Cigars' mean all rolls of tobacco or any substitute thereof, wrapped in leaf tobacco that are consumed via combustion of the tobacco.[138] (b) 'Cigarettes' mean all rolls of Snely-cut leaf tobacco, or any substitute therefor, wrapped in paper or in any other material that are consumed via combustion of the tobacco.[138] https://www.bir.gov.ph/index.php/tax-code.html Page 117 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (c) 'Wholesale price' shall mean the amount of money or price paid for cigars or cigarettes purchased for the purpose of resale, regardless of quantity. (d) 'Retail price' shall mean the amount of money or price which an ultimate consumer or end-user pays for cigars or cigarettes purchased. (e) ‘Heated tobacco products’ refer to tobacco products that may be consumed through heating tobacco, either electrically or through other means suZciently to release an aerosol that can be inhaled, without burning or any combustion of the tobacco. Heated tobacco products include liquid solutions and gels that are part of the product and are heated to generate an aerosol.[138] (f) ‘Vapor products’ shall mean electronic nicotine and non-nicotine delivery systems (ENDS/ENNDS), which are combinations of (i) a liquid solution or gel, that transforms into an aerosol without combustion through the employment of a mechanical or electronic heating element, battery or circuit that can be used to heat such solution or gel, and includes, but is not limited to (ii) a cartridge, (iii) a tank, and (iv) the device without a cartridge or tank. It is commonly known as nicotine salt/salt nicotine, and conventional “freebase” or “classic” nicotine, and other similar products: Provided, That all vapor products shall be covered by this Act regardless of its nicotine content. [138] CHAPTER V EXCISE TAX ON PETROLEUM PRODUCTS SEC. 148. Manufactured Oils and Other Fuels. - There shall be collected on reSned and manufactured mineral oils and motor fuels, the following excise taxes which shall attach to the goods hereunder enumerated as soon as they are in existence as such: Effective January 1, 2018 (a) Lubricating oils and greases, including but not limited to, basestock for lube oils and greases, high vacuum distillates, aromatic extracts, and other similar preparations, and additives for lubricating oils and greases, whether such additives are petroleum based or not, per liter and kilogram respectively, of volume capacity or weight, Eight pesos (P8.00): Provided, That lubricating oils and greases produced from basestocks and additives on which the excise tax has already been paid shall no longer be subject to excise tax: Provided, further, That locally produced or imported oils previously taxed as such but are subsequently reprocessed, re-reSned or recycled shall likewise be subject to the tax imposed under this Section. [139] (b) Processed gas, per liter of volume capacity, Eight pesos (P8.00);[140] (c) Waxes and petrolatum, per kilogram, Eight pesos (P8.00);[141] (d) On denatured alcohol to be used for motive power, per liter of volume capacity, Eight pesos (P8.00):[140] Provided, That unless otherwise provided by special laws, if the denatured alcohol is mixed with gasoline, the excise tax on which has already been paid, only the alcohol content shall be subject to the tax herein prescribed. For purposes of this https://www.bir.gov.ph/index.php/tax-code.html Page 118 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Subsection, the removal of denatured alcohol of not less than one hundred eighty degrees (180o) proof (ninety percent (90%) absolute alcohol) shall be deemed to have been removed for motive power, unless shown otherwise; (e) Naphtha, regular gasoline, pyrolysis gasoline [142] and other similar products of distillation, per liter of volume capacity, Seven pesos (P7.00): [143] Provided, however, That naphtha and pyrolysis gasoline, [142] when used as a raw material in the reproduction of petrochemical products or in reSning of petroleum products, [142] or as replacement fuel for natural-gas-Sred-combined cycle power plant in lieu of locally-extracted natural gas during the non-availability thereof, subject to the rules and regulations to be promulgated by the Secretary of Finance,[144] per liter of volume capacity, zero (P0.00): Provided, further, That the production of petroleum products, whether or not they are classiSed as products of distillation and for use solely for the production of gasoline shall be exempt from excise tax:[142] Provided, Snally, That the by-product including fuel oil, diesel fuel, kerosene, pyrolysis gasoline, liqueSed petroleum gases and similar oils having more or less the same generating power, which are produced in the processing of naphtha into petrochemical products shall be subject to the applicable excise tax speciSed in this Section, except when such by- products are transferred to any of the local oil reSneries through sale, barter or exchange, for the purpose of further processing or blending into Snished products which are subject to excise tax under this Section; (f) Unleaded premium gasoline, per liter of volume capacity, Seven pesos (P7.00);[145] (g) Aviation turbo jet fuel, aviation gas,,[142] per liter of volume capacity, Four pesos (P4.00);[146] (h) Kerosene, per liter of volume capacity, Three pesos (P3.00):[147] Provided, That kerosene, when used as aviation fuel, shall be subject to the same tax on aviation turbo jet fuel under the preceding paragraph (g), such tax to be assessed on the user thereof; (i) Diesel fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, Two pesos and Sfty centavos (P2.50);[147] (j) LiqueSed petroleum gas, per kilogram, One peso (P1.00):[147] Provided, That liqueSed petroleum gas when used as raw material in the production of petrochemical products, subject to the rules and regulations to be promulgated by the Secretary of Finance, shall be taxed zero (P0.00) per kilogram:[142] Provided, Snally, That liqueSed petroleum gas used for motive power shall be taxed at the equivalent rate as the excise tax on diesel fuel oil; (k) Asphalts, per kilogram, Eight pesos (P8.00);[148] (l) Bunker fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, Two pesos and Sfty centavos (P2.50):[147] Provided, however, That the excise taxes paid on the purchased basestock (bunker) used in the manufacture of excisable articles and forming part thereof shall be credited against the excise tax due therefrom;[142] and (m) Petroleum coke, per metric ton, Two pesos and Sfty centavos (P2.50): Provided, however, That, petroleum coke, when used as feedstock to any power generating facility, per metric ton, zero (P0.00).[142] Effective January 1, 2019[142] https://www.bir.gov.ph/index.php/tax-code.html Page 119 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (a) Lubricating oils and greases, including but not limited to, basestock for lube oils and greases, high vacuum distillates, aromatic extracts, and other similar preparations, and additives for lubricating oils and greases, whether such additives are petroleum based or not, per liter and kilogram respectively, of volume capacity or weight, Nine pesos (P9.00): Provided, That lubricating oils and greases produced from basestocks and additives on which the excise tax has already been paid shall no longer be subject to excise tax: Provided, further, That locally produced or imported oils previously taxed as such but are subsequently reprocessed, re-reSned or recycled shall likewise be subject to the tax imposed under this Section. (b) Processed gas, per liter of volume capacity, Nine pesos (P9.00); (c) Waxes and petrolatum, per kilogram, Nine pesos (P9.00); (d) On denatured alcohol to be used for motive power, per liter of volume capacity, Nine pesos (P9.00): Provided, That unless otherwise provided by special laws, if the denatured alcohol is mixed with gasoline, the excise tax on which has already been paid, only the alcohol content shall be subject to the tax herein prescribed. For purposes of this Subsection, the removal of denatured alcohol of not less than one hundred eighty degrees (180o) proof (ninety percent (90%) absolute alcohol) shall be deemed to have been removed for motive power, unless shown otherwise; (e) Naphtha, regular gasoline, pyrolysis gasoline and other similar products of distillation, per liter of volume capacity, Nine pesos (P9.00): Provided, however, That naphtha and pyrolysis gasoline, when used as a raw material in the reproduction of petrochemical products or in reSning of petroleum products, or as replacement fuel for natural-gas-Sred- combined cycle power plant in lieu of locally-extracted natural gas during the non-availability thereof, subject to the rules and regulations to be promulgated by the Secretary of Finance, per liter of volume capacity, zero (P0.00): Provided, further, That the production of petroleum products, whether or not they are classiSed as products of distillation and for use solely for the production of gasoline shall be exempt from excise tax: Provided, Snally, That the by-product including fuel oil, diesel fuel, kerosene, pyrolysis gasoline, liqueSed petroleum gases and similar oils having more or less the same generating power, which are produced in the processing of naphtha into petrochemical products shall be subject to the applicable excise tax speciSed in this Section, except when such by-products are transferred to any of the local oil reSneries through sale, barter or exchange, for the purpose of further processing or blending into Snished products which are subject to excise tax under this Section; (f) Unleaded premium gasoline, per liter of volume capacity, Nine pesos (P9.00); (g) Aviation turbo jet fuel, aviation gas, per liter of volume capacity, Four pesos (P4.00); (h) Kerosene, per liter of volume capacity, Four pesos (P4.00): Provided, That kerosene, when used as aviation fuel, shall be subject to the same tax on aviation turbo jet fuel under the preceding paragraph (g), such tax to be assessed on the user thereof; (i) Diesel fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, Four pesos and Sfty centavos (P4.50); (j) LiqueSed petroleum gas, per kilogram, Two pesos (P2.00): Provided, That liqueSed petroleum gas when used as raw material in the production of petrochemical products, subject to the rules and regulations to be promulgated by the Secretary of Finance, shall be taxed zero (P0.00) per kilogram: Provided, Snally, That liqueSed petroleum gas used for motive power shall be taxed at the equivalent rate as the excise tax on diesel fuel oil; https://www.bir.gov.ph/index.php/tax-code.html Page 120 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (k) Asphalts, per kilogram, Nine pesos (P9.00); (l) Bunker fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, Four pesos and Sfty centavos (P4.50): Provided, however, That the excise taxes paid on the purchased basestock (bunker) used in the manufacture of excisable articles and forming part thereof shall be credited against the excise tax due therefrom; and (m) Petroleum coke, per metric ton, Four pesos and Sfty centavos (P4.50): Provided, however, That, petroleum coke, when used as feedstock to any power generating facility, per metric ton, zero (P0.00). Effective January 1, 2020[149] (a) Lubricating oils and greases, including but not limited to, basestock for lube oils and greases, high vacuum distillates, aromatic extracts, and other similar preparations, and additives for lubricating oils and greases, whether such additives are petroleum based or not, per liter and kilogram respectively, of volume capacity or weight, Ten pesos (P10.00): Provided, That lubricating oils and greases produced from basestocks and additives on which the excise tax has already been paid shall no longer be subject to excise tax: Provided, further, That locally produced or imported oils previously taxed as such but are subsequently reprocessed, re-reSned or recycled shall likewise be subject to the tax imposed under this Section. (b) Processed gas, per liter of volume capacity, Ten pesos (P10.00); (c) Waxes and petrolatum, per kilogram, Ten pesos (P10.00); (d) On denatured alcohol to be used for motive power, per liter of volume capacity, Ten pesos (P10.00): Provided, That unless otherwise provided by special laws, if the denatured alcohol is mixed with gasoline, the excise tax on which has already been paid, only the alcohol content shall be subject to the tax herein prescribed. For purposes of this Subsection, the removal of denatured alcohol of not less than one hundred eighty degrees (180o) proof (ninety percent (90%) absolute alcohol) shall be deemed to have been removed for motive power, unless shown otherwise; (e) Naphtha, regular gasoline, pyrolysis gasoline and other similar products of distillation, per liter of volume capacity, Ten pesos (P10.00): Provided, however, That naphtha and pyrolysis gasoline, when used as a raw material in the reproduction of petrochemical products or in reSning of petroleum products, or as replacement fuel for natural-gas-Sred- combined cycle power plant in lieu of locally-extracted natural gas during the non-availability thereof, subject to the rules and regulations to be promulgated by the Secretary of Finance, per liter of volume capacity, zero (P0.00): Provided, further, That the production of petroleum products, whether or not they are classiSed as products of distillation and for use solely for the production of gasoline shall be exempt from excise tax: Provided, Snally, That the by-product including fuel oil, diesel fuel, kerosene, pyrolysis gasoline, liqueSed petroleum gases and similar oils having more or less the same generating power, which are produced in the processing of naphtha into petrochemical products shall be subject to the applicable excise tax speciSed in this Section, except when such by-products are transferred to any of the local oil reSneries through sale, barter or exchange, for the purpose of further processing or blending into Snished products which are subject to excise tax under this Section; (f) Unleaded premium gasoline, per liter of volume capacity, Ten pesos (P10.00); (g) Aviation turbo jet fuel, aviation gas, per liter of volume capacity, Four pesos (P4.00); https://www.bir.gov.ph/index.php/tax-code.html Page 121 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (h) Kerosene, per liter of volume capacity, Five pesos (P5.00): Provided, That kerosene, when used as aviation fuel, shall be subject to the same tax on aviation turbo jet fuel under the preceding paragraph (g), such tax to be assessed on the user thereof; (i) Diesel fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, Six pesos (P6.00); (j) LiqueSed petroleum gas, per kilogram, Three peso (P3.00): Provided, That liqueSed petroleum gas when used as raw material in the production of petrochemical products, subject to the rules and regulations to be promulgated by the Secretary of Finance, shall be taxed zero (P0.00) per kilogram: Provided, Snally, That liqueSed petroleum gas used for motive power shall be taxed at the equivalent rate as the excise tax on diesel fuel oil; (k) Asphalts, per kilogram, Ten pesos (P10.00); (l) Bunker fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, Six pesos (P6.00): Provided, however, That the excise taxes paid on the purchased basestock (bunker) used in the manufacture of excisable articles and forming part thereof shall be credited against the excise tax due therefrom; and (m) Petroleum coke, per metric ton, Six pesos (P6.00): Provided, however, That, petroleum coke, when used as feedstock to any power generating facility, per metric ton, zero (P0.00). [150] VETOED BY THE PRESIDENT For the period covering 2018 to 2020, the scheduled increase in the excise tax on fuel as imposed in this Section shall be suspended when the average Dubai crude oil price based on Mean of Platts Singapore (MOPS) for three (3) months prior to the scheduled increase of the month reaches or exceeds Eighty dollars (USD 80) per barrel. Provided, That the Department of Finance shall perform an annual review of the implementation of the excise tax on fuel and shall, based on projections provided and recommendations of the Development budget coordination Committee, as reconciled from the conditions as provided above, recommend the implementation or suspension of the excise tax on fuel: Provided, further, That the recommendation shall be given on a yearly basis: Provided, Snally, That any suspension of the increase in excise tax shall not result in any reduction of the excise tax being imposed at the time of the suspension.[142] SEC. 148-A. Mandatory Marking of ALL Petroleum Products. [4] – In accordance with rules and regulations to be issued by the Secretary of Finance, in consultation with the Commissioner of Internal Revenue and Commissioner of Customs and in coordination with the Secretary of Energy, the Secretary of Finance shall require the use of an oZcial fuel marking or similar technology on petroleum products that are reSned, manufactured, or imported into the Philippines, and that are subject to the payment of taxes and duties, such as but not limited to, unleaded premium gasoline, kerosene, and diesel fuel oil after the taxes and duties thereon have been paid. The mandatory marking of all petroleum products shall be in accordance with the following: (a) O9cial Markers. – There shall be a list of chemical additives and corresponding quantitative ratio as identiSed by the Secretary of Finance as oZcial fuel markers. The oZcial fuel markers shall be distinct and, to the greatest degree possible, impossible to imitate or replicate: Provided, That the oZcial fuel marker must be unique to the Philippines and that its chemical composition and quantitative ratio must persist for at least three (3) years from their application or administration to the unmarked fuel; https://www.bir.gov.ph/index.php/tax-code.html Page 122 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (b) The person, entity, or taxpayer who owns or enters the petroleum products into the country, or the person to whom the petroleum products are consigned shall cause and accommodate the marking of the petroleum products with the oZcial marking agent; (c) Internal revenue or customs oZcers shall be on site to administer the declaration of the tax and duties imposed on the petroleum products and commence to the application of the fuel marking. (d) Absences of O9cial or Dilution of the O9cial Market; Presumptions. – In the event that the petroleum products which do not contain the oZcial marker or which contain the oZcial market but are diluted beyond acceptable percentage approved by the Secretary of Finance are found in the domestic market or in the possession of anyone, or under any situation where said petroleum products are subject to duties and taxes, it shall be presumed that the same were withdrawn with the intention to evade the payment of the taxes and duties due thereon; (e) The use of fraudulent marker on the petroleum products shall be considered prima facie evidence that the same have been withdrawn or imported without payment of taxes and duties due thereon; (f) Engagement of Fuel Marking Provider. – The government shall engage only one fuel marking provider who shall, under the supervision and direction of the Commissioner of Internal Revenue and Customs, be responsible for providing, monitoring, and administering the fuel markers, provide equipment and devices, conduct Seld and conSrmatory tests, and perform such other acts incident or necessary to the proper implementation of the provisions of this Act: Provided, That the fuel marking provider shall provide an end-to-end solution to the Government, including establishment and operation of testing facilities that are certiSed to ISO 17025; (g) All costs pertaining to the procurement of the oZcial markers shall be borne by the reSner. Manufacturer or importer, of petroleum products, as the case may be: Provided, That the government may subsidize the cost of oZcial fuel markers in the Srst year of implementation; (h) Fuel Marking Program Funds. – In addition to any appropriation to implement this Section and the last paragraph of Section 171 of this Act, fees or charges collected in relation to the fuel marking program may be recorded as trust receipts of the implementing agencies, and shall exclusively disbursed to defray the cost of services or equipment required to fully implement the said program, subject to rules and regulations to be issued by the DOF-DBM-COA permanent committee; (i) The marking of petroleum products shall be mandatory within Sve (5) years from the effectivity of this Act; and (j) The term ‘random Qeld test’ shall refer to periodic random inspections and test performed to establish qualitative and quantitative positive result of fuel traZcking, which are conducted on fuels found in warehouses, storage tanks, gas stations and other retail outlets, and in such other properties or equipment, including mechanisms of transportation of persons engaged in the sale, delivery, trading, transportation, distribution, or importation of fuel intended for domestic market. The term ‘conQrmatory tests’ shall refer to the accurate and precise analytical test of the tested unmarked, adulterated, or diluted fuel using a device, tool or equipment which will validate and conSrm the result of the Seld test, that is immediately conducted in an accredited testing facility that is certiSed to ISO 17025. [151] https://www.bir.gov.ph/index.php/tax-code.html Page 123 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 CHAPTER VI EXCISE TAX ON MISCELLANEOUS ARTICLES SEC. 149. Automobiles. - There shall be levied, assessed and collected an ad valorem tax on automobiles based on the manufacturer’s or importer’s selling price, net of excise and value-added tax, in accordance with the following schedule: Effective January 1, 2018[152] Net manufacturer’s price/importer’s selling Rate Up to Six hundred thousand pesos (P600,000) Four percent (4%) Over Six hundred thousand pesos (P600,000) to One Ten percent (10%) Million pesos (P1,000,000) Over One million pesos (P1,000,000) to Four Million pesos Twenty percent (20%) Over Four Million pesos (P4,000,000) Fifty percent (50%) Provided, That hybrid vehicles shall be subject to Sfty percent (50%) of the applicable excise tax rates on automobiles under this Section: Provided, further, That purely electric vehicles and pick-ups shall be exempt from excise tax on automobiles.[153] As used in this Section- (a) Automobile shall mean any four (4) or more wheeled motor vehicle regardless of seating capacity, which is propelled by gasoline, diesel, electricity or any other motive power. Provided, That for purposes of this Act, buses, trucks, cargo vans, jeeps/jeepneys [152] substitutes, single cab chassis and special-purpose vehicles shall not be considered as automobiles. (b) Trucks/cargo van shall mean a motor vehicle of any conSguration that is exclusively designed for the carriage of goods and with any number of wheels and axles: Provided, that pick-ups shall not be considered as trucks.[154] (c) Jeepney/jeepney[152] substitutes shall mean as ”Philippine jeep or jeepney“ which are of the jitney type locally designed and manufactured generally from surplus parts and components. It shall also include jeepney substitutes that are manufactured from brand-new single cab chassis or cowl chassis and locally customized rear body that has continuous sideway row seats with open rear door and without retractable glass windows. (d) Bus shall mean a motor vehicle of any conSguration with gross vehicle weight of 4.0 tons or more with any number of wheels and axles, which is generally accepted and speciScally designed for mass or public transportation. (e) Single cab chassis shall mean a motor vehicle with complete engine power train and chassis equipped with a cab that has a maximum of two (2) doors and only one (1) row of seats. (f) Special purpose vehicle shall mean a motor vehicle designed for speciSc applications such as cement mixer, Sne truck, boom truck, ambulance and/or medical unit, and off-road vehicles for heavy industries and not for recreational activities. https://www.bir.gov.ph/index.php/tax-code.html Page 124 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (g) Hybrid electric vehicle shall mean a motor vehicle powered by electric energy, with or without provision for off-vehicle charging, in combination with gasoline, diesel or any other motive power. Provided, That, for purposes of this Act, a hybrid electric vehicle must be able to propel itself from a stationary condition using solely electric motor.[153] Provided, That in the case of imported automobiles not for sale, the tax imposed herein shall be based on the total landed value, including transaction value, customs duty and all other charges. Automobiles used exclusively within the Freeport zone shall be exempt from excise tax. SEC. 150. Non-essential Goods. - There shall be levied, assessed and collected a tax equivalent to twenty-percent (20%) based on the wholesale price or the value of importation used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added tax, of the following goods: (a) All goods commonly or commercially known as jewelry, whether real or imitation, pearls, precious and semi-precious stones and imitations thereof; goods made of, or ornamented, mounted or Stted with, precious metals or imitations thereof or ivory (not including surgical and dental instruments, silver-plated wares, frames or mountings for spectacles or eyeglasses, and dental gold or gold alloys and other precious metals used in Slling, mounting or Stting the teeth); opera glasses and lorgnettes. The term ‘precious metals’ shall include platinum, gold, silver and other metals of similar or greater value. The term ‘imitations thereof‘ shall include platings and alloys of such metals; (b) Perfumes and toilet waters; (c) Yachts and other vessels intended for pleasure or sports. SEC. 150-A. Non-essential Services. – There shall be levied, assessed, and collected a tax equivalent to Sve percent (5%) based on the gross receipts derived from the performance of services, net of excise tax and value-added tax, on invasive cosmetic procedures, surgeries, and body enhancements directed solely towards improving, altering, or enhancing the patient’s appearance and do not meaningfully promote the proper function of the body or prevent or treat illness or disease. Provided, That this tax shall not apply to procedures necessary to ameliorate a deformity arising from, or directly related to, a congenital or developmental defect or abnormality, a personal injury resulting from an accident or trauma, or disSguring disease, tumor, virus or infection: Provided, further, That cases or treatments covered by the National Health Insurance Program shall not be subject to this tax.[155] SEC. 150-B. Sweetened Beverages. – (A) Rate and Base of Tax. – Effective January 1, 2018: (1) A tax of Six pesos (P6.00) per liter of volume capacity shall be levied, assessed and collected on sweetened beverages using purely caloric sweeteners, and purely non-caloric sweeteners, or a mix of caloric and non-caloric sweeteners: Provided, further, That this tax rate shall not apply to sweetened beverages using high fructose corn syrup: Provided, further, That sweetened beverages using purely coconut sap sugar and purely steviol glycosides shall be exempt from this tax; and (2) A tax of Twelve pesos (P12.00) per liter of volume capacity shall be levied, assessed, and collected on sweetened beverages using purely high fructose corn syrup or in combination with any caloric or non-caloric sweetener. (B) DeQnition of Terms. – As used in this Act: https://www.bir.gov.ph/index.php/tax-code.html Page 125 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (1) Sweetened beverages (SBs) refer to non-alcoholic beverages of any constitution (liquid, powder, or concentrates) that are pre-packaged and sealed in accordance with the Food and Drug Administration (FDA) standards, that contain caloric and/or non-caloric sweeteners added by the manufacturers, and shall include, but not limited to the following, as described in the Food Category System from Codex Alimentarius Food Category Descriptors(Codex Stan 192-1995, Rev. 2017 or the latest) as adopted by the FDA: (a) Sweetened juice drinks; (b) Sweetened tea; (c) All carbonated beverages; (d) Flavored water; (e) Energy and sports drinks; (f) Other powdered drinks not classiSed as milk, juice, tea, and coffee; (g) Cereal and grain beverages; and (h) Other non-alcoholic beverages that contain added sugar. (2) Caloric sweetener refers to a substance that is sweet and includes sucrose, fructose, and glucose that produces a certain sweetness; (3) High fructose corn syrup refers to a sweet saccharide mixture containing fructose and glucose which is derived from corn and added to provide sweetness to beverages, and which includes other similar fructose syrup preparations; and (4) Non-caloric sweetener refers to a substance that are artiScially or chemically processed that produces a certain sweetness. These are substances which can be directly added to beverages, such as aspartame, sucralose, saccharin, acesulfame potassium, neotame, cyclmates and other non-nutritive sweeteners approved by the Codex Alimentarius and adopted by the FDA. (C) Exclusions. – The following products, as described in the food category system from Codex Alimentarius Food Category Descriptors (Codex Stan 192-1995, Rev. 2017 or the latest) as adopted by the FDA, as excluded from the scope of this Act: (1) All milk products, including plain milk, infant formula milk, follow-on milk, growing up milk, powdered milk, ready-to- drink milk and bavored milk, fermented milk, soymilk, and bavored soymilk; (2) One Hundred Percent (100%) Natural Fruit Juices – Original liquid resulting from the pressing of fruit, the liquid resulting from the reconstitution of natural fruit juice concentrate, or the liquid resulting from the restoration of water to dehydrated natural fruit juice that do not have added sugar or caloric sweetener; (3) One Hundred Percent (100%) Natural vegetable Juices – Original liquid resulting from the pressing of vegetables, the liquid resulting from the reconstitution of natural vegetables juice concentrate, or the liquid resulting from the restoration of water to dehydrated natural vegetable juice that do not have added sugar or caloric sweetener; https://www.bir.gov.ph/index.php/tax-code.html Page 126 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (4) Meal Replacement and Medically Indicated Beverages – Any liquid or powder drink/product for oral nutritional therapy for persons who cannot absorb or metabolize dietary nutrients from food or beverages, or as source of necessary nutrition used due to a medical condition and an oral electrolyte solution for infants and children formulated to prevent dehydration due to illness; and (5) Ground coffee, instant soluble coffee, and pre-packaged powdered coffee products. (D) Filing of Return and Payment of Excise Tax and Penalty. – (1) Filing of Return and Payment of Excise Tax on Domestic and Imported Sweetened Beverages. – The provision of Sections 130 and 131 of the NIRC, as appropriate, shall apply to sweetened beverages. (2) Penalty. – Upon Snal Sndings by the Commissioner of Internal Revenue and/or Customs that any manufacturer or importer, in violation of this Section, misdeclares or misrepresents in the sworn statement provided in Section 130(c) of the NIRC, as amended, any pertinent data or information, the penalty of summary cancellation or withdrawal of the permit to engage in business as manufacturer or importer of sweetened beverages as provided under Section 268 of the NIRC, as amended, shall be imposed. Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be Sned treble the amount of deSciency taxes, surcharges, and interest which may be assessed pursuant to this Section. Any persons liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of the NIRC, as amended. Any person who willfully aids or abets in the commission of any such act or omission shall be criminally liable in the same manner as the principal. If not a citizen of the Philippines, the offender shall be deported immediately after serving the sentence without further proceedings for deportation. (E) SpeciQc Responsibility of the Food and Drug Administration (FDA). – Starting June 1, 2018, the FDA shall require all manufacturers and importers of sweetened beverages covered by this Act to indicate on the label the type of sweetener used, and on sweetened beverages in powder form to indicate on the label the equivalent of each serving per liter of volume capacity. The FDA shall also conduct post-marketing surveillance of the sweetened beverages on display in supermarkets, groceries or retail stores and/or inspection of manufacturing sites to determine compliance with the requirements of this Section. Violations of the provisions of this Act, including but not limited to, mislabeling or misbranding, shall, to the extent applicable, be punishable under existing laws. (F) Duty of the Commissioner to Ensure Payment of Taxes. – It shall be the duty of the Commissioner, among other things, to prescribe a materially unique, secure and nonremovable identiScations, such as codes, stamps or other markings, to be Srmly and conspicuously aZxed on and form part of the label of all excisable sweetened beverages. For this purpose, the abovementioned control measure shall be caused by the Commissioner to be printed with adequate security features to ensure the payment of excise tax on sweetened beverages. https://www.bir.gov.ph/index.php/tax-code.html Page 127 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (G) Review of Implementation of the Sweetened Beverage Tax. – At the start of the implementation of the sugar sweetened beverage tax and every year thereafter, the Department of Health, Department of Science and Technology, and Department of Finance shall review the impact of these provisions on its health objectives with the view to making recommendations on the tax rate on these beverages.[156] CHAPTER VII EXCISE TAX ON MINERAL PRODUCTS SEC. 151. Mineral Products. – (A) Rates of Tax. - There shall be levied, assessed and collected on minerals, mineral products and quarry resources, excise tax as follows: (1) On domestic or imported[157] coal and coke, notwithstanding any incentives granted in any law or special law: Effective January 1, 2018, Fifty pesos (P50.00) per metric ton;[158] Effective January 1, 2019, One hundred pesos (P100.00) per metric ton;[159] and Effective January 1, 2020, One hundred Sfty pesos (P150.00) per metric ton.[160] (2) On all nonmetallic minerals and quarry resources, a tax of four percent (4%)[161] based on the actual market value of the gross output thereof at the time of removal, in the case of those locally extracted or produced; or the value used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added tax, in the case of importation. Notwithstanding the provision of paragraph (4) of Subsection (A) of this Section, locally extracted natural gas and liqueSed natural gas shall not be subject to the excise tax imposed herein. (3) On all metallic minerals, a tax based on the actual market value of the gross output thereof at the time of removal, in the case of those locally extracted or produced; or the value used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added tax, in the case of importation, in accordance with the following schedule; (a) Copper and other metallic minerals, four percent (4%);[161] (b) Gold and chromite, four percent (4%).[161] (4) On indigenous petroleum, a tax of six percent (6%)[162] of the fair international market price thereof, on the Srst taxable sale, barter, exchange or such similar transaction, such tax to be paid by the buyer or purchaser before removal from the place of production. The phrase ‘Srst taxable sale, barter, exchange or similar transaction’ means the transfer of indigenous petroleum in its original state to a Srst taxable transferee. The fair international market price shall be determined in consultation with an appropriate government agency; https://www.bir.gov.ph/index.php/tax-code.html Page 128 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 For the purpose of this Subsection, ‘indigenous petroleum’ shall include locally-extracted mineral oil, hydrocarbon gas, bitumen, crude asphalt, mineral gas and all other similar or naturally associated substances with the exception of coal, peat, bituminous shale and/or stratiSed mineral deposits. (B) For purposes of this Section, the term – (1) ‘Gross output’ shall be interpreted as the actual market value of minerals or mineral products or of bullion from each mine or mineral land operated as a separate entity, without any deduction from mining, milling, reSning (including all expenses incurred to prepare the said minerals or mineral products in a marketable state), as well as transporting, handling, marketing or any other expenses: Provided, That if the minerals or mineral products are sold or consigned abroad by the lessee or owner of the mine under C.I.F. terms, the actual cost of ocean freight and insurance shall be deducted: provided, however, That in the case of mineral concentrate, not traded in commodity exchanges in the Philippines or abroad, such as copper concentrate, the actual market value shall be the world price quotations of the reSned mineral products content thereof prevailing in the said commodity exchanges, after deducting the smelting, reSning and other charges incurred in the process of converting the mineral concentrates into reSned metal traded in those commodity exchanges. (2) ‘Minerals’ shall mean all naturally occurring inorganic substances (found in nature) whether in solid, liquid, gaseous or any intermediate state. (3) ‘Mineral products’ shall mean things produced and prepared in a marketable state by simple treatment processes such as washing or drying, but without undergoing any chemical change or process or manufacturing by the lessee, concessionaire or owner of mineral lands. (4) ‘Quarry resources’ shall mean any common stone or other common mineral substances as the Director of the Bureau of Mines and Geo-Sciences may declare to be quarry resources such as, but not restricted to, marl, marble, granite, volcanic cinders, basalt, tuff and rock phosphate: Provided, That they contain no metal or other valuable minerals in economically workable quantities. (C) Notwithstanding the foregoing, gold which is sold, or eventually sold, to the Bangko Sentral ng Pilipinas, in accordance with Section 32 (B)(7)(i), shall be exempt from the payment of excise tax: Provided, however, That if the excise tax due thereon had been paid prior to the sale of gold to the Bangko Sentral ng Pilipinas, the taxpayer may Sle a claim for refund or credit with the Commissioner for the excise tax paid.[163] CHAPTER VIII ADMINISTRATIVE PROVISIONS REGULATING BUSINESS OF PERSONS DEALING IN ARTICLES SUBJECT TO EXCISE TAX SEC. 152. Extent of Supervision Over Establishments Producing Taxable Output. - The BIR has authority to supervise establishments where articles subject to excise tax are made or kept. The Secretary of Finance shall prescribe rules and regulations in which the process of production shall be conducted insofar as may be necessary to secure a sanitary output and to safeguard revenue, such rules and regulations to safeguard revenue may allow the appointment of third parties to monitor production and removal processes and volumes, and the exclusion of exciseable goods from duty-free barter transactions. [164] https://www.bir.gov.ph/index.php/tax-code.html Page 129 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 153. Records to be Kept by Manufacturers; Assessment Based Thereon. - Manufacturers of articles subject to excise tax shall keep such records as required by rules and regulations recommended by the Commissioner and approved by the Secretary of Finance, and such records, whether of raw materials received into the factory or of articles produced therein, shall be deemed public and oZcial documents for all purposes. The records of raw materials kept by such manufacturers may be used as evidence by which to determine the amount of excise taxes due from them, and whenever the amounts of raw material received into any factory exceeds the amount of manufactured or partially manufactured products on hand and lawfully removed from the factory, plus waste removed or destroyed, and a reasonable allowance for unavoidable loss in manufacture, the Commissioner may assess and collect the tax due on the products which should have been produced from the excess. The excise tax due on the products as determined and assessed in accordance with this Section shall be payable upon demand or within the period speciSed therein. SEC. 154. Premises Subject to Approval by Commissioner. - No person shall engage in business as a manufacturer of or dealer in articles subject to excise tax unless the premises upon which the business is to conducted shall have been approved by the Commissioner. SEC. 155. Manufacturers and/or Importers to Provide Themselves with Counting or Metering Devices to Determine Volume of Production and Importation. - Manufacturers of cigarettes, alcoholic products, oil products and other articles subject to excise tax that can be similarly measured shall provide themselves with such necessary number of suitable counting or metering devices to determine as accurately as possible the volume, quantity or number of the articles produced by them under rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner: Provided, That the Department of Finance shall maintain a registry of all petroleum manufacturers and/or importers and the articles being manufactured and/or imported by them: Provided, further, That the Department of Finance shall mandate the creation of a real-time inventory of petroleum articles being manufactured, imported or found in storage depots of such petroleum manufacturers and/or importers: Provided, Snally, that importers of Snished petroleum products shall also provide themselves with Bureau-accredited metering devices to determine as accurately as possible the volume of petroleum products imported by them.[165] This requirement shall be complied with before commencement of operations. SEC. 156. Labels and Form of Packages. - All articles of domestic manufacture subject to excise tax and all leaf tobacco shall be put up and prepared by the manufacturer or producer, when removed for sale or consumption, in such packages only and bearing such marks or brand as shall be prescribed in the rules and regulations promulgated by the Secretary of Finance; and goods of similar character imported into the Philippines shall likewise be packed and marked in such a manner as may be required. SEC. 157. Removal of Articles After the Payment of Tax. - When the tax has been paid on articles or products subject to excise tax, the same shall not thereafter be stored or permitted to remain in the distillery, distillery warehouse, bonded warehouse, or other factory or place where produced. However, upon prior permit from the Commissioner, oil reSneries and/or companies may store or deposit tax-paid petroleum products and commingle the same with its own manufactured products not yet subjected to excise tax. Imported petroleum products may be allowed to be withdrawn from customs custody without the prepayment of excise tax, which products may be commingled with the tax-paid or bonded products of the importer himself after securing a prior permit from the Commissioner: Provided, That withdrawals shall be taxed and accounted for on a “Srst- in, Srst-out’ basis. https://www.bir.gov.ph/index.php/tax-code.html Page 130 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 158. Storage of Goods in Internal-revenue Bonded Warehouses. - An internal-revenue bonded warehouse may be maintained in any port of entry for the storing of imported or manufactured goods which are subject to excise tax. The taxes on such goods shall be payable only upon removal from such warehouse and a reasonable charge shall be made for their storage therein. The Commissioner, may, in his discretion, exact a bond to secure the payment of the tax on any goods so stored. SEC. 159. Proof of Exportation; Exporter's Bond. - Exporters of goods that would be subject to excise tax, if sold or removed for consumption in the Philippines, shall submit proof of exportation satisfactory to the Commissioner, and, when the same is deemed necessary, shall be required to give a bond prior to the removal of the goods for shipment, conditioned upon the exportation of the same in good faith. SEC. 160. Manufacturers' and Importers' Bond. - Manufacturers and importers of articles subject to excise tax shall post a bond subject to the following conditions: (A) Initial Bond.- In case of initial bond, the amount shall be equal to One Hundred thousand pesos (P100,000): Provided, That if after six (6) months of operation, the amount of initial bond is less than the amount of the total excise tax paid during the period, the amount of the bond shall be adjusted to twice the tax actually paid for the period. (B) Bond for the Succeeding Years of Operation. - The bonds for the succeeding years of operation shall be based on the actual total excise tax paid during the period the year immediately preceding the year of operation. Such bond shall be conditioned upon faithful compliance, during the time such business is followed, with laws and rules and regulations relating to such business and for the satisfaction of all Snes and penalties imposed by this Code. SEC. 161. Records to be Kept by Wholesale Dealers. - Wholesale dealers shall keep records of their purchases and sales or deliveries of articles subject to excise tax, in such form as shall be prescribed in the rules and regulations by the Secretary of Finance. These records and the entire stock of goods subject to tax shall be subject at all times to inspection of internal revenue oZcers. SEC. 162. Records to be Kept by Dealers in Leaf Tobacco. - Dealers in leaf tobacco shall keep records of the products sold or delivered by them to other persons in such manner as may be prescribed in the rules and regulations by the Secretary of Finance, such records to be at all times subject to inspection of internal revenue oZcers. SEC. 163. Preservation of Invoices and Stamps. - All dealers whosoever shall preserve, for the period prescribed in Section 235, all oZcial invoices received by them from other dealers or from manufacturers, together with the fractional parts of stamps aZxed thereto, if any, and upon demand, shall deliver or transmit the same to any interval revenue oZcer. SEC. 164. Information to be Given by Manufacturers, Importers, Indentors and Wholesalers of any Apparatus or Mechanical Contrivance Specially for the Manufacture of Articles Subject to Excise Tax and Importers, Indentors, Manufacturers or Sellers of Cigarette Paper in Bobbins, Cigarette Tipping Paper or Cigarette Filter Tips. - Manufacturers, indentors, wholesalers and importers of any apparatus or mechanical contrivance specially for the manufacture of articles subject to tax shall, before any such apparatus or mechanical contrivance is removed from the place of manufacture or from the customs house, give written information to the Commissioner as to the nature and capacity of the same, the time when it is to be removed, and the place for which it is destined, as well as the name of the person by whom it is to be used; and such apparatus or mechanical contrivance shall not be set up nor dismantled or transferred without a permit in writing from the Commissioner. https://www.bir.gov.ph/index.php/tax-code.html Page 131 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 "A written permit from the Commissioner for importing, manufacturing or selling of apparatus or mechanical contrivance specially for the manufacture of articles subject to excise tax,[166] cigarette paper in bobbins or rolls, cigarette tipping paper or cigarette Slter tips is required before any person shall engage in the importation, manufacture or sale of the said articles. No permit to sell said articles shall be granted unless the name and address of the prospective buyer is Srst submitted to the Commissioner and approved by him/her.[167] Records, showing the stock of the said articles and the disposal thereof by sale of persons with their respective addresses as approved by the Commissioner, shall be kept by the seller, and records, showing stock of said articles and consumption thereof, shall be kept by the buyer, subject to inspection by internal revenue oZcers." SEC. 165. Establishment of Distillery Warehouse. - Every distiller, when so required by the Commissioner, shall provide at his own expense a warehouse, and shall be situated in and constitute a part of his distillery premises and to be used only for the storage of distilled spirits of his own manufacture until the tax thereon shall have been paid; but no dwelling house shall be used for such purpose. Such warehouse, when approved by the Commissioner, is declared to be a bonded warehouse, and shall be known as a ‘distillery warehouse’. SEC. 166. Custody of Distillery or Distillery Warehouse. - Every distillery or distillery warehouse shall be in the joint custody of the revenue inspector, if one is assigned thereto, and of the proprietor thereof. It shall be kept securely locked, and shall at no time be unlocked or opened or remain unlocked or opened unless in the presence of such revenue inspector or other person who may be designated to act for him as provided by law. SEC. 167. Limitation on Quantity of Spirits Removed from Warehouse. - No distilled spirits shall be removed from any distillery, distillery warehouse, or bonded warehouse in quantities of less than Sfteen (15) gauge liters at any one time, except bottled goods, which may be removed by the case of not less than twelve (12) bottles. SEC. 168. Denaturing Within Premises. - For purposes of this Title, the process of denaturing alcohol shall be effected only within the distillery premises where the alcohol to be denatured is produced in accordance with formulas duly approved by the Bureau of Internal Revenue and only in the presence of duly designated representatives of said Bureau. SEC. 169. Recovery of Alcohol for Use in Arts and Industries. - Manufacturers employing processes in which denatured alcohol used in arts and industries is expressed or evaporated from the articles manufactured may, under rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner, be permitted to recover the alcohol so used and restore it again to a condition suitable solely for use in manufacturing processes. SEC. 170. Requirements Governing RectiQcation and Compounding of Liquors. - Persons engaged in the rectiScation or compounding of liquors shall, as to the mode of conducting their business and supervision over the same, be subject to all the requirements of law applicable to distilleries: Provided, That where a rectiSer makes use of spirits upon which the excise tax has been paid, no further tax shall be collected on any rectiSed spirits produced exclusively therefrom: Provided, further, That compounders in the manufacture of any intoxicating beverage whatever, shall not be allowed to make use of spirits upon which the excise tax has not been previously paid. SEC. 171. Authority of Internal Revenue O9cer in Searching for and Testing Taxable Articles. [4] - Any internal revenue oZcer may, in the discharge of his oZcial duties, enter any house, building or place where articles subject to tax under this Title are produced or kept, or are believed by him upon reasonable grounds to be produced or kept, so far as may be necessary to examine, test, discover or seize the same. He may also stop and search any vehicle or other means of transportation when upon reasonable grounds he believes that the same carries any article on which the excise tax has not been paid. https://www.bir.gov.ph/index.php/tax-code.html Page 132 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Subject to rules and regulations to be issued by the Secretary of Finance, the Commissioner of Internal Revenue or his authorized representatives may conduct periodic random Seld tests and conSrmatory tests on fuel required to be marked under Section 148-A found in warehouses, storage tanks, gas stations and other retails outlets, and in such other properties of persons engaged in the sale, delivery, trading, transportation, distribution, or importation of fuel intended for the domestic market: Provided, (a) Random Seld testing shall be conducted in the presence of revenue or customs oZcers, fuel marking provider, and the authorized representative of the owner of the fuel to be tested: Provided, that an employee assigned or working at the place where the random Seld test is conducted shall be deemed an authorized representative of the owner; (b) All Seld tests shall be properly Slmed or video-taped, and documented; and (c) A sample of the randomly tested fuel shall be immediately obtained by the revenue or customs oZcer upon discovering that the same is unmarked, adulterated, or diluted: Provided, further, That conSrmatory fuel test certiScates issued by fuel testing facilities shall be valid for any legal purpose from the date of issue, and shall constitute admissible and conclusive evidence before any court.[168] SEC. 172. Detention of Package Containing Taxable Articles. - Any revenue oZcer may detain any package containing or supposed to contain articles subject to excise tax when he has good reason to believe that the lawful tax has not been paid or that the package has been or is being removed in violation of law, and every such package shall be held by such oZcer in a safe place until it shall be determined whether the property so detained is liable by law to be proceeded against for forfeiture; but such summary detention shall not continue in any case longer than seven (7) days without due process of law or intervention of the oZcer to whom such detention is to be reported. << Back to NIRC Outline >> TITLE VII DOCUMENTARY STAMP TAX [169] SEC. 173. Stamp Taxes Upon Documents, Loan Agreements, Instruments and Papers. - Upon documents, instruments, loan agreements and papers, and upon acceptances, assignments, sales and transfers of the obligation, right or property incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following Sections of this Title, by the person making, signing, issuing, accepting, or transferring the same wherever the document is made, signed, issued, accepted or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines, and the same time such act is done or transaction had: Provided, That whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party who is not exempt shall be the one directly liable for the tax. SEC. 174. Stamp Tax on Original Issue of Shares of Stock. - On every original issue, whether on organization, reorganization or for any lawful purpose, of shares of stock by any association, company or corporation, there shall be collected a documentary stamp tax of Two peso (P2.00)[170] on each Two hundred pesos (P200), or fractional part thereof, of the par value, of such https://www.bir.gov.ph/index.php/tax-code.html Page 133 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 shares of stock: Provided, That in the case of the original issue of shares of stock without par value, the amount of the documentary stamp tax herein prescribed shall be based upon the actual consideration for the issuance of such shares of stock: Provided, further, That in the case of stock dividends, on the actual value represented by each share. SEC. 175. Stamp Tax on Sales, Agreements to Sell, Memoranda of Sales, Deliveries or Transfer of Shares or CertiQcates of Stock.- On all sales, or agreements to sell, or memoranda of sale, or deliveries, or transfer of shares or certiScates of stock in any association, company, or corporation, or transfer of such securities by assignment in blank, or by delivery, or by any paper or agreement, or memorandum or other evidences of transfer or sale whether entitling the holder in any manner to the beneSt of such stock, or to secure the future payment of money, or for the future transfer of any stock, there shall be collected a documentary stamp tax of One peso and Sfty centavos (P1.50)[171] on each Two hundred pesos (P200) or fractional part thereof, of the par value of such due-bill, certiScate of obligation or stock; Provided, That only one tax shall be collected on each sale or transfer of stock from one person to another, regardless of whether or not a certiScate of stock is issued, indorsed, or delivered in pursuance of such sale or transfer: and Provided, further, That in the case of stock without par value the amount of documentary stamp tax herein prescribed shall be equivalent to Sfty percent (50%)[172] of the documentary stamp tax paid upon the original issue of said stock. SEC. 176. Stamp Tax on Bonds, Debentures, CertiQcate of Stock or Indebtedness Issued in Foreign Countries. - On all bonds, debentures, certiScates of stock, or certiScates of indebtedness issued in any foreign country, there shall be collected from the person selling or transferring the same in the Philippines, such as tax as is required by law on similar instruments when issued, sold or transferred in the Philippines. SEC. 177. Stamp Tax on CertiQcates of ProQts or Interest in Property or Accumulations. [4] - On all certiScates of proSts, or any certiScate or memorandum showing interest in the property or accumulations of any association, company or corporation, and on all transfers of such certiScates or memoranda, there shall be collected a documentary stamp tax of One peso (P1.00) [173] on each Two hundred pesos (P200), or fractional part thereof, of the face value of such certiScate or memorandum. SEC. 178. Stamp Tax on Bank Checks, Drafts, CertiQcates of Deposit not Bearing Interest, and Other Instruments. - On each bank check, draft, or certiScate of deposit not drawing interest, or order for the payment of any sum of money drawn upon or issued by any bank, trust company, or any person or persons, companies or corporations, at sight or on demand, there shall be collected a documentary stamp tax of Three pesos (P3.00).[174] SEC. 179. Stamp Tax on All Debt Instruments.- On every original issue of debt instruments, there shall be collected documentary stamp tax of One peso and Sfty centavos (P1.50)[175] on each Two hundred pesos (P200), or fractional part thereof, of the issue price of any such debt instrument: Provided, That for such debt instruments with terms of less than one (1) year, the documentary stamp tax to be collected shall be of proportional amount in accordance with the ratio of its terms in number of days to three hundred sixty days (365): Provided, further, That only one documentary stamp tax shall be imposed on either loan agreement, or promissory notes issued to secure such loan. For purposes of this section, the term ‘debt instrument’ shall mean debt instrument representing borrowing and lending transactions including but not limited to debentures, certiScates of indebtedness, due bills, bonds, loan agreements, including those signed abroad wherein the object of contract is located or used in the Philippines, instruments and securities issued by the government or any of its instrumentalities, deposit substitute debt instruments, certiScates or other evidences of deposits that are either drawing interest signiScantly higher than the regular savings deposit taking into consideration the size of the deposit and the risks involved or drawing interest and having a speciSc maturity date, orders for payment of any sum of money otherwise than at sight or on demand, promissory notes, whether negotiable or non-negotiable, except bank notes issued for circulation. https://www.bir.gov.ph/index.php/tax-code.html Page 134 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 180. Stamp Tax on All Bills of Exchange or Drafts. [4] -On all bill of exchange (between points within the Philippines) or drafts, there shall be collected a documentary stamp tax of sixty centavo (P0.60)[176] on each Two hundred peso (P200), or fractional part thereof, of the face value of any such bill of exchange or draft. SEC. 181. Stamp Tax Upon Acceptance of Bills of Exchange and Others. - Upon any acceptance or payment of any bill of exchange or order for the payment of money purporting to be drawn in a foreign country but payable in the Philippines, there shall be collected a documentary stamp tax of Sixty centavos (P0.60)[177] on each Two hundred pesos (P200), or fractional part thereof, of the face value of any such bill of exchange, or order, or the Philippine equivalent to such value, if expressed in foreign currency. SEC. 182. Stamp Tax on Foreign Bills of Exchange and Letters of Credit. - On all foreign bills of exchange and letters of credit (including orders, by telegraph or otherwise, for the payment of money issued by express or steamship companies or by any person or persons) drawn in but payable out of the Philippines in a set of three (3) or more according to the custom of merchants and bankers, there shall be collected a documentary stamp tax of Sixty centavos (P0.60)[178] on each Two hundred pesos (P200), or fractional part thereof, of the face value of any such bill of exchange or letter of credit, or the Philippine equivalent of such face value, if expressed in foreign currency. SEC. 183. Stamp Tax on Life Insurance Policies. - On all policies of insurance or other instruments by whatever name the same may be called, whereby any insurance shall be made or renewed upon any life or lives, there shall be collected a one- time documentary stamp tax at the following rates:[179] If the amount of insurance does not exceed P100,000 Exempt If the amount of insurance exceeds P100,000 but does not Php 20.00 exceed P300,000 If the amount of insurance exceeds P300,000 but does not Php 50.00 exceed P500,000 If the amount of insurance exceeds 500,000 but does not Php100.00 exceed 750,000 If the amount of insurance exceeds P750,000 but does not Php150.00 exceed P1,000,000 If the amount of insurance exceeds P1,000,000 Php200.00 SEC. 184. Stamp Tax on Policies of Insurance Upon Property. - On all policies of insurance or other instruments by whatever name the same may be called, by which insurance shall be made or renewed upon property of any description, including rents or proSts, against peril by sea or on inland waters, or by Sre or lightning, there shall be collected a documentary stamp tax of Fifty centavos (P0.50) on each Four pesos (P4.00), or fractional part thereof, of the amount of premium charged: Provided, however, That no documentary stamp tax shall be collected on reinsurance contracts or on any instrument by which cession or acceptance of insurance risks under any reinsurance agreement is effected or recorded. SEC. 185. Stamp Tax on Fidelity Bonds and Other Insurance Policies. - On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage or liability made or renewed by any person, association, company or corporation transacting the business of accident, Sdelity, employer’s liability, plate, glass, steam, boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and Sre insurance), and all bonds, undertakings, or https://www.bir.gov.ph/index.php/tax-code.html Page 135 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 recognizances, conditioned for the performance of the duties of any oZce or position, for the doing or not doing of anything therein speciSed, and on all obligations guaranteeing the validity or legality of any bond or other obligations issued by any province, city, municipality, or other public body or organization, and on all obligations guaranteeing the title to any real estate, or guaranteeing any mercantile credits, which may be made or renewed by any such person, company or corporation, there shall be collected a documentary stamp tax of Fifty centavos (P0.50) on each Four pesos (P4.00), or fractional part thereof, of the premium charged. SEC. 186. Stamp Tax on Policies of Annuities and Pre-Need Plans. - On all policies of annuities, or other instruments by whatever name the same may be called, whereby an annuity may be made, transferred or redeemed, there shall be collected a documentary stamp tax of One peso (P1.00)[180] on each Two hundred pesos (P200) or fractional part thereof, of the premium or installment payment or contract price collected. On pre-need plans, the documentary stamp tax shall be Forty centavos (P0.40)[181] on each Two hundred pesos (P200), or fractional part thereof, of the premium or contribution collected. SEC. 187. Stamp Tax on Indemnity Bonds. - On all bonds for indemnifying any person, Srm or corporation who shall become bound or engaged as surety for the payment of any sum of money or for the due execution or performance of the duties of any oZce or position or to account for money received by virtue thereof, and on all other bonds of any description, except such as may be required in legal proceedings, or are otherwise provided for herein, there shall be collected a documentary stamp tax of Thirty centavos (P0.30) on each Four pesos (P4.00), or fractional part thereof, of the premium charged. SEC. 188. Stamp Tax on CertiQcates. - On each certiScate of damages or otherwise, and on every other certiScate or document issued by any customs oZcer, marine surveyor, or other person acting as such, and on each certiScate issued by a notary public, and on each certiScate of any description required by law or by rules or regulations of a public oZce, or which is issued for the purpose of giving information, or establishing proof of a fact, and not otherwise speciSed herein, there shall be collected a documentary stamp tax of Thirty pesos (P30.00).[182] SEC. 189. Stamp Tax on Warehouse Receipts. [4] - On each warehouse receipt for property held in storage in a public or private warehouse or yard for any person other than the proprietor of such warehouse or yard, there shall be collected a documentary stamp tax of Thirty pesos (P30.00):[183] Provided, That no tax shall be collected on each warehouse receipt issued to any one person in any one calendar month covering property the value of which does not exceed Two hundred pesos (P200). SEC. 190. Stamp Tax on Jai-Alai, Horse Racing Tickets, Lotto or Other Authorized Numbers Games. - On each jai-alai, horse race ticket, lotto, or other authorized number games, there shall be collected a documentary stamp tax of Twenty centavos (P0.20):[184] Provided, That if the cost of the ticket exceeds One peso (P1.00), an additional tax of Twenty centavos (P0.20) [184] on every One peso (P1.00), or fractional part thereof, shall be collected. SEC. 191. Stamp Tax on Bills of Lading or Receipts. - On each set of bills of lading or receipts (except charter party) for any goods, merchandise or effects shipped from one port or place in the Philippines[185] (except on ferries across rivers), or to any foreign port, there shall be collected documentary stamp tax of Two peso (P2.00),[186] if the value of such goods exceeds One hundred pesos (P100) and does not exceed One Thousand pesos (P1,000); Twenty pesos (P20.00),[187] if the value exceeds One thousand pesos (P1,000): Provided, however, That freight tickets covering goods, merchandise or effects carried as accompanied baggage of passengers on land and water carriers primarily engaged in the transportation of passengers are hereby exempt. SEC. 192. Stamp Tax on Proxies. - On each proxy for voting at any election for oZcers of any company or association, or for any other purpose, except proxies issued affecting the affairs of associations or corporations organized for religious, charitable or literary purposes, there shall be collected a documentary stamp tax of Thirty pesos (P30.00).[188] https://www.bir.gov.ph/index.php/tax-code.html Page 136 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 193. Stamp Tax on Powers of Attorney. - On each power of attorney to perform any act whatsoever, except acts connected with the collection of claims due from or accruing to the Government of the Republic of the Philippines, or the government of any province, city or municipality, there shall be collected a documentary stamp tax of Ten pesos (P10.00).[189] SEC. 194. Stamp Tax on Leases and Other Hiring Agreements. - On each lease, agreement, memorandum, or contract for hire, use or rent of any lands or tenements, or portions thereof, there shall be collected a documentary stamp tax of Six pesos (P6.00)[190] for the Srst Two thousand pesos (P2,000), or fractional part thereof, and an additional Two peso (P2.00)[191] for every One Thousand pesos (P1,000) or fractional part thereof, in excess of the Srst Two thousand pesos (P2,000) for each year of the term of said contract or agreement. SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust. - On every mortgage or pledge of lands, estate, or property, real or personal, heritable or movable, whatsoever, where the same shall be made as a security for the payment of any deSnite and certain sum of money lent at the time or previously due and owing of forborne to be paid, being payable and on any conveyance of land, estate, or property whatsoever, in trust or to be sold, or otherwise converted into money which shall be and intended only as security, either by express stipulation or otherwise, there shall be collected a documentary stamp tax at the following rates: (a) When the amount secured does not exceed Five thousand pesos (P5,000), Forty pesos (P40.00).[192] (b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of Five thousand pesos (P5,000), an additional tax of Twenty pesos (P20.00).[193] On any mortgage, pledge, or deed of trust, where the same shall be made as a security for the payment of a buctuating account or future advances without Sxed limit, the documentary stamp tax on such mortgage, pledge or deed of trust shall be computed on the amount actually loaned or given at the time of the execution of the mortgage, pledge or deed of trust, additional documentary stamp tax shall be paid which shall be computed on the basis of the amount advanced or loaned at the rates speciSed above: Provided, however, That if the full amount of the loan or credit, granted under the mortgage, pledge or deed of trust shall be computed on the amount actually loaned or given at the time of the execution of the mortgage, pledge or deed of trust. However, if subsequent advances are made on such mortgage, pledge or deed of trust, additional documentary stamp tax shall be paid which shall be computed on the basis of the amount advanced or loaned at the rates speciSed above: Provided, however, That if the full amount of the loan or credit, granted under the mortgage, pledge or deed of trust is speciSed in such mortgage, pledge or deed of trust, the documentary stamp tax prescribed in this Section shall be paid and computed on the full amount of the loan or credit granted. SEC. 196. Stamp Tax on Deeds of Sale, Conveyances and Donation[194] of Real Property. - On all conveyances, donations,[194] deeds, instruments, or writings, other than grants, patents or original certiScates of adjudication issued by the Government, whereby any land, tenement, or other realty sold shall be granted, assigned, transferred, donated[194] or otherwise conveyed to the purchaser, or purchasers, or to any other person or persons designated by such purchaser or purchasers or donee, [194] there shall be collected a documentary stamp tax, at the rates herein below prescribed, based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6(E) of this Code, whichever is higher: Provided, That when one of the contracting parties is the Government, the tax herein imposed shall be based on the actual consideration. (a) When the consideration, or value received or contracted to be paid for such realty after making proper allowance of any encumbrance, does not exceed One thousand pesos (P1,000) Sfteen pesos (P15.00). https://www.bir.gov.ph/index.php/tax-code.html Page 137 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (b) For each additional One thousand Pesos (P1,000), or fractional part thereof in excess of One thousand pesos (P1,000) of such consideration or value, Fifteen pesos (P15.00). Transfers exempt from donor’s tax under Section 101(a) and (b) of this Code shall be exempt from the tax imposed under this Section.[194] When it appears that the amount of the documentary stamp tax payable hereunder has been reduced by an incorrect statement of the consideration in any conveyance, deed, instrument or writing subject to such tax the Commissioner, provincial or city Treasurer, or other revenue oZcer shall, from the assessment rolls or other reliable source of information, assess the property of its true market value and collect the proper tax thereon. SEC. 197. Stamp Tax on Charter Parties and Similar Instruments. – On every charter party, contract or agreement for the charter of any ship, vessel or steamer, or any letter or memorandum or other writing between the captain, master or owner, or other person acting as agent of any ship, vessel or steamer, and any other person or persons for or relating to the charter of any such ship, vessel or steamer, and on any renewal or transfer of such charter, contract, agreement, letter or memorandum, there shall be collected a documentary stamp tax at the following rates: (a) If the registered gross tonnage of the ship, vessel or steamer does not exceed one thousand (1,000) tons, and the duration of the charter or contract does not exceed six (6) months, One thousand pesos (P1,000);[195] and for each month or fraction of a month in excess of six (6) months, an additional tax of One hundred pesos (P100.00)[196] shall be paid. (b) If the registered gross tonnage exceeds one thousand (1,000) tons and does not exceed ten thousand (10,000) tons, and the duration of the charter or contract does not exceed six (6) months, Two thousand pesos (P2,000);[197] and for each month or fraction of a month in excess of six (6) months, an additional tax of Two hundred pesos (P200)[198] shall be paid. (c) If the registered gross tonnage exceeds ten thousand (10,000) tons and the duration of the charter or contract does not exceed six (6) months, Three thousand pesos (P3,000);[199] and for each month or fraction of a month in excess of six (6) months, an additional tax of Three hundred pesos (P300)[200] shall be paid. SEC. 198. Stamp Tax on Assignments and Renewals of Certain Instruments. - Upon each and every assignment or transfer of any mortgage, lease or policy of insurance, or the renewal or continuance of any agreement, contract, charter, or any evidence of obligation or indebtedness by altering or otherwise, there shall be levied, collected and paid a documentary stamp tax, at the same rate as that imposed on the original instrument. SEC. 199. Documents and Papers Not Subject to Stamp Tax. - The provisions of Section 173 to the contrary notwithstanding, the following instruments, documents and papers shall be exempt from the documentary stamp tax: (a) Policies of insurance or annuities made or granted by a fraternal or beneSciary society, order, association or cooperative company, operated on the lodge system or local cooperation plan and organized and conducted solely by the members thereof for the exclusive beneSt of each member and not for proSt. (b) CertiScates of oaths administered to any government oZcial in his oZcial capacity or of acknowledgment by any government oZcial in the performance of his oZcial duties, written appearance in any court by any government oZcial, in his oZcial capacity; certiScates of the administration of oaths to any person as to the authenticity of any paper https://www.bir.gov.ph/index.php/tax-code.html Page 138 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 required to be Sled in court by any person or party thereto, whether the proceedings be civil or criminal; papers and documents Sled in courts by or for the national, provincial, city or municipal governments; aZdavits of poor persons for the purpose of proving poverty; statements and other compulsory information required of persons or corporations by the rules and regulations of the national, provincial, city or municipal governments exclusively for statistical purposes and which are wholly for the use of the bureau or oZce in which they are Sled, and not at the instance or for the use or beneSt of the person Sling them; certiSed copies and other certiScates placed upon documents, instruments and papers for the national, provincial, city, or municipal governments, made at the instance and for the sole use of some other branch of the national, provincial, city or municipal governments; and certiScates of the assessed value of lands, not exceeding Two hundred pesos (P200) in value assessed, furnished by the provincial, city or municipal Treasurer to applicants for registration of title to land. (c) Borrowing and lending of securities executed under the Securities Borrowing and Lending Program of a registered exchange, or in accordance with regulations prescribed by the appropriate regulatory authority: Provided, however, That any borrowing or lending of securities agreement as contemplated hereof shall be duly covered by a master securities borrowing and lending agreement acceptable to the appropriate regulatory authority and which agreement is duly registered and approved by the Bureau of Internal Revenue. (BIR). (d) Loan agreements or promissory notes, the aggregate of which does not exceed Two hundred Sfty thousand pesos ( P250,000) or any such amount as may be determined by the Secretary of Finance, executed by an individual for his purchase on installment for his personal use or that for his family and not for business or resale, barter or hire of a house, lot, motor vehicle, appliance or furniture: Provided, however, That the amount to be set by the Secretary of Finance shall be in accordance with a relevant price index but not to exceed ten percent (10%) of the current amount and shall remain in force at least for three (3) years. (e) Sale, barter or exchange of shares of stock listed and traded through the local stock exchange. (f) Assignment or transfer of any mortgage, lease or policy of insurance, or the renewal or continuance of any agreement, contract, charter, or any evidence of obligation or indebtedness, if there is no change in the maturity date or remaining period of coverage from that of the original instrument. (g) Fixed income and other securities traded in the secondary market or through an exchange. (h) Derivatives: Provided, That for purposes of this exemption, repurchase agreements and reverse repurchase agreements shall be treated similarly as derivatives. (i) Interbank or interdepartmental advances within the same legal entity. (j) All forebearances arising from sales or service contracts including credit card and trade receivables: Provided, That the exemption be limited to those executed by the seller or service provided. (k) Bank deposit accounts without a Sxed term or maturity. (l) All contracts, deeds, documents, documents and transactions related to the conduct of business of the Bangko Sentral ng Pilipinas. (m) Transfer of property pursuant to Section 40 (C) (2) of the National Internal Revenue Code of 1997, as amended. https://www.bir.gov.ph/index.php/tax-code.html Page 139 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (n) Interbank call loans with maturity of not more than seven (7) days to cover deSciency in reverses against deposit liabilities including those between or among banks and quasi-banks. SEC. 200. Payment of Documentary Stamp Tax. – (A) In General.- The provisions of Presidential Decree No. 1045 notwithstanding, any person liable to pay documentary stamp tax upon any document subject to tax under Title VII of this Code shall Sle a tax return and pay the tax in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner. (B) Time for Filing and Payment of the Tax. - Except as provided by rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner, the tax return prescribed in this Section shall be Sled within ten (10) days after the close of the month when the taxable document was made, signed, issued, accepted, or transferred, and the tax thereon shall be paid at the same time the aforesaid return is Sled. (C) Where to File.- Except in cases where the Commissioner otherwise permits, the aforesaid tax return shall be Sled with and the tax due shall be paid through the authorized agent bank within the territorial jurisdiction of the Revenue District OZce which has jurisdiction over the residence or principal place of business of the taxpayer. In places where there is no authorized agent bank, the return shall be Sled with the Revenue District OZcer, collection agent, or duly authorized Treasurer of the city or municipality in which the taxpayer has his legal residence or principal place of business. (D) Exception. - In lieu of the foregoing provisions of this Section, the tax may be paid either through purchase and actual aZxture; or by imprinting the stamps through a documentary stamp metering machine, on the taxable document, in the manner as may be prescribed by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner. SEC. 201. Effect of Failure to Stamp Taxable Document. - An instrument, document or paper which is required by law to be stamped and which has been signed, issued, accepted or transferred without being duly stamped, shall not be recorded, nor shall it or any copy thereof or any record of transfer of the same be admitted or used in evidence in any court until the requisite stamp or stamps are aZxed thereto and cancelled. No notary public or other oZce authorized to administer oaths shall add this jurat or acknowledgment to any document subject to documentary stamp tax unless the proper documentary stamps are aZxed thereto and cancelled. << Back to NIRC Outline >> TITLE VIII REMEDIES CHAPTER I REMEDIES IN GENERAL https://www.bir.gov.ph/index.php/tax-code.html Page 140 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 202. Final Deed to Purchaser. - In case the taxpayer shall not redeem the property as herein provided, the Revenue District OZcer shall, as grantor, execute a deed conveying to the purchaser so much of the property as has been sold, free from all liens of any kind whatsoever, and the deed shall succinctly recite all the proceedings upon which the validity of the sale depends. SEC. 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the Sling of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is Sled beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was Sled. For purposes of this Section, a return Sled before the last day prescribed by law for the Sling thereof shall be considered as Sled on such last day. SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. – The Commissioner may – (A) Compromise the payment of any internal revenue tax, when: (1) A reasonable doubt as to the validity of the claim against the taxpayer exists; or (2) The Snancial position of the taxpayer demonstrates a clear inability to pay the assessed tax. The compromise settlement of any tax liability shall be subject to the following minimum amounts: For cases of Snancial incapacity, a minimum compromise rate equivalent to ten percent (10%) of the basic assessed tax; and For other cases, a minimum compromise rate equivalent to forty percent (40%) of the basic assessed tax. Where the basic tax involved exceeds One million pesos (P1,000.000) or where the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to the approval of the Evaluation Board which shall be composed of the Commissioner and the four (4) Deputy Commissioners. (B) Abate or cancel a tax liability, when: (1) The tax or any portion thereof appears to be unjustly or excessively assessed; or (2) The administration and collection costs involved do not justify the collection of the amount due. All criminal violations may be compromised except: (a) those already Sled in court, or (b) those involving fraud. (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unSt for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer Sles in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return Sled showing an overpayment shall be considered as a written claim for credit or refund.[201] https://www.bir.gov.ph/index.php/tax-code.html Page 141 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 A Tax Credit CertiScate validly issued under the provisions of this Code may be applied against any internal revenue tax, excluding withholding taxes, for which the taxpayer is directly liable. Any request for conversion into refund of unutilized tax credits may be allowed, subject to the provisions of Section 230 of this Code: Provided, That the original copy of the Tax Credit CertiScate showing a creditable balance is surrendered to the appropriate revenue oZcer for veriScation and cancellation: Provided, further, That in no case shall a tax refund be given resulting from availment of incentives granted pursuant to special laws for which no actual payment was made. The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of both the Senate and House of Representatives, every six (6) months, a report on the exercise of his powers under this Section, stating therein the following facts and information, among others: names and addresses of taxpayers whose cases have been the subject of abatement or compromise; amount involved; amount compromised or abated; and reasons for the exercise of power: Provided, That the said report shall be presented to the Oversight Committee in Congress that shall be constituted to determine that said powers are reasonably exercised and that the Government is not unduly deprived of revenues. CHAPTER II CIVIL REMEDIES FOR COLLECTION OF TAXES SEC. 205. Remedies for the Collection of Delinquent Taxes. - The civil remedies for the collection of internal revenue taxes, fees or charges, and any increment thereto resulting from delinquency shall be: (a) By distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, bank accounts and interest in and rights to personal property, and by levy upon real property and interest in rights to real property; and (b) By civil or criminal action. Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes: Provided, however, That the remedies of distraint and levy shall not be availed of where the amount of tax involve is not more than One hundred pesos (P100). The judgment in the criminal case shall not only impose the penalty but shall also order payment of the taxes subject of the criminal case as Snally decided by the Commissioner. The Bureau of Internal Revenue shall advance the amounts needed to defray costs of collection by means of civil or criminal action, including the preservation or transportation of personal property distrained and the advertisement and sale thereof, as well as of real property and improvements thereon. SEC. 206. Constructive Distraint of the Property of A Taxpayer. - To safeguard the interest of the Government, the Commissioner may place under constructive distraint the property of a delinquent taxpayer or any taxpayer who, in his opinion, is retiring from any business subject to tax, or is intending to leave the Philippines or to remove his property therefrom or to hide or conceal his property or to perform any act tending to obstruct the proceedings for collecting the tax due or which may be due from him. https://www.bir.gov.ph/index.php/tax-code.html Page 142 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 The constructive distraint of personal property shall be affected by requiring the taxpayer or any person having possession or control of such property to sign a receipt covering the property distrained and obligate himself to preserve the same intact and unaltered and not to dispose of the same ;in any manner whatever, without the express authority of the Commissioner. In case the taxpayer or the person having the possession and control of the property sought to be placed under constructive distraint refuses or fails to sign the receipt herein referred to, the revenue oZcer effecting the constructive distraint shall proceed to prepare a list of such property and, in the presence of two (2) witnesses, leave a copy thereof in the premises where the property distrained is located, after which the said property shall be deemed to have been placed under constructive distraint. SEC. 207. Summary Remedies. – (A) Distraint of Personal Property. - Upon the failure of the person owing any delinquent tax or delinquent revenue to pay the same at the time required, the Commissioner or his duly authorized representative, if the amount involved is in excess of One million pesos (P1,000,000), or the Revenue District OZcer, if the amount involved is One million pesos (P1,000,000) or less, shall seize and distraint any goods, chattels or effects, and the personal property, including stocks and other securities, debts, credits, bank accounts, and interests in and rights to personal property of such persons in suZcient quantity to satisfy the tax, or charge, together with any increment thereto incident to delinquency, and the expenses of the distraint and the cost of the subsequent sale. A report on the distraint shall, within ten (10) days from receipt of the warrant, be submitted by the distraining oZcer to the Revenue District OZcer, and to the Revenue Regional Director: Provided, That the Commissioner or his duly authorized representative shall, subject to rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner, have the power to lift such order of distraint: Provided, further, That a consolidated report by the Revenue Regional Director may be required by the Commissioner as often as necessary. (B) Levy on Real Property. - After the expiration of the time required to pay the delinquent tax or delinquent revenue as prescribed in this Section, real property may be levied upon, before simultaneously or after the distraint of personal property belonging to the delinquent. To this end, any internal revenue oZcer designated by the Commissioner or his duly authorized representative shall prepare a duly authenticated certiScate showing the name of the taxpayer and the amounts of the tax and penalty due from him. Said certiScate shall operate with the force of a legal execution throughout the Philippines. Levy shall be affected by writing upon said certiScate a description of the property upon which levy is made. At the same time, written notice of the levy shall be mailed to or served upon the Register of Deeds for the province or city where the property is located and upon the delinquent taxpayer, or if he be absent from the Philippines, to his agent or the manager of the business in respect to which the liability arose, or if there be none, to the occupant of the property in question. In case the warrant of levy on real property is not issued before or simultaneously with the warrant of distraint on personal property, and the personal property of the taxpayer is not suZcient to satisfy his tax delinquency, the Commissioner or his duly authorized representative shall, within thirty (30) days after execution of the distraint, proceed with the levy on the taxpayer's real property. Within ten (10) days after receipt of the warrant, a report on any levy shall be submitted by the levying oZcer to the Commissioner or his duly authorized representative: Provided, however, That a consolidated report by the Revenue Regional Director may be required by the Commissioner as often as necessary: Provided, further, That the Commissioner or his duly authorized representative, subject to rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner, shall have the authority to lift warrants of levy issued in accordance with the provisions hereof. https://www.bir.gov.ph/index.php/tax-code.html Page 143 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 208. Procedure for Distraint and Garnishment. - The oZcer serving the warrant of distraint shall make or cause to be made an account of the goods, chattels, effects or other personal property distrained, a copy of which, signed by himself, shall be left either with the owner or person from whose possession such goods, chattels, or effects or other personal property were taken, or at the dwelling or place of business of such person and with someone of suitable age and discretion, to which list shall be added a statement of the sum demanded and note of the time and place of sale. Stocks and other securities shall be distrained by serving a copy of the warrant of distraint upon the taxpayer and upon the president, manager, treasurer or other responsible oZcer of the corporation, company or association, which issued the said stocks or securities. Debts and credits shall be distrained by leaving with the person owing the debts or having in his possession or under his control such credits, or with his agent, a copy of the warrant of distraint. The warrant of distraint shall be suZcient authority to the person owning the debts or having in his possession or under his control any credits belonging to the taxpayer to pay to the Commissioner the amount of such debts or credits. Bank accounts shall be garnished by serving a warrant of garnishment upon the taxpayer and upon the president, manager, treasurer or other responsible oZcer of the bank. Upon receipt of the warrant of garnishment, the bank shall turn over to the Commissioner so much of the bank accounts as may be suZcient to satisfy the claim of the Government. SEC. 209. Sale of Property Distrained and Disposition of Proceeds. - The Revenue District OZcer or his duly authorized representative, other than the oZcer referred to in Section 208 of this Code shall, according to rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, forthwith cause a notiScation to be exhibited in not less than two (2) public places in the municipality or city where the distraint is made, specifying; the time and place of sale and the articles distrained. The time of sale shall not be less than twenty (20) days after notice to the owner or possessor of the property as above speciSed and the publication or posting of such notice. One place for the posting of such notice shall be at the OZce of the Mayor of the city or municipality in which the property is distrained. At the time and place Sxed in such notice, the said revenue oZcer shall sell the goods, chattels, or effects, or other personal property, including stocks and other securities so distrained, at public auction, to the highest bidder for cash, or with the approval of the Commissioner, through duly licensed commodity or stock exchanges. In the case of Stocks and other securities, the oZcer making the sale shall execute a bill of sale which he shall deliver to the buyer, and a copy thereof furnished the corporation, company or association which issued the stocks or other securities. Upon receipt of the copy of the bill of sale, the corporation, company or association shall make the corresponding entry in its books, transfer the stocks or other securities sold in the name of the buyer, and issue, if required to do so, the corresponding certiScates of stock or other securities. Any residue over and above what is required to pay the entire claim, including expenses, shall be returned to the owner of the property sold. The expenses chargeable upon each seizure and sale shall embrace only the actual expenses of seizure and preservation of the property pending the sale, and no charge shall be imposed for the services of the local internal revenue oZcer or his deputy. SEC. 210. Release of Distrained Property Upon Payment Prior to Sale. - If at any time prior to the consummation of the sale all proper charges are paid to the oZcer conducting the sale, the goods or effects distrained shall be restored to the owner. https://www.bir.gov.ph/index.php/tax-code.html Page 144 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 211. Report of Sale to Bureau of Internal Revenue. - Within two (2) days after the sale, the oZcer making the same shall make a report of his proceedings in writing to the Commissioner and shall himself preserve a copy of such report as an oZcial record. SEC. 212. Purchase by Government at Sale Upon Distraint.- When the amount bid for the property under distraint is not equal to the amount of the tax or is very much less than the actual market value of the articles offered for sale, the Commissioner or his deputy may purchase the same in behalf of the national Government for the amount of taxes, penalties and costs due thereon. Property so purchased may be resold by the Commissioner or his deputy, subject to the rules and regulations prescribed by the Secretary of Finance, the net proceeds therefrom shall be remitted to the National Treasury and accounted for as internal revenue. SEC. 213. Advertisement and Sale. - Within twenty (20) days after levy, the oZcer conducting the proceedings shall proceed to advertise the property or a usable portion thereof as may be necessary to satisfy the claim and cost of sale; and such advertisement shall cover a period of a least thirty (30) days. It shall be effectuated by posting a notice at the main entrance of the municipal building or city hall and in public and conspicuous place in the barrio or district in which the real estate lies and by publication once a week for three (3) weeks in a newspaper of general circulation in the municipality or city where the property is located. The advertisement shall contain a statement of the amount of taxes and penalties so due and the time and place of sale, the name of the taxpayer against whom taxes are levied, and a short description of the property to be sold. At any time before the day Sxed for the sale, the taxpayer may discontinue all proceedings by paying the taxes, penalties and interest. If he does not do so, the sale shall proceed and shall be held either at the main entrance of the municipal building or city hall, or on the premises to be sold, as the oZcer conducting the proceedings shall determine and as the notice of sale shall specify. Within Sve (5) days after the sale, a return by the distraining or levying oZcer of the proceedings shall be entered upon the records of the Revenue Collection OZcer, the Revenue District oZcer and the Revenue Regional Director. The Revenue Collection OZcer, in consultation with the Revenue district OZcer, shall then make out and deliver to the purchaser a certiScate from his records, showing the proceedings of the sale, describing the property sold stating the name of the purchaser and setting out the exact amount of all taxes, penalties and interest: Provided, however, That in case the proceeds of the sale exceeds the claim and cost of sale, the excess shall be turned over to the owner of the property. The Revenue Collection OZcer, upon approval by the Revenue District OZcer may, out of his collection, advance an amount suZcient to defray the costs of collection by means of the summary remedies provided for in this Code, including the preservation or transportation in case of personal property, and the advertisement and subsequent sale, both in cases of personal and real property including improvements found on the latter. In his monthly collection reports, such advances shall be rebected and supported by receipts. SEC. 214. Redemption of Property Sold. - Within one (1) year from the date of sale, the delinquent taxpayer, or any one for him, shall have the right of paying to the Revenue District OZcer the amount of the public taxes, penalties, and interest thereon from the date of delinquency to the date of sale, together with interest on said purchase price at the rate of Sfteen percent (15%) per annum from the date of purchase to the date of redemption, and such payment shall entitle the person paying to the delivery of the certiScate issued to the purchaser and a certiScate from the said Revenue District OZcer that he has thus redeemed the property, and the Revenue District OZcer shall forthwith pay over to the purchaser the amount by which such property has thus been redeemed, and said property thereafter shall be free from the lien of such taxes and penalties. https://www.bir.gov.ph/index.php/tax-code.html Page 145 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 The owner shall not, however, be deprived of the possession of the said property and shall be entitled to the rents and other income thereof until the expiration of the time allowed for its redemption. SEC. 215. Forfeiture to Government for Want of Bidder. - In case there is no bidder for real property exposed for sale as herein above provided or if the highest bid is for an amount insuZcient to pay the taxes, penalties and costs, the Internal Revenue OZcer conducting the sale shall declare the property forfeited to the Government in satisfaction of the claim in question and within two (2) days thereafter, shall make a return of his proceedings and the forfeiture which shall be spread upon the records of his oZce. It shall be the duty of the Register of Deeds concerned, upon registration with his oZce of any such declaration of forfeiture, to transfer the title of the property forfeited to the Government without the necessity of an order from a competent court. Within one (1) year from the date of such forfeiture, the taxpayer, or any one for him, may redeem said property by paying to the Commissioner or the latter's Revenue Collection OZcer the full amount of the taxes and penalties, together with interest thereon and the costs of sale, but if the property be not thus redeemed, the forfeiture shall become absolute. SEC. 216. Resale of Real Estate Taken for Taxes. - The Commissioner shall have charge of any real estate obtained by the Government of the Philippines in payment or satisfaction of taxes, penalties or costs arising under this Code or in compromise or adjustment of any claim therefore; and said Commissioner may, upon the giving of not less than twenty (20) days notice, sell and dispose of the same of public auction or with prior approval of the Secretary of Finance, dispose of the same at private sale. In either case, the proceeds of the sale shall be deposited with the National Treasury, and an accounting of the same shall rendered to the Chairman of the Commission on Audit. SEC. 217. Further Distraint or Levy. - The remedy by distraint of personal property and levy on realty may be repeated if necessary until the full amount due, including all expenses, is collected. SEC. 218. Injunction not Available to Restrain Collection of Tax. - No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code. SEC. 219. Nature and Extent of Tax Lien. - If any person, corporation, partnership, joint-account (cuentas en participacion), association or insurance company liable to pay an internal revenue tax, neglects or refuses to pay the same after demand, the amount shall be a lien in favor of the Government of the Philippines from the time when the assessment was made by the Commissioner until paid, with interests, penalties, and costs that may accrue in addition thereto upon all property and rights to property belonging to the taxpayer: Provided, That this lien shall not be valid against any mortgagee, purchaser or judgment creditor until notice of such lien shall be Sled by the Commissioner in the oZce of the Register of Deeds of the province or city where the property of the taxpayer is situated or located. SEC. 220. Form and Mode of Proceeding in Actions Arising under this Code. - Civil and criminal actions and proceedings instituted in behalf of the Government under the authority of this Code or other law enforced by the Bureau of Internal Revenue shall be brought in the name of the Government of the Philippines and shall be conducted by legal oZcers of the Bureau of Internal Revenue but no civil or criminal action for the recovery of taxes or the enforcement of any Sne, penalty or forfeiture under this Code shall be Sled in court without the approval of the Commissioner. SEC. 221. Remedy for Enforcement of Statutory Penal Provisions. - The remedy for enforcement of statutory penalties of all sorts shall be by criminal or civil action, as the particular situation may require, subject to the approval of the Commissioner. SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.- https://www.bir.gov.ph/index.php/tax-code.html Page 146 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (a) In the case of a false or fraudulent return with intent to evade tax or of failure to Sle a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be Sled without assessment, at any time within ten (10) years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which has become Snal and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof. (b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon. (c) Any internal revenue tax which has been assessed within the period of limitation as prescribed in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in court within Sve (5) years following the assessment of the tax. (d) Any internal revenue tax, which has been assessed within the period agreed upon as provided in paragraph (b) hereinabove, may be collected by distraint or levy or by a proceeding in court within the period agreed upon in writing before the expiration of the Sve (5) -year period. The period so agreed upon may be extended by subsequent written agreements made before the expiration of the period previously agreed upon. (e) Provided, however, That nothing in the immediately preceding and paragraph (a) hereof shall be construed to authorize the examination and investigation or inquiry into any tax return Sled in accordance with the provisions of any tax amnesty law or decree. SEC. 223. Suspension of Running of Statute of Limitations. - The running of the Statute of Limitations provided in Sections 203 and 222 on the making of assessment and the beginning of distraint or levy a proceeding in court for collection, in respect of any deSciency, shall be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for sixty (60) days thereafter; when the taxpayer requests for a reinvestigation which is granted by the Commissioner; when the taxpayer cannot be located in the address given by him in the return Sled upon which a tax is being assessed or collected: Provided, that, if the taxpayer informs the Commissioner of any change in address, the running of the Statute of Limitations will not be suspended; when the warrant of distraint or levy is duly served upon the taxpayer, his authorized representative, or a member of his household with suZcient discretion, and no property could be located; and when the taxpayer is out of the Philippines. SEC. 224. Remedy for Enforcement of Forfeitures.- The forfeiture of chattels and removable Sxtures of any sort shall be enforced by the seizure and sale, or destruction, of the speciSc forfeited property. The forfeiture of real property shall be enforced by a judgment of condemnation and sale in a legal action or proceeding, civil or criminal, as the case may require. SEC. 225. When Property to be Sold or Destroyed. - Sales of forfeited chattels and removable Sxtures shall be effected, so far as practicable, in the same manner and under the same conditions as the public notice and the time and manner of sale as are prescribed for sales of personal property distrained for the non-payment of taxes. Distilled spirits, liquors, cigars, cigarettes, other manufactured products of tobacco, and all apparatus used I or about the illicit production of such articles may, upon forfeiture, be destroyed by order of the Commissioner, when the sale of the same for consumption or use would be injurious to public health or prejudicial to the enforcement of the law. https://www.bir.gov.ph/index.php/tax-code.html Page 147 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 All other articles subject to excise tax, which have been manufactured or removed in violation of this Code, as well as dies for the printing or making of internal revenue stamps and labels which are in imitation of or purport to be lawful stamps, or labels may, upon forfeiture, be sold or destroyed in the discretion of the Commissioner. Forfeited property shall not be destroyed until at least twenty (20) days after seizure. SEC. 226. Disposition of funds Recovered in Legal Proceedings or Obtained from Forfeitures. - all judgments and monies recovered and received for taxes, costs, forfeitures, Snes and penalties shall be paid to the Commissioner or his authorized deputies as the taxes themselves are required to be paid, and except as specially provided, shall be accounted for and dealt with the same way. SEC. 227. Satisfaction of Judgment Recovered Against any Internal Revenue O9cer. - When an action is brought against any Internal Revenue oZcer to recover damages by reason of any act done in the performance of oZcial duty, and the Commissioner is notiSed of such action in time to make defense against the same, through the Solicitor General, any judgment, damages or costs recovered in such action shall be satisSed by the Commissioner, upon approval of the Secretary of Finance, or if the same be paid by the person used shall be repaid or reimbursed to him. No such judgment, damages, or costs shall be paid or reimbursed in behalf of a person who has acted negligently or in bad faith, or with willful oppression. CHAPTER III PROTESTING AN ASSESSMENT, REFUND, ETC. SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized representative Snds that proper taxes should be assessed, he shall Srst notify the taxpayer of his Sndings: Provided, however, That a pre-assessment notice shall not be required in the following cases: (a) When the Snding for any deSciency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return; or (b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or (c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or (d) When the excise tax due on excisable articles has not been paid; or (e) When the article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons. The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. https://www.bir.gov.ph/index.php/tax-code.html Page 148 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his Sndings. Such assessment may be protested administratively by Sling a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from Sling of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become Snal. If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of one hundred eighty (180)-day period; otherwise, the decision shall become Snal, executory and demandable. SEC. 229. Recovery of Tax Erroneously or Illegally Collected.- no suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, of any sum alleged to have been excessively or in any manner wrongfully collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly Sled with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be Sled after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. SEC. 230. Forfeiture of Cash Refund and of Tax Credit. – (A) Forfeiture of Refund. - A refund check or warrant issued in accordance with the pertinent provisions of this Code, which shall remain unclaimed or uncashed within Sve (5) years from the date the said warrant or check was mailed or delivered, shall be forfeited in favor of the Government and the amount thereof shall revert to the general fund. (B) Forfeiture of Tax Credit. - A tax credit certiScate issued in accordance with the pertinent provisions of this Code, which shall remain unutilized after Sve (5) years from the date of issue, shall, unless revalidated, be considered invalid, and shall not be allowed as payment for internal revenue tax liabilities of the taxpayer, and the amount covered by the certiScate shall revert to the general fund. (C)Transitory Provision. - For purposes of the preceding Subsection, a tax credit certiScate issued by the Commissioner or his duly authorized representative prior to January 1, 1998, which remains unutilized or has a creditable balance as of said date, shall be presented for revalidation with the Commissioner or his duly authorized representative or on before June 30, 1998. SEC. 231. Action to Contest Forfeiture of Chattel. - In case of the seizure of personal property under claim of forfeiture, the owner desiring to contest the validity of the forfeiture may, at any time before sale or destruction of the property, bring an action against the person seizing the property or having possession thereof to recover the same, and upon giving proper bond, may enjoin the sale; or after the sale and within six (6) months, he may bring an action to recover the net proceeds realized at the sale. https://www.bir.gov.ph/index.php/tax-code.html Page 149 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 << Back to NIRC Outline >> TITLE IX COMPLIANCE REQUIREMENTS CHAPTER I KEEPING OF BOOKS OF ACCOUNTS AND RECORDS SEC. 232. Keeping of Books of Accounts. - (A) Corporations, Companies, Partnerships or Persons Required to Keep Books of Accounts. - All corporations, companies, partnerships or persons required by law to pay internal revenue taxes shall keep and use relevant and appropriate[202] set of bookkeeping records duly authorized by the Secretary of Finance wherein all transactions and results of operations are shown and from which all taxes due the Government may readily and accurately be ascertained and determined any time of the year. Provided, that corporations, companies, partnerships or persons whose gross annual[203] sales, earnings, receipts or output exceed Three Million pesos (P3,000,000),[204] shall have their books of accounts audited and examined yearly by independent CertiSed Public Accountants and their income tax returns accompanied with a duly accomplished Account Information Form(AIF) which shall contain, among others, information lifted from certiSed balance sheets, proSt and loss statements, schedules listing income-producing properties and the corresponding income therefrom and other relevant statements. (B) Independent CertiQed Public Accountant DeQned. - The term 'Independent CertiQed Public Accountant', as used in the preceding paragraph, means an accountant who possesses the independence as deSned in the rules and regulations of the Board of Accountancy promulgated pursuant to Presidential Decree No. 692, otherwise known as the Revised Accountancy Law. SEC. 233. Subsidiary Books. - All corporations, companies, partnerships or persons keeping the books of accounts mentioned in the preceding Section may, at their option, keep subsidiary books as the needs of their business may require: Provided, That were such subsidiaries are kept, they shall form part of the accounting system of the taxpayer and shall be subject to the same rules and regulations as to their keeping, translation, production and inspection as are applicable to the journal and the ledger. SEC. 234. Language in which Books are to be Kept; Translation. - All such corporations, companies, partnerships or persons shall keep the books or records mentioned in Section 232 hereof in native language, English or Spanish: Provided, however, That if in addition to said books or records the taxpayer keeps other books or records in a language other than a native language, English or Spanish, he shall make a true and complete translation of all the entries in such other books or records into a native language; English or Spanish, and the said translation must be made by the bookkeeper, or such taxpayer, or in his absence, by his manager, and must be certiSed under oath as to its correctness by the said bookkeeper or manager, and shall form an integral part of the aforesaid books of accounts. The keeping of such books or records in any language other than a native language; English or Spanish, is hereby prohibited. SEC. 235. Preservation of Books and Accounts and Other Accounting Records. - All the books of accounts, including the subsidiary books and other accounting records of corporations, partnerships, or persons, shall be preserved by them for a period beginning from the last entry in each book until the last day prescribed by Section 203 within which the Commissioner https://www.bir.gov.ph/index.php/tax-code.html Page 150 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 is authorized to make an assessment. The said books and records shall be subject to examination and inspection by internal revenue oZcers: Provided, That for income tax purposes, such examination and inspection shall be made only once in a taxable year, except in the following cases: (a) Fraud, irregularity or mistakes, as determined by the Commissioner; (b) The taxpayer requests reinvestigation; (c) VeriScation of compliance with withholding tax laws and regulations; (d) VeriScation of capital gains tax liabilities; and (e) In the exercise of the Commissioner's power under Section 5(B) to obtain information from other persons in which case, another or separate examination and inspection may be made. Examination and inspection of books of accounts and other accounting records shall be done in the taxpayer's oZce or place of business or in the oZce of the Bureau of Internal Revenue. All corporations, partnerships or persons that retire from business shall, within ten (10) days from the date of retirement or within such period of time as may be allowed by the Commissioner in special cases, submit their books of accounts, including the subsidiary books and other accounting records to the Commissioner or any of his deputies for examination, after which they shall be returned. Corporations and partnerships contemplating dissolution must notify the Commissioner and shall not be dissolved until cleared of any tax liability. Any provision of existing general or special law to the contrary notwithstanding, the books of accounts and other pertinent records of tax-exempt organizations or grantees of tax incentives shall be subject to examination by the Bureau of Internal Revenue for purposes of ascertaining compliance with the conditions under which they have been granted tax exemptions or tax incentives, and their tax liability, if any. CHAPTER II ADMINISTRATIVE PROVISIONS SEC. 236. Registration Requirements. - (A) Requirements. [4]- Every person subject to any internal revenue tax shall register once with the appropriate Revenue District OZcer: (1) Within ten (10) days from date of employment, or (2) On or before the commencement of business,or (3) Before payment of any tax due, or (4) Upon Sling of a return, statement or declaration as required in this Code. The registration shall contain the taxpayer's name, style, place of residence, business and such other information as may be required by the Commissioner in the form prescribed therefor. Provided, That the Commissioner shall simplify the requirements of self-employed individuals and/or professionals.[205] https://www.bir.gov.ph/index.php/tax-code.html Page 151 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 A person maintaining a head oZce, branch or facility shall register with the Revenue District OZcer having jurisdiction over the head oZce, brand or facility. For purposes of this Section, the term 'facility' may include but not be limited to sales outlets, places of production, warehouses or storage places. (B) Annual Registration Fee - An annual registration fee in the amount of Five hundred pesos (P500) for every separate or distinct establishment or place of business, including facility types where sales transactions occur, shall be paid upon registration and every year thereafter on or before the last day of January: Provided, however, That cooperatives, individuals earning purely compensation income, whether locally or abroad, and overseas workers are not liable to the registration fee herein imposed. The registration fee shall be paid to an authorized agent bank located within the revenue district, or to the Revenue Collection OZcer, or duly authorized Treasurer of the city or municipality where each place of business or branch is registered. (C) Registration of Each Type of Internal Revenue Tax.- Every person who is required to register with the Bureau of Internal Revenue under Subsection (A) hereof, shall register each type of internal revenue tax for which he is obligated, shall Sle a return and shall pay such taxes, and shall updates such registration of any changes in accordance with Subsection (E) hereof. (D) Transfer of Registration. - In case a registered person decides to transfer his place of business or his head oZce or branches, it shall be his duty to update his registration status by Sling an application for registration information update in the form prescribed therefor. (E) Other Updates. - Any person registered in accordance with this Section shall, whenever applicable, update his registration information with the Revenue District OZce where he is registered, specifying therein any change in type and other taxpayer details. (F) Cancellation of Registration. – (1) General Rule. - The registration of any person who ceases to be liable to a tax type shall be cancelled upon Sling with the Revenue District OZce where he is registered an application for registration information update in a form prescribed therefor. (2) Cancellation of Value-Added Tax Registration. – A VAT- registered person may cancel his registration for VAT if: (a) He makes written application and can demonstrate to the Commissioner’s satisfaction that his gross sales or receipts for the following twelve (12) months, other than those that are exempt under Section 109 (A) to (U) (sic), will not exceed One million Sve hundred thousand pesos (P1,500,000) or (b) He has ceased to carry on his trade or business, and does not expect to recommence any trade or business within the next (12) months. The cancellation of registration will be effective from the Srst day of the following month. (G) Persons Required to Register for Value-Added Tax. — (1) Any person who, in the course of trade or business, sells, barters or exchanges goods or properties, or engages in the sale or exchange of services, shall be liable to register for value-added tax if: https://www.bir.gov.ph/index.php/tax-code.html Page 152 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (a) His gross sales or receipts for the past twelve (12) months, other than those that are exempt under Section 109(A) to (BB),[206] have exceeded Three million pesos (P3,000,000);[207] or (b) There are reasonable grounds to believe that his gross sales or receipts for the next twelve (12) months, other than those that are exempt under Section 109(A) to (BB), will exceed Three million pesos (P3,000,000).[207] (2) Every person who becomes liable to be registered under paragraph (1) of this Subsection shall register with the Revenue District OZce which has jurisdiction over the head oZce or branch of that person, and shall pay the annual registration fee prescribed in Subsection (B) hereof. If he fails to register, he shall be liable to pay the tax under Title IV as if he were a VAT-registered person, but without the beneSt of input tax credits for the period in which he was not properly registered. (H) Optional Registration for Value-Added Tax of Exempt Person. (1) Any person who is not required to register for value-added tax under Subsection (G) hereof may elect to register for value-added tax by registering with the Revenue District OZce that has a jurisdiction over the head oZce of that person, and paying the annual registration fee in Subsection (B) hereof. (2) Any person who elects to register under this Subsection shall not be entitled to cancel his registration under Subsection (F)(2) for the next three (3) years. Provided, That any person taxed under Section 24(A)(2)(b) and 24(A)(2)(c)(2)(a) of the NIRC who elected to pay the eight percent (8%) tax on gross sales or receipts shall not be allowed to avail of this option.[205] For purposes of Title IV of this code, any person who has registered value-added tax as a tax type in accordance with the provisions of Subsection (C) hereof shall be referred to as a “VAT-registered person” who shall be assigned only one Taxpayer IdentiScation Number (TIN). (I) Supplying of Taxpayer IdentiQcation Number (TIN). – Any person required under the authority of this Code to make, render or Sle a return, statement or other document shall be supplied with or assigned a Taxpayer IdentiScation Number (TIN) which he shall indicate in such return, statement or document Sled with the Bureau of Internal Revenue for his proper identiScation for tax purposes, and which he shall indicate in certain documents, such as, but not limited to the following: (1) Sugar quedans, reSned sugar release order or similar instruments; (2) Domestic bills of lading; (3) Documents to be registered with the Register of Deeds or Assessor's OZce; (4) Registration certiScate of transportation equipment by land, sea or air; (5) Documents to be registered with the Securities and Exchange Commission; (6) Building construction permits; https://www.bir.gov.ph/index.php/tax-code.html Page 153 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (7) Application for loan with banks, Snancial institutions, or other Snancial intermediaries; (8) Application for mayor's permit; (9) Application for business license with the Department of Trade & Industry; and (10) Such other documents which may hereafter be required under rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner. In cases where a registered taxpayer dies, the administrator or executor shall register the estate of the decedent in accordance with Subsection (A) hereof and a new Taxpayer IdentiScation Number (TIN) shall be supplied in accordance with the provisions of this Section. In the case of a nonresident decedent, the executor or administrator of the estate shall register the estate with the Revenue District OZce where he is registered: Provided, however, That in case such executor or administrator is not registered, registration of the estate shall be made with the Taxpayer IdentiScation Number (TIN) supplied by the Revenue District OZce having jurisdiction over his legal residence. Only one Taxpayer IdentiScation Number (TIN) shall be assigned to a taxpayer. Any person who shall secure more than one Taxpayer IdentiScation Number shall be criminally liable under the provision of Section 275 on “Violation of Other Provisions of this Code or Regulations in General”. SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. – (A) Issuance. - All persons subject to an internal revenue tax shall, at the point[208] of each sale and transfer of merchandise or for services rendered valued at One hundred pesos (P100.00)[209] or more, issue duly registered receipts or sales or commercial invoices, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That where the receipt is issued to cover payment made as rentals, commissions, compensations, fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client: Provided, further, That where the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or receipt shall further show the Taxpayer IdentiScation Number (TIN) of the purchaser.[208] Within Sve(5) years from the effectivity of this Act and upon the establishment of a system capable of storing and processing the required data, the Bureau shall require taxpayers engaged in the export of goods and services, taxpayers engaged in e- commerce, and taxpayers under the jurisdiction of the Large Taxpayers Service to issue electronic receipts or sales or commercial invoices in lieu of manual receipts or sales or commercial invoices, subject to the rules and regulations to be issued by the Secretary of Finance upon recommendation of the Commissioner and after a public hearing shall have been held for this purpose: Provided, That taxpayers not covered by the mandate of this provision may issue electronic receipts or sales or commercial invoices, in lieu of manual receipts, and sales and commercial invoices.[210] The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of three (3) years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period: Provided, That in case of electronic receipts or sales or commercial invoices, the digital records of the same shall be kept by the purchaser, customer or client and the issuer for the same period above stated.[210] https://www.bir.gov.ph/index.php/tax-code.html Page 154 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 The Commissioner may, in meritorious cases, exempt any person subject to internal revenue tax from compliance with the provisions of this Section. SEC. 237-A. Electronic Sales Reporting System. – Within Sve (5) years from the effectivity of this Act and upon establishment of a system capable of storing and processing the required data, the Bureau shall require taxpayers engaged in the export of goods and services, and taxpayers under the jurisdiction of the Large Taxpayers Service to electronically report their sales data to the Bureau through the use of electronic point of sale systems, subject to rules and regulations to be issued by the Secretary of Finance as recommended by the Commissioner of Internal Revenue: Provided, That the machines, Sscal devices, and Sscal memory devices shall be at the expense of the taxpayer. The date processing of sales and purchase data shall comply with the provisions of Republic Act No. 10173, otherwise known as the “Data Privacy Act” and Section 270 of the NIRC, as amended, on unlawful divulgence of taxpayer information and such other laws relating to the conSdentiality of information. The Bureau shall also establish policies, risk management approaches, actions, trainings, and technologies to protect cyber environment, organization, and data in compliance with Republic Act No. 10175 or the “Cybercrime Prevention Act of 2012.”[211] SEC. 238. Printing of Receipts or Sales or Commercial Invoices. - All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer IdentiScation Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner. All persons who print receipt or sales or commercial invoices shall maintain a logbook/register of taxpayers who availed of their printing services. The logbook/register shall contain the following information: (1) Names, Taxpayer IdentiScation Numbers of the persons or entities for whom the receipts or sales or commercial invoices were printed; and (2) Number of booklets, number of sets per booklet, number of copies per set and the serial numbers of the receipts or invoices in each booklet. SEC. 239. Sign to be Exhibited by Distiller, RectiQer, Compounder, Repacker and Wholesale Liquor Dealer. - Every person engaged in distilling or rectifying spirits, compounding liquors, repacking wines or distilled spirits, and every wholesale liquor dealer shall keep conspicuously on the outside of his place of business a sign exhibiting, in letters not less than six centimeters (6 cms.) high, his name or Srm style, with the words 'Registered Distiller,' 'RectiSer of Spirits,' 'Compounder of Liquors,' 'Repacker of Wines or Distilled Spirits,' or 'Wholesale Liquor Dealer,' as the case may be, and his assessment number. SEC. 240. Sign to be exhibited by manufacturer of Products of Tobacco. – Every manufacturer of cigars, cigarettes or tobacco, and every wholesale dealer in leaf tobacco or manufactured products of tobacco shall place and keep on outside of the building wherein his business is carried on, so that it can be distinctly seen, a sign stating his full name and business in letters not less than six centimeters (6 cms.) high and also giving his assessment number. https://www.bir.gov.ph/index.php/tax-code.html Page 155 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 241. Exhibition of CertiQcate of Payment at Place of Business. - The certiScate or receipts showing payment of taxes issued to a person engaged in a business subject to an annual registration fee shall be kept conspicuously exhibited in plain view in or at the place where the business is conducted; and in case of a peddler or other persons not having a Sxed place of business, shall be kept in the possession of the holder thereof, subject to production upon demand of any internal revenue oZcer. SEC. 242. Continuation of Business of Deceased Person. - When any individual who has paid the annual registration fee dies, and the same business is continued by the person or persons interested in his estate, no additional payment shall be required for the residue of the term which the tax was paid: Provided, however, That the person or persons interested in the estate should, within thirty (30) days from the death of the decedent, submit to the Bureau of Internal Revenue or the Regional or Revenue District OZce inventories of goods or stocks had at the time of such death. The requirement under this Section shall also be applicable in the case of transfer of ownership or change of name of the business establishment. SEC. 243. Removal of Business to Other Location. - Any business for which the annual registration fee has been paid may, subject to the rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, be removed and continued in any other place without the payment of additional tax during the term for which the payment was made. CHAPTER III RULES AND REGULATIONS SEC. 244. Authority of Secretary of Finance to Promulgate Rules and Regulations. - The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code. SEC. 245. SpeciQc Provisions to be Contained in Rules and Regulations. - The rules and regulations of the Bureau of Internal Revenue shall, among other things, contain provisions specifying, prescribing or deSning: (a) The time and manner in which Revenue Regional Directors shall canvass their respective Revenue Regions for the purpose of discovering persons and property liable to national internal revenue taxes, and the manner in which their lists and records of taxable persons and taxable objects shall be made and kept; (b) The forms of labels, brands or marks to be required on goods subject to an excise tax, and the manner in which the labelling, branding or marking shall be effected; (c) The conditions under which and the manner in which goods intended for export, which if not exported would be subject to an excise tax, shall be labelled, branded or marked; (d) The conditions to be observed by revenue oZcers respecting the institutions and conduct of legal actions and proceedings; https://www.bir.gov.ph/index.php/tax-code.html Page 156 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (e) The conditions under which goods intended for storage in bonded warehouses shall be conveyed thither, their manner of storage and the method of keeping the entries and records in connection therewith, also the books to be kept by Revenue Inspectors and the reports to be made by them in connection with their supervision of such houses; (f) The conditions under which denatured alcohol may be removed and dealt in, the character and quantity of the denaturing material to be used, the manner in which the process of denaturing shall be effected, so as to render the alcohol suitably denatured and unSt for oral intake, the bonds to be given, the books and records to be kept, the entries to be made therein, the reports to be made to the Commissioner, and the signs to be displayed in the business or by the person for whom such denaturing is done or by whom, such alcohol is dealt in; (g) The manner in which revenue shall be collected and paid, the instrument, document or object to which revenue stamps shall be aZxed, the mode of cancellation of the same, the manner in which the proper books, records, invoices and other papers shall be kept and entries therein made by the person subject to the tax, as well as the manner in which licenses and stamps shall be gathered up and returned after serving their purposes; (h) The conditions to be observed by revenue oZcers respecting the enforcement of Title III imposing a tax on estate of a decedent, and other transfers mortis causa, as well as on gifts and such other rules and regulations which the Commissioner may consider suitable for the enforcement of the said Title III; (i) The manner in which tax returns, information and reports shall be prepared and reported and the tax collected and paid, as well as the conditions under which evidence of payment shall be furnished the taxpayer, and the preparation and publication of tax statistics; (j) The manner in which internal revenue taxes, such as income tax, including withholding tax, estate and donor's taxes, value-added tax, other percentage taxes, excise taxes and documentary stamp taxes shall be paid through the collection oZcers of the Bureau of Internal Revenue or through duly authorized agent banks which are hereby deputized to receive payments of such taxes and the returns, papers and statements that may be Sled by the taxpayers in connection with the payment of the tax: Provided, however, That notwithstanding the other provisions of this Code prescribing the place of Sling of returns and payment of taxes, the Commissioner may, by rules and regulations, require that the tax returns, papers and statements that may be Sled by the taxpayers in connection with the payment of the tax. Provided, however, That notwithstanding the other provisions of this Code prescribing the place of Sling of returns and payment of taxes, the Commissioner may, by rules and regulations require that the tax returns, papers and statements and taxes of large taxpayers be Sled and paid, respectively, through collection oZcers or through duly authorized agent banks: Provided, further, That the Commissioner can exercise this power within six (6) years from the approval of Republic Act No. 7646 or the completion of its comprehensive computerization program, whichever comes earlier: Provided, Snally, That separate venues for the Luzon, Visayas and Mindanao areas may be designated for the Sling of tax returns and payment of taxes by said large taxpayers. For the purpose of this Section, 'large taxpayer' means a taxpayer who satisSes any of the following criteria: (1) Value-Added Tax (VAT) - Business establishment with VAT paid or payable of at least One hundred thousand pesos (P100, 000) for any quarter of the preceding taxable year; (2) Excise tax - Business establishment with excise tax paid or payable of at least One million pesos (P1, 000,000) for the preceding taxable year; https://www.bir.gov.ph/index.php/tax-code.html Page 157 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (3) Corporate Income Tax - Business establishment with annual income tax paid or payable of at least One million pesos (P1,000,000) for the preceding taxable year; and (4) Withholding tax - Business establishment with withholding tax payment or remittance of at least One million pesos (P1,000,000) for the preceding taxable year. Provided, however, That the Secretary of Finance, upon recommendation of the Commissioner, may modify or add to the above criteria for determining a large taxpayer after considering such factors as inbation, volume of business, wage and employment levels, and similar economic factors. The penalties prescribed under Section 248 of this Code shall be imposed on any violation of the rules and regulations issued by the Secretary of Finance, upon recommendation of the Commissioner, prescribing the place of Sling of returns and payments of taxes by large taxpayers. SEC. 246. Non- Retroactivity of Rulings. - Any revocation, modiScation or reversal of any of the rules and regulations promulgated in accordance with the preceding Sections or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modiScation or reversal will be prejudicial to the taxpayers, except in the following cases: (a) Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by the Bureau of Internal Revenue; (b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or (c) Where the taxpayer acted in bad faith. << Back to NIRC Outline >> TITLE X STATUTORY OFFENSES AND PENALTIES CHAPTER I ADDITIONS TO THE TAX SEC. 247. General Provisions. - (a) The additions to the tax or deSciency tax prescribed in this Chapter shall apply to all taxes, fees and charges imposed in this Code. The Amount so added to the tax shall be collected at the same time, in the same manner and as part of the tax. https://www.bir.gov.ph/index.php/tax-code.html Page 158 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (b) If the withholding agent is the Government or any of its agencies, political subdivisions or instrumentalities, or a government-owned or controlled corporation, the employee thereof responsible for the withholding and remittance of the tax shall be personally liable for the additions to the tax prescribed herein. (c) The term 'person', as used in this Chapter, includes an oZcer or employee of a corporation who as such oZcer, employee or member is under a duty to perform the act in respect of which the violation occurs. SEC. 248. Civil Penalties. - (A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-Sve percent (25%) of the amount due, in the following cases: (1) Failure to Sle any return and pay the tax due thereon as required under the provisions of this Code or rules and regulations on the date prescribed; or (2) Unless otherwise authorized by the Commissioner, Sling a return with an internal revenue oZcer other than those with whom the return is required to be Sled; or (3) Failure to pay the deSciency tax within the time prescribed for its payment in the notice of assessment; or (4) Failure to pay the full or part of the amount of tax shown on any return required to be Sled under the provisions of this Code or rules and regulations, or the full amount of tax due for which no return is required to be Sled, on or before the date prescribed for its payment. (B) In case of willful neglect to Sle the return within the period prescribed by this Code or by rules and regulations, or in case a false or fraudulent return is willfully made, the penalty to be imposed shall be Sfty percent (50%) of the tax or of the deSciency tax, in case, any payment has been made on the basis of such return before the discovery of the falsity or fraud: Provided, That a substantial under-declaration of taxable sales, receipts or income, or a substantial overstatement of deductions, as determined by the Commissioner pursuant to the rules and regulations to be promulgated by the Secretary of Finance, shall constitute prima facie evidence of a false or fraudulent return: Provided, further, That failure to report sales, receipts or income in an amount exceeding thirty percent (30%) of that declared per return, and a claim of deductions in an amount exceeding (30%) of actual deductions, shall render the taxpayer liable for substantial under-declaration of sales, receipts or income or for overstatement of deductions, as mentioned herein. SEC. 249. Interest. - (A) In General. - There shall be assessed and collected on any unpaid amount of tax, interest at the rate of double the legal interest for loans or forbearance of any money in the absence of an express stipulation as set by the Banko Sentral ng Pilipinas[212] from date prescribed for payment until the amount is fully paid: Provided, That in no case shall the deSciency and delinquency interest prescribed under Sections (B) and (C) hereof, be imposed simultaneously.[213] (B) DeQciency Interest. - Any deSciency in the tax due, as the term is deSned in this Code, shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof, or upon issuance of a notice and demand by the Commissioner of Internal Revenue, whichever comes earlier.[213] (C) Delinquency Interest. - In case of failure to pay: https://www.bir.gov.ph/index.php/tax-code.html Page 159 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (1) The amount of the tax due on any return to be Sled, or (2) The amount of the tax due for which no return is required, or (3) A deSciency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner, there shall be assessed and collected on the unpaid amount, interest at the rate prescribed in Subsection (A) hereof until the amount is fully paid, which interest shall form part of the tax.2 (D) Interest on Extended Payment. - If any person required to pay the tax is qualiSed and elects to pay the tax on installment under the provisions of this Code, but fails to pay the tax or any installment hereof, or any part of such amount or installment on or before the date prescribed for its payment, or where the Commissioner has authorized an extension of time within which to pay a tax or a deSciency tax or any part thereof, there shall be assessed and collected interest at the rate hereinabove prescribed on the tax or deSciency tax or any part thereof unpaid from the date of notice and demand until it is paid. SEC. 250. Failure to File Certain Information Returns.- In the case of each failure to Sle an information return, statement or list, or keep any record, or supply any information required by this Code or by the Commissioner on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the Commissioner, be paid by the person failing to Sle, keep or supply the same, One thousand pesos (1,000) for each failure: Provided, however, That the aggregate amount to be imposed for all such failures during a calendar year shall not exceed Twenty-Sve thousand pesos (P25,000). SEC. 251. Failure of a Withholding Agent to Collect and Remit Tax. - Any person required to withhold, account for, and remit any tax imposed by this Code or who willfully fails to withhold such tax, or account for and remit such tax, or aids or abets in any manner to evade any such tax or the payment thereof, shall, in addition to other penalties provided for under this Chapter, be liable upon conviction to a penalty equal to the total amount of the tax not withheld, or not accounted for and remitted. SEC. 252. Failure of a Withholding Agent to refund Excess Withholding Tax. - Any employer/withholding agent who fails or refuses to refund excess withholding tax shall, in addition to the penalties provided in this Title, be liable to a penalty to the total amount of refunds which was not refunded to the employee resulting from any excess of the amount withheld over the tax actually due on their return. CHAPTER II CRIMES, OTHER OFFENSES AND FORFEITURES SEC. 253. General Provisions. - (a) Any person convicted of a crime penalized by this Code shall, in addition to being liable for the payment of the tax, be subject to the penalties imposed herein: Provided, That payment of the tax due after apprehension shall not constitute a valid defense in any prosecution for violation of any provision of this Code or in any action for the forfeiture of untaxed articles. (b) Any person who willfully aids or abets in the commission of a crime penalized herein or who causes the commission of any such offense by another shall be liable in the same manner as the principal. https://www.bir.gov.ph/index.php/tax-code.html Page 160 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (c) If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence without further proceedings for deportation. If he is a public oZcer or employee, the maximum penalty prescribed for the offense shall be imposed and, in addition, he shall be dismissed from the public service and perpetually disqualiSed from holding any public oZce, to vote and to participate in any election. If the offender is a CertiSed Public Accountant, his certiScate as a CertiSed Public Accountant shall, upon conviction, be automatically revoked or cancelled. (d) In the case of associations, partnerships or corporations, the penalty shall be imposed on the partner, president, general manager, branch manager, treasurer, oZcer-in-charge, and the employees responsible for the violation. (e) The Snes to be imposed for any violation of the provisions of this Code shall not be lower than the Snes imposed herein or twice the amount of taxes, interest and surcharges due from the taxpayer, whichever is higher. SEC. 254. Attempt to Evade or Defeat Tax. [4] - Any person who willfully attempts in any manner to evade or defeat any tax imposed under this Code or the payment thereof shall, in addition to other penalties provided by law, upon conviction thereof, be punished by a Sne not less than Five hundred thousand pesos (P500,000) but not more than Ten million pesos (P10,000,000) and suffer imprisonment of not less than six (6) years but not more than Ten (10) years:[214] Provided, That the conviction or acquittal obtained under this Section shall not be a bar to the Sling of a civil suit for the collection of taxes. SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation. - Any person required under this Code or by rules and regulations promulgated thereunder to pay any tax make a return, keep any record, or supply correct the accurate information, who willfully fails to pay such tax, make such return, keep such record, or supply correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or rules and regulations shall, in addition to other penalties provided by law, upon conviction thereof, be punished by a Sne of not less than Ten thousand pesos (P10,000) and suffer imprisonment of not less than one (1) year but not more than ten (10) years. Any person who attempts to make it appear for any reason that he or another has in fact Sled a return or statement, or actually Sles a return or statement and subsequently withdraws the same return or statement after securing the oZcial receiving seal or stamp of receipt of internal revenue oZce wherein the same was actually Sled shall, upon conviction therefore, be punished by a Sne of not less than Ten thousand pesos (P10,000) but not more than Twenty thousand pesos (P20,000) and suffer imprisonment of not less than one (1) year but not more than three (3) years. SEC. 256. Penal Liability of Corporations. - Any corporation, association or general co-partnership liable for any of the acts or omissions penalized under this Code, in addition to the penalties imposed herein upon the responsible corporate oZcers, partners, or employees shall, upon conviction for each act or omission, be punished by a Sne of not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000). SEC. 257. Penal Liability for Making False Entries, Records or Reports, or Using FalsiQed or Fake Accountable Forms. – (A) Any Snancial oZcer or independent CertiSed Public Accountant engaged to examine and audit books of accounts of taxpayers under Section 232 (A) and any person under his direction who: (1) Willfully falsiSes any report or statement bearing on any examination or audit, or renders a report, including exhibits, statements, schedules or other forms of accountancy work which has not been veriSed by him personally or under his supervision or by a member of his Srm or by a member of his staff in accordance with sound auditing practices; or https://www.bir.gov.ph/index.php/tax-code.html Page 161 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (2) CertiSes Snancial statements of a business enterprise containing an essential misstatement of facts or omission in respect of the transactions, taxable income, deduction and exemption of his client; or (B) Any person who: (1) Not being an independent CertiSed Public Accountant according to Section 232(B) or a Snancial oZcer, examines and audits books of accounts of taxpayers; or (2) Offers to sign and certify Snancial statements without audit; or (3) Offers any taxpayer the use of accounting bookkeeping records for internal revenue purposes not in conformity with the requirements prescribed in this Code or rules and regulations promulgated thereunder; or (4) Knowingly makes any false entry or enters any false or Sctitious name in the books of accounts or record mentioned in the preceding paragraphs; or (5) Keeps two (2) or more sets of such records or books of accounts; or (6) In any way commits an act or omission, in violation of the provisions of this Section; or (7) Fails to keep the books of accounts or records mentioned in Section 232 in a native language, English or Spanish, or to make a true and complete translation as required in Section 234 of this Code, or whose books of accounts or records kept in a native language, English or Spanish, and found to be at material variance with books or records kept by him in another language; or (8) Willfully attempts in any manner to evade or defeat any tax imposed under this Code, or knowingly uses fake or falsiSed revenue oZcial receipts, Letters of Authority, certiScates authorizing registration, Tax Credit CertiScates, Tax Debit Memoranda and other accountable forms shall, upon conviction for each act or omission, be punished by a Sne not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000) and suffer imprisonment of not less than two (2) years but not more than six (6) years. If the offender is a CertiSed Public Accountant, his certiScate as a CertiSed Public Accountant shall be automatically revoked or cancelled upon conviction. In the case of foreigners, conviction under this Code shall result in his immediate deportation after serving sentence, without further proceedings for deportation. SEC. 258. Unlawful Pursuit of Business. - Any person who carries on any business for which an annual registration fee is imposed without paying the tax as required by law shall, upon conviction for each act or omission, be punished by a Sne of not less than Five thousand pesos (P5,000) but not more than Twenty thousand pesos (P20,000) and suffer imprisonment of not less than six (6) months but not more than two (2) years: Provided, That in the case of a person engaged in the business of distilling, rectifying, repacking, compounding or manufacturing any article subject to excise tax, he shall, upon conviction for each act or omission, be punished by a Sne of not less than Thirty thousand pesos (P30,000) but not more than Fifty thousand pesos (P50,000) and suffer imprisonment of not less than two (2) years but not more than four (4) years. https://www.bir.gov.ph/index.php/tax-code.html Page 162 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 259. Illegal Collection of Foreign Payments. - Any person who knowingly undertakes the collection of foreign payments as provided under Section 67 of this Code without having obtained a license therefor, or without complying with its implementing rules and regulations, shall, upon conviction for each act or omission, be punished by a Sne of not less than Twenty thousand pesos (P20,000) but not more than Fifty thousand pesos (P50,000) and suffer imprisonment of not less than one (1) year but not more than two (2) years. SEC. 260. Unlawful Possession of Cigarette Paper in Bobbins or Rolls, Etc. [48] - It shall be unlawful for any person to have in his possession cigarette paper in bobbins or rolls, cigarette tipping paper or cigarette Slter tips, without the corresponding authority therefor issued by the Commissioner. Any person, importer, manufacturer of cigar and cigarettes, who has been found guilty under this Section, shall, upon conviction for each act or omission, be punished by a Sne of not less than One million Sve hundred thousand pesos (₱1,500,000.00) but not more than Fifteen million pesos (₱15,000,000.00)[215] and imprisonment for a term of not less than six (6) years and one (1) day but not more than twelve (12) years. SEC. 261. Unlawful Use of Denatured Alcohol. - Any person who for the purpose of manufacturing any beverage, uses denatured alcohol or alcohol specially denatured to be used for motive power or withdrawn under bond for industrial uses or alcohol knowingly misrepresented to be denatured to be unSt for oral intake or who knowingly sells or offers for sale any beverage made in whole or in part from such alcohol or who uses such alcohol for the manufacture of liquid medicinal preparations taken internally, or knowingly sells or offers for sale such preparations containing as an ingredient such alcohol, shall upon conviction for each act or omission be punished by a Sne of not less than Twenty thousand pesos (P20,000) but not more than One hundred thousand pesos (P100,000) and suffer imprisonment for a term of not less than six (6) years and one (1) day but not more than twelve (12) years. Any person who shall unlawfully recover or attempt to recover by distillation or other process any denatured alcohol or who knowingly sells or offers for sale, conceals or otherwise disposes of alcohol so recovered or redistilled shall be subject to the same penalties imposed under this Section. SEC. 262. Shipment or Removal of Liquor or Tobacco Products Under False Name or Brand or as an Imitation of any Existing or Otherwise Known-Product Name or Brand. [48] - Any person who ships, transports or removes spirituous, compounded or fermented liquors, wines or any manufactured products of tobacco under any other than the proper name or brand known to the trade as designating the kind and quality of the contents of the cask, bottle or package containing the same or as an imitation of any existing or otherwise known product name or brand or causes such act to be done, shall, upon conviction for each act or omission, be punished by a Sne of not less than One million Sve hundred thousand pesos (₱1,500,000.00) but not more than Fifteen million pesos (₱15,000,000.00)[215] and imprisonment of not less than six (6) years and one (1) day but not more than twelve (12) years. SEC. 263. Unlawful Possession or Removal of Articles Subject to Excise Tax Without Payment of the Tax. - Any person who owns and/or is found in possession of imported articles subject to excise tax, the tax on which has not been paid in accordance with law, or any person who owns and/or is found in possession of imported tax-exempt articles other than those to whom they are legally issued shall be punished by: (a) A Sne of not less than One hundred thousand pesos (P100,000.00) but not more than Two hundred thousand pesos (P200,000.00)[216] and imprisonment of not less than sixty (60) days but not more than one hundred (100) days if the appraised value, to be determined in the manner prescribed in Republic Act No. 10863, otherwise known as the ‘Customs Modernization and Tariff Act 20 (CMTA)’,[216] including duties and taxes, of the articles does not exceed Two https://www.bir.gov.ph/index.php/tax-code.html Page 163 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 hundred Sfty thousand pesos (P250,000.00): Provided, That if the appraised value, including duties and taxes, does not exceed Ten thousand pesos (P10,000.00), the penalty shall only be a Sne in the amount of Twelve thousand pesos (P12,000.00);[216] (b) A Sne of not less than One million pesos (₱1,000,000.00) but not more than Two million pesos (₱2,000,000.00) [216] and imprisonment of not less than two (2) years but not more than four (4) years if the appraised value, to be determined in the manner prescribed in Republic Act No. 10863, otherwise known as the ‘Customs Modernization and [216] Tariff Act (CMTA)"[ including duties and taxes, of the articles exceeds Two hundred Sfty thousand pesos (₱250,000.00) but does not exceed Five hundred thousand pesos (₱500,000.00); [216] (c) A Sne of not less than Three million pesos (₱3,000,000.00) but not more than Four million pesos (₱4,000,000.00) [216] and imprisonment of not less than four (4) years but not more than six (6) years, if the appraised value, to be determined in the manner prescribed in Republic Act No. 10863, otherwise known as the ‘Customs Modernization and Tariff Act (CMTA)’[216], including duties and taxes of the articles is more than Five hundred thousand pesos (₱500,000.00) but does not exceed One million pesos (₱1,000,000.00); [216] (d) A Sne of not less than Ten million pesos (₱10,000,000.00) but not more than Twenty million pesos (₱20,000,000.00) [216] and imprisonment of not less than ten (10) years but not more than twelve (12) years, if the appraised value, to be determined in the manner prescribed in Republic Act No. 10863, otherwise known as the ‘Customs Modernization and Tariff Act (CMTA)’[216], including duties and taxes, of the articles exceeds One million pesos (₱1,000,000.00);[216] Any person who is found in possession of locally manufactured articles subject to excise tax, the tax on which has not been paid in accordance with law, or any person who is found in possession of such articles which are exempt from excise tax other than those to whom the same is lawfully issued shall be punished with a Sne of not less than (10) times the amount of excise tax due on the articles found but not less than One million pesos (₱1,000,000.00) and imprisonment of not less than Sve (5) years but not more than eight (8) years.[216] Any manufacturer, importer, owner or person in charge of any article subject to excise tax who removes or allows or causes the unlawful removal of any such articles from the place of production or bonded warehouse, upon which the excise tax has not been paid at the time and in the manner required, and any person who knowingly aids or abets in the removal of such articles as aforesaid, or conceals the same after illegal removal shall, for the Srst offense, be punished with a Sne of not less than ten (10) times the amount of excise tax due on the articles but not less than Fifty million pesos (₱50,000,000.00) and imprisonment of not less than Sve (5) years but not more than eight (8) years.[216] The mere unexplained possession of articles subject to excise tax, the tax on which has not been paid in accordance with law, shall be punishable under this Section. Sec. 263-A. Selling of Heated Tobacco Products and Vapor Products at a Lower Price than the Combined Excise and Value- added Taxes. – Any person who sells heated tobacco products and vapor products at a price lower than the combined excise and value-added taxes shall be punished with a Sne of ten (10) times the amount of excise tax plus value-added tax but not less than One hundred thousand pesos (P100,000.00), and imprisonment of not less than two (2) years but not more than four (4) years. https://www.bir.gov.ph/index.php/tax-code.html Page 164 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 If there is a question on whether a nicotine product is a heated tobacco product or vapor product for purposes of taxation under this Section, the proper tax classiScation thereof shall be resolved through revenue regulations issued by the Secretary of Finance. [217] SEC. 264. Failure or refusal to Issue Receipts or Sales or Commercial Invoices, Violations Related to the Printing of such Receipts or Invoices and Other Violations. - (a) Any person who, being required under Section 237 to issue receipts or sales or commercial invoices, fails or refuses to issue such receipts of invoices, issues receipts or invoices that do not truly rebect and/or contain all the information required to be shown therein, or uses multiple or double receipts or invoices, shall, upon conviction for each act or omission, be punished by a Sne of not less than One thousand pesos (P1,000) but not more than Fifty thousand pesos (P50,000) and suffer imprisonment of not less than two (2) years but not more than four (4) years. (b) Any person who commits any of the acts enumerated hereunder shall be penalized with a Sne of not less than Five hundred thousand pesos (P500,000) but not more than Ten million pesos (Php10,000,000), and imprisonment of not less than six (6) years but not more than ten (10) years:[218] (1) Printing of receipts or sales or commercial invoices without authority from the Bureau of Internal Revenue; or (2) Printing of double or multiple sets of invoices or receipts; or (3) Printing of unnumbered receipts or sales or commercial invoices, not bearing the name, business style, Taxpayer IdentiScation Number, and business address of the person or entity; or (4) Printing of other fraudulent receipts or sales or commercial invoices.[219] SEC. 264-A. Failure to Transmit Sales Data Entered on Cash Register Machine(CRM)/ Point of Sales System (POS) Machines to the BIR’s Electronic Sales Reporting System. – Any taxpayer required to transmit sales data to the Bureau’s electronic sales reporting system but fails to do so, shall pay, for each day of violation, a penalty amounting to one-tenth of one percent (1/10 of 1%) of the annual net income as rebected in the taxpayer’s audited Snancial statement for the second year preceding the current taxable year for each day of violation or Ten thousand pesos (P10,000), whichever is higher: Provided, That should the aggregate number of days of violation exceed one hundred eighty (180) days within a taxable year, an additional penalty of permanent closure of the taxpayer shall be imposed: Provided, further, That if the failure to transmit is due to force majeure or any cause beyond the control of the taxpayer the penalty shall not apply.[220] SEC. 264-B. Purchase, Use, Possession, Sale or Offer to Sell, Installment, Transfer, Update, Upgrade, Keeping or Maintaining of Sales Suppression Devices. – Any person who shall purchase, use, possess, sell or offer to sell, install, transfer, update, upgrade, keep, or maintain any software or device designed for, or is capable of: (a) suppressing the creation of electronic records of sale transactions that a taxpayer is required to keep under existing tax laws and/or regulations; or (b) modifying, hiding, or deleting electronic records of sales transactions and providing a ready means of access to them, shall be punished by a Sne of not less than Five hundred thousand pesos (P500,000) but not more than Ten million pesos (P10,000,000), and suffer imprisonment of not less than two(2) years but not more than four(4) years: Provided, That a cumulative suppression of electronic sales record in excess of the amount of Fifty million pesos (P50,000,000) shall be considered as economic sabotage and shall be punished in the maximum penalty provided for under this provision.[221] https://www.bir.gov.ph/index.php/tax-code.html Page 165 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 265. Offenses Relating to Stamps. - Any person who commits any of the acts enumerated hereunder shall, upon conviction thereof, be punished by a Sne of not less than Ten million pesos (P10,000,000.00) but not more than Five hundred million pesos (P500,000,000.00) and imprisonment of not less than Sve (5) years[222] but not more than eight (8) years: (a) Making, importing, selling, using or possessing without express authority from the Commissioner, any die for printing or making stamps, labels, tags or playing cards; (b) Reusing previously aZxed stamps,[223] erasing the cancellation marks of any stamp previously used, or altering the written Sgures or letters or cancellation marks on internal revenue stamps; (c) Possessing false, counterfeit, restored or altered stamps, labels or tags or causing the commission of any such offense by another; (d) Selling or offering for sale any box or package containing articles subject to excise tax with false, spurious or counterfeit stamps or labels or selling from any such fraudulent box, package or container as aforementioned; or (e) Giving away or accepting from another, or selling, buying or using containers on which the stamps are not completely destroyed. Provided, That the cumulative possession of false/counterfeit/recycled tax stamps in excess of the amount of Fifty million pesos (P50,000,000.00) shall be punishable by a Sne of Five hundred million pesos (P500,000,000.00) or up to ten (10) times the value of the illegal stamps seized, whichever is higher, and imprisonment of not less than ten (10) years but not more than Sfteen (15) years.[223] SEC. 265-A. Offenses Relating to Fuel Marking. – All offenses relating to fuel marking shall, in addition to the penalties imposed under Title X of the NIRC, as amended, Section 1401 of Republic Act No. 10863, otherwise known as the ‘Customs Modernization and Tariff Act(CMTA)’, and other relevant laws, be punishable as follows: (a) Any person who is found to be engaged in the sale, trade, delivery, distribution or transportation of unmarked fuel in commercial quantity held for domestic use or merchandise shall, upon conviction, suffer the penalties of: (1) For the Srst offense, a Sne of Two million Sve hundred thousand pesos (P2,500,000); (2) For the second offense, a Sne of Five million pesos (P5,000,000); and (3) For the third offense, a Sne of Ten million pesos (P10,000,000) and revocation of license to engage in any trade or business. (b) Any person who causes the removal of the oZcial fuel marking agent from marked fuel, and the adulteration or dilution of fuel intended for sale to the domestic market, or the knowing possession, storage, transfer or offer to sale of fuel obtained as a result of such removal, adulteration or dilution shall be penalized in the same manner and extent as provided for in the preceding Subsection. (c) Any person who commits any of the acts enumerated hereunder shall, upon conviction, be punished by a Sne of not less than One million pesos (P1,000,000) but not more than Five million pesos (P5,000,000), and suffer imprisonment of not less than four (4) years but not more than eight (8) years: https://www.bir.gov.ph/index.php/tax-code.html Page 166 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (1) Making, importing, selling, using or possessing fuel markers without express authority; (2) Making, importing, selling, using or possessing counterfeit fuel markers; (3) Causing another person or entity to commit any of the two(2) preceding acts; or (4) Causing the sale, distribution, supply or transport of legitimately imported, in-transit, manufactured or procured controlled precursors and essential chemicals, in diluted, mixtures or in concentrated form, to any person or entity penalized in Subsections (a), (b) or (c) hereof, including but not limited to, packaging, repackaging, labeling, relabeling or concealment of such transaction through fraud, destruction of documents, fraudulent use of permits, misdeclaration, use of front companies or mail fraud. (d) Any person who willfully inserts, places, adds or attaches directly or indirectly, through any overt or covert act, whatever quantity of any unmarked fuel, counterfeit additive or chemical in the person, house, effects, inventory, or in the immediate vicinity of an innocent individual for the purpose of implicating, incriminating or imputing the commission of any violation of this Act shall, upon conviction, be punished by a Sne of not less than Five million pesos (P5,000,000) but not more than Ten million pesos (P10,000,000), and suffer imprisonment of not less than four (4) years but not more than eight (8) years. (e) Any person who is authorized, licensed or accredited under this Act and its implementing rules to conduct fuel tests, who issues false or fraudulent fuel test results knowingly, willfully, or through gross negligence, shall suffer the additional penalty of imprisonment ranging from one (1) year and one (1) day to two (2) years and six (6) months. The additional penalties of revocation of the license to practice his profession in case of practitioner, and the closure of the fuel testing facility, may also be imposed at the instance of the court.[224] Sec. 265-B. Violations Committed by Manufacturers, Importers, Indentors, and Wholesalers of Any Apparatus or Mechanical Contrivance Specially for the Manufacture of Articles Subject to Excise Tax and Importers, Indentors, Manufacturers or Sellers of Cigarette Paper in Bobbins, Cigarette Tipping Paper or Cigarette Filter Tips. - Any violation of Section 164 of this Code, including mere possession of any apparatus or mechanical contrivance for the manufacture of cigarettes, cigarette paper, or cigarette tipping paper, for which no permit was obtained from the Commissioner shall be punishable with a Sne of not less than Fifteen million pesos (₱15,0000,000.00) but not more than Fifty million pesos (₱50,000,000.00) and imprisonment of not less than twelve (12) years but not more than twenty (20) years.[225] SEC. 266. Failure to Obey Summons. - Any person who, being duly summoned to appear to testify, or to appear and produce books of accounts, records, memoranda or other papers, or to furnish information as required under the pertinent provisions of this Code, neglects to appear or to produce such books of accounts, records, memoranda or other papers, or to furnish such information, shall, upon conviction, be punished by a Sne of not less than Five thousand pesos (P5,000) but not more than ten thousand pesos (P10,000) and suffer imprisonment of not less than one (1) year but not more than two (2) years. SEC. 267. Declaration under Penalties of Perjury. - Any declaration, return and other statement required under this Code, shall, in lieu of an oath, contain a written statement that they are made under the penalties of perjury. Any person who willfully Sles a declaration, return or statement containing information which is not true and correct as to every material matter shall, upon conviction, be subject to the penalties prescribed for perjury under the Revised Penal Code. SEC. 268. Other Crimes and Offenses. – https://www.bir.gov.ph/index.php/tax-code.html Page 167 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (A) Misdeclaration or Misrepresentation of Manufacturers Subject to Excise Tax.- Any manufacturer who, in violation of the provisions of Title VI of this Code, misdeclares in the sworn statement required therein or in the sales invoice, any pertinent data or information shall be punished by a summary cancellation or withdrawal of the permit to engage in business as a manufacturer of articles subject to excise tax. (B) Forfeiture of Property Used in Unlicensed Business or Dies Used for Printing False Stamps, Etc.- All chattels, machinery, and removable Sxtures of any sort used in the unlicensed production of articles subject to excise tax shall be forfeited. Dies and other equipment used for the printing or making of any internal revenue stamp, label or tag which is in imitation of or purports to be a lawful stamp, label or tag shall also be forfeited. (C) Forfeiture of Goods Illegally Stored or Removed. - Unless otherwise speciScally authorized by the Commissioner, all articles subject to excise tax should not be stored or allowed to remain in a distillery, distillery warehouse, bonded warehouse or other place where made, after the tax thereon has been paid; otherwise, all such articles shall be forfeited. Articles withdrawn from any such place or from customs custody or imported into the country without the payment of the required tax shall likewise be forfeited. CHAPTER III PENALTIES IMPOSED ON PUBLIC OFFICERS SEC. 269. Violations Committed by Government Enforcement O9cers. [4]- Every oZcial, agent, or employee of the Bureau of Internal Revenue or any other agency of the Government charged with the enforcement of the provisions of this Code, who is guilty of any of the offenses herein below speciSed shall, upon conviction for each act or omission, be punished by a Sne of not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000) and suffer imprisonment of not less than ten (10) years but not more than Sfteen (15) years and shall likewise suffer an additional penalty of perpetual disqualiScation to hold public oZce, to vote, and to participate in any public election (a) Extortion or willful oppression through the use of his oZce or willful oppression and harassment of a taxpayer who refused, declined, turned down or rejected any of his offers speciSed in paragraph (d) hereof; (b) Knowingly demanding or receiving any fee, other or greater sums that are authorized by law or receiving any fee, compensation or reward, except as by law prescribed, for the performance of any duty; (c) Willfully neglecting to give receipts, as by law required, for any sum collected in the performance of duty or willfully neglecting to perform any other duties enjoined by law; (d) Offering or undertaking to accomplish, Sle or submit a report or assessment on a taxpayer without the appropriate examination of the books of accounts or tax liability, or offering or undertaking to submit a report or assessment less than the amount due the Government for any consideration or compensation, or conspiring or colluding with another or others to defraud the revenues or otherwise violate the provisions of this Code; (e) Neglecting or by design permitting the violation of the law by any other person; (f) Making or signing any false entry or entries in any book, or making or signing any false certiScate or return; https://www.bir.gov.ph/index.php/tax-code.html Page 168 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (g) Allowing or conspiring or colluding with another to allow the unauthorized retrieval, withdrawal or recall of any return, statement or declaration after the same has been oZcially received by the Bureau of Internal Revenue; (h) Having knowledge or information of any violation of this Code or of any fraud committed on the revenues collectible by the Bureau of Internal Revenue, failure to report such knowledge or information to their superior oZcer, or failure to report as otherwise required by law; (i) Without the authority of law, demanding or accepting or attempting to collect, directly or indirectly, as payment or otherwise any sum of money or other thing of value for the compromise, adjustment or settlement of any charge or complaint for any violation or alleged violation of this Code; and (j) Deliberate failure to act on the application for refunds within prescribed period provided under Section 112 of this Act. [226] Provided, That the provisions of the foregoing paragraph notwithstanding, any internal revenue oZcer for which a prima facie case of grave misconduct has been established shall, after due notice and hearing of the administrative case and subject to Civil Service Laws, be dismissed from the revenue service: Provided, further, That the term 'grave misconduct', as deSned in Civil Service Law, shall include the issuance of fake letters of authority and receipts, forgery of signature, usurpation of authority and habitual issuance of unreasonable assessments. SEC. 270. Unlawful Divulgence of Trade Secrets. - Except as provided in Section 6(F) and 71 of this Code and Section 26 of Republic Act No. 6388, any oZcer or employee of the Bureau of Internal Revenue who divulges to any person or makes known in any other manner than may be provided by law information regarding the business, income or estate of any taxpayer, the secrets, operation, style or work, or apparatus of any manufacturer or producer, or conSdential information regarding the business of any taxpayer, knowledge of which was acquired by him in the discharge of his oZcial duties, shall upon conviction for each act or omission, be punished by a Sne of not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000), or suffer imprisonment of not less than two (2) years but not more than Sve (5) years, or both. Any oZcer or employee of the Bureau of Internal Revenue who divulges or makes known in any other manner to any person other than the requesting foreign tax authority information obtained from banks and Snancial institutions pursuant to Section 6(F), knowledge or information acquired by him in the discharge of his oZcial duties, shall upon conviction, be punished by a Sne of not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000), or suffer imprisonment of not less than two (2) years but not more than Sve (5) years, or both.4 SEC. 271. Unlawful Interest of Revenue Law Enforcers in Business. - Any internal revenue oZcer who is or shall become interested, directly or indirectly, in the manufacture, sale or importation of any article subject to excise tax under Title VI of this Code or in the manufacture or repair or sale, of any die for printing, or making of stamps, or labels shall upon conviction for each act or omission, be punished by a Sne of not less than Five thousand pesos (P5,000) but not more than Ten thousand pesos (P10,000), or suffer imprisonment of not less than two (2) years and one (1) day but not more than four (4) years, or both. SEC. 272. Violation of Withholding Tax Provision. - Every oZcer or employee of the Government of the Republic of the Philippines or any of its agencies and instrumentalities, its political subdivisions, as well as government-owned or-controlled corporations, including the Bangko Sentral ng Pilipinas (BSP), who, under the provisions of this Code or rules and regulations promulgated thereunder, is charged with the duty to deduct and withhold any internal revenue tax and to remit the same in accordance with the provisions of this Code and other laws is guilty of any offense herein below speciSed shall, upon https://www.bir.gov.ph/index.php/tax-code.html Page 169 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 conviction for each act or omission be punished by a Sne of not less than Five thousand pesos (P5,000) but not more than Fifty thousand pesos (P50,000) or suffer imprisonment of not less than six (6) months and one (1) day but not more than two (2) years, or both: (a) Failing or causing the failure to deduct and withhold any internal revenue tax under any of the withholding tax laws and implementing rules and regulations; (b) Failing or causing the failure to remit taxes deducted and withheld within the time prescribed by law, and implementing rules and regulations; and (c) Failing or causing the failure to Sle return or statement within the time prescribed, or rendering or furnishing a false or fraudulent return or statement required under the withholding tax laws and rules and regulations. SEC. 273. Penalty for Failure to Issue and Execute Warrant. - Any oZcial who fails to issue or execute the warrant of distraint or levy within thirty (30) days after the expiration of the time prescribed in Section 207 or who is found guilty of abusing the exercise thereof by competent authority shall be automatically dismissed from the service after due notice and hearing. CHAPTER IV OTHER PENAL PROVISIONS SEC. 274. Penalty for Second and Subsequent Offenses. - In the case of reincidence, the maximum of the penalty prescribed for the offense shall be imposed. SEC. 275. Violation of Other Provisions of this Code or Rules and Regulations in General. - Any person who violates any provision of this Code or any rule or regulation promulgated by the Department of Finance, for which no speciSc penalty is provided by law, shall, upon conviction for each act or omission, be punished by a Sne of not more than One thousand pesos (P1,000) or suffer imprisonment of not more than six (6) months, or both. SEC. 276. Penalty for Selling, Transferring, Encumbering or in any way Disposing of Property Placed under Constructive Distraint. - Any taxpayer, whose property has been placed under constructive distraint, who sells, transfers, encumbers or in any way disposes of said property, or any part thereof, without the knowledge and consent of the Commissioner, shall, upon conviction for each act or omission, be punished by a Sne of not less than twice the value of the property so sold, encumbered or disposed of but not less than Five Thousand pesos (P5,000), or suffer imprisonment of not less than two (2) years and one (1) day but not more than four (4) years, or both. SEC. 277. Failure to Surrender Property Placed under Distraint and Levy.- Any person having in his possession or under his control any property or rights to property, upon which a warrant of constructive distraint, or actual distraint and levy has been issued shall, upon demand by the Commissioner or any of his deputies executing such warrant, surrender such property or right to property to the Commissioner or any of his deputies, unless such property or right is, at the time of such demand, subject to an attachment or execution under any judicial process. Any person who fails or refuses to surrender any of such property or right shall be liable in his own person and estate to the Government in a sum equal to the value of the property or rights not so surrendered but not exceeding the amount of the taxes (including penalties and interest) for the collection of https://www.bir.gov.ph/index.php/tax-code.html Page 170 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 which such warrant had been issued, together with cost and interest if any, from the date of such warrant. In addition, such person shall, upon conviction for each act or omission, be punished by a Sne of not less than Five thousand pesos (P5,000), or suffer imprisonment of not less than six (6) months and one (1) day but not more than two (2) years, or both. SEC. 278. Procuring Unlawful Divulgence of Trade Secrets. - Any person who causes or procures an oZcer or employee of the Bureau of Internal Revenue to divulge any conSdential information regarding the business, income or inheritance of any taxpayer, knowledge of which was acquired by him in the discharge of his oZcial duties, and which it is unlawful for him to reveal, and any person who publishes or prints in any manner whatever, not provided by law, any income, proSt, loss or expenditure appearing in any income tax return, shall be punished by a Sne of not more than Two thousand pesos (P2,000), or suffer imprisonment of not less than six (6) months nor more than Sve (5) years, or both. SEC. 279. ConQscation and Forfeiture of the Proceeds or Instruments of Crime. - In addition to the penalty imposed for the violation of the provisions of Title X of this Code, the same shall carry with it the conSscation and forfeiture in favor of the government of the proceeds of the crime or value of the goods, and the instruments or tools with which the crime was committed: Provided, however, That if in the course of the proceedings, it is established that the instruments or tools used in the illicit act belong to a third person, the same shall be conSscated and forfeited after due notice and hearing in a separate proceeding in favor of the Government if such third person leased, let, chartered or otherwise entrusted the same to the offender: Provided, further, That in case the lessee subleased, or the borrower, charterer, or trustee allowed the use of the instruments or tools to the offender, such instruments or tools shall, likewise, be conSscated and forfeited: Provided, Snally, That property of common carriers shall not be subject to forfeiture when used in the transaction of their business as such common carrier, unless the owner or operator of said common carrier was, at the time of the illegal act, a consenting party or privy thereto, without prejudice to the owner's right of recovery against the offender in a civil or criminal action. Articles which are not subject of lawful commerce shall be destroyed. SEC. 280. Subsidiary Penalty. - If the person convicted for violation of any of the provisions of this Code has no property with which to meet the Sne imposed upon him by the court, or is unable to pay such Sne, he shall be subject to a subsidiary personal liability at the rate of one (1) day for each Eight pesos and Sfty centavos (P8.50) subject to the rules established in Article 39 of the Revised Penal Code. SEC. 281. Prescription for Violations of any Provision of this Code. - All violations of any provision of this Code shall prescribe after Sve (5) years. Prescription shall begin to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment. The prescription shall be interrupted when proceedings are instituted against the guilty persons and shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy. The term of prescription shall not run when the offender is absent from the Philippines. SEC. 282. Informer's Reward to Persons Instrumental in the Discovery of Violations of the National Internal Revenue Code and in the Discovery and Seizure of Smuggled Goods. - (A) For Violations of the National Internal Revenue Code.- Any person, except an internal revenue oZcial or employee, or other public oZcial or employee, or his relative within the sixth degree of consanguinity, who voluntarily gives deSnite and sworn information, not yet in the possession of the Bureau of Internal Revenue, leading to the discovery of frauds upon the internal revenue laws or violations of any of the provisions thereof, thereby resulting in the recovery of revenues, surcharges and fees https://www.bir.gov.ph/index.php/tax-code.html Page 171 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 and/or the conviction of the guilty party and/or the imposition of any of the Sne or penalty, shall be rewarded in a sum equivalent to ten percent (10%) of the revenues, surcharges or fees recovered and/or Sne or penalty imposed and collected or One Million Pesos (P1,000,000) per case, whichever is lower. The same amount of reward shall also be given to an informer where the offender has offered to compromise the violation of law committed by him and his offer has been accepted by the Commissioner and collected from the offender: Provided, That should no revenue, surcharges or fees be actually recovered or collected, such person shall not be entitled to a reward: Provided, further, That the information mentioned herein shall not refer to a case already pending or previously investigated or examined by the Commissioner or any of his deputies, agents or examiners, or the Secretary of Finance or any of his deputies or agents: Provided, Snally, That the reward provided herein shall be paid under rules and regulations issued by the Secretary of Finance, upon recommendation of the Commissioner. (B) For Discovery and Seizure of Smuggled Goods.To encourage the public to extend full cooperation in eradicating smuggling, a cash reward equivalent to ten percent (10%) of the fair market value of the smuggled and conSscated goods or One Million Pesos (P1,000,000) per case, whichever is lower, shall be given to persons instrumental in the discovery and seizure of such smuggled goods. The cash rewards of informers shall be subject to income tax, collected as a Snal withholding tax at a rate of ten percent (10%). The Provisions of the foregoing Subsections notwithstanding, all public oZcials, whether incumbent or retired, who acquired the information in the course of the performance of their duties during their incumbency, are prohibited from claiming informer's reward. << Back to NIRC Outline >> TITLE XI ALLOTMENT OF INTERNAL REVENUE CHAPTER I DISPOSITION AND ALLOTMENT OF NATIONAL INTERNAL REVENUE IN GENERAL SEC. 283. Disposition of National Internal Revenue. - National Internal revenue collected and not applied as herein above provided or otherwise specially disposed of by law shall accrue to the National Treasury and shall be available for the general purposes of the Government, with the exception of the amounts set apart by way of allotment as provided for under Republic Act No. 7160, otherwise known as the Local Government Code of 1991. In addition to the internal revenue allotment as provided for in the preceding paragraph, Sfty percent (50%) of the national taxes collected under Sections 106, 108 and 116 of this Code in excess of the increase in collections for the immediately preceding year shall be distributed as follows: (a) Twenty percent (20%) shall accrue to the city or municipality where such taxes are collected and shall be allocated in accordance with Section 150 of Republic Act No. 7160, otherwise known as the Local Government Code of 1991; and (b) Eighty percent (80%) shall accrue to the National Government. https://www.bir.gov.ph/index.php/tax-code.html Page 172 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 284. Allotment for the Commission on Audit. - One-half of one percent (1/2 of 1%) of the collections from the national internal revenue taxes not otherwise accruing to special accounts in the general fund of the national government shall accrue to the Commission on Audit as a fee for auditing services rendered to local government units, excluding maintenance, equipment, and other operating expenses as provided for in Section 21 of Presidential Decree No. 898. The Secretary of Finance is hereby authorized to deduct from the monthly internal revenue tax collections an amount equivalent to the percentage as herein Sxed, and to remit the same directly to the Commission on Audit under such rules and regulations as may be promulgated by the Secretary of Finance and the Chairman of the Commission on Audit. SEC. 285. Allotment for the Bureau of Internal Revenue. - An amount equivalent to Sve percent (5%) of the excess of actual collections of national internal revenue taxes over the collection goal shall accrue to the special fund of the Bureau of Internal Revenue and shall be treated as receipts automatically appropriated. Said amount shall be utilized as incentive bonus for revenue personnel, purchase of necessary equipment and facilities for the improvement of tax administration, as approved by the Commissioner: Provided, That the President may, upon recommendation of the Commissioner, direct that the excess be credited to a Special Account in the National Treasury to be held in the reserve available for distribution as incentive bonus in subsequent years. The Secretary of Finance is hereby authorized to transfer from the Treasury an amount equivalent to the percentage as herein Sxed and to remit the same directly to the Bureau of Internal Revenue under such rules and regulations as may be promulgated by the Secretary of Finance. CHAPTER II SPECIAL DISPOSITION OF CERTAIN NATIONAL INTERNAL REVENUE TAXES SEC. 286. Disposition of Proceeds of insurance Premium Tax. - Twenty-Sve percent (25%) of the premium tax collected under Section 123 of this Code shall accrue to the Insurance Fund as contemplated in Section 418 of Presidential Decree No. 612 which shall be used for the purpose of defraying the expenses of the Insurance Commission. The Commissioner shall turn over and deliver the said Insurance Fund to the Insurance Commissioner as soon as the collection is made. SEC. 287. Shares of Local Government Units in the Proceeds from the Development and Utilization of the National Wealth. - Local government units shall have an equitable share in the proceeds derived from the utilization and development of the national wealth within their respective areas, including sharing the same with the inhabitants by way of direct beneSts. (A) Amount of Share of Local Government Units. - Local government units shall, in addition to the internal revenue allotment, have a share of forty percent (40%) of the gross collection derived by the national government from the preceding Sscal year from excise taxes on mineral products, royalties, and such other taxes, fees or charges, including related surcharges, interests or Snes, and from its share in any co-production, joint venture or production sharing agreement in the utilization and development of the national wealth within their territorial jurisdiction. (B) Share of the Local Governments from Any Government Agency or Government-owned or - Controlled Corporation. - Local Government Units shall have a share, based on the preceding Sscal year, from the proceeds derived by any government agency or government-owned or controlled corporation engaged in the utilization and development of the national wealth based on the following formula, whichever will produce a higher share for the local government unit: https://www.bir.gov.ph/index.php/tax-code.html Page 173 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (1) One percent (1%) of the gross sales or receipts of the preceding calendar year; or (2) Forty percent (40%) of the excise taxes on mineral products, royalties, and such other taxes, fees or charges, including related surcharges, interests or Snes the government agency or government-owned or -controlled corporations would have paid if it were not otherwise exempt. (C) Allocation of Shares. - The share in the preceding Section shall be distributed in the following manner: (1) Where the natural resources are located in the province: (a) Province - twenty percent (20%) (b) Component city/municipality - forty-Sve percent (45%); and (c) Barangay - thirty-Sve percent (35%) Provided, however, That where the natural resources are located in two (2) or more provinces, or in two (2) or more component cities or municipalities or in two (2) or more barangays, their respective shares shall be computed on the basis of: (1) Population – seventy percent (70%); and (2) Land area – thirty percent (30%). (2) Where the natural resources are located in a highly urbanized or independent component city: (a) City - sixty - Sve percent (65%); and (b) Barangay - thirty - Sve percent (35%) Provided, however, That where the natural resources are located in two (2) or more cities, the allocation of shares shall be based on the formula on population and land area as speciSed in subsection (C)(1) hereof. SEC. 288. Disposition of Incremental Revenue.– (A) Incremental Revenues from Republic Act No. 7660. - The incremental revenues from the increase in the documentary stamp taxes under R.A. No. 7660 shall be set aside for the following purposes: (1) In 1994 and 1995, twenty-Sve percent (25%) thereof respectively, shall accrue to the UniSed Home-Lending Program under Executive Order No. 90 particularly for mass-socialized housing program to be allocated as follows: Sfty percent (50%) for mass-socialized housing; thirty percent (30%) for the community mortgage program; and twenty percent (20%) for land banking and development to be administered by the National Housing Authority: Provided, That not more than one percent (1%) of the respective allocations hereof shall be used for administrative expenses; (2) In 1996, twenty-Sve percent (25%) thereof to be utilized for the National Health Insurance Program that hereafter may be mandated by law; (3) In 1994 and every year thereafter, twenty-Sve percent (25%) thereof shall accrue to a Special Education Fund to be administered by the Department of Education, Culture and Sports for the construction and repair of school facilities, training of teachers, and procurement or production of instructional materials and teaching aids; and https://www.bir.gov.ph/index.php/tax-code.html Page 174 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (4) In 1994 and every year thereafter, Sfty percent (50%) thereof shall accrue to a Special Infrastructure Fund for the Construction and repair of roads, bridges, dams and irrigation, seaports and hydroelectric and other indigenous power projects: Provided, however, That for the years 1994 and 1995, thirty percent (30%), and for the years 1996, 1997 and 1998, twenty percent (20%), of this fund shall be allocated for depressed provinces as declared by the President as of the time of the effectivity of R.A. No. 7660: Provided, further, That availments under this fund shall be determined by the President on the basis of equity. Provided, Snally, That in paragraphs (2), (3), and (4) of this Section, not more one percent (1%) of the allocated funds thereof shall be used for administrative expenses by the implementing agencies. (B) [227] (C) [227] (D) Incremental Revenue from the Value-Added Tax – Fifty percent (50%) of the local government unit’s share from the incremental revenue from the Value-Added Tax shall be allocated and used exclusively for the following purposes: (1) Fifteen percent (15%) for public elementary and secondary education to Snance the construction of buildings, purchases of school furniture and in-service teacher trainings; (2) Ten percent (10%) for health insurance premiums of enrolled indigents as a counterpart contribution of the local government to sustain the universal coverage of the National Health Insurance Program; (3) Fifteen percent (15%) for environmental conservation to fully implement a comprehensive national reforestation program; and (4) Ten percent (10%) for agricultural modernization to Snance the construction of farm-to-market roads and irrigation facilities. Such allocations shall be segregated as separate trust funds by the national treasury and shall be over and above the annual appropriation for similar purposes. (E) The amount of Fifteen million pesos (P15, 000,000) shall be allocated for a Public Information and Education Program to be administered by the Bureau of Internal Revenue, explaining clearly to businesses their registration, invoicing and reporting requirements under the value-added tax rules. Such program should include seminars and visits to taxpayers to familiarize them with the tax and the development and publication of easy-to-read guides on the value-added tax. (F) Incremental Revenues from the Tax Reform for Acceleration and Inclusion (TRAIN). – For Sve (5) years from the effectivity of this Act, the yearly incremental revenues generated shall be automatically appropriated as follows: (1) Not more than seventy percent (70%) to fund infrastructure projects such as, but not limited to the Build, Build, Build Program and provide infrastructure programs to address congestion through mass transport and new road networks, military infrastructure, sport facilities for public schools, and potable drinking water supply in all public places; and (2) Not more than thirty percent (30%) to fund: https://www.bir.gov.ph/index.php/tax-code.html Page 175 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (a) Programs under Republic Act No. 10659, otherwise known as ‘Sugarcane Industry Development Act of 2015’ to advance the self-reliance of sugar farmers that will increase productivity, provide livelihood opportunities, develop alternative farming systems and ultimately enhance farmers’ income; (b) Social mitigating measures and investments in: (i) education, (ii) health, targeted nutrition, and anti-hunger programs for mothers, infants , and young children, (iii) social protection, (iv) employment, and (v) housing that prioritize and directly beneSt both the poor and near-poor households; (c) A social welfare and beneSts program where qualiSed beneSciaries shall be provided with a social beneSts card to avail of the following social beneSts: (i) Unconditional cash transfer households in the Srst to seventh income deciles of the National Household Targeting System for Poverty Reduction(NHTS-PR), Pantawid Pamilyang Pilipino Program, and the social pension program for a period of three (3) years from the effectivity of this Act: Provided, That the unconditional cash transfer shall be Two hundred pesos (P200.00) per month for the Srst year and Three hundred pesos (P300.00) per month for the second year and third year, to be implemented by the Department of Social Welfare and Development (DSWD); (ii) Fuel vouchers to qualiSed franchise holders of Public Utility Jeepneys (PUJs); (iii) For minimum wage earners, unemployed, and the poorest Sfty percent (50%) of the population: (1) Fare discount from all public utility vehicles (except trucks for hire and school transport service) in the amount equivalent to ten percent (10%) of the authorized fare; (2) Discounted purchase of National Food Authority (NFA) rice from accredited retail stores in the amount equivalent to ten percent (10%) of the net retail prices, up to maximum of twenty (20) kilos per month; and (3) Free skill training under a program implemented by the Technical Skills Development Authority (TESDA). Provided, That beneSts or grants contained in this Subsection shall not be availed in addition to any other discounts. (iv) Other social beneSts programs to be developed and implemented by the government. [228] VETOED BY THE PRESIDENT An interagency committee, chaired by the Department of Budget and Management (DBM) and co-chaired by DOF and DSWD, and comprised of the National Economic and Development Authority (NEDA), Department of Transportation (DOTr), Department of Education (DepEd), Department of Health (DOH), Department of Labor and Employment (DOLE), National Housing Authority (NHA), Sugar Regulatory Administration (SRA), Department of Interior and Local Government (DILG), Department of Energy (DOE), NFA, and TESDA, is hereby created to oversee the identiScation of qualiSed beneSciaries and the implementation of these projects and programs: Provided, That qualiSed beneSciaries under Subsection (c) hereof shall be identiSed using the National ID System which may be enacted by Congress. https://www.bir.gov.ph/index.php/tax-code.html Page 176 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Within sixty (60) days from the end of the three (3) year period from the effectivity of this Act, the interagency committee and respective implementing agencies for the above programs shall submit corresponding program assessments to the COCCTRP. The National Expenditure Program from 2019 onwards shall provide line items that correspond to the allocations mandated in the provisions above. At the end of Sve (5) years from the effectivity of this Act, all earmarking provisions under Subsection (F), shall cease to exist and all incremental revenues derived under this Act shall accrue to the General Fund of the government.[229] (G) Disposition of Revenues from Gaming Tax of offshore Gaming licensees. – The provisions of existing law to the contrary notwithstanding, sixty percent (60%) of the total revenue collected from the gaming tax imposed on offshore gaming licensees shall be allocated and used exclusively in the following manner: (1) Sixty percent (60%) for the implementation of Republic Act No. 11223, otherwise known as the ‘Universal Health Care Act’; (2) Twenty percent (20%) shall be allocated to the Health Facilities Enhancement Program (HFEP), the annual requirements of which shall be determined by the Department of Health; and (3) Twenty percent (20%) shall be allocated for the attainment of the Sustainable Development Goals (SDGs): Provided, That the speciSc SDG targets shall be determined by the National Economic and Development Authority.[20] Sec. 288-A. Disposition of Revenues from Excise Tax on Sweetened Beverages, Alcohol, Tobacco Products, Heated Tobacco Products, and Vapor Products. - (A) Revenues from Excise Tax on Sweetened Beverages from Republic Act No. 10963. - The provisions of existing laws to the contrary 27 notwithstanding, Sfty percent (50%) of the total revenues collected from the excise tax on sweetened beverages shall be allocated and used 3 exclusively in the following manner: (1) Eighty percent (80%) to the Philippine Health Insurance Corporation (PhilHealth) for the implementation of Republic Act No. 11223, otherwise known as the ‘Universal Health Care Act’ of 2019; and (2) Twenty percent (20%) shall be allocated nationwide, based on political and district-subdivisions, for medical assistance, the Health Facilities Enhancement Program (HFEP), the annual requirements of which shall be determined by the Department of Health (DOH). (B) Revenues from Excise Tax on Alcohol Products. - The provisions of existing laws to the contrary notwithstanding, one hundred percent (100%) of the total revenues collected from the excise tax on alcohol products shall be allocated and used exclusively in the following manner: (1) Sixty percent (60%) for the implementation of Republic Act No. 11223, otherwise known as the ‘Universal Health Care Act of 2019’; (2) Twenty percent (20%) shall be allocated nationwide, based on political and district subdivisions, for medical assistance, the Health Facilities Enhancement Program (HFEP), the annual requirements of which shall be determined by the DOH; and (3) Twenty percent (20%) shall be allocated for the attainment of the Sustainable Development Goals (SDGS): Provided, That the speciSc SDG targets shall be determined by the National Economic and Development Authority (NEDA). https://www.bir.gov.ph/index.php/tax-code.html Page 177 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (C) Revenues from Excise Tax on Tobacco Products. [48] - The provisions of existing laws to the contrary notwithstanding, the total revenues collected from the excise tax on tobacco products shall be distributed in the following manner: (1) An annual amount equivalent to Sve percent (5%) of the revenue collection from excise tax on tobacco products, but not exceeding Four billion pesos (₱4,000,000,000.00) shall be allocated and divided among the provinces producing burley and native tobacco in accordance with the volume of tobacco leaf production. The respective shares of the local government units of a beneSciary province under this Section shall be distributed as follows: (i) Fifty percent (50%) shall be allocated to the provincial government of the beneSciary province; and (ii) Fifty percent (50%) shall be proportionately allocated to the municipalities and cities of the beneSciary province on the basis of the volume of then-respective tobacco production. The fund shall be exclusively utilized for programs to promote economically viable alternatives for tobacco farmers and workers such as: (a) Programs that will provide inputs, training, and other support for tobacco farmers who shift to production of agricultural products other than tobacco including, but not limited to, high-value crops, spices, rice, corn, sugarcane, coconut, livestock and Ssheries; (b) Programs that will provide Snancial support for tobacco farmers who are displaced or who cease to produce tobacco; (c) Cooperative programs to assist tobacco farmers in p [anting alternative crops or implementing other livelihood projects: (d) Livelihood programs and projects that will promote, enhance, and develop the tourism potential of tobacco-growing provinces; (e) Infrastructure projects such as farm-to-market roads, bridges, schools, hospitals, rural health facilities and irrigation systems; and (f) Agro-industrial projects that will enable tobacco farmers to be involved in the management and subsequent ownership of projects, such as post-harvest and secondary processing like cigarette-manufacturing and by-product utilization. (2) Fifty percent (50%) of the total excise tax collection from tobacco products shall be allocated and used exclusively in the following manner: (a) Eighty percent (80%) to PhilHealth for the implementation of Republic Act No. 11223, otherwise known as the ‘Universal Health Care Act’ of 2019; and (b) Twenty percent (20%) shall be allocated nationwide, based on political and district subdivisions, for medical assistance, the Health Facilities Enhancement Program (HFEP), the annual requirements of which shall be determined by the DOH; and (D) Revenues from Excise Tax on Heated Tobacco Products and Vapor Products. - The provisions of existing laws to the contrary notwithstanding, one hundred percent (100%) of the total revenues collected from the excise tax on heated tobacco products and vapor products shall be allocated and used exclusively in the following manner: https://www.bir.gov.ph/index.php/tax-code.html Page 178 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (1) Sixty percent (60%) for the implementation of Republic Act No. 11223, otherwise known as the “Universal Health Care Act’ of 2019; (2) Twenty percent (20%) shall be allocated nationwide, based on political and district subdivisions, for medical assistance and the Health Facilities Enhancement Program (HFEP), the annual requirements of which shall be determined by the DOH; and (3) Twenty percent (20%) shall be allocated for the attainment of the Sustainable Development Goals (SDGS): Provided, That the speciSc SDG targets shall be determined by the National Economic and Development Authority (NEDA). Provided, That the Department of Budget and Management (DBM), in consultation with the Department of Agriculture and National Tobacco Administration, shall issue rules and regulations governing the allocation and disbursement of the fund allocated to tobacco-producing provinces, not later than one hundred eighty (180) days from the effectivity of this Act. Provided, further, That the allocation for Universal Health Care under Section 288-A shall be based on the collection of the second Sscal year preceding the current Sscal year.[230] SEC. 289. Special Financial Support to BeneQciary Provinces Producing Virginia Tobacco. [48] - The Snancial support given by the National Government for the beneSciary provinces shall be constituted and collected from the proceeds of Sfteen percent (15%) of the excise taxes on locally manufactured Virginia-type of cigarettes, but not exceeding Seventeen billion pesos (₱17,000,000,000.00) notwithstanding the provision of Section 3 of Republic Act No. 7171.[231] The funds allotted shall be divided among the beneSciary provinces pro-rata according to the volume of Virginia tobacco production. Provinces producing Virginia tobacco shall be the beneSciary provinces under Republic Act No. 7171: Provided, however, That to qualify as beneSciary under R.A. No. 7171, a province must have an average annual production of Virginia leaf tobacco in an amount not less than one million kilos: Provided, further, That the Department of Budget and Management (DBM) shall each year determine the beneSciary provinces and their computed share of the funds under R.A. No. 7171, referring to the National Tobacco Administration (NTA) records of tobacco acceptances, at the tobacco trading centers for the immediate past year. "The Secretary of Budget and Management is hereby directed to retain annually the said funds equivalent to Sfteen percent (15%) of excise taxes on locally manufactured Virginia-type cigarettes, but not exceeding Seventeen billion pesos (₱17,000,000,000.00) notwithstanding the provision of Section 3 of R.A. No. 7171,[231] to be remitted to the beneSciary provinces qualiSed under R.A. No. 7171. The provisions of existing laws to the contrary notwithstanding, the Sfteen percent (15%) share from government revenues mentioned in R.A. No. 7171, but not exceeding Seventeen billion pesos (₱I7,000,000,000.00) notwithstanding the provision of Section 3 of R.A. No. 7171,[231] and due to the Virginia tobacco-producing provinces shall be directly remitted to the provinces concerned. Provided, That this Section shall be implemented in accordance with the guidelines of Memorandum Circular No. 61-A dated November 28, 1993, which amended Memorandum Circular No. 61, entitled ‘Prescribing Guidelines for Implementing Republic Act No. 7171’, dated January 1, 1992 and that the funds be utilized to further advance self-reliance and expand viable alternatives for Virginia-tobacco farmers and workers through: https://www.bir.gov.ph/index.php/tax-code.html Page 179 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (1) Cooperative projects that will enhance better quality of products, increase productivity, guarantee the market and as a whole increase farmers’ income; (2) Livelihood projects particularly the development of alternative farming systems to enhance farmers’ income; (3) Agro-industrial projects that will enable tobacco farmers in the Virginia tobacco-producing provinces to be involved in the management and subsequent ownership of these projects such as post-harvest and secondary processing like cigarette manufacturing and by-product utilization; (4) Infrastructure projects such as farm-to-market roads, bridges, schools, hospitals, rural health facilities, and irrigation systems; (5) Programs and projects that will promote, enhance, and develop the tourism potential of Virginia tobacco-growing provinces; and (6) Programs that will provide Snancial assistance for tobacco farmers that were displaced or who cease to produce tobacco. [231] Provided, further, That in addition to the local government units mentioned in the above circular, the concerned oZcials in the province shall be consulted as regards the identiScation of projects to be Snanced. SEC. 289-A. Support for Local Water Districts. – The amount that would have been paid as income tax and saved by the local water district by virtue of its exemption to the income taxes shall be used by the local water district concerned for capital equipment expenditure in order to expand water services coverage and improve water quality in order to provide safe and clean water in provinces, cities and municipalities: Provided, further, that the water district shall not increase by more than twenty percent (20%) a year its appropriation for personal services, as well as for travel, transportation or representation expenses and purchase of motor vehicles. All unpaid taxes or any portion thereof due from a local water district for the period starting August 13, 1996 until the effectivity date of this Act are hereby condoned by the Government subject to the following conditions: (1) that the Bureau of Internal Revenue, after careful review of the Snancial statements of a water district applying for condonation of taxes due, establishes its Snancial incapacity, after providing for its maintenance and operating expenses, debt servicing and reserved fund, to meet such obligations for the period stated herein, and (2) that the water district availing of such condonation shall submit to Congress of the Philippines a program of internal reforms, duly certiSed by the local water utilities administration, that would bring about its economic and Snancial viability. All water districts, through the Local Water Utilities Administration, shall furnish the Committee on Ways and Means for the Senate and House of Representatives, respectively, on an annual basis, with statistical data and Snancial statements regarding their operations and other information as may be required, for purposes of monitoring compliance with the provisions of this Act [55] and reviewing the rationalization for tax exemption privileges. << Back to NIRC Outline >> TITLE XII https://www.bir.gov.ph/index.php/tax-code.html Page 180 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 OVERSIGHT COMMITTEE SEC. 290. Congressional Oversight Committee. - A Congressional Oversight Committee, hereinafter referred to as the Committee, is hereby constituted in accordance with the provisions of this Code. The Committee shall be composed of the Chairpersons [232] of the Committee on Ways and Means of the Senate and House of Representatives and four (4) additional members from each House, to be designated by the Speaker of the House of Representatives and the Senate President, respectively. The Committee shall, among others, in aid of legislation: (1) Monitor and ensure the proper implementation of Republic Act No. 8240; (2) Determine that the power of the Commissioner to compromise and abate is reasonably exercised; (3) Review the collection performance of the Bureau of Internal Revenue; (4) Review the implementation of the programs of the Bureau of Internal Revenue; and (5) Review the performance of the Fiscal Incentives Review Board. [233] In furtherance of the hereinabove cited objectives, the Committee is empowered to require of the Bureau of Internal Revenue, submission of all pertinent information, including but not limited to: industry audits; collection performance data; status report on criminal actions initiated against persons; and submission of taxpayer returns: Provided, however, That any return or return information which can be associated with, or otherwise identify, directly or indirectly, a particular taxpayer shall be furnished the Committee only when sitting in Executive Session unless such taxpayer otherwise consents in writing to such disclosure. SEC. 290-A. Joint Congressional Oversight Committee on Illicit Trade on Excisable Products. - A Joint Congressional Oversight Committee, herein referred to as the Oversight Committee on illicit trade on excisable products, shall be constituted. The Oversight Committee on Illicit Trade on Excisable Products shall be composed of the respective Chairpersons of the Committees on Ways and Means of the Senate and the House of Representatives as co chairpersons and six (6) additional members from each house to be designated respectively by the Senate President and the Speaker of the House of Representatives. The Oversight Committee on Illicit Trade on Excisable Products shall, in aid of legislation, perform the following duties and functions, among others: (1) Review and evaluate the programs and performance of the Bureau of Internal Revenue and the Bureau of Customs in addressing illicit trade on excisable products and recommend necessary remedial legislation; (2) Require concerned government agencies to submit reports and all pertinent data and information which will aid in resolving illicit trade of excisable products; (3) Hold public hearings and summon concerned private individuals, government personnel and oZcials as resource persons; https://www.bir.gov.ph/index.php/tax-code.html Page 181 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (4) Deputize the Bureau of Internal Revenue, Bureau of Customs, the Philippine National Police, the National Bureau of Investigation and other enforcement agencies of the government as may be necessary in undertaking its duties and functions; and (5) Perform such other duties and functions as may be necessary to perform its mandate. The Joint Congressional Oversight Committee shall be assisted by a Secretariat composed of even number of monitors from both Houses. It shall be co-headed by the service directors of the Committees on Ways and Means of the Senate and the House of Representatives. << Back to NIRC Outline >> TITLE XIII [234] TAX INCENTIVES CHAPTER I GENERAL PROVISIONS ON TAX INCENTIVES SEC. 291. Scope and Coverage. - This Title shall cover all existing Investment Promotion Agencies as deSned in this Code or related laws unless otherwise speciScally exempted from the coverage of this Code. The Investment Promotion Agencies shall maintain their functions and powers as provided under the special laws governing them except to the extent modiSed by the provisions of this Code: Notwithstanding the provisions of this Section, the Department of Finance, the Bureau of Internal Revenue, and the Bureau of Customs shall retain their respective mandates, powers and functions as provided for under this Act and related laws. SEC. 292. Extent of Authority to Grant Tax Incentives. - The Fiscal Incentives Review Board, or the Investment Promotion Agencies, under a delegated authority from the Fiscal Incentives Review Board, shall grant the appropriate tax incentives provided in this Title to be granted to registered business enterprises only to the extent of their approved registered project or activity under the Strategic Investment Priority Plan. SEC. 293. DeQnitions. - When used in this Title: (A) Capital equipment refers to machinery, equipment, major components thereof, tools, devices, applications or apparatus, which are directly or reasonably needed in the registered project or activity of the registered enterprise; (B) Direct local employment refers to the full and decent employment of Filipinos by registered business enterprises under an employer-employee relationship to perform functions that are directly related to the production of goods or performance of services under the registered project or activity; https://www.bir.gov.ph/index.php/tax-code.html Page 182 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (C) Domestic input refers to purchases of locally manufactured goods or locally produced raw materials or domestically outsourced services known as services embedded in manufacturing that are used directly in the production of goods under the registered project or activity. In the case of locally manufactured goods, Sfty percent (50%) of the value-added of the said good should likewise be locally produced or manufactured; (D) Domestic market enterprise refers to any enterprise registered with the Investment Promotion Agency other than export enterprise; (E) Export enterprise refers to any individual, partnership, corporation, Philippine branch of a foreign corporation, or other entity organized and existing under Philippine laws and registered with the Investment Promotion Agency to engage in manufacturing, assembling or processing activity, and services such as information technology (IT) activities and business process outsourcing (BPO), and resulting in the direct exportation, and/or sale of its manufactured, assembled or processed product or IT/BPO services to another registered export enterprise that will form part of the Snal export product or export service of the latter, of at least seventy percent (70%) of its total production or output; (F) Freeport zones refer to an isolated and policed area adjacent to a port of entry, which shall be operated and managed as a separate customs territory to ensure free bow or movement of goods, except those expressly prohibited by law, within, into, and exported out of the freeport zone where imported goods may be unloaded for immediate transshipment or stored, repacked, sorted, mixed, or otherwise manipulated without being subject to import duties. However, movement of these imported goods from the free-trade area to a non-free trade area in the country shall be subject to all applicable internal revenue taxes and duties: Provided, That for the freeport to qualify as a separate customs territory, a freeport shall have a permanent customs control or customs oZce at its perimeter; (G)[235] (H) Investment Promotion Agencies refer to government entities created by law, executive order, decree or other issuance, in charge of promoting investments, granting and administering tax and non-tax incentives, and overseeing the operations of the different economic zones and freeports in accordance with their respective special laws. These include the Board of Investments (BOI), Regional Board of Investments-Autonomous Region in Muslim Mindanao (RBOI-ARMM), Philippine Economic Zone Authority (PEZA), Bases Conversion and Development Authority (BCDA), Subic Bay Metropolitan Authority (SBMA), Clark Development Corporation (CDC), John Hay Management Corporation (JHMC), Poro Point Management Corporation (PPMC), Cagayan Economic Zone Authority (CEZA), Zamboanga City Special Economic Zone Authority (ZCSEZA), PHIVIDEC Industrial Authority (PIA), Aurora PaciSc Economic Zone and Freeport Authority (APECO), Authority of the Freeport Area of Bataan (AFAB), Tourism Infrastructure and Enterprise Zone Authority (TIEZA), and all other similar existing authorities or that may be created by law unless otherwise speciScally exempted from the coverage of this Code; (I) Metropolitan areas refer to Metro Cebu and Metro Davao or those local government units which are later qualiSed or grouped as such by the National Economic and Development Authority or through laws or executive issuances; (J) Other government agencies administering tax incentives refer to government agencies other than Investment Promotion Agencies which register or administer tax incentives of any kind to any speciSc entities and/or class of persons pursuant to any law; (K) Other registered entities refer to any individual, partnership, organization, corporation, Philippine branch of a foreign corporation, or other entity incorporated and/or organized and existing under Philippine laws, and registered with other government agencies administering tax incentives; https://www.bir.gov.ph/index.php/tax-code.html Page 183 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (L) Quali9ed capital expenditure refers to purchases of capital goods with a useful life of more than one (1) year acquired for the entity's production of goods and services to be directly used in the project or activity of the registered business enterprise; (M) Registered business enterprise refers to any individual, partnership, corporation, Philippine branch of a foreign corporation, or other entity organized and existing under Philippine laws and registered with an Investment Promotion Agency excluding service enterprises such as those engaged in customs brokerage, trucking or forwarding services, janitorial services, security services, insurance, banking, and other Snancial services, consumers' cooperatives, credit unions, consultancy services, retail enterprises, restaurants, or such other similar services, as may be determined by the Fiscal Incentives Review Board, irrespective of location, whether inside or outside the zones, duly accredited or licensed by any of the Investment Promotion Agencies and whose income delivered within the economic zones shall be subject to taxes under the National Internal Revenue Code of 1997, as amended; (N) Research and development refers to experimental or other related projects or activities: (1) Whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work: (i) Based on principles of established science; and (ii) Proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions. (2) That are conducted for the purpose of generating new knowledge, including new knowledge in the form of new or improved materials, products, devices, processes or services; (O) Sophisticated refers to the state when a product or service requires a high level of technology, human capital, competencies or know-how, and infrastructure to be produced or offered; (P) Sophistication refers to the level of technology, human capital, competencies or know-how, and infrastructure required for a product or service to be offered by an economy like that of the Philippines; (Q) Source document refers to input materials and documents reasonably needed by information technology (IT) and IT- enabled industries such as books, directories, magazines, newspapers, brochures, pamphlets, medical records or Sles, legal records or Sles, instruction materials, and drawings, blueprints, or outlines; (R) Special economic zone or ecozone refers to a selected area, which shall be operated and managed as a separate customs territory that is highly developed or has the potential to be developed into an agro-industrial, industrial, information technology, or tourist/recreational area, whose metes and bounds are Sxed or delimited by presidential proclamations and within a speciSc geographical area which includes industrial estates (IEs), export processing zones (EPZs), ICT parks and centers, and free trade zones: Provided, That for the ecozone to qualify as a separate customs territory, an ecozone shall have a permanent customs control or customs oZce at its perimeter: Provided, however, That areas where mining extraction is undertaken shall not be declared as an ecozone: Provided, further, That vertical economic zones, such as, but not limited to, buildings, selected boors within buildings, and selected areas on a boor, need to comply with the minimum contiguous land area as determined by the Fiscal Incentives Review Board; and (S) Training refers to courses, curricula, certiScations or modules provided to Filipino employees that are directly related to the production of goods or performance of services under the registered project or activity and that are of a technical nature, which shall develop or improve the speciSc skills or practical knowledge of the employee especially in the mechanical, https://www.bir.gov.ph/index.php/tax-code.html Page 184 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 industrial art, scientiSc Seld or practical science of a particular position or job function in the registered project or activity, or in preparation for enhancing the value chain. CHAPTER II TAX AND DUTY INCENTIVES SEC. 294. Incentives. - Subject to the conditions and period of availment in Sections 295 and 296, respectively, the following types of tax incentives may be granted to registered projects or activities: (A) Income Tax Holiday (ITH); (B) Special Corporate Income Tax (SCIT) Rate - For export enterprise, [236] a tax rate equivalent to Sve percent (5%) effective July 1, 2020, based on the gross income earned, in lieu of all national and local taxes.[237] The period of availment of the Special Corporate Income Tax shall be subject to the conditions set under paragraphs (A) and (B) of Section 296 of this Act: Provided, That, if applicable, the shares of the local government units and the Investment Promotion Agencies under the special laws governing the latter shall be observed and shall not result in the diminution of their respective shares.[238] (C) Enhanced Deductions (ED) - For export enterprise and domestic market enterprise,[239] the following may be allowed as deductions: (1) Depreciation allowance of the assets acquired for the entity's production of goods and services (qualiSed capital expenditure) — additional ten percent (10%) for buildings; and additional twenty percent (20%) for machineries and equipment; (2) Fifty percent (50%) additional deduction on the labor expense incurred in the taxable year; (3) One hundred percent (100%) additional deduction on research and development expense incurred in the taxable year; (4) One hundred percent (100%) additional deduction on training expense incurred in the taxable year; (5) Fifty percent (50%) additional deduction on domestic input expense incurred in the taxable year; (6) Fifty percent (50%) additional deduction on power expense incurred in the taxable year; (7) Deduction for reinvestment allowance to manufacturing industry — When a manufacturing registered business enterprise reinvests its undistributed proSt or surplus in any of the projects or activities listed in the Strategic Investment Priority Plan, the amount reinvested to a maximum of Sfty percent (50%) shall be allowed as a deduction from its taxable income within a period of Sve (5) years from the time of such reinvestment; and https://www.bir.gov.ph/index.php/tax-code.html Page 185 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (8) Enhanced Net Operating Loss Carry-Over (NOLCO). — The net operating loss of the registered project or activity during the Srst three (3) years from the start of commercial operation, which had not been previously offset as deduction from gross income, may be carried over as deduction from gross income within the next Sve (5) consecutive taxable years immediately following the year of such loss. (D)Duty exemption on importation of capital equipment, raw materials, spare parts, or accessories; and (E)Value-Added Tax (VAT) exemption on importation and VAT zero-rating on local purchases. SEC. 295. Conditions of Availment. - The tax incentives in the preceding Section shall be governed by the following rules: (A) The income tax holiday shall be followed by the Special Corporate Income Tax rate or Enhanced Deductions. (B) At the option of the export enterprise,[240] the Special Corporate Income Tax rate or enhanced deductions shall be granted: Provided, That in no case shall the enhanced deductions be granted simultaneously with the Special Corporate Income Tax. The following conditions for the availment of each enhanced deductions shall be complied with:. (1) The depreciation allowance of the assets acquired for the entity’s production of goods and services (qualiSed capital expenditure) shall be allowed for assets that are directly related to the registered enterprise's production of goods and services other than administrative and other support services. (2) The additional deduction on the labor expense shall not include salaries, wages, beneSts, and other personnel costs incurred for managerial, administrative, indirect labor, and support services. (3) The additional deduction on research and development expense shall only apply to research and development directly related to the registered project or activity of the entity and shall be limited to local expenditure incurred for salaries of Filipino employees and consumables and payments to local research and development organizations. (4) The additional deduction on training expense shall only apply to trainings, as approved by the Investment Promotion Agencies based on the Strategic Investment Priority Plan, given to the Filipino employees engaged directly in the registered business enterprise's production of goods and services. (5) The additional deduction on domestic input expense shall only apply to domestic input that are directly related to and actually used in the registered export project or activity of the registered business enterprise. (6) The additional deduction on power expense shall only apply to power utilized for the registered project or activity. (7) The deduction for reinvestment allowance to manufacturing industry shall be determined in the Strategic Investment Priority Plan. (C) The duty exemption shall only apply to the importation of capital equipment, raw materials, spare parts, or accessories directly and exclusively used in the registered project or activity by registered business enterprises: Provided, That the following conditions are complied with: https://www.bir.gov.ph/index.php/tax-code.html Page 186 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (1) The capital equipment, raw materials, spare parts, or accessories are directly and reasonably needed and will be used exclusively in and as part of the direct cost of the registered project or activity of the registered business enterprise, and are not produced or manufactured domestically in suZcient quantity or of comparable quality and at reasonable prices. Prior approval of the Investment Promotion Agency may be secured for the part-time utilization of said capital equipment, raw materials, spare parts, or accessories in a non-registered project or activity to maximize usage thereof: Provided, That the proportionate taxes and duties are paid on a speciSc capital equipment, raw materials, spare parts, or accessories in proportion to the utilization for non-registered projects or activities. In the event that the capital equipment, raw materials, spare parts, or accessories shall be used for a non-registered project or activity of the registered business enterprise at any time within the Srst Sve (5) years from date of importation, the registered business enterprise shall Srst seek prior approval of the concerned Investment Promotion Agency and pay the taxes and customs duties that were not paid upon the importation; and (2) The approval of the Investment Promotion Agency was obtained by the registered business enterprise prior to the importation of such capital equipment, raw materials, spare parts, or accessories. Within the Srst Sve (5) years from date of importation, approval of the Investment Promotion Agency must be secured before the sale, transfer, or disposition of the capital equipment, raw materials, spare parts, or accessories, which were granted tax and customs duty exemption hereunder, and shall be allowed only under the following circumstances: (a) If made to another enterprise availing customs duty exemption on imported capital equipment, raw materials, spare parts, or accessories; (b) If made to another enterprise not availing of duty exemption on imported capital equipment, raw materials, spare parts, or accessories, upon payment of any taxes and duties due on the net book value of the capital equipment, raw materials, spare parts, or accessories to be sold; (c) Exportation of capital equipment, raw materials, spare parts, accessories, source documents, or those required for pollution abatement and control; (d) Proven technical obsolescence of the capital equipment, raw materials, spare parts, or accessories; or (e) ) If donated to the TESDA, state universities and colleges (SUCs), or DepEd and CHED-accredited schools: Provided, That the donation shall be exempt from import duties and taxes, including donor's tax. Provided, That if the registered business enterprise sells, transfers, or disposes the aforementioned imported items without prior approval, the registered business enterprise and the vendee, transferee, or assignee shall be solidarily liable to pay twice the amount of the duty exemption that should have been paid during its importation: Provided, further, That the sale, transfer, or disposition of the capital equipment, raw materials, spare parts, or accessories made after Sve (5) years from date of importation shall require that prior notice be given by the registered business enterprise to the Investment Promotion Agency: Provided, 9nally, That even if the sale, transfer, or disposition of the capital equipment, raw materials, spare parts or accessories was made after Sve (5) years from date of importation with notice to the Investment Promotion Agency, the registered business enterprise is still liable to pay the duties based on the net book value of the capital equipment, raw materials, spare parts, or accessories if it has violated any of its registration terms and conditions. (D) 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 by a registered business enterprise.. https://www.bir.gov.ph/index.php/tax-code.html Page 187 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Notwithstanding the provisions in the preceding paragraphs, sales receipts and other income derived from non-registered project or activity shall be subject to appropriate taxes imposed under this Code.. (E) Notwithstanding any law to the contrary, the importation of COVID-19 vaccine shall be exempt from import duties, taxes and other fees, subject to the approval or licenses issued by the Department of Health or the Food and Drug Administration. (F) Persons who directly import petroleum products deSned under Republic Act No. 8479, otherwise known as the ‘Downstream Oil Industry Deregulation Act of 1998’, for resale in the Philippine customs territory and/or in free zones as deSned under Republic Act No. 10863, otherwise known as the Customs Modernization and Tariff Act, shall not be entitled to the foregoing tax and duty incentives, and shall be subject to appropriate taxes imposed under this Code.. Any law to the contrary notwithstanding, the importation of petroleum products by any person, including registered business enterprises, shall be subject to the payment of applicable duties and taxes as provided under Republic Act No. 10863, otherwise known as the Customs Modernization and Tariff Act, and this Code, respectively, upon importation into the Philippine customs territory and/or into free zones as deSned under Republic Act No. 10863, otherwise known as the Customs Modernization and Tariff Act:. Provided, That the importer can Sle for claims for the refund of duties and taxes applicable under Republic Act No. 10863, otherwise known as the Customs Modernization and Tariff Act, and this Code, respectively, for direct or indirect export of petroleum products, and/or other tax-exempt sales under the Customs Modernization and Tariff Act and other special laws within the period provided therein:. Provided, further, That the importers who subsequently export fuel, subject to the appropriate rules of the fuel marking program, may apply for a refund of duties and taxes, as applicable under Republic Act No. 10863, otherwise known as the Customs Modernization and Tariff Act, and this Code.. (G) Crude oil that is intended to be reSned at a local reSnery, including the volumes that are lost and not converted to petroleum products when the crude oil actually undergoes the reSning process, shall be exempt from payment of applicable duties and taxes upon importation:. Provided, That applicable duties and taxes on petroleum products shall be payable only upon lifting of the petroleum products produced from the imported crude oil, subject to rules and regulations that may be prescribed by the Bureau of Customs and the Bureau of Internal Revenue, to ensure that crude oil shall not be lifted from the reSnery without payment of appropriate duties and taxes.. Registered business enterprises, whose performance commitments include job generation, shall maintain their employment levels to the extent practicable, and in the case of reduced employment or when the performance commitment for job generation is not met, the registered business enterprises must submit to their respective Investment Promotion Agencies and the Fiscal Incentives Review Board their justiScation for the same.. SEC. 296. Period of Availment. - The period of availment of incentive by the registered business enterprise shall be as follows: (A) For export enterprise,[241] income tax holiday of four (4) to seven (7) years, depending on location and industry priorities as speciSed in this Section, and followed by special corporate income tax rate or enhanced deductions for ten (10) years. https://www.bir.gov.ph/index.php/tax-code.html Page 188 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 A qualiSed expansion or entirely new project or activity registered under this Act may qualify to avail of incentives,[242] subject to the qualiScations set forth in the Strategic Investment Priority Plan and performance review by the Fiscal Incentives Review Board: Provided, That existing registered projects or activities prior to the effectivity of this Act may qualify to register and avail of the incentives granted under this Act for the prescribed period, subject to the criteria and conditions set forth in the Strategic Investment Priority Plan; (B) For domestic market enterprise under the Strategic Investment Priority Plan, income tax holiday for four (4) to seven (7) years followed by [243] enhanced deductions for Sve (5) years. [243] A qualiSed expansion or entirely new project or activity registered under this Act may qualify to avail of incentives,[245] subject to the qualiScations set forth in the Strategic Investment Priority Plan and performance review by the Fiscal Incentives Review Board: Provided, That existing registered projects or activities prior to the effectivity of this Act may qualify to register and avail of the incentives granted under this Act for the prescribed period, subject to the criteria and conditions set forth in the Strategic Investment Priority Plan. The period of availment of the foregoing incentives shall commence from the actual start of commercial operations with the registered business enterprise availing of the tax incentives within three (3) years from the date of registration, unless otherwise provided in the Strategic Investment Priority Plan and its corresponding guidelines: Provided, That after the expiration of the transitory period under Section 311(C), export enterprises registered prior to the effectivity of this Act shall have the option to reapply and avail of the incentives granted under Section 294(B) for the same period provided under this Section,[246] subject to the conditions and qualiScations set forth in the Strategic Investment Priority Plan and performance review by the Fiscal Incentives Review Board. For the purpose of this Section, the determination of the category shall be based on both location and industry of the registered project or activity, and other relevant factors as may be deSned in the Strategic Investment Priority Plan. The location of the registered project or activity shall be prioritized according to the level of development as follows: (1) National Capital Region; (2) metropolitan areas or areas contiguous and adjacent to the National Capital Region; and (3) all other areas. The metropolitan areas shall be determined by the National Economic and Development Authority. The industry of the registered project or activity shall be prioritized according to national industrial strategy speciSed in the Strategic Investment Priority Plan. The Strategic Investment Priority Plan shall deSne the coverage of the tiers and provide the conditions for qualifying the activities: (1) Tier I shall include activities that (i) have high potential for job creation; (ii) take place in sectors with market failures resulting in underprovision of basic goods and services; (iii) generate value creation through innovation, upgrading or moving up the value chain; (iv) provide essential support for sectors that are critical to industrial development; or (v) are emerging owing to potential comparative advantage. [247] (2) Tier II shall include activities that produce supplies, parts and components, and intermediate services that are not locally produced but are critical to industrial development and import-substituting activities, including crude oil reSning. (3) Tier III activities shall include (i) research and development resulting in demonstrably signiScant value-added, higher productivity, improved eZciency, breakthroughs in science and health, and high-paying jobs; (ii) generation of new knowledge and intellectual property registered and/or licensed in the Philippines; (iii) commercialization of patents, https://www.bir.gov.ph/index.php/tax-code.html Page 189 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 industrial designs, copyrights and utility models owned or co-owned by a registered business enterprise; (iv) highly technical manufacturing; or (v) are critical to the structural transformation of the economy and require substantial catch- up efforts.[248] The period of availment of incentives based on the combination of both location and industry priorities, as determined in the Strategic Investment Priority Plan, shall be as follows: For exporters:[249] Location/Industry Tiers Tier I Tier II Tier III National Capital Region 4 ITH + 10 ED/SCIT 5 ITH + 10 ED/SCIT 6 ITH + 10 ED/SCIT Metropolitan areas or areas contiguous and 5 ITH + 10 ED/SCIT 6 ITH + 10 ED/SCIT 7 ITH + 10 ED/SCIT adjacent to the National Capital Region All other areas 6 ITH + 10 ED/SCIT 7 ITH + 10 ED/SCIT 7 ITH + 10 ED/SCIT For domestic market activities: Location/Industry Tiers Tier I Tier II Tier III National Capital Region 4 ITH + 5 ED 5 ITH + 5 ED 6 ITH + 5 ED Metropolitan areas or areas contiguous and 5 ITH + 5 ED 6 ITH + 5 ED 7 ITH + 5 ED adjacent to the NCR All other areas 6 ITH + 5 ED 7 ITH + 5 ED 7 ITH + 5 ED[250] In addition to the incentives provided in tiers above, projects or activities of registered enterprises located in areas recovering from armed conbict or a major disaster, as determined by the OZce of the President, shall be entitled to two (2) additional years of income tax holiday. Projects or activities registered prior to the effectivity of this Act, or under the incentive system provided herein that shall, in the duration of their incentives, completely relocate from the National Capital Region, shall be entitled to three (3) additional years of income tax holiday: Provided, That the additional incentive shall commence at the completion of the relocation of operations. The industry and locational prioritization speciSed herein shall be subject to review and revision every three (3) years in accordance with the Strategic Investment Priority Plan, subject to the standards in Section 300 hereof or in exceptional circumstances, to attract substantial investment to respond to a situation or crisis or to target speciSc industries. CHAPTER III https://www.bir.gov.ph/index.php/tax-code.html Page 190 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 THE FISCAL INCENTIVES REVIEW BOARD SEC. 297. Expanded Functions of the Fiscal Incentives Review Board. - The functions and powers of the Fiscal Incentives Review Board created under Presidential Decree No. 776, as amended, shall be expanded as follows: (A) To exercise policy making and oversight functions on the administration and grant of tax incentives by the Investment Promotion Agencies and other government agencies administering tax incentives. In particular, the Fiscal Incentives Review Board shall: (1) Determine the target performance metrics as conditions to avail of tax incentives; (2) Review and audit the compliance of other government agencies administering tax incentives, with respect to the administration and grant of tax incentives and impose sanctions such as, but not limited to, withdrawal, suspension, or cancellation of their power to grant tax incentives; (3) Determine the minimum contiguous land area that vertical economic zones should comply with; (4) Conduct regular monitoring and evaluation of investment and non-investment tax incentives, such as using cost- beneSt analysis (CBA) to determine their impact on the economy and whether agreed performance targets are met; and (5) Check and verify, as necessary, the compliance of registered business enterprises with the terms and conditions of their availment, in particular the agreed target performance metrics, rules and regulations of this Act, and other relevant laws or issuances; (B) To approve or disapprove, the grant of tax incentives to the extent of the registered project or activity upon the recommendation of the Investment Promotion Agency: Provided, That the application for tax incentives shall be duly accompanied by a cost-beneSt analysis: Provided, further, That the Fiscal Incentives Review Board shall prescribe the data requirements for the application of incentives to allow for the calculation of costs and beneSts upon application: Provided, further, That the grant of tax incentives to registered projects or activities with investment capital of One billion pesos (P1,000,000,000.00) and below shall be delegated by the Fiscal Incentives Review Board to the concerned Investment Promotion Agency to the extent of the registered project or activity: Provided, furthermore, That the Fiscal Incentives Review Board may increase the threshold amount of One billion pesos (P1,000,000,000.00).[251] (C) To approve applications for tax subsidies to government-owned or -controlled corporations, government instrumentalities, government commissaries, and state universities and colleges. For this purpose, the other government agencies shall ensure complete submission of applications, documents, records, books, or other relevant data or material; (D) To formulate place-speciSc strategic investment plans during periods of recovery from calamities and post-conbict situations and where the Fiscal Incentives Review Board determines that there is a need to attract many classes, Srms, that would accelerate the growth of a region's bagship industries, in accordance with the Medium-Term Development Plan. The Fiscal Incentives Review Board may formulate and approve place-speciSc strategic investment plans and recommend incentives to the President, following the same procedure in Section 297; https://www.bir.gov.ph/index.php/tax-code.html Page 191 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (E) To cancel, suspend, or withdraw the enjoyment of Sscal incentives of concerned registered business enterprises on its own initiative or upon the recommendation of the Investment Promotion Agency for material violations of any of the conditions imposed in the grant of Sscal incentives, including, but not limited to, the non-compliance of the agreed performance commitments and endorse registered business enterprises whose incentives are cancelled, suspended, or withdrawn to the concerned revenue agencies for the assessment and collection of taxes and duties due commencing from the Srst year of availment; (F) To cancel, suspend, or withdraw the enjoyment of tax subsidy of concerned government-owned or -controlled corporations, government instrumentalities, government commissaries, and state universities and colleges, and when necessary, endorse the same to the concerned revenue agencies for assessment and collection of taxes and duties due, including Snes or penalties, if warranted, for violations of any of the conditions imposed in the grant of tax subsidy, or provisions of this Act, or applicable rules; (G) To require Investment Promotion Agencies and other government agencies administering tax incentives to submit, regularly or when requested, summaries of approved investment and incentives granted, and Srm- or entity-level tax incentives and beneSts data as input to the Fiscal Incentives Review Board's review and audit function, and evaluation of performance of recipients of tax incentives. For this purpose, the Fiscal Incentives Review Board shall maintain a masterlist of registered products and services for export or domestic consumption that are entitled to incentives: Provided, That, to facilitate compliance with the foregoing, the Department of Trade and Industry, in coordination with relevant regulatory bodies, shall cause the registration and reporting by registered business enterprises of the types of services rendered whether domestically or to foreign clients; types of products manufactured domestically, products imported and sold locally, and products exported; (H) To publish regularly, per Srm, the data pertaining to the amount of tax incentives, tax payments, and other related information, including beneSts data; (I) To obtain information, summon, examine, inquire and receive from other government agencies administering tax incentives, government-owned or -controlled corporations, government instrumentalities, government commissaries, state universities and colleges, and local government units, documents, records, books, or other data relevant or material to the resolution of issues arising from the approval, disapproval, cancellation, suspension, withdrawal or forfeiture of tax subsidy, or in imposing penalties for violations of the terms and conditions on the availment of tax subsidy, or any of the provisions of this Act; (J) To submit annual reports to the OZce of the President, as part of the budget process, covering its policy and activities in the administration of this Act, including recommendations on tax incentive policies and approval of tax incentives; (K) To decide on issues, on its own initiative or upon the recommendation of the Investment Promotion Agency, after due hearing, concerning the approval, disapproval, cancellation, suspension, withdrawal, or forfeiture of tax incentives or tax subsidy in accordance with this Act. The Fiscal Incentives Review Board shall decide on the matter within ninety (90) days from the date when the Fiscal Incentives Review Board declares the issues submitted for resolution. A business enterprise adversely affected by the decision of the Fiscal Incentives Review Board may, within thirty (30) days from receipt of the adverse decision, appeal the same to the Court of Tax Appeals; (L) To promulgate such rules and regulations as may be necessary to implement the intent and provisions of this Section; (M) To recommend to the President the grant of appropriate non-Sscal incentives in accordance with the Strategic Investment Priority Plan for highly desirable projects or very speciSc industrial activities and based on: (a) beneSt-cost analysis approved by the Fiscal Incentives Review Board; and (b) containing a schedule of budgets of expenditures and sources of Snancing with https://www.bir.gov.ph/index.php/tax-code.html Page 192 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 magnitudes provisionally approved via resolution for inclusion in the upcoming National Expenditure Plans by the Development Budget Coordination Committee; (N) To adopt policies for the development and expansion of the domestic supply chain in order to reduce dependence on imports; promote diversiScation and sophistication of products produced and services offered, whether exported or consumed locally; and cater to local market demand; and (O) To exercise all other powers necessary or incidental to attain the purposes of this Act and other laws vesting additional functions on the Fiscal Incentives Review Board.[252] Notwithstanding the provisions in the preceding paragraphs, tax and duty incentives granted through legislative franchises shall be excepted from the foregoing expanded powers of the Fiscal Incentives Review Board to review, withdraw, suspend, or cancel tax incentives and subsidies. SEC. 298. Composition of the Fiscal Incentives Review Board. - The Fiscal Incentives Review Board shall be reconstituted as follows: Chairperson - Secretary of Finance Co-Chairperson - Secretary of Finance Members - Executive Secretary of the OZce of the President - Secretary of Budget and Management - Director General of the National Economic and Development Authority The Board shall have a technical committee, which shall serve as its main support unit and perform functions as may be assigned, and shall be composed of the following: Chairperson - Undersecretary of Finance Members - Undersecretary or Assistant Secretary of the OZce of the Executive Secretary Undersecretary of Trade and Industry and Board of Investments Managing Head or - Assistant Secretary of Trade and Industry - Undersecretary or Assistant Secretary of Budget and Management - Deputy or Assistant Director General of the National Economic and Development Authority - Commissioner or Deputy Commissioner of Internal Revenue - Commissioner or Deputy Commissioner of Customs - Commissioner of the Philippine Competition Commission Director General or Chairperson or Administrator of the Investment Promotion Agencies: Provided, That the participation of the Investment Promotion Agency representative in https://www.bir.gov.ph/index.php/tax-code.html Page 193 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 - deliberations and decision-making processes of the technical committee shall be limited to the matters concerning their Investment Promotion Agency The secretariat shall be headed by an Assistant Secretary of Finance and shall be staffed Secretariat - by the National Tax Research Center. SEC. 299. Structure and Sta9ng Pattern. - To support the expanded functions of the Fiscal Incentives Review Board, the National Tax Research Center, as secretariat thereof, shall create three (3) additional groups, namely, Fiscal Incentives Management Group, Monitoring and Evaluation Group, and Legal Group. Each group shall be composed of at least two (2) divisions, which will be headed by a deputy executive director. The existing administrative and Snancial branch of the National Tax Research Center shall be converted into a group to be headed by a deputy executive director and will be composed of four (4) divisions, namely, Snance, human resource management and development, general services, and management and information system. Provided, That the Fiscal Incentives Review Board secretariat is authorized to determine its organizational structure and staZng pattern, and create such services, divisions, and units, as it may require or deem necessary in the future, subject to the approval by the Department of Budget and Management: Provided, 9nally, That nothing herein modiSes the existing organizational structure and staZng pattern of the Investment Promotion Agencies or affects their power to maintain or determine their respective organizational structure and staZng pattern. CHAPTER IV QUALIFIED PROJECTS OR ACTIVITIES FOR TAX INCENTIVES SEC. 300. Strategic Investment Priority Plan. - The Board of Investments, in coordination with the Fiscal Incentives Review Board, Investment Promotion Agencies, other government agencies administering tax incentives, and the private sector, shall formulate the Strategic Investment Priority Plan to be submitted to the President for approval, which may contain recommendations for types of non-Sscal support needed to create high-skilled jobs to grow a local pool of enterprises, particularly micro, small and medium enterprises (MSMEs), that can supply to domestic and global value chains, to increase the sophistication of products and services that are produced and/or sourced domestically, to expand domestic supply and reduce dependence on imports, and to attract signiScant foreign capital or investment. The Strategic Investment Priority Plan shall be valid for a period of three (3) years, subject to review and amendment every three (3) years thereafter unless there would be a supervening event that would necessitate its review. The Strategic Investment Priority Plan shall contain the following: (A) Priority projects or activities that are included in the Philippine Development Plan or its equivalent, or other government programs, taking into account any of the following: (1) Substantial amount of investments; (2) Considerable generation of employment, especially towards less developed areas; (3) Considerable amount of net exports; https://www.bir.gov.ph/index.php/tax-code.html Page 194 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (4) Use of modern, advance, or new technology; (5) Processes and innovations that will lead towards the attainment of the sustainable development goals, shall include, but not be limited to, adoption of adequate environmental protection systems and sustainability strategies; (6) Addressing missing links and other gaps in the supply or value chain or otherwise moving up the value chain or product ladder; (7) Promotion of market competitiveness; (8) Enhancement of the capabilities of Filipino enterprises and professionals to produce and offer increasingly sophisticated products and services; (9) Contribution to Philippine food security and increase incomes in the agriculture and Ssheries sector; or (10) Services and activities that can promote regional and global operations in the country. (B) Scope and coverage of location and industry tiers in Section 296; and (C) Terms and conditions on the grant of enhanced deductions under Section 294(C). All sectors or industries that may be included in the Strategic Investment Priority Plan shall undergo an evaluation process to determine the suitability and potential of the industry or the sector in promoting long-term growth and sustainable development, and the national interest. In no case shall a sector or industry be included in the Strategic Investment Priority Plan unless it is supported by a formal evaluation process or report. The projects or activities must comply with the speciSc qualiScation requirements or conditions for a particular sector or industry and other limitations as set and determined by the Board of Investments, and in coordination with the Fiscal Incentives Review Board. In no case shall the Investment Promotion Agencies accept applications unless the project or activity is listed in the Strategic Investment Priority Plan. Projects or activities not listed in the Strategic Investment Priority Plan shall be automatically disapproved.” SEC. 301. Power of the President to Grant Incentives. - Notwithstanding the provisions of Sections 295 and 296, the President may, in the interest of national economic development and upon the recommendation of the Fiscal Incentives Review Board, modify the mix, period or manner of availment of incentives provided under this Code or craft the appropriate Snancial support package for a highly desirable project or a speciSc industrial activity based on deSned development strategies for creating high-value jobs, building new industries to diversify economic activities, and attracting signiScant foreign and domestic capital or investment, and the Sscal requirements of the activity or project, subject to maximum incentive levels recommended by the Fiscal Incentives Review Board: Provided, That the grant of income tax holiday shall not exceed eight (8) years and thereafter, a special corporate income tax rate of Sve percent (5%) may be granted: Provided, further, That the total period of incentive availment shall not exceed forty (40) years. The Fiscal Incentives Review Board shall determine whether the beneSts that the Government may derive from such investment are clear and convincing and far outweigh the cost of incentives that will be granted in determining whether a project or activity is highly desirable. https://www.bir.gov.ph/index.php/tax-code.html Page 195 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 The exercise by the President of his powers under this Section shall be based on a positive recommendation from the Fiscal Incentives Review Board upon its determination that the following conditions are satisSed: (1) The project has a comprehensive sustainable development plan with clear inclusive business approaches, and high level of sophistication and innovation; and (2) Minimum investment capital of Fifty billion pesos (P50,000,000,000.00) or its equivalent in US dollars, or a minimum direct local employment generation of at least ten thousand (10,000) within three (3) years from the issuance of the certiScate of entitlement. Provided, That the threshold shall be subject to a periodic review by the Fiscal Incentives Review Board every three (3) years, taking into consideration international standards or other economic indicators: Provided, further, That if the project fails to substantially meet the projected impact on the economy and agreed performance targets, the Fiscal Incentives Review Board shall recommend to the President the cancellation of the tax incentive or Snancial support package or the modiSed period or manner of availment of incentives, after due hearing and an adequate opportunity to substantially comply with the agreed performance targets and outputs. For this purpose, Snancial support includes utilization of government resources such as land use, water appropriation, power provision, and budgetary support provision under the annual General Appropriations Act. This power of the President, in as far as it commands additional public sector expenditures in support of investors, is suspended during Sscal years when, an unimaginable Sscal deScit is declared by the President on the advice of the Development Budget Coordination Committee with a consequence that even core budgetary obligations, such as, but not limited to, mandatory revenue allotments for local government units and budget for the National Economic and Development Authority's core public investments program, cannot be fully Snanced.[253] Notwithstanding the provisions in the preceding paragraphs, tax and duty incentives granted through legislative franchises shall be excepted from the foregoing powers of the President to review, withdraw, suspend, or cancel tax incentives and subsidies. SEC. 302. Amendments to the Strategic Investment Priority Plan. - Subject to publication requirements and the criteria for investment priority determination, the Board of Investments may include additional areas in the Strategic Investment Priority Plan, alter any of the terms of the declaration of an investment area, and temporarily suspend projects or activities on the Strategic Investment Priority Plan if it considers that such project or activity is no longer a priority within the effectivity of the Strategic Investment Priority Plan. SEC. 303. Publication. - Upon approval of the Strategic Investment Priority Plan, in whole or in part, or upon approval of an amendment thereof, the Plan or the amendment, specifying and declaring the areas of investments shall be published in at least one (1) newspaper of general circulation or in the OZcial Gazette: Provided, That all such areas in the existing Strategic Investment Priority Plan shall be open for application until publication of an amendment or deletion thereof. SEC. 304. QualiQcations of a Registered Business Enterprise for Tax Incentives. - In the review and grant of tax incentives, the registered business enterprise must: (A) Be engaged in a project or activity included in the Strategic Investment Priority Plan; (B) Meet the target performance metrics after the agreed time period; https://www.bir.gov.ph/index.php/tax-code.html Page 196 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (C) Install an adequate accounting system that shall identify the investments, revenues, costs and proSts or losses of each registered project or activity undertaken by the enterprise separately from the aggregate investments, revenues, costs and proSts or losses of the whole enterprise; or establish a separate corporation for each registered project or activity if the Investment Promotion Agency should so require; (D) Comply with the e-receipting and e-sales requirement in accordance with Sections 237 and 237(a) of this Code; and (E) Submit annual reports of beneScial ownership of the organization and related parties. CHAPTER V TAX INCENTIVES MANAGEMENT AND TRANSPARENCY SEC. 305. Filing of Tax Returns and Submission of Tax Incentives Reports. - All registered business enterprises and other registered entities whether taxable or exempt, are required to Sle their tax returns and pay their tax liabilities, on or before the deadline as provided under the National Internal Revenue Code of 1997, as amended, using the electronic system for Sling and payment of taxes with the Bureau of Internal Revenue: Provided, That for purposes of complying with their tax obligations, cooperatives and other registered entities, which do not have access to the electronic facilities, shall Sle with their respective revenue district oZces. For registered business enterprises and other registered enterprises availing of tax incentives administered by the Investment Promotion Agencies and other government agencies administering tax incentives, they shall Sle with their respective Investment Promotion Agencies or other government agencies administering tax incentives a complete annual tax incentives report of their income-based tax incentives, VAT exemptions and zero-rating, customs duty exemptions, deductions, credits or exclusions from the income tax base, and exemptions from local taxes, as provided under Section 294 of this Act and in the special laws of the concerned Investment Promotion Agency or other government agency administering tax incentives, and respective laws, and a complete annual beneSts report which shall include data such as, but not limited to, the approved and actual amount of investments, approved and actual employment level and job creation including information on quality of jobs and hiring of foreign and local workers, approved and actual exports and imports, domestic purchases, proSts and dividend payout, all taxes paid, withheld and foregone within thirty (30) calendar days from the statutory deadline for Sling of tax returns and payment of taxes: Provided, That a copy of the report shall be simultaneously submitted to the Fiscal Incentives Review Board in electronic form. The Investment Promotion Agencies and other government agencies administering tax incentives shall, within sixty (60) calendar days from the end of the statutory deadline for Sling of the relevant tax returns, submit to the Bureau of Internal Revenue, their respective annual tax incentives reports based on the list of the registered business enterprises and other registered enterprises, which have Sled said tax incentives report: Provided, That the reportorial requirement under Section 3 of Republic Act No. 10963 or the ‘TRAIN Law’ shall be covered by this Section. The details of the tax incentives reports, as provided in the preceding paragraphs, shall be provided in the implementing rules and regulations of this Act. The foregoing provisions shall be without prejudice to the right of the Bureau of Internal Revenue and the Bureau of Customs to assess and/or audit tax liabilities, if any, within the prescribed period provided in the National Internal Revenue Code of 1997, as amended, and Republic Act No. 10863, otherwise known as the Customs Modernization and Tariff Act, as amended, respectively. https://www.bir.gov.ph/index.php/tax-code.html Page 197 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SEC. 306. Monitoring, Evaluation, and Reporting of Tax Incentives. - Notwithstanding any law to the contrary, the Bureau of Internal Revenue and the Bureau of Customs shall submit to the Department of Finance: (a) all tax and duty incentives of registered business enterprises and other registered enterprises, as rebected in their Sled tax returns and import entries; and (b) actual tax and duty incentives as evaluated and determined by the Bureau of Internal Revenue and the Bureau of Customs. The Department of Finance shall maintain a single database for monitoring and analysis of tax incentives granted. The Fiscal Incentives Review Board is mandated to systematically collect and store all tax incentives and beneSt data from the Department of Finance, Investment Promotion Agencies, other government agencies administering tax incentives, registered business enterprises, and other registered enterprises, as well as to evaluate and assess the process, outcomes, and impact of incentives granted to Srms to determine whether agreed performance targets and intended results and outcomes are met. The method of evaluation may include the conduct of cost-beneSt analysis or other process and impact evaluation methods: Provided, That for purposes of this Act, the term cost-beneSt analysis refers to the systematic evaluation of the total costs of granting tax incentives vis-à-vis the total beneSts derived from the grant of tax incentives based on the annual tax incentive report, annual beneSts report, and other related sources, to calculate the net beneSt or cost associated with tax incentives. For purposes of monitoring and transparency, the Department of Finance shall submit to the Department of Budget and Management (DBM) a per Srm and per registered project and activity data arranged on a sectoral and per industry basis: (1) the amount of tax incentives availed of by registered business enterprises and other registered enterprises; (2) the estimate claims of tax incentives immediately preceding the current year; (3) the programmed tax incentives for the current year; and (4) the projected tax incentives for the following year. The aforesaid data shall be rebected by the DBM in the annual Budget of Expenditures and Sources of Financing (BESF), which shall be known as the Tax Incentives Information (TII) Section: Provided, That the tax incentives information shall include a per Srm data related to incentives availed of by registered business enterprises and other registered enterprises based on the submissions of the Department of Finance and the concerned Investment Promotion Agencies and other government agencies administering tax incentives, categorized by sector, by Investment Promotion Agency or other government agency administering tax incentives, and by type of tax incentive: Provided, further, That the results of the cost- beneSt analysis shall be published at the per Srm level by the Fiscal Incentives Review Board and a report shall be submitted to the President and Congress on an annual basis. SEC. 307. Conduct of Impact Evaluation on Tax Incentives. - The Fiscal Incentives Review Board is mandated to conduct impact evaluation such as a cost-beneSt analysis on the investment and non-investment incentives to determine the impact of tax incentives on the Philippine economy and on the relevant sector. For this purpose, the Department of Finance, all heads of the Investment Promotion Agencies and other government agencies administering tax incentives shall submit to the Fiscal Incentives Review Board per Srm- and per registered project- or activity- level in a machine-readable format: (1) Data on tax incentives based on the submissions of registered business enterprises and other registered enterprises; and (2) Other investment- and non-investment-related data. https://www.bir.gov.ph/index.php/tax-code.html Page 198 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 A third party government institution may conduct on its own or upon request of the Fiscal Incentives Review Board a peer review of the impact evaluation of the Board, or a parallel impact evaluation on the investment and non-investment incentives to determine the impact of the tax incentives on the Philippine economy and on the relevant sector: Provided, That for this purpose the Fiscal Incentives Review Board may provide anonymized Srm-level data to the third party government institution, subject to a data sharing agreement. SEC. 308. Penalties for Noncompliance with Filing and Reportorial Requirements. - Any registered business enterprise or other registered enterprise, which fails to comply with Sling and reportorial requirements with the appropriate Investment Promotion Agencies or other government agencies administering tax incentives and/or, which fails to show proof of Sling of tax returns using the electronic system for Sling and payment of taxes of the Bureau of Internal Revenue under Section 305 hereof, shall be imposed the following penalties by the appropriate Investment Promotion Agency or other government agency administering tax incentives: (A) First (1st) Violation — Payment of a Sne amounting to One hundred thousand pesos (P100,000.00); (B) Second (2nd) Violation — Payment of a Sne amounting to Five hundred thousand pesos (P500,000.00); and (C) Third (3rd) Violation — Cancellation by the Fiscal Incentives Review Board of the registration of the registered business enterprise or registered entity with the Investment Promotion Agency or other government agency administering tax incentives. Provided, That if the failure to show such proof is not due to the fault of the registered business enterprises or other registered enterprises, the same shall not be a ground for the suspension of the Income Tax Holiday (ITH) and/or other tax incentives availment: Provided, further, That collections from the penalties shall accrue to the general fund. After due process, the Fiscal Incentives Review Board or the concerned Investment Promotion Agency, as the case may be, may cancel the registration, suspend the enjoyment of incentive beneSts of any registered enterprise, and/or require refund of incentives enjoyed by such enterprise, including interests and monetary penalties, for any material misrepresentation of information for the purpose of availing more incentives than what it is entitled to under this Code. Provided, That the Fiscal Incentives Review Board, with the recommendation of the Commissioner, may revoke or suspend incentives granted by an Investment Promotion Agency and/or order a business closure of a registered business enterprise that violates Title VI (Excise Taxes on Certain Goods) and Title X (Statutory Offenses and Penalties) of this Code and other related revenue regulations, orders, or issuances of the government: Provided, further, That such authority shall cover the acts of the registered business enterprise committed even in the Srst year of availment of incentives. Notwithstanding the provisions of this Section, the Department of Finance, the Bureau of Internal Revenue, and the Bureau of Customs shall retain their respective mandates, powers and functions as provided for under this Act and related laws. Any government oZcial or employee who fails without justiSable reason to provide or furnish the required tax incentives report or other data or information as required under Sections 306 and 307 of this Act shall be penalized, after due process, by a Sne equivalent to the oZcial's or employee's basic salary for a period of one (1) month to six (6) months or by suspension from government service for not more than one (1) year, or both, in addition to any criminal and administrative penalties imposable under existing laws. CHAPTER VI https://www.bir.gov.ph/index.php/tax-code.html Page 199 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 TRANSITORY AND MISCELLANEOUS PROVISIONS SEC. 309. Prohibition on Registered Activities. - A qualiSed registered project or activity under an Investment Promotion Agency administering an economic zone or freeport shall be exclusively conducted or operated within the geographical boundaries of the zone or freeport being administered by the Investment Promotion Agency in which the project or activity is registered: Provided, That a registered business enterprise may conduct or operate more than one qualiSed registered project or activity within the same zone or freeport under the same Investment Promotion Agency: Provided, further, That any project or activity conducted or performed outside the geographical boundaries of the zone or freeport shall not be entitled to the incentives provided in this Act, unless such project or activity is conducted or operated under another Investment Promotion Agency. SEC. 310. Establishment of One-Stop Action Center. - All Investment Promotion Agencies shall establish a one-stop shop or one-stop action center that will facilitate and expedite, to the extent possible, the setting up and conduct of registered projects or activities, including assistance in coordinating with the local government units and other government agencies to comply with Republic Act No. 11032, otherwise known as the Ease of Doing Business and EZcient Government Service Delivery Act of 2018: Provided, however, That the enterprises shall continue to avail of the one-stop shop facility notwithstanding the expiration of their incentives under this Code. SEC. 311. Investments Prior to the Effectivity of This Act. - Registered business enterprises with incentives granted prior to the effectivity of this Act shall be subject to the following rules: (A) Registered business enterprises whose projects or activities were granted only an income tax holiday prior to the effectivity of this Act shall be allowed to continue with the availment of the income tax holiday for the remaining period of the income tax holiday as speciSed in the terms and conditions of their registration: Provided, That for those that have been granted the income tax holiday but have not yet availed of the incentive upon the effectivity of this Act, they may use the income tax holiday for the period speciSed in the terms and conditions of their registration; (B) Registered business enterprises, whose projects or activities were granted an income tax holiday prior to the effectivity of this Act and that are entitled to the Sve percent (5%) tax on gross income earned incentive after the income tax holiday, shall be allowed to avail of the Sve percent (5%) tax on gross income earned incentive based on Subsection (C); and (C) Registered business enterprises currently availing of the Sve percent (5%) tax on gross income earned granted prior to the effectivity of this Act shall be allowed to continue availing the said tax incentive at the rate of Sve percent (5%) for ten (10) years. SECTION 17. Repealing Clause. — (a) To transfer to the Fiscal Incentives Review Board the power of the Investment Promotion Agency Board to review, approve, or disapprove Sscal incentives and to mandate the Investment Promotion Agency Board to recommend to the Fiscal Incentives Review Board after a thorough review of the application, the approval or disapproval of the same, the following provisions are hereby repealed: (1) Article 7 (14) of Executive Order No. 226, series of 1987, entitled: The Omnibus Investments Code of 1987; (2) Section 1 (G) of Executive Order No. 458, series of 1991, entitled: "Devolving the Powers and Functions of the Board of Investments Over Investments within the Autonomous Region in Muslim Mindanao to the Autonomous Regional Government and for Other Purposes"; https://www.bir.gov.ph/index.php/tax-code.html Page 200 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (3) Section 8 of Republic Act No. 9400, entitled: "An Act Amending Republic Act No. 7227, as Amended, Otherwise Known as the Bases Conversion and Development Act of 1992, and for Other Purposes"; (4) Section 85 (a) of Subchapter IV-B of Republic Act No. 9593, entitled: "An Act Declaring a National Policy for Tourism as an Engine of Investment, Employment, Growth and National Development, and Strengthening the Department of Tourism and its Attached Agencies to Effectively and EZciently Implement That Policy, and Appropriating Funds Therefor," as amended by Republic Act No. 11262; and (5) Sections 7 and 8 of Republic Act No. 9490, entitled: "An Act Establishing the Aurora Special Economic Zone in the Province of Aurora, Creating for the Purpose the Aurora Special Economic Zone Authority, Appropriating Funds Therefor and for Other Purposes," as amended by Republic Act No. 10083, entitled: "An Act Amending Republic Act No. 9490, Otherwise Known as the 'Aurora Special Economic Zone Act of 2007'"; (b) The provisions of the following laws, including the tag incentives, that are inconsistent with this Act are hereby repealed: (1) Articles 39 (A), (B), (C), (D), (H), (I), (J), (L) and (M); 40, 41, 42, 61, 62, 63, 64, 65, and 67 of Executive Order No. 226, series of 1987, entitled: The Omnibus Investments Code of 1987, as amended by Republic Act No. 7918, and further amended by Republic Act No. 8756; (2) Executive Order No. 85, series of 2019, entitled: "Reducing the Rates of Duty on Capital Equipment, Spare Parts and Accessories Imported by Board of Investments — Registered New and Expanding Enterprises"; (3) Presidential Decree No. 66, entitled: "Creating the Export Processing Zone Authority and Revising Republic Act No. 5490"; (4) Section 4 (e) of Republic Act No. 7903, entitled: "An Act Creating a Special Economic Zone and Free Port in the City of Zamboanga Creating for this Purpose the Zamboanga City Special Economic Zone Authority, Appropriating Funds Therefor, and for Other Purposes"; (5) Section 7 of Republic Act No. 9400, entitled: "An Act Amending Republic Act No. 7227, as Amended, Otherwise Known as the Bases Conversion and Development Act of 1992, and for Other Purposes"; (6) Section 4 (b) of Republic Act No. 7922, entitled: "An Act Establishing a Special Economic Zone and Free Port in the Municipality of Santa Ana and the Neighboring Islands in the Municipality of Aparri, Province of Cagayan, Providing Funds Therefor, and for Other Purposes"; (7) Sections 23 and 42 of Republic Act No. 7916, entitled: "An Act Providing for the Legal Framework and Mechanisms for the Creation, Operation, Administration, and Coordination of Special Economic Zones in the Philippines, Creating for this Purpose, the Philippine Economic Zone Authority (PEZA), and for Other Purposes" as amended by Republic Act No. 8748; DaIAcC (8) Sections 4 (f), 5 (a), (b), (d), (e), (f), (g), (h), (j), (l), and (m), and 9 of Republic Act No. 9490, entitled: "An Act Establishing the Aurora Special Economic Zone in the Province of Aurora, Creating for the Purpose the Aurora Special Economic Zone Authority, Appropriating Funds Therefor and for Other Purposes," as amended by Republic Act No. 10083; https://www.bir.gov.ph/index.php/tax-code.html Page 201 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (9) Sections 5, 9, and 10 of Republic Act No. 9728, entitled: "An Act Converting the Bataan Economic Zone Located in the Municipality of Mariveles, Province of Bataan, into the Freeport Area of Bataan (FAB), Creating for this Purpose the Authority of the Freeport Area of Bataan (AFAB), Appropriating Funds Therefor and for Other Purposes"; (10) Section 16 of Republic Act No. 7844, entitled: "An Act to Develop Exports as a Key Towards the Achievement of the National Goals Towards the Year 2000"; (11) Sections 86 (a), (c), (d), (e), (f), and 88 of Republic Act No. 9593, entitled: "An Act Declaring a National Policy for Tourism as an Engine of Investment, Employment, Growth and National Development, and Strengthening the Department of Tourism and its Attached Agencies to Effectively and EZciently Implement That Policy, and Appropriating Funds Therefor"; and (12) Section 1 (a) and (e) of Presidential Decree No. 1955, entitled: "Withdrawing, Subject to Certain Conditions, the Duty and Tax Privileges Granted to Private Business Enterprises and/or Persons Engaged in Any Economic Activity, and for Other Purposes." (c) To expand the powers and functions of the Fiscal Incentives Review Board and enhance its membership, the provisions of the following laws that are inconsistent with this Act are hereby repealed: (1) Sections 1 (6) and 2 of Presidential Decree No. 776, entitled: "Modifying All Laws, Acts, Decrees, Orders and Ordinances, Granting Subsidies, Exemptions from Taxes, Duties, Fees, Imposts and Other Charges under Certain Exceptions and Creating a Fiscal Incentives Board"; (2) Section 2 of Presidential Decree No. 1931, series of 1984, entitled: "Directing the Rationalization of Duty and Tax Exemption Privileges Granted to Government-Owned or -Controlled Corporations and All Other Units of Government"; (3) Section 1 (c) and (d) of Executive Order No. 93, series of 1986, entitled: "Withdrawing All Tax and Duty Incentives, Subject to Certain Exceptions, Expanding the Powers of the Fiscal Incentives Review Board and for Other Purposes"; and (4) Memorandum Order No. 23, series of 1986, entitled: "Expanding the Membership of the Fiscal Incentives Review Board (FIRB)". (d) The provisions of the following laws on the Investment Priorities Plan that are inconsistent with the provisions of this Act are hereby repealed: (1) Articles 7 (1), 22, 26, 27, 28, 29, 30, 31 and 32 of Executive Order No. 226, series of 1987, entitled: The Omnibus Investments Code of 1987, as amended; and (2) Sections 2 and 3 of Executive Order No. 458, series of 1991, entitled: "Devolving the Powers and Functions of the Board of Investments Over Investments within the Autonomous Region in Muslim Mindanao to the Autonomous Regional Government and for Other Purposes." TAacHE (e) Sections 4, 5, 6, and 7 of Republic Act No. 10708, entitled: "An Act Enhancing Transparency in the Management and Accounting of Tax Incentives Administered by Investment Promotion Agencies," are also repealed for being inconsistent with this Act. (f) Article 7 (11) of Executive Order No. 226, series of 1987, entitled: The Omnibus Investments Code of 1987. https://www.bir.gov.ph/index.php/tax-code.html Page 202 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 SECTION 18. Amendatory Clause. — (a) To transfer to the Fiscal Incentives Review Board the power of the Investment Promotion Agency Board to review, approve, or disapprove Sscal incentives and to mandate the Investment Promotion Agency Board to recommend to the Fiscal Incentives Review Board after a thorough review of the application, the approval or disapproval of the same, the following provisions are hereby amended: (1) Articles 7 (3) and (8), 34, 35, and 36 of Executive Order No. 226, series of 1987, entitled: The Omnibus Investments Code of 1987; (2) Section 1 (A), (B), (D), and (E) of Executive Order No. 458, series of 1991, entitled: "Devolving the Powers and Functions of the Board of Investments Over Investments within the Autonomous Region in Muslim Mindanao to the Autonomous Regional Government and for Other Purposes"; (3) Section 7 (a) and (c) of Republic Act No. 7903, entitled: "An Act Creating a Special Economic Zone and Free Port in the City of Zamboanga Creating for this Purpose the Zamboanga City Special Economic Zone Authority, Appropriating Funds Therefor, and for Other Purposes"; DHIcET (4) Sections 4 (f), 8 and 13 (c), (d), (r), (w) and (x) of Republic Act No. 9728, entitled: "An Act Converting the Bataan Economic Zone Located in the Municipality of Mariveles, Province of Bataan, into the Freeport Area of Bataan (FAB), Creating for this Purpose the Authority of the Freeport Area of Bataan (AFAB), Appropriating Funds Therefor and for Other Purposes," as amended by Republic Act No. 11463; (5) Sections 5 (l), 12 (b), and 13 (b) (11) of Republic Act No. 7227, entitled: "An Act Accelerating the Conversion of Military Reservations into Other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor and for Other Purposes," as amended by Republic Act No. 9400; (6) Section 69 (n) of Subchapter IV-B of Republic Act No. 9593, entitled: "An Act Declaring a National Policy for Tourism as an Engine of Investment, Employment, Growth and National Development, and Strengthening the Department of Tourism and its Attached Agencies to Effectively and EZciently Implement That Policy, and Appropriating Funds Therefor," as amended by Republic Act No. 11262; (7) Section 12 (a), (b) and (u) of Republic Act No. 9490, entitled: "An Act Establishing the Aurora Special Economic Zone in the Province of Aurora, Creating for the Purpose the Aurora Special Economic Zone Authority, Appropriating Funds Therefor and for Other Purposes," as amended by Republic Act No. 10083, entitled: "An Act Amending Republic Act No. 9490, Otherwise Known as the 'Aurora Special Economic Zone Act of 2007'"; (8) Section 6 (c) and (l) of Republic Act No. 7922, entitled: "An Act Establishing a Special Economic Zone and Free Port in the Municipality of Santa Ana and the Neighboring Islands in the Municipality of Aparri, Province of Cagayan, Providing Funds Therefor, and for Other Purposes"; (9) Sections 4 (a) and (q), and 6 of Presidential Decree No. 538, entitled: "Creating and Establishing the PHIVIDEC Industrial Authority and Making it a Subsidiary Agency of the Philippine Veterans Investment Development Corporation, DeSning its Powers, Functions and Responsibilities, and for Other Purposes"; and https://www.bir.gov.ph/index.php/tax-code.html Page 203 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (10) Sections 12 (a) and (b) and 13 (a), (b) and (i), and 15 of Republic Act No. 7916, entitled: "An Act Providing for the Legal Framework and Mechanisms for the Creation, Operation, Administration, and Coordination of Special Economic Zones in the Philippines, Creating for this Purpose, the Philippine Economic Zone Authority (PEZA), and for Other Purposes," as amended by Republic Act No. 8748. (b) The provisions of the following laws, including the tax incentives, that are inconsistent with this Act are hereby amended: (1) Articles 69, 77, and 78 of Executive Order No. 226, series of 1987, entitled: The Omnibus Investments Code of 1987, as amended; (2) Sections 24 and 35 of Republic Act No. 7916, entitled: "An Act Providing for the Legal Framework and Mechanisms for the Creation, Operation, Administration, and Coordination of Special Economic Zones in the Philippines, Creating for this Purpose, the Philippine Economic Zone Authority (PEZA), and for Other Purposes," as amended by Republic Act No. 8748; (3) Sections 12 (c), 15, 15-A, 15-B, 15-C of Republic Act No. 7227, entitled: "An Act Accelerating the Conversion of Military Reservations into Other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor and for Other Purposes" as amended by Republic Act No. 9400, and further amended by Executive Order No. 619, series of 2007; (4) Section 6 of Republic Act No. 9400, entitled: "An Act Amending Republic Act No. 7227, as Amended, Otherwise Known as the Bases Conversion and Development Act of 1992, and for Other Purposes"; (5) Section 5 (c) of Republic Act No. 9490, entitled: "An Act Establishing the Aurora Special Economic Zone in the Province of Aurora, Creating for the Purpose the Aurora Special Economic Zone Authority, Appropriating Funds Therefor and for Other Purposes," as amended by Republic Act No. 10083, entitled: "An Act Amending Republic Act No. 9490, Otherwise Known as the 'Aurora Special Economic Zone Act of 2007'"; HcDSaT (6) Section 4 (f) of Republic Act No. 7903, entitled: "An Act Creating a Special Economic Zone and Free Port in the City of Zamboanga Creating for this Purpose the Zamboanga City Special Economic Zone Authority, Appropriating Funds Therefor, and for Other Purposes"; (7) Section 4 (c) of Republic Act No. 7922, entitled: "An Act Establishing a Special Economic Zone and Free Port in the Municipality of Santa Ana and the Neighboring Islands in the Municipality of Aparri, Province of Cagayan, Providing Funds Therefor, and for Other Purposes"; (8) Section 6 of Republic Act No. 9728, entitled: "An Act Converting the Bataan Economic Zone Located in the Municipality of Mariveles, Province of Bataan, into the Freeport Area of Bataan (FAB), Creating for this Purpose the Authority of the Freeport Area of Bataan (AFAB), Appropriating Funds Therefor and for Other Purposes"; (9) Sections 6 (k), 14 (e), 39, 76, 85 (c) and 86 (b) of Republic Act No. 9593, entitled: "An Act Declaring a National Policy for Tourism as an Engine of Investment, Employment, Growth and National Development, and Strengthening the Department of Tourism and its Attached Agencies to Effectively and EZciently Implement That Policy, and Appropriating Funds Therefor"; https://www.bir.gov.ph/index.php/tax-code.html Page 204 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (10) Section 8 of Presidential Decree No. 538, entitled: "Creating and Establishing the PHIVIDEC Industrial Authority and Making it a Subsidiary Agency of the Philippine Veterans Investment Development Corporation, DeSning its Powers, Functions and Responsibilities, and for Other Purposes," as amended by Presidential Decree No. 1491; and IDaEHC (11) Section 1 (1.1) of Executive Order No. 97-A, series of 1993, entitled: "Further Clarifying the Tax and Duty-Free Privilege within the Subic Special Economic and Free Port Zone." (c) To expand the powers and functions of the Fiscal Incentives Review Board, the provisions of the following laws that are inconsistent with this Act are hereby amended: (1) Section 13 of Republic Act No. 7903, entitled: "An Act Creating a Special Economic Zone and Free Port in the City of Zamboanga Creating for this Purpose the Zamboanga City Special Economic Zone Authority, Appropriating Funds Therefor, and for Other Purposes"; (2) Section 10 of Republic Act No. 7922, entitled: "An Act Establishing a Special Economic Zone and Free Port in the Municipality of Santa Ana and the Neighboring Islands in the Municipality of Aparri, Province of Cagayan, Providing Funds Therefor, and for Other Purposes"; (3) Section 17 of Republic Act No. 7227, entitled: "An Act Accelerating the Conversion of Military Reservations into Other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor and for Other Purposes"; (4) Section 20 of Republic Act No. 9490, entitled: "An Act Establishing the Aurora Special Economic Zone in the Province of Aurora, Creating for the Purpose the Aurora Special Economic Zone Authority, Appropriating Funds Therefor and for Other Purposes"; and (5) Section 22 of Republic Act No. 9728, entitled: "An Act Converting the Bataan Economic Zone Located in the Municipality of Mariveles, Province of Bataan, into the Freeport Area of Bataan (FAB), Creating for this Purpose the Authority of the Freeport Area of Bataan (AFAB), Appropriating Funds Therefor and for Other Purposes." (d) The provisions of the following laws on the Investment Priorities Plan, including all other laws, decrees, executive orders, rules and regulations, or parts thereof which provide for the mandatory inclusion in the Investment Priorities Plan that are inconsistent with the provisions of this Act are hereby amended: (1) Sections 4 (d) and 13 (i) of Republic Act No. 9728, entitled: "An Act Converting the Bataan Economic Zone Located in the Municipality of Mariveles, Province of Bataan, into the Freeport Area of Bataan (FAB), Creating for this Purpose the Authority of the Freeport Area of Bataan (AFAB), Appropriating Funds Therefor and for Other Purposes," as amended by Republic Act No. 11453; (2) Section 12 (f) of Republic Act No. 9490, as amended, entitled: "An Act Establishing the Aurora Special Economic Zone in the Province of Aurora, Creating for the Purpose the Aurora Special Economic Zone Authority, Appropriating Funds Therefor and for Other Purposes"; (3) Section 6 (f) of Republic Act No. 7922, entitled: "An Act Establishing a Special Economic Zone and Free Port in the Municipality of Santa Ana and the Neighboring Islands in the Municipality of Aparri, Province of Cagayan, Providing Funds Therefor, and for Other Purposes"; https://www.bir.gov.ph/index.php/tax-code.html Page 205 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 (4) Section 21 of Republic Act No. 7916, as amended, entitled: "An Act Providing for the Legal Framework and Mechanisms for the Creation, Operation, Administration, and Coordination of Special Economic Zones in the Philippines, Creating for this Purpose, the Philippine Economic Zone Authority (PEZA), and for Other Purposes"; (5) Section 5 of Executive Order No. 80, series of 1993, entitled: "Authorizing the Establishment of the Clark Development Corporation as the Implementing Arm of the Bases Conversion and Development Authority for the Clark Special Economic Zone, and Directing All Heads of Departments, Bureaus, OZces, Agencies and Instrumentalities of Government to Support the Program"; (6) Sections 4 (b) and 13 (b) (7) of Republic Act No. 7227, entitled: "An Act Accelerating the Conversion of Military Reservations into Other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor and for Other Purposes"; and DTCSHA (7) Section 1 (F) of Executive Order No. 458, series of 1991, entitled: "Devolving the Powers and Functions of the Board of Investments Over Investments within the Autonomous Region in Muslim Mindanao to the Autonomous Regional Government and for Other Purposes." SECTION 19. Separability Clause. — If any provision or part of this Act is declared invalid or unconstitutional, such declaration shall be conSned in its operation to the clause, sentence, paragraph, or part thereof directly involved in the case, whereas the parts or provisions not affected thereby shall remain in full force and effect. SECTION 20. Appropriation. — The National Tax Research Center, as the secretariat of the Fiscal Incentives Review Board, shall be provided with an initial appropriation of One hundred million pesos (P100,000,000.00) to be drawn from the available funds from the National Treasury not otherwise appropriated. Appropriations for the succeeding years shall be included in the annual General Appropriations Act. SECTION 21. Implementing Rules and Regulations. — Within ninety (90) days from the effectivity of this Act, the Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue, shall promulgate the necessary rules and regulations for its effective implementation: Provided, That for the provisions under Title XIII, the Secretary of Finance and the Secretary of Trade and Industry shall jointly promulgate the necessary rules and regulations thereof within the same period, after due consultations with the Commissioner of Internal Revenue, the Board of Investments, and other Investment Promotion Agencies, for its effective implementation. Failure to promulgate the rules and regulations shall not prevent the implementation of this Act upon its effectivity. SECTION 22. Effectivity. — This Act shall take effect Sfteen (15) days after its complete publication in the OZcial Gazette or in a newspaper of general circulation. Approved: March 26, 2021. ||| (Corporate Recovery and Tax Incentives for Enterprises Act or CREATE, Republic Act No. 11534, [March 26, 2021]) << Back to NIRC Outline >> https://www.bir.gov.ph/index.php/tax-code.html Page 206 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 [1] Republic Act No. 10963, entitled “Tax Reform for Acceleration and Inclusion (TRAIN),” Amending Sections 5, 6, 24, 25, 27, 31-34, 51, 52, 56-58, 74, 79, 84, 86, 90, 91, 97, 99-101, 106-110, 112, 114, 116, 127-129, 145, 148-151, 155, 171, 174, 175, 177- 183, 186, 188-197, 232, 236, 237, 249, 254, 264, 269 and 288; creating new Sections 51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B, and 265-A; and repealing Sections 35, 62 and 89; all under Republic Act No. 8424, otherwise known as the National Internal Revenue Code of 1997, as amended” was approved on December 19, 2017. Republic Act No. 10963 - An Act Amending Sections 5, 6, 24, 25, 27, 31, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99, 100, 101, 106, 107, 108, 109, 110, 112, 114, 116, 127, 128, 129, 145, 148, 149, 151, 155, 171, 174, 175, 177, 178, 179, 180, 181, 182, 183, 186, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 232, 236, 237, 249, 254, 264, 269, and 288; Creating New Sections 51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B, and 265-A; and Repealing Sections 35, 62, and 89; All Under Republic Act No. 8424, Otherwise Known as the National Internal Revenue Code of 1997, as Amended, and for Other Purposes. Republic Act No. 11256 - An Act to Strengthen the Country’s Gross International Reserves, Amending For the Purpose Sections 32 and 151 of the National internal Revenue Code,9 mandates the exemption from payment of income and excise taxes on the sale of gold to the BSP by registered small scale and accredited small scale miners and traders. Republic Act No. 11346 - An Act Increasing the Excise Tax on Tobacco Products, Imposing Excise Tax on Heated Tobacco Products and Vapor Products, Increasing the Penalties for Violations of Provisions on Articles Subject to Excise Tax, and Earmarking a Portion of the Total Excise Tax Collection from Sugar-Sweetened Beverages, Alcohol, Tobacco, Heated Tobacco and Vapor Products for Universal Health Care, Amending for this Purpose Sections 144, 145, 146, 147, 152, 164, 260, 262, 263, 265, 288, and 289, Repealing Section 288(B) and 288(C), and Creating New Sections 263-A, 265-B, and 288-A of the National Internal Revenue Code of 1997, as Amended by Republic Act No. 10963, and for Other Purposes. Republic Act111 No. 11467 - An Act Amending Sections 109, 141, 142, 143, 144, 147, 152, 263, 263-A, 265, and 288-A, and Adding a New Section 290-A to RA 8424, as amended, otherwise known as the National Internal Revenue Code of 1997, and for Other Purposes. Republic Act No. 11534 - An Act Reforming the Corporate Income Tax and Incentives System, Amending for the Purpose Sections 20, 22, 25, 27, 28, 29, 34, 40, 57, 109, 116, 204 and 290 of the National Internal Revenue Code of 1997, as Amended and Creating Therein New Title XIII, and for Other Purposes. [2] The National Internal Revenue Code of 1997 is embodied under Section 3 of Republic Act (RA) 8424, entitled “An Act Amending the National Internal Revenue Code, as Amended, and for Other Purposes,” which is otherwise known as the “Tax Reform Act of 1997 and which took effect on January 1, 1998. Congress passed numerous laws amending the provisions of RA 8424 such as RAs 8761, 9010, 9224, 9238, 9243, 9294, 9334, 9337, 9361, 9504, 9648, 10001, 10021, 10026, 10351, 10378, 10653, 10754, 10864, 10963 (TRAIN Law), 11256, 11346 (Tobacco Tax Law), 11467 and recently RA 11534 known as Corporate Recovery and Tax Incentives for Enterprises Act or CREATE which took effect on ______. [3] Republic Act 1125, entitled “An Act Creating the Court of Tax Appeals,” had been amended by RA 3457, RA 9282 and RA

9503. Under RA 9282 (April 23, 2004), the jurisdiction of the Court of Tax Appeals (CTA) was expanded, elevating its rank to the level of a collegiate court. Its organizational structure was also enlarged y RA 9503 with the creation of another Division to hasten resolution of tax cases. Currently, there are three (3) divisions in the CTA. [4] TRAIN law. [5] Introduced by Sec. 4 of the TRAIN Law. https://www.bir.gov.ph/index.php/tax-code.html Page 207 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 [6] As Amended by Republic Act (RA) No. 10021, “An Act to Allow the Exchange of Se by the Bureau of Internal Revenue (BIR) of Tax Matters Pursuant to Internationally-Agreed Tax Standards, Amending Sections 6(F), 71 and 270 of the National Internal Revenue Code (NIRC) of 1997, As Amended, and for Other Purposes”, 8 March 2010. [7] As amended by RA No. 10351, “An Act Restructuring the Excise Tax on Alcohol and Tobacco Products by Amending Sections 141, 142, 143, 144, 145, 8, 131 And 288 of RA No. 8424. Otherwise Known as the NIRC of 1997, as Amended by RA No. 9334, and for Other Purposes”, approved on 19 December 2012. [8] A new provision introduced by Sec. 3 of the CREATE Law. [9] As amended by Sec. 3 of the CREATE Law [10] Introduced by Sec. 4 of the CREATE Law, expanding the coverage of the term “corporation” to include one person corporation. [11] As amended by RA No. 11590, “AN ACT TAXING PHILIPPINE OFFSHFORE GAMING OPERATIONS, AMENDING FOR THE PURPOSE SECTIONS 22, 25, 27, 28, 106, 108, AND ADDING NEW SECTIONS 125-A AND 288 (G) OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED AND FOR OTHER PURPOSES”. [12] As amended by Sec. 5 of the TRAIN Law. [13] Introduced by Sec. 5 of the TRAIN Law. [14] As amended by Sec. 5 of the TRAIN Law. Previous rate was 7.5%. [15] As amended by Sec. 5 of the TRAIN Law. Old rates were removed. [16] As amended by Sec. 5 of the TRAIN Law. Previous rates were 5% and 10%. [17] As amended by Sec. 5 of the CREATE Law. [18] Introduced by Sec. 6 of the TRAIN Law. [19] This paragraph was originally part of the amendments introduced by the TRAIN Law on Section 6(F), but was vetoed by the President. The veto message reads: “I am constrained to veto the provision under Section 6(F) of the enrolled bill that effectively maintains the special tax rate of 15% of gross income for the aforementioned employees, to wit: ‘Provided, however, That existing RHQs/ROHQs, OBUs or petroleum service contractors and subcontractors presently availing of preferential tax rates for qualiSed employees shall continue to be entitled to avail of the preferential tax rate for present and future qualiSed employees. While I understand the laudable objective of the proposal, the provision is violative of the Equal Protection Clause under Section 1, Article III of the 1987 Constitution, as well as the rule of equity and uniformity in the application of the burden of taxation: Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws. In line with this, the overriding consideration is the promotion of fairness of the tax system for individuals performing similar work. Given the signiScant reduction in the personal income tax, the employees of these forms should follow the regular tax rates applicable to other individual taxpayers.” Under Sec. 4 (C) of Revenue Regulation (RR) 08-18, the effect of the VETO is that the 15% preferential income tax rate under https://www.bir.gov.ph/index.php/tax-code.html Page 208 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 subsections (C) (D) and (E) of Sec. 25 of the Tax Code, as amended, shall no longer be applicable which means that the concerned employees of the regional or area headquarters and regional operating headquarters of multinational companies, offshore banking units and petroleum service contractors and subcontractors shall be subject to the regular income tax, without prejudice, however, to the application of preferential tax rates under tax treaties, if applicable. Reading the provisions of the TRAIN Law and RR 8-2018, all employees (whether Filipino or alien) of RHQs, ROHQs, OBUs and petroleum contractors and subcontractors shall be subject to the graduated income tax rates under Sec. 24 (A)(2)(a) of the Tax Code. [20] As amended by RA No. 11590 [21] As amended by Sec. 6 of the CREATE Law.” [22]Deleted by Sec. 6 of the CREATE Law [23]New provision Introduced by Sec. 6 of the CREATE Law. [24] As amended by the CREATE Law. [25] Sec. 6 of the CREATE Law included HDMF. [26] Sec. 7 of the TRAIN Law excluded the Philippine Charity Sweepstakes OZce and included local water districts.. [27] As amended by Sec. 7 of the TRAIN. Previous rate was 7.5%. [28] As amended by Sec. 7 of the TRAIN. Previous rates were 5% and 10%. [29] As amended by RA 9337. [30] RA 10378, supra. [31] As amended by RA 10378. [32] The provisions on OBUs were removed/deleted by Sec. 7 of the CREATE. [33] Introduced by Sec. 7 of the CREATE. [34] As amended by Sec. 7 of the CREATE. The rate has increased from 7.5% to 15%. [35] As amended by Sec. 7 of the CREATE. Previous rates were 5% and 10%.. [36] As amended by RA 11467. [37] As amended by Sec. 7 of the CREATE. Previous rate was 35%. [38] As amended by Sec. 7 of the CREATE. Previous rate was 20%. https://www.bir.gov.ph/index.php/tax-code.html Page 209 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 [39] The entire Sec. 29 of the Tax Code, as amended, was repealed by Sec. 8 of the CREATE. [40] As amended by Sec. 8 of the TRAIN. Personal and additional exemptions were removed. [41] As amended by Sec. 9 of the TRAIN. Previous ceiling was P82,000. The prerogative of the Secretary of Finance to increase the ceiling was removed. [42] Introduced by Sec. 1 of RA No. 11256. [43] As amended by Sec. 10 of the TRAIN. Previous rate was 32%. [44] As amended by Sec. 10 of the TRAIN. Previous divisor was 68%. [45] As amended by Sec. 11 of the TRAIN. Subsection (M) (Premium Payments on Health and/or Hospitalization Insurance of an Individual Taxpayer) was repealed/removed. [46] New provision introduced by Sec. 9 of the CREATE. [47] As amended by RA 9337,supra. [48] As amended by RA No. 11346 [49] Should read as “taxable” income, not “net” income”. Refer to Footnote of Section 31 of the NIRC of 1997, supra. [50] Introduced by Sec. 11 of the TRAIN. [51] Repealed by Sec. 12 of the TRAIN. [52] As amended by Sec. 13 of the TRAIN. Personal and additional exemptions were replaced by an exemption threshold of P250,000. [53] Under RA 9994, otherwise known as the “Senior Citizens Act of 2010,” which took effect on February 15, 2010, senior citizens who are considered to be minimum wage earners in accordance with RA 9504 shall also be treated as exempt from the payment of individual income tax. [54] As amended by RA 9504,supra. [55] RA 337, otherwise known as the “General Banking Act,” had been amended by RA 8791, otherwise known as the “General Banking Law of 2000.” [56] Introduced by Sec. 13 of the TRAIN. [57] Introduced by Sec. 14 of the TRAIN. https://www.bir.gov.ph/index.php/tax-code.html Page 210 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 [58] Introduced by Sec. 15 of the TRAIN. [59] Introduced by Sec. 3 of the TRAIN law. [60] As amended by Sec. 16 of the TRAIN. Previous deadline was July 15. [61] Introduced by Sec. 17 of the TRAIN. [62] Introduced by Sec. 18 of the TRAIN. [63] Repealed by Sec. 19 of the TRAIN. [64] N.B.: See footnote under Section 62, supra. [65] As inserted by RA 10021,supra. [66] As amended by Sec. 20 of the TRAIN. Previous deadline for the Srst quarterly income tax declaration was April 15 of the same taxable year. [67] As amended by Sec. 20 of the TRAIN. Previous deadline for the fourth installment was April 15 of the following calendar year. To clarify, the deadline for Sling the annual income tax return and payment of the income tax payable therein is still April 15 of the succeeding calendar year pursuant to Sec 51 (C)(1) of this Code. [68] As amended by Sec. 21 of the TRAIN. Subsections (D) (Personal Exemptions) and (F) (Husband and Wife) were removed. [69] As amended by Sec. 22 of the TRAIN. [70] As amended by Sec. 23 of the TRAIN. Section 86(D) (Miscellaneous Provisions) was removed. [71] As amended by Sec. 23 of the TRAIN. SpeciSc deductions for actual funeral expenses, judicial expenses of the testamentary of intestate proceedings and medical expenses were removed. [72] As amended by Sec. 23 of the TRAIN. Previous threshold was P1,000,000. [73] Introduced by Sec. 23 of the TRAIN. [74] As amended by Sec. 23 of the TRAIN. [75] Repealed by Sec. 24 of the TRAIN. [76] As amended by Sec. 25 of the TRAIN. [77] Ibid. Previous threshold was P2,000,000. https://www.bir.gov.ph/index.php/tax-code.html Page 211 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 [78] As amended by Sec. 25 of the TRAIN. Previous deadline was 6 months. [79] Introduced by Sec. 26 of the TRAIN. [80] As amended by Sec. 27 of the TRAIN. [81] As amended by Sec. 28 of the TRAIN. [82] Introduced by Sec. 29 of the TRAIN. [83] As amended by Sec. 30 of the TRAIN. Dowries or gifts made on account of marriage were removed. [84] As amended by Sec. 31 of the TRAIN. [85] As amended by Sec. 31 of the TRAIN. Subsection (b) (Foreign Currency Denominated Sale) was removed. [86] As amended by Sec. 31 of the TRAIN. Sale of gold to the Bangko Sentral ng Pilipinas was removed and reclassiSed as exempt from value-added tax under Sec. 109 of this Code. See Note 77 ?>>> [87] The amendment introduced by the TRAIN Law on Section 106(A)(2)(9)(2) was vetoed by the President. The veto message reads: I am constrained to veto the provisions under Section 31 of the enrolled bill, to wit: Section 31: (2) Sale and Delivery of Goods to: (i) Registered enterprises within a separate customs territory as provided under special laws; and (ii) Registered enterprises within tourism enterprises zones as declared by the Tourism Infrastructure and Enterprise Zone Authority(TIEZA) [88] Introduced by Sec. 31 of the TRAIN. [89] As amended by RA 9334, supra and RA 10351 entitled, An Act Restructuring the Excise Tax on Alcohol and Tobacco Products by Amending Sections 141, 142, 143, 144, 145, 8, 131 and 288 of Republic Act No. 8424. Otherwise Known as the National Internal Revenue Code of 1997, as amended by Republic Act No. 9334, and for Other Purposes approved on December 19, 2012. [90] As amended by Sec. 32 of the TRAIN. [91] As amended by Sec. 33 of the TRAIN. [92] Introduced by Sec. 33 of the TRAIN. [93] The amendment introduced by the TRAIN Law was vetoed by the President. The veto message reads: I am constrained to veto the provisions under Section 33 of the enrolled bill, to wit: https://www.bir.gov.ph/index.php/tax-code.html Page 212 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 Section 33: (8) Services Rendered To: I. Registered Enterprises Within A Separate Customs Territory As Provided Under Special Laws; and II. Registered Enterprises Within Tourism Enterprise Zones As Declared By the TIEZA Subject To the Provisions Under Republic Act No. 9593 Or The Tourism Act of 2009. The above provisions go against the principle of limiting the VAT zero-rating to direct exporters. The proliferation of separate customs territories, which include buildings, creates signiScant leakages in our tax system. This makes the tax system highly inequitable and signiScantly reduces the revenues that could be better used for the poor. As to tourism enterprises, the current law only allows for duty and tax free importation of capital equipment, transportation equipment and other goods. The TIEZA Law explicitly allows only duty and tax free importation of capital equipment, transportation equipment and other goods (in certain cases and always subject to rules provided by the DOF). Thus, this provision actually grants a new incentive to suppliers of registered tourism enterprises. At any rate, TIEZA law, which is still in effect for two more years, can be used to avail of the above-mentioned incentives. [94] As amended by RA 9337. [95] Introduced by Sec. 34 of the TRAIN. [96] As amended Sec. 34 of the TRAIN. Previous period was ‘within ninety (90) days before or after arrival’. [97] As amended by Sec. 34 of the TRAIN. [98] As amended Sec. 34 of the TRAIN. National Statistics OZce (NSO) was changed to Philippine Statistics Authority (PSA). [99] The amendment introduced by RA11534 or the CREATE Law was vetoed by the President. Hence, the original provision remains. The President, in his veto message, states that – I am constrained to veto item (P) of the amended Section 109 of the National Internal Revenue Code of 1997, as amended (Tax Code), under Section 12 of this Act, to wit: "(P) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing as deSned by Republic Act No. 7279, otherwise known as the 'Urban Development and Housing Act of 1992', and other related laws, residential lot valued at Two million Sve hundred thousand Pesos (P2,500,OOO.OO) and below, house and lot, and other residential dwellings valued at Four million two hundred thousand Pesos (P4,200,OOO.OO) and below: Provided, That beginning January 1, 2024 and every three (3) years thereafter, the amounts herein stated shall be adjusted to present values using the Consumer Price Index, as published by the Philippine Statistics Authority (PSA)"; Under the Tax Code, as amended by the TRAIN Law, the sales of house and lot and other residential dwellings valued at not more than P2.5 million shall be VATexempt. The exemption is targeted to provide relief to buyers of socialized housing and base-level economic housing. The amendment in the CREATE Act increases the VAT-threshold to up to P4.2 million. In effect, https://www.bir.gov.ph/index.php/tax-code.html Page 213 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 this will beneSt even those not originally targeted for the VAT-exemption—those who can actually afford proper housing. This results in a tax exemption that is highly distortive and exacts a heavy price on the taxpaying community. The provision is also prone to abuse, as properties can be parceled into lots so that their individual values fall within the VAT-exempt threshold. If not vetoed, the estimated revenue loss from the foregoing is PI 55.3 billion from 2020 to 2030, which could be used in public goods to beneSt the poor directly. [100] Ibid. Previous threshold was P10,000. [101] Ibid. Previous, this was subject to the 0% value-added tax under Sec. 106 (A)(2) of the Tax Code. See Note ??>> [102] As amended by Sec. 12 of the CREATE by inserting ‘of’ after the word ‘sale”. The original provision introduced by Sec. 34 of the TRAIN states: (AA) Sale of drugs and medicines prescribed for diabetes, high cholesterol, and hypertension beginning January 1, 2019; and This was amended by Sec. 1 of RA 11467 which states: (AA) Sale or importation of prescription drugs and medicines for: [103] Introduced by Sec. 1 of RA 11467. [104] As amended by Sec. 12 of the CREATE by changing the year 2023 (as introduced by Sec. 1 of RA 11467) to year 2021. [105] Originally introduced by Sec. 1 of RA 11467. [106] Introduced by Sec. 12 of the CREATE. [107] As amended by Sec. 34 of the TRAIN. The VAT-exempt threshold was increased from P1,500,000 to P3,000,000. Original subsection (BB) of Sec. 109, is now subsection (CC) under the CREATE. [108] Introduced by Sec. 35 of the TRAIN. [109] As amended Sec. 36 of the TRAIN. Previous number of days was 120 days. [110] As amended Sec. 36 of the TRAIN. Previous submission referred to ‘complete documents’. [111] Introduced by Sec. 36 of the TRAIN. [112] As newly introduced under RA 9337, supra. [113] Introduced by Sec. 37 of the TRAIN. [114] As amended by Sec. 37 of the TRAIN. https://www.bir.gov.ph/index.php/tax-code.html Page 214 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 [115] As amended by RA No. 11534 [116] As amended by Sec. 13 of the CREATE. [117] The amendment introduced by the TRAIN Law was vetoed by the President. The veto message reads: C. Exemptions from percentage tax of gross sales/receipts not exceeding Sve hundred thousand pesos (P500,000)I am constrained to veto the provision which provides for the above under line 12 of Sec. 38 in the enrolled bill, to wit: “And Beginning January 1, 2019, Self-Employed and Professionals With Total Annual Gross Sales And/Or Gross Receipts Not exceeding Five Hundred Thousand Pesos (P500,000). The Proposed exemption from percentage tax will result in unnecessary erosion of revenues and would lead to abuse and leakages. The subject taxpayers under this provision are already exempted from the VAT, thus, the lower three percent percentage tax on gross sales or gross receipts is considered as their fair share in contributing to the revenue base of the country. [118] Inroduced by Sec. 13 of the CREATE. [119] As amended by RA 9337,supra. [120] As Amended by RA 10378,supra. [121] As originally amended by RA 9238, supra, and as last amended by RA 9337, supra. [122] RA 9238, supra, re-imposed the gross receipts tax on other non-bank Snancial intermediaries which includes pawnshops beginning January 1, 2004. [123] As amended by RA 9238 and RA 9337, supra. [124] As amended by RA 10001, supra. [125] As amended by Sec. 39 of the TRAIN. Previous rate was ½ of 1%. [126] As amended by Sec. 40 of the TRAIN. Original Subsection (A)(3)(Exceptions) - authorizing the BIR Commissioner to provide the time for Sling the return at intervals other than the time prescribed by law and the manner and time of payment of percentage taxes other than as prescribed by law - was removed/deleted. [127] Introduced by Sec. 41 of the TRAIN. [128] Introduced by Sec. 2 of RA 11346. Effective 1 January 2020. [129] As amended by Sec. 3 of RA 11346. Previous rate was 4%. https://www.bir.gov.ph/index.php/tax-code.html Page 215 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 [130] Introduced by Sec. 3 of RA 11346. Effective 1 January 2020. [131] As amended by Sec. 3 of RA 11346. The rates under Sec. 42 of the TRAIN were increased. Effective 1 January 2020. [132] As amended by Sec. 3 of RA 11346. Previous rate was 4%. Effective 1 January 2020. [133] As amended by Sec. 42 of the TRAIN. [134] As amended by Sec. 3 of RA 11346. Effective 1 January 2020. [135] As amended by Sec. 3 of RA 11346. The rates were increased under Sec. 42 of the TRAIN. Effective 1 January 2020. [136] Introduced by Sec. 3 of RA 11346. Effective 1 January 2020. [137] Introduced by Sec. 4 of RA 11346. Effective 1 January 2020. [138] Introduced by Sec. 5 of RA 11346. Effective 1 January 2020. [139] As amended by Sec. 43 of the TRAIN. Previous rate was P4.50. [140] As amended by Sec. 43 of the TRAIN. Previous rate was P0.50. [141] As amended by Sec. 43 of the TRAIN. Previous rate was P3.50. [142] Introduced by Sec. 43 of the TRAIN. [143] As amended by Sec. 43 of the TRAIN. Previous rate was P4.35. [144] As amended by Sec. 43 of the TRAIN. Previous, Secretary of Energy. [145] As amended by Sec. 43 of the TRAIN. Excise tax on leaded premium gasoline was removed. Previous rate on unleaded premium gasoline was P4.35. [146] As amended by Sec. 43 of the TRAIN. Previous rate was P3.67. [147] As amended by Sec. 43 of the TRAIN. Previous rate was P0. [148] As amended by Sec. 43 of the TRAIN. Previous rate was P0.56. [149] As amended by Sec. 43 of the TRAIN [150] The amendment introduced by the TRAIN Law was vetoed by the President. The veto message reads: https://www.bir.gov.ph/index.php/tax-code.html Page 216 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 I am constrained to veto the provision which provides for the above under line 25 Sec. 43 of the enrolled bill, to wit: “Petroleum Products, Including Naptha, LPG, Petroleum, Coke, ReSnery Fuel And Other Products Of Distillation, When Used As Input, Feedstock Or As Raw Material In The Manufacturing Of Petrochemical Products, Or In The ReSning Of Petroleum Products, Or As Replacement Fuel for Natural-Gas-Fired-Combined Cycle Power Plant [,] In Lieu Of Locally-Extracted Natural Gas During The Non-Availability Thereof, Subject To The Rules And Regulations To Be Promulgated By The Secretary Of Finance, xxx, For The Purpose Of Further Processing Or Blending into Finished Products Which Are Subject To Excise tax Under This Section.” The provision runs the risk of being too general, covering all types of petroleum products, which may be subject to abuse by taxpayers, and thus lead to massive revenue erosion. At any rate, the tax code already identiSes which petroleum products can be exempted. [151] Introduced by Sec. 44 of the TRAIN. [152] As amended by Sec. 45 of the TRAIN. [153] Introduced by Sec. 45 of the TRAIN. [154] As amended by Sec. 45 of the TRAIN. Previously, pick-up trucks were not considered ‘trucks’. [155] Introduced by Sec. 46 of the TRAIN. [156] Introduced by Sec. 47 of the TRAIN. [157] Introduced by Sec. 48 of the TRAIN. [158] As amended by Sec. 48 of the TRAIN. Previous rate was P10. [159] As amended by Sec. 48 of the TRAIN. Previous rate was P50. [160] As amended by Sec. 48 of the TRAIN. Previous rate was P100. [161] As amended by Sec. 48 of the TRAIN. Previous rate was 2%. [162] As amended by Sec. 48 of the TRAIN. Previous rate was 3%. [163] Introduced by Sec. 2 of RA 11256. [164] Introduced by Sec. 6 of RA 11346. Effective 1 January 2020. [165] Introduced by Sec. 49 of the TRAIN. [166] Introduced by Sec. 7 of RA 11346. Effective 1 January 2020. https://www.bir.gov.ph/index.php/tax-code.html Page 217 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 [167] As amended by Sec. 7 of RA 11346. Effective 1 January 2020. [168] Introduced by Sec. 50 of the TRAIN. [169] The TRAIN Law increased the rate of DST imposed on documents beginning January 1, 2018 by 100%, except DST on sale or conveyance of real property, insurance and Sdelity bonds which were retained at the old rate. DST on debt instruments under Section 179 was increased by 50% only. [170] As amended by Sec. 51 of the TRAIN. Previous rate was P1. [171] As amended by Sec. 52 of the TRAIN. Previous rate was P0.75. [172] As amended by Sec. 52 of the TRAIN. Previous rate was 25%. [173] As amended by Sec. 53 of the TRAIN. Previous rate was P0.50. [174] As amended by Sec. 54 of the TRAIN. Previous rate was P1.50. [175] As amended by Sec. 55 of the TRAIN. Previous rate was P1. [176] As amended by Sec. 56 of the TRAIN. Previous rate was P0.30. [177] As amended by Sec. 57 of the TRAIN. Previous rate was P0.30. [178] As amended by Sec. 58 of the TRAIN. Previous rate was P0.30. [179] As amended by Sec. 59 of the TRAIN. Previous rate was P0.50 on each P200, or fractional part thereof. [180] As amended by Sec. 60 of the TRAIN. Previous rate was P0.50. [181] As amended by Sec. 60 of the TRAIN. Previous rate was P0.20. [182] As amended by Sec. 61 of the TRAIN. Previous rate was P15. [183] As amended by Sec. 62 of the TRAIN. Previous rate was P15. [184] As amended by Sec. 63 of the TRAIN. Previous rate was P0.10. [185] As amended by Sec. 64 of the TRAIN. The phrase “to another port or place in the Philippines” was removed. [186] As amended by Sec. 64 of the TRAIN. Previous rate was P1. [187] As amended by Sec. 64 of the TRAIN. Previous rate was P10. https://www.bir.gov.ph/index.php/tax-code.html Page 218 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 [188] As amended by Sec. 65 of the TRAIN. Previous rate was P15. [189] As amended by Sec. 66 of the TRAIN. Previous rate was P5. [190] As amended by Sec. 67 of the TRAIN. Previous rate was P3. [191] As amended by Sec. 67 of the TRAIN. Previous rate was P1. [192] As amended by Sec. 68 of the TRAIN. Previous rate was P20. [193] As amended by Sec. 68 of the TRAIN. Previous rate was P10. [194] Introduced by Sec. 69 of the TRAIN. [195] As amended by Sec. 70 of the TRAIN. Previous rate was P500. [196] As amended by Sec. 70 of the TRAIN. Previous rate was P50. [197] As amended by Sec. 70 of the TRAIN. Previous rate was P1,000. [198] As amended by Sec. 70 of the TRAIN. Previous rate was P100 [199] As amended by Sec. 70 of the TRAIN. Previous rate was P1,500. [200] As amended by Sec. 70 of the TRAIN. Previous rate was P150. [201] The amendment introduced by the CREATE Law was vetoed by the President. The veto message on the proposed 90-day period for the processing of general tax refunds reads: For being administratively impracticable, I am constrained to veto the whole of Section 14 of this Act, to wit: SEC. 14. Section 204 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows: SEC. 204. Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes. —The Commissioner may — "(A) x xx "(B) x xx "(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and in his discretion, redeem or change unused stamps that have been rendered unSt for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer Sles in writing with the Commissioner a claim or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return Sled showing an overpayment shall be considered as a written claim for credit or refund: Provided, further, That in proper cases, the Commissioner shall grant a refund for taxes or penalties within ninety (90) days from the date of complete submission of the documents in support of the application Sled: Provided, furthermore, That should the Commissioner Snd that the grant of refund is not proper, the Commissioner must state https://www.bir.gov.ph/index.php/tax-code.html Page 219 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 in writing the legal and factual basis for the denial: Provided, Snally, That in case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals." While I laud the intention to improve tax administration, this provision is administratively diZcult for the Bureau of Internal Revenue (BIR) to implement and may cause delayed or erroneous processing of refund claims. The general form of tax refund under Section 204 of the Tax Code, as distinguished from VAT refunds in Section 112 of the same Code, requires a full audit of all internal revenue tax liabilities and examination of the tax payments, books, and returns Sled by a taxpayer. Aside from this, the Tax Code itself requires the Commission on Audit to examine refunds. Thus, it is incumbent upon the BIR to exercise utmost diligence in granting a general tax refund. This is not possible within a 90-day period for all cases. I do not want the BIR to be forced to choose between only two (2) awful choices: grant tax refunds haphazardly, or deny an application outright considering the short period given to the BIR to process the same and then have the taxpayer go to court with his refund being unnecessarily delayed. Thus, while imposing a hard deadline may appear good on paper, the actual experience in the conduct of a full audit in general tax refund will either cause damage to the government if the BIR acts haphazardly, or cause more delays to the prejudice of the taxpayers if the BIR chooses the more convenient option of simply denying applications given the time constraints. As alternative, I suggest that the legislature, the Department of Finance, and the BIR, come up with mechanisms to streamline the process of tax refunds in a separate tax administration bill. [202] Introduced by Sec. 71 of the TRAIN. [203] As amended by Sec. 71 of the TRAIN. Previously ‘quarterly”. [204] As amended by Sec. 71 of the TRAIN. Previous threshold was P150,000. [205] Introduced by Sec. 72 of the TRAIN. [206] As amended by Sec. 72 of the TRAIN. [207] As amended by Sec. 72 of the TRAIN. Previous threshold was P1,500,000. [208] As amended by Sec. 73 of the TRAIN. [209] Ibid. Previous threshold was P25. [210] Introduced by Sec. 73 of the TRAIN. [211] Introduced by Sec. 74 of the TRAIN. [212] As amended by Sec. 75 of the TRAIN. Previous rate was 20% per annum. [213] Introduced by Sec. 75 of the TRAIN. [214] As amended by Sec. 76 of the TRAIN. [215] As amended by Sec. 8 of RA 11346. Effective 1 January 2020. https://www.bir.gov.ph/index.php/tax-code.html Page 220 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 [216] As amended by Sec. 10 of RA 11346. Effective 1 January 2020. [217] Introduced by Sec. 11 of RA 11346. Effective 1 January 2020. [218] As amended by Sec. 77 of the TRAIN. [219] Introduced by Sec. 77 of the TRAIN. [220] Introduced by Sec. 78 of the TRAIN. [221] Introduced by Sec. 79 of the TRAIN. [222] As amended by Sec. 12 of RA 11346. Effective 1 January 2020. [223] Introduced by Sec. 12 of RA 11346. Effective 1 January 2020. [224] Introduced by Sec. 80 of the TRAIN. [225] Introduced by Sec. 13 of RA 11346. Effective 1 January 2020. [226] Introduced by Sec. 81 of the TRAIN. [227] Repealed by Sec. 15 of RA 11346. Effective 1 January 2020. [228] The amendment introduced by the TRAIN Law was vetoed by the President. The veto message reads: E. Earmarking of incremental tobacco taxes I am constrained to veto the provision which provides for the above in lines 20 to 29 of Sec. 82 of the enrolled bill, to wit: “Notwithstanding Any Provisions Herein To The Contrary, The Incremental Revenues From The Tobacco Taxes Under This Act Shall Be Subject To Section 3 of Republic Act No. 7171, Otherwise Known As ‘An Act To Promote The Development Of The Farmer In The Virginia Tobacco Producing Provinces’, And Section 8 Of Republic Act No. 8240, Otherwise Known As ‘An Act Amending Sections 138, 140 & 142 Of The National Internal Revenue Code, As Amended, And For Other Purposes.” The provision effectively amends the Sin Tax Law, or RA 10351, which provides for guaranteed funds for universal health care. The provision will effectively diminish the share of the health sector in the proposed allocation. [229] Introduced by Sec. 82 of the TRAIN. [230] Introduced by Sec. 14 of RA 11346. Effective 1 January 2020. [231] Introduced by Sec. 16 of RA 11346. Effective 1 January 2020. https://www.bir.gov.ph/index.php/tax-code.html Page 221 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 [232] As amended by Sec. 15 of the CREATE. [233] Introduced by Sec. 15 of the CREATE. [234] Introduced under RA No. 11534 (Corporate Recovery and Tax Incentives for Enterprises Act or CREATE Act) [235] Vetoed under Par C. The President, in his veto message under Par. C - DeSnition of investment capital, states that – I am constrained to veto item (g) of the new Section 293 of the Tax Code under Section 16 of this Act: "(g) Investment capital refers to the value of investment indicated in Philippine currency, excluding the value of land and working capital, that shall be used to carry out a registered project or activity, except that land shall be included as investment capital for registered real estate development. Investment capital may include the cost of land improvements, buildings, leasehold improvements, machinery and equipment, and other non-current tangible assets;" The term "investment capital" is relevant in determining which registered projects or activities shall fall within the approving jurisdiction of the Fiscal Incentives Review Board (FIRB). To ensure that currently operational administrative processes are not unduly disturbed, I prefer that we adopt the measures now used by investment promotion agencies to determine the scale of an investment. Excluding land and operating expenses from the measure of an investment's total scale may also lead to an underestimation of our investment promotion performance. [236] Vetoed under Par. D (1). The President, in his veto message under Par D - Redundant incentives for domestic enterprises, states that – The special corporate income tax (SCIT) rate for domestic market enterprises, which is in lieu of all local and national taxes, is redundant, unnecessary, and weakens the Sscal incentives system. Domestic-oriented enterprises are market-seeking enterprises or enterprises that invest in selling goods and services to a market where viable demand exists—with or without tax incentives. Tax incentives for domestic market enterprises are only justiSed to the extent that they yield measurable net beneSts to the economy. I Snd that the generous, targeted, and performance-based enhanced deductions to domestic activities in priority sectors or industries under the CREATE Act are already suZcient incentives for the purpose. Contrary to a common misconception that denying domestic enterprises the SCIT is tantamount to abandoning our own local businesses to fend for themselves, vetoing the subject provision is actually for the beneSt of all local businesses. It must be emphasized that only registered business entities are proposed to be entitled to SCIT. Thus, local and homegrown Srms that are not registered Srms, which make up most of our MSMEs, will have to pay more taxes than registered Srms. The latter would then have more legroom to reduce prices, secure more contracts, and ultimately take over the market and put our MSMEs out of business. In actuality, this line item veto will effectively level the domestic playing Seld and provide only the most generous incentives during the most critical times [e.g., income tax holiday 0TH) during start-up years]. After ITH expires, performance-based incentives, speciScally the enhanced deductions, will become available. All of these ensure that extended tax savings are matched with targeted spending (e.g., direct labor and research and development) and not awarded outright which is the case if SCIT is extended to them. [237] Vetoed under Par. D (2) https://www.bir.gov.ph/index.php/tax-code.html Page 222 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 [238] Vetoed under Par. D (3) [239] Vetoed under Par. D (4) [240] Vetoed under Par. D (5) [241] Vetoed under Par. D (6) [242] Vetoed under Par E (1). The President, in his veto message under Par E – Allowing existing registered activities to apply for new incentives for the same activity, states that – Allowing an additional fourteen (14) to seventeen (17) years of incentives and another ten (10) year-extension for the same activity on top of the original period of incentives enjoyment is Sscally irresponsible and utterly unfair to the ordinary taxpayer and to un incentivized enterprises. Registered business enterprises interested in further enjoying incentives must engage in new activities or projects incentivized in the Strategic Investment Priority Plan. My principle on this matter is simple: only new activities and projects deserve new incentives. [243] Vetoed under Par. D (7) [244] Vetoed under Par. D (8) [245] Vetoed under Par. E (2) [246] Vetoed under Par. E (3) [247] Vetoed under Par. G (1). The President, in his veto message under Par G – SpeciSc industries mentioned under activity tiers, states that – On the one hand, there are industries in the enumeration that either do not merit support through incentives or are expected to become obsolete in the short-term. On the other hand, there might be economic activities in the mid- to long-term that need to be prioritized and granted tax incentives which are not captured in the current enumeration. The CREATE Act must be kept bexible to be able to keep up with the changing times. Activities and projects should not be hard coded in the law so that we do not keep on incentivizing obsolete industries and close our doors to technological advances and industries of the future. [248] Vetoed under Par. G (2) [249] Vetoed under Par. D (9) [250] Vetoed under Par. D (10). The President has vetoed all mention of “/SCIT” in the table after the phrase “For domestic market activities”. [251] Vetoed under Par. I. The President, in his veto message under Par I – Automatic approval of applications for incentive, states that – https://www.bir.gov.ph/index.php/tax-code.html Page 223 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 The automatic approval of applications runs counter to the declared policy to approve or disapprove applications based on merit. The core of the reform is to develop a performance-based tax incentives system. The FIRB or the investment promotion agencies, as the case may be, should be allowed to carefully review the application for tax incentives since these are privileges granted by the State. This important function should not be sacriSced for the sake of expediency. Moreover, concerns over inaction can be addressed by the Ease of Doing Business and EZcient Government Service Delivery Act of 2018, which punishes the failure to render government services within a prescribed time. [252] Vetoed under Par. F. The President, in his veto message under Par F – Limitations on the power of the FIRB, states that – The primary role of the FIRB in the Sscal incentives system of the Philippines is to exercise policy-making and oversight functions on all registered business enterprises and investment promotion agencies. Section 297 (B) is clear that the power of the investment promotion agencies to grant incentives only stems from a delegated authority from the FIRB. Corollary to this, the current practice of granting incentives without a regular impact analysis conducted and without regard to the Snal cost to the government is unacceptable, given our economic aims under the CREATE Act. Consistent with the theme of the "Tax Incentives Management and Transparency Act (TIMTA)" emphasizing Sscal accountability and transparency in the grant and management of tax incentives, the oversight functions of the FIRB will ensure the proper grant and monitoring of tax incentives, as well as assure Filipinos that in every peso invested, we get our tax's worth. These powers must remain plenary over those of the investment promotion agencies. The concern that the FIRB oversight will result in inordinate delays is highly speculative. Even with the veto of the foregoing provision, the investment promotion agencies retain the delegated power to grant incentives up to a certain threshold amount. The FIRB does not create another layer in the approval process but is simply granted the authority to check whether the incentives granted by the investment promotion agencies conform to the overarching aim of the reform to modernize our incentive system into one that is performance-based, targeted, time-bound, and transparent. The oversight power of the FIRB supports its policy-making function since analyzing important data on all granted incentives is crucial in crafting sound, sustainable, and Sscally responsible incentives policy. [253] Vetoed under Par. H. The President, in his veto message under Par H – Provision granting the President the power to exempt any investment promotion agency from the reform , states that – The provisions allowing any future President the power to exempt an investment promotion agency from the coverage of the CREATE Act disregards the huge steps we have taken to rationalize our Sscal incentives system. It could become a highly political tool that could allow subsequent Presidents to dismantle decades of studies, disregard discussions based on empirical evidence, and even subvert the will of Congress itself. Fair and sensible public policy must bear the quality of uniform application. Exempting any investment promotion agency from the CREATE Act, which provides for transparency, accountability, and proper administration of tax incentives may be used as an escape from the accountability measures institutionalized in that law, and opens a wide path for discretion and capture by vested interests. << Back to NIRC Outline >> (https://www.bir.gov.ph) https://www.bir.gov.ph/index.php/tax-code.html Page 224 of 225 Tax Code - Bureau of Internal Revenue 20/06/22, 09:17 REPUBLIC OF THE PHILIPPINES All content is in the public domain unless otherwise stated. ABOUT GOVPH Learn more about the Philippine government, its structure, how government works and the people behind it. 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