DBM-DOF Joint Circular Entitled "Guidelines and Procedures on the Release of the Share of Local Government Units (LGUs) from the Gross Income Earned by All Businesses within the Cagayan Special Economic Zone"

March 8, 2012 DOF MEMORANDUM FOR : Secretary Florencio B. Abad Department of Budget and Management SUBJECT : DBM-DOF Joint Circular Entitled "Guidelines and Procedures on the Release of the Share of Local Government Units (LGUs) from the Gross Income Earned by All Businesses within the Cagayan Special Economic Zone" This is to respectfully transmit the aforementioned Joint Circular, duly signed by the Secretary of Finance, Hon. Cesar V. Purisima. CIAacS Thank you and best regards. By authority of the Secretary: (SGD.) CARLO A. CARAG Undersecretary Revenue Operations and Legal Affairs Group ATTACHMENT DOF Memorandum February 27, 2012 Department of Budget and Management Malacaang, Manila February 17, 2012 Hon. CESAR V. PURISIMA Secretary Department of Finance Executive Tower Building BSP Complex, Roxas Boulevard Manila Sir: We are forwarding for your consideration and approval the attached DBM-DOF Joint Circular entitled, "GUIDELINES AND PROCEDURES ON THE RELEASE OF THE SHARE OF LOCAL GOVERNMENT UNITS (LGUs) FROM THE GROSS INCOME EARNED BY ALL BUSINESSES WITHIN THE CAGAYAN SPECIAL ECONOMIC ZONE". We have incorporated in the joint circular, the proposed revisions of that Department, specifically those of the Bureau of Internal Revenue (BIR) and the Bureau of the Treasury (BTr) which are contained in letter dated 6 December 2011 of Undersecretary Carlo A. Carag of the DOF-Revenue Operations and Legal Affairs Office. Thank you. THaAEC Very truly yours, (SGD.) FLORENCIO B. ABAD Secretary DEPARTMENT OF BUDGET AND MANAGEMENT DEPARTMENT OF FINANCE Joint Circular No. ___ _________, 2011 FOR : ALL CONCERNED OFFICIALS OF THE DEPARTMENT OF BUDGET AND MANAGEMENT (DBM) AND THE DEPARTMENT OF FINANCE (DOF) SUBJECT : GUIDELINES AND PROCEDURES ON THE RELEASE OF THE SHARE OF LOCAL GOVERNMENT UNITS (LGUs) FROM THE GROSS INCOME EARNED BY ALL BUSINESSES WITHIN THE CAGAYAN SPECIAL ECONOMIC ZONE 1.0 Purpose This circular is issued to implement Special Provision No. 4 of Section 1, Item XXXVI. Allocations to Local Government Units, of Republic Act No. 10147 or the FY 2011 General Appropriations Act, providing for the "Allocation and Release of LGU Share in Gross Income Tax Paid by all Businesses and Enterprises within the Economic Zones". Specifically, the objectives are as follows: 1.1 To provide procedural guidelines on the release of funds to Local Government Units (LGUs) which are collectively entitled to the one and one-half percent (1 1/2%) share in the gross income earned by all businesses within the Cagayan Special Economic Zone (CSEZ) pursuant to 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"; and THaDAE 1.2 To delineate the responsibilities of the Department of Budget and Management (DBM) and the Department of Finance (DOF) in the allocation and release of the funds to the LGUs. 2.0 Guidelines 2.1 All registered enterprises which conduct their business activities inside the CSEZ shall, in lieu of paying local and national taxes, pay to the BIR five percent (5%) final tax on their Gross Income Earned (GIE) to the BIR. GIE refers to the gross sales or gross revenues derived from registered business activities within the CSEZ, net of sales discounts, sales returns and allowances and minus cost of sales, cost of production or direct costs of services (depending on the nature of business) but before any deduction is made for administrative, selling, and other expenses or incidental losses during a given taxable period. 2.2 The following LGUs shall be entitled to their respective shares out of the 5% final tax on GIE, to wit: 2.2.1 One percent (1%) of the 5% final tax which is equivalent to twenty percent (20%) of the total tax collected, to the Province of Cagayan; and HScAEC 2.2.2 One-half percent (1/2%) of the 5% final tax which is equivalent to ten percent (10%) of the total tax collected, to be shared by the municipalities affected by the declaration of the CSEZ in proportion to their income from business activities within the CSEZ. 3.0 Roles and Responsibilities 3.1 Department of Finance Bureau of Internal Revenue (BIR) shall: 3.1.1 Prepare on or before March 15 of each year, a certification on the total computed LGU share based on the revenue collections corresponding to thirty percent (30%) of the total final tax collected on GIE for the base year, which is two years preceding the current year; 3.1.2 Transmit the certification to the Bureau of the Treasury (BTr) for validation; 3.1.3 Include the amount reflected in the aforesaid certification as one of the authorized deductions in the computation of the Internal Revenue Tax Collection Base (IRTCB); and SaHIEA 3.1.4 Submit to the DBM the validated BIR certification on or before May 15. 3.2 Department of Finance Bureau of the Treasury (BTr) shall: 3.2.1 Validate the certification on remittances/statement of deposited collections transmitted by BIR. This shall be based from the reports submitted by the BTr Regional Offices and Authorized Government/Agent Depository Banks; and 3.2.2 Transmit to the BIR the above duly validated certification within thirty (30) days after receipt from the BIR. 3.3 The Department of Budget and Management shall: 3.3.1 Include under the Special Purpose Fund-Assistance to Local Government Units of the General Appropriations Act, the amount certified by the BIR and BTr, as the total share of the LGUs affected by the declaration of the CSEZ; and DcSTaC 3.3.2 Issue the necessary release documents corresponding to the one and one half percent (1 1/2%) share of the LGUs from the GIE which is equivalent to thirty percent (30%) of the final tax collected by BIR based on the certification issued by the BIR and BTr. 4.0 Effectivity This Circular shall take effect immediately. (SGD.) FLORENCIO B. ABAD CESAR V. PURISIMA Secretary Secretary Department of Budget and Management Department of Finance Department of Budget and Management Malacaang, Manila September 30, 2011 HON. Cesar V. Purisima Secretary Department of Finance Executive Tower Building BSP Complex, Roxas Boulevard Manila Dear Secretary Purisima, We are forwarding for your consideration and approval the attached DBM-DOF Joint Circular entitled, "GUIDELINES AND PROCEDURES ON THE RELEASE OF THE SHARE OF LOCAL GOVERNMENT UNITS (LGUs) FROM THE GROSS INCOME EARNED BY ALL BUSINESSES WITHIN THE CAGAYAN SPECIAL ECONOMIC ZONE". EIAHcC By virtue of RA 7922 or the Cagayan Special Economic Zone Act of 1995, Local Government Units (LGUs) are entitled to have a share in the final taxes paid by all business and enterprises located in the Cagayan Special Economic Zone (CSEZ). We wish to inform you that under the FY 2011 GAA, Php15.736M was appropriated to cover the share of LGUs in the gross income taxes paid by economic zones. However, the fund could not be released since the DOF and the DBM have yet to jointly issue a set of guidelines on this. The existing DILG-DBM-DOF Joint Circular No. 99-2 dated 20 April 1999 only covers LGUs in Subic, Clark, John Hay, Poro Point Special Economic Zones and other special economic zones under the Philippine Economic Zone Authority (PEZA). Hence, there is a need to issue the attached set of guidelines as this will serve as a basis for the release of the shares to LGUs in the Province of Cagayan. Thank you. Very truly yours, (SGD.) FLORENCIO B. ABAD Secretary DEPARTMENT OF BUDGET AND MANAGEMENT DEPARTMENT OF FINANCE Joint Circular No. ___ ________, 2011 FOR : ALL CONCERNED OFFICIALS OF THE DEPARTMENT OF BUDGET AND MANAGEMENT (DBM) AND THE DEPARTMENT OF FINANCE (DOF) SUBJECT : GUIDELINES AND PROCEDURES ON THE RELEASE OF THE SHARE OF LOCAL GOVERNMENT UNITS (LGUs) FROM THE GROSS INCOME EARNED BY ALL BUSINESSES WITHIN THE CAGAYAN SPECIAL ECONOMIC ZONE 1.0 Purpose This circular is issued to implement Special Provision No. 4 of Republic Act No. 10147 or the FY 2011 General Appropriations Act, on the "Allocation and Release of LGU Share in Gross Income Tax Paid by all Businesses and Enterprises within the Economic Zones". cIHDaE Specifically, the objectives are as follows: 1.1 To provide procedural guidelines on the release of funds to Local Government Units (LGUs) which are entitled to the one and one-half percent (1 1/2%) share in the gross income earned by all businesses within the Cagayan Special Economic Zone (CSEZ) pursuant to R.A. No. 7922 entitled "An Act Establishing a Special Economic Zone and Free Port in the Municipality of Sta. Ana and the Neighboring Islands in the Municipality of Aparri, Province of Cagayan, Providing Funds Therefor, and for Other Purposes"; and 1.2 To delineate the responsibilities of the Department of Budget and Management (DBM) and the Department of Finance (DOF) in the allocation and release of the funds to the LGUs. 2.0 Guidelines 2.1 All registered enterprises which conduct their business activities inside the CSEZ shall, in lieu of paying local and national taxes, pay five per cent (5%) final tax on their Gross Income Earned (GIE) to the BIR. GIE refers to the gross sales or gross revenues derived from business activities within the CSEZ, net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction is made for administrative, selling, and/or operating expenses or incidental losses during the taxable period. ECaSIT 2.2 The following LGUs shall be entitled to their respective shares out of the 5% final tax on GIE, to wit: 2.2.1 One per cent (1%) of the 5% final tax which is equivalent to twenty percent (20%) of the total tax collected, to the Province of Cagayan; and 2.2.2 One-half percent (1/2%) of the final tax which is equivalent to ten percent (10%) of the total tax collected, to be shared by the municipalities affected by the declaration of the Zone in proportion to their income from business activities within the Zone. 3.0 Roles and Responsibilities 3.1 Department of Finance Bureau of Internal Revenue (BIR), shall: 3.1.1 Prepare on or before March 15, a certification on the total computed LGU share based on the revenue collections corresponding to thirty percent (30%) of the total final tax collected on GIE for the base year, which is two years preceding the current year; TEHIaD 3.1.2 Transmit the certification to the Bureau of the Treasury (BTr) for validation; 3.1.3 Include the amount reflected in the aforesaid certification as one of the authorized deductions in the computation of the Internal Revenue Tax Collection Base (IRTCB); and 3.1.4 Submit to the DBM the validated BIR certification on or before May 15. 3.2 Department of Finance Bureau of the Treasury (BTr), shall: 3.2.1 Validate the certification on the total computed LGU share transmitted by the BIR; SDHITE 3.2.2 After validation, transmit to the BIR a certification on remittances or statement of deposited collections, within thirty (30) days after receipt of the BIR certification. 3.3 The Department of Budget and Management shall: 3.3.1 Include under the Special Purpose Fund Assistance to Local Government Units of the General Appropriations Act (GAA), the amount certified by the BIR as certified by the BTr, as the total share of the LGUs affected by the declaration of the CSEZ; and 3.3.2 Issue the necessary release documents corresponding to the one and one half percent (1 1/2%) share of the LGUs from the GIE which is equivalent to thirty percent (30%) of the final tax collected by BIR as certified by the BTr. 4.0 Effectivity This Circular shall take effect immediately. ACIEaH (SGD.) FLORENCIO B. ABAD (SGD.) CESAR V. PURISIMA Secretary Secretary Department of Budget and Management Department of Finance Department of Budget and Management Malacaang, Manila January 30, 2012 Hon. CESAR V. PURISIMA Secretary Department of Finance Executive Tower Building BSP Complex, Roxas Boulevard Manila Sir: We are forwarding for your consideration and approval the attached DBM-DOF Joint Circular entitled, "GUIDELINES AND PROCEDURES ON THE RELEASE OF THE SHARE OF LOCAL GOVERNMENT UNITS (LGUs) FROM THE GROSS INCOME EARNED BY ALL BUSINESSES WITHIN THE CAGAYAN SPECIAL ECONOMIC ZONE". We have incorporated in the joint circular, the proposed revisions of that Department, specifically those of the Bureau of Internal Revenue (BIR) and the Bureau of the Treasury (BTr) which are contained in letter dated 6 December 2011 of Undersecretary Carlo A. Carag of the DOF-Revenue Operations and Legal Affairs Office. Thank you. TIAEac Very truly yours, (SGD.) FLORENCIO B. ABAD Secretary