Applicability of VAT-Zero Rate or VAT Exemption on Local Sales Transactions of Export Enterprises Registered with the Board of Investments and the Philippine Economic Zone Authority

January 28, 1981 REVENUE REGULATIONS NO. 06-81 SUBJECT : Declaration and Payment of Percentage and Fixed Taxes TO : All Internal Revenue Officers and Others Concerned Pursuant to the provisions of Section 326 in relation to Section 4 of the Tax Code, these regulations are hereby promulgated prescribing the method for filing quarterly cumulative and annual percentage tax returns as provided in Presidential Decree Nos. 1705 and 1778. SECTION 1 . Scope . These regulations prescribe the procedure in the filing of cumulative quarterly and annual percentage tax returns, computation of the tax and the payment of the fixed tax. A. PERCENTAGE TAX SECTION 2 . P ercentage Ta x . In general, unless otherwise specifically provided in the Tax Code, every person conducting business on which percentage tax is imposed under Chapter II Title V of the Tax Code must render quarterly declaration on cumulative basis of the amount of his sales, receipts or earnings or gross value of output actually removed from the factory or near warehouse, compute and pay the tax due thereon. "(a) Quarterly Percentage Tax Return . For each of the first three quarters of the taxable year, the tax so computed shall be decreased by the amount of tax previously paid and by the sum of the tax credits allowed under this Title for the preceding and current quarters. The tax due shall be paid not later than twenty (20) days following the close of each of the first three quarters of the taxable year (BIR Form No. ). "(b) Final Annual Percentage Tax Return . On or before the twentieth day of the second month following the close of the taxable year, a final percentage tax return shall be filed under BIR Form No. ______ covering the entire taxable year. If the sum of the total quarterly percentage tax payments made for the first three quarters and the total tax credit allowable for the taxable year are not equal to the total tax due on the entire gross sales, receipts or earnings or gross value of the output for that taxable year, the taxpayer shall either: "(1) Pay the tax still due; or "(2) Credit to the extent allowable under this Title, the amount of excess tax credits shown in the final adjustment return against the quarterly percentage tax liabilities for the succeeding taxable quarters. "Sales on consignment shall be considered actually sold on the day of sale or sixty (60) days after the date consigned, whichever is earlier. "A PERSON ENGAGED IN BUSINESS AS A PRIME OR PRINCIPAL CONTRACTOR AND AS A SUBCONTRACTOR AT THE SAME TIME SHALL DECLARE HIS ENTIRE GROSS RECEIPTS DERIVED FROM HIS PRINCIPAL CONTRACTING AND SUBCONTRACTING BUSINESS ON A CUMULATIVE BASIS FOR THE FOUR QUARTERS OF ANY TAXABLE YEAR. PAYMENTS MADE TO ANOTHER SUBCONTRACTOR SHALL LIKEWISE BE INDICATED IN THE CONTRACTOR'S QUARTERLY PERCENTAGE TAX RETURN (BIR FORM NO.____) SPECIFYING THEREIN THE NAMES AND TAX ACCOUNT NUMBERS OF THE FOLLOWING: 1. CONTRACTEES FROM WHOM HIS TAXABLE GROSS RECEIPTS WERE RECEIVED. 2. CONTRACTORS FROM WHOM HE DERIVED SUBCONTRACT RECEIPTS. 3. SUBCONTRACTORS TO WHOM HE MADE SUBCONTRACT PAYMENTS. THE "TAXABLE" AND "NON-TAXABLE" RECEIPTS SHALL BE DECLARED ON CUMULATIVE BASIS WITH THE AMOUNT RECEIVED OR PAID IN THE PRECEDING QUARTER OR QUARTERS BEING ADDED AND LAST QUARTERS OF THE SAME TAXABLE YEARS, IRRESPECTIVE OF WHETHER OR NOT THE RECEIPTS ARE RECEIVED FROM OR THE PAYMENTS MADE TO THE SAME OR DIFFERENT PRINCIPAL CONTRACTORS OR SUBCONTRACTOR, PROVIDED, HOWEVER, THAT IF THE AMOUNT IN ANY ONE QUARTER DOES NOT EXCEED FIFTY THOUSAND PESOS (P50,000.00),THE AMOUNTS MAY BE LUMPED AND DECLARED UNDER THE TERM "VARIOUS". cd SECTION 3 . Computation of the Quarterly and Final Annual Percentage Tax . The percentage tax due on every quarter shall be computed on a cumulative basis in accordance with the provisions of Section 193 (now 205) of the Tax Code. ILLUSTRATION: If the operations of a taxpayer on a calendar year basis are as follows: Gross quarterly Tax credits sales allowable each quarter Jan. 1 March 31 P300,000.00 P40,000.00 April 1 June 30 400,000.00 20,000.00 July 1 Sept. 30 200,000.00 20,000.00 Oct. 1 Dec. 31 300,000.00 10,000.00 TOTAL P1,200,000.00 P 90,000.00 ========== ========= For the 1st quarter: Tax base: Gross receipts P300,000.00 Tax due at 10% P30,000.00 Less: Tax credits allowable: Tax credits, 1st quarter P20,000.00 Excess tax credits, previous quarter/s 20,000.00 40,000.00 Tax payable/Excess credits (P10,000.00) For the 2nd quarter: Tax base: Gross receipts, 2nd quarter P400,000.00 Gross receipts, 1st quarter 300,000.00 TOTAL gross receipts P700,000.00 Tax due at 10% P70,000.00 Less: Tax paid for 1st quarter P Tax credits applied: 1st quarter 30,000.00 Excess tax credits for previous quarter 10,000.00 Tax credits for 2nd quarter 20,000.00 60,000.00 Tax still due, 2nd quarter P10,000.00 ========= For the 3rd quarter: Tax base: Gross receipts, 3rd quarter P200,000.00 Previous quarters: 1st quarter 300,000.00 2nd quarter 400,000.00 TOTAL gross receipts P900,000.00 Tax due at 10% P90,000.00 Less: Tax paid for: 1st quarter P 2nd quarter 10,000.00 Tax credit applied: 1st quarter 30,000.00 2nd quarter 30,000.00 3rd quarter 20,000.00 90,000.00 Tax still due, 3rd quarter P000,000.00 Final annual percentage tax returns: Tax base: Gross receipts, 4th quarter P300,000.00 Previous quarters: 1st quarter 300,000.00 2nd quarter 400,000.00 3rd quarter 200,000.00 TOTAL gross receipts P1,200,000.00 Tax due at 10% P120,000.00 Less: Tax paid for: Less: Tax paid for: 1st quarter P 2nd quarter 10,000.00 3rd quarter ________ P10,000.00 Tax credit applied: 1st quarter P30,000.00 2nd quarter 30,000.00 3rd quarter 20,000.00 4th quarter 10,000.00 90,000.00 100,000.00 Tax still due for final return P20,000.00 SECTION 4 . Where to File . The percentage tax return shall be filed with the Revenue District Officer, Collection Agent or authorized Municipal Treasurer at the taxpayer's legal residence or principal place of business in the Philippines, or in any other place where the Commissioner may authorize. SECTION 5 . When to File . The quarterly percentage tax returns for the first three quarters shall be filed within twenty (20) days following the close of each quarter and the final annual return, on or before the 20th day of the second month following the close of the taxable year. When any person retires from a business subject to the percentage tax, he shall immediately notify the nearest internal revenue officer, file his return or declaration and pay the tax due thereon within twenty (20) days after closing his business. SECTION 6 . When and Where to Pay the Tax . The quarterly and final annual percentage taxes shall be paid upon the filing of the corresponding return to the authorized officer mentioned in Section 4 hereof. acd SECTION 7 . Penalties . (a) Surcharges. (1) A surcharge of twenty-five (25%) per centum shall be added to the tax if: (i) No return is filed; or (ii) The return is not filed with any of the persons mentioned in Section 4 hereof; or (iii) The tax is not paid within the time prescribed by law. (2) A surcharge of fifty (50%) per centum shall be added to the tax or to the deficiency tax: (i) When there is willful neglect to file the return within the prescribed period; or (ii) When a false or fraudulent return is willfully made. (b) Interest . The tax and surcharge/s or the entire unpaid amount shall be subject to interest at the rate of twenty (20%) per centum from the date the tax is due until paid, which amount shall be collected at the same time and in the same manner as the tax. SECTION 8 . Declaration under Penalties of Perjury . The return required under these regulations pursuant to Section 193 of the Tax Code, shall contain a written declaration that it is made under the penalties of perjury. Any person who willfully files a return containing information which is not true and correct as to every material fact shall be subject to the penalties prescribed for perjury under the Revised Penal Code. SECTION 9 . Transitory Provisions Percentage Tax . (a) Calendar quarter taxpayers . Beginning 1981, all persons subject to percentage tax shall pay their percentage taxes on a cumulative basis in accordance with the following schedule: First quarter : Quarterly return from January 1, 1981 to March 31, 1981. Second quarter : Cumulative quarterly return for the period from January 1, 1981 to June 30, 1981. Third quarter : Cumulative quarterly return for the period from January 1, 1981 to September 30, 1981. Final annual percentage tax return : For the period from January 1, 1981 to December 31, 1981. (b) Fiscal quarter taxpayers . Beginning 1981, corporations using the fiscal year as their accounting period for income tax purposes shall pay their percentage taxes on the basis of fiscal quarters in accordance with the following rules: (1) Percentage tax return shall continue to be filed on the basis of calendar quarters until the end of the taxpayers' fiscal year which closes during 1981. cdt (2) A fractional quarterly percentage tax return shall be filed if the closing of the fiscal year in 1981 results in a shortening of a quarter to less than three months. For example: a taxpayer closes his fiscal year on May 31, 1981. The transition from calendar quarter to fiscal quarter for percentage tax purposes shall be effected by filing percentage tax returns as follows: (i) Calendar quarterly return from January 1, 1981 to March 31, 1981. (ii) Fractional quarterly return from April 1, 1981 to May 31, 1981 (two months only). (iii) Beginning with the fiscal year June 1, 1981 to May 31, 1982 the taxpayer shall file the following quarterly percentage tax returns on a cumulative basis: First quarter : Quarterly return for the period from June 1, 1981 to August 31, 1981. Second quarter : Cumulative quarterly return for the period from June 1, 1981 to November 30, 1981. cdtai Third quarter : Cumulative quarterly return for the period from June 1, 1981 to February 28, 1982. Final annual percentage tax return : Covering the period from June 1, 1981 to May 31, 1982. B. F IXED TA X SECTION 10 . Time for Payment of Fixed Taxes . All persons must pay a fixed tax before engaging in business. The fixed tax shall be payable annually, on or before the last day of the first month of the taxable year adopted by the taxpayer for income tax purposes. SECTION 11 . Penalties . A surcharge of twenty-five (25%) per centum shall be added to the amount of the tax if the fixed tax is not paid within the time specified. SECTION 12 . Transitory Provisions Fixed Tax . Beginning 1981, taxpayers using the fiscal year for income tax purposes shall pay fixed taxes on the basis of the fiscal year in accordance with the following rules: acd (a) On or before January 31, 1981 the amount payable by a taxpayer using the fiscal year shall be computed by taking a proportion of the amount of fixed tax imposed in Section 192 which the number of months from January 1 to the end of the fiscal year ending in 1981 bears to 12 months. (b) On or before the end of the first month of the fiscal year which begins in 1981, the same taxpayer shall pay the full amount of fixed tax prescribed by Section 192 of the National Internal Revenue Code. Example: A taxpayer engaged in business as a manufacturer of soft drinks is subject to the annual fixed tax of P1,000.00 and files its annual income tax return on the basis of a fiscal year which ends on March 31. For 1981, it shall pay the following amounts of fixed tax to effect the transition from the calendar year to fiscal year for fixed tax, as well as for income tax purposes: (1) On or before January 31, 1981, it shall pay the amount of P250.00 computed as follows: (i) Number of months from January 1 to March 31, 1981 3 (ii) Number of months for the whole taxable year 12 (iii) 3/12 x P1,000 P250.00 (2) On or before April 30, 1981 ,the taxpayer will pay the full amount of P1,000 annual fixed tax for the fiscal year April 1, 1981 to March 31, 1982. acd In all cases where the amount of fixed tax is determined by reference to the preceding years, gross sales, income, etc.,the amount of fixed tax payable on or before January 31, shall be based on the preceding calendar year's sales, receipts, income, etc. and the amount of the fixed tax for the full fiscal year will be based on the preceding fiscal year's gross sales, receipts, income, etc. Example: A taxpayer engaged in merchandising business uses the fiscal year ending September 30 gross sales for the calendar year 1980 amounted to P500,000 and for the fiscal year ended September 30, 1980, P1,000,000. On or before January 31, 1981, the taxpayer shall pay the amount of P1,200 determined as follows: (a) Graduated fixed tax based on gross sales of P500,000 P1,600 (b) Number of months from January 1 to September 30, 1981 9 (c) Full taxable year 12 (d) Amount payable (9/12 x P1,600) P1,200 SECTION 13 . All existing laws, rules and regulations, or part thereof inconsistent with the provisions of these regulations are hereby revoked or modified accordingly. SECTION 14 . Effectivity . These regulations shall take effect upon approval. (SGD.) ALFREDO PIO DE RODA, JR. Acting Minister of Finance Recommended by: (SGD.) RUBEN B. ANCHETA Acting Commissioner