BIR Ruling [DA-390-05]

September 14, 2005 BIR RULING [DA-390-05] Jose Ma. M. Lacson 13 Sunset Drive St. Sunset Village Tambo, Paraaque City S i r : This refers to your letter dated August 4, 2005, which was referred to this office on August 25, 2005, requesting clarification on the submission of a tax clearance under Revenue Regulations No. 3-2005 implementing Executive Order (EO) No. 398, stating that on June 21, 2005, the Land Transportation Franchising and Regulatory Board (LTFRB) published in the INQUIRER, an "Invitation to Apply for Eligibility and To Bid" for its Passenger Personal Accident Insurance Program (PPAIP) for public utility vehicles. However, the EO provides as pre-condition, that all prospective bidders desiring to enter into or participate in any contract with the government shall submit along with their proposal and/or bid, their latest tax returns duly stamped and received by the BIR, and a Tax Clearance for bidding purposes before it could be accepted for evaluation. Hence your request relative to the submission of the aforesaid clearance, to wit: "1. In the above mentioned Invitation to Apply for Eligibility and to Bid by the LTFRB, a government agency, can a prospective bidder be eligible to participate in the bidding process even without securing a "Tax Clearance" for Bidding from your Office? This is in reference with pre-condition mentioned in Section 1 of EO 398 and RR 3-2005. 2. Can the LTFRB proceed with the evaluation of the submitted proposed/bid of a prospective bidder who failed to submit a "Tax Clearance" for bidding? Would there be any violation in the part of the procuring government agency if they disregard the pre-condition requirement stated in Section 1 of EO 398 which was signed by the president last January 12, 2005." In reply, please be informed as follows: 1. As regards Question No. 1, Section 1 of EO 398, provides that, to quote: "All persons, natural or juridical, local or foreign, desiring to enter into or participate in any contract with the government, its departments, bureaus, offices and agencies, including state universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units, shall, as a pre-condition, submit, along with their proposal and/or bid, a copy of their latest income tax and business tax returns duly stamped and received by the Bureau of Internal Revenue, and duly validated with the tax payments made thereon. They shall also submit a tax clearance from the BIR to prove full and timely payment of taxes." Accordingly, a prospective buyer in an Invitation to Apply for Eligibility and to Bid is not eligible to participate in the bidding process without the tax clearance issued by the Collection Enforcement Division of this Bureau. 2. As for Question No. 2, Section 2 of EO 398, provides, to quote: "All departments, bureaus, offices and agencies, including state universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units shall, before entering into a contract with a private contracting party, exert all efforts to determine that the private contracting party is face and clear of all tax liabilities to the government. CEaDAc The private contracting party, through its responsible officer(s) shall, before entering into a contract with the public contracting party, certify under oath that it is free and clear from all tax liabilities to the government." It appearing that the above-quoted provision applies to all government agencies without exception, it is clear and unequivocal, needing no further interpretation. Thus, the LTFRB is necessarily included in the mandate of EO 398. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service