Guidelines for Suspension or Withdrawal of Tax Incentives and Cancellation of Certificate of Registration (COR) of Registered Business Enterprises (RBEs)

May 2, 2023 FIRB ADMINISTRATIVE ORDER NO. 004-2023 FOR : All Heads of Investment Promotion Agencies (IPAs), All Registered Business Enterprises (RBEs), the Bureau of Customs (BOC), and the Bureau of Internal Revenue (BIR) SUBJECT : Guidelines for the Suspension or Withdrawal of Tax Incentives and Cancellation of Certificate of Registration (COR) of Registered Business Enterprises (RBEs) Pursuant to the National Internal Revenue Code (NIRC) of 1997, as Amended by Republic Act (RA) No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act WHEREAS , Section 297 (A) of the NIRC of 1997, as amended by the CREATE Act, expanded the functions of the FIRB to include policy-making and oversight functions on the administration and grant of tax incentives by the IPAs; WHEREAS , the FIRB, under Section 297 (E) of the NIRC of 1997, as amended, may cancel, suspend, or withdraw the enjoyment of fiscal incentives of concerned RBEs on its own initiative or upon the recommendation of the IPA for material violations of any of the conditions imposed in the grant of fiscal incentives, including, but not limited to, non-compliance with the agreed performance commitments and endorse RBEs whose incentives are cancelled, suspended, or withdrawn to the concerned revenue agencies for the assessment and collection of taxes and duties due commencing from the first year of availment; CAIHTE WHEREAS , under Section 308 of the NIRC of 1997, as amended, after due process, the FIRB or the concerned IPA, as the case may be, may cancel the registration or suspend the enjoyment of incentives of any registered enterprise and/or require a 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 the law; WHEREAS , Section 308 of the NIRC of 1997, as amended, likewise provides for the imposition of penalties upon RBEs or other registered enterprises which fail to comply with the filing and reportorial requirements such as, but not limited to, the Annual Tax Incentives Report (ATIR) and Annual Benefits Report (ABR), with the appropriate IPAs, which fail to show proof of filing of tax returns using the electronic system for filing and payment of taxes of the BIR under Section 305 of the NIRC of 1997, as amended; WHEREAS , Rule 8, Section 5 of the CREATE Act Implementing Rules and Regulations (IRR), as amended, in relation to Section 304 of the NIRC of 1997, as amended, provides that the availment of incentives shall be subject to the requirements and conditions set forth in the Strategic Investment Priority Plan (SIPP) and performance review by the concerned IPA; WHEREAS , to impose the suspension or withdrawal of tax incentives or cancellation of the Certificate of Registration (COR) of the RBEs found to have committed certain violations, there is a need to provide guidelines for the issuance of suspension, withdrawal and cancellation orders to supplement the existing guidelines of IPAs. aScITE NOW, THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED , That the Board, by virtue of the powers vested in it under Section 297 (L) of the NIRC of 1997, as amended, do hereby promulgate and adopt these Guidelines. RESOLVED, FURTHER , That all IPAs, RBEs, and officials and employees of the BIR and BOC are enjoined to follow the procedures and guidelines as provided hereunder: SECTION 1. Scope . These Guidelines shall cover the suspension or withdrawal of tax incentives and cancellations of COR made by the IPA or the FIRB, as the case may be, of registered projects or activities of RBEs during the effectivity of the CREATE Act. SECTION 2. Jurisdiction . The IPA with which the project or activity is registered ("concerned IPA") shall have the authority to suspend or withdraw the tax incentives for projects or activities with investment capital of one billion pesos (Php1,000,000,000.00) and below. Nonetheless, the FIRB may, when it determines from the monitoring report under Rule 8, Section 7 of the CREATE IRR that an RBE has committed a violation, direct the concerned IPA to initiate the proceedings to suspend or withdraw tax incentives pursuant to these Guidelines. Nothing herein shall affect the FIRB's powers under Section 297 (A) (5) of the NIRC of 1997, as amended. The FIRB shall have the sole authority to suspend or withdraw tax incentives for projects or activities with investment capital exceeding one billion pesos (Php1,000,000,000.00). The concerned IPA may recommend to the FIRB the suspension or withdrawal of tax incentives of such projects or activities. The concerned IPA and the FIRB shall have concurrent authority to cancel the COR of a project or activity regardless of the amount of investment capital based on Section 4 of these Guidelines. SECTION 3. Suspension or Withdrawal of Tax Incentives . In case the RBE commits a material violation, the concerned IPA or the FIRB, as the case may be, after due process, may suspend or withdraw the tax incentives of a registered project or activity of an RBE. A violation, whether individually or in aggregate with all other violations, shall be considered "material" when the act/s or omission/s of the RBE would render the project or activity unqualified vis--vis the requirements under the SIPP, the terms and conditions of its registration, or the requirements for the availment or grant of incentives, and requirements under relevant laws. Such violations may include, but not limited to, the following: DETACa a.) Non-compliance with the agreed performance target commitments or violation of any of the conditions imposed in the grant of fiscal or tax incentives; b.) Misrepresentation of information or false statement made by the RBE in any documents submitted in connection with its registration with the concerned IPA or for the purpose of availing incentives under the NIRC of 1997, as amended by the CREATE Act; c.) Non-submission by the RBE of reportorial requirements such as, but not limited to, annual financial statements or the ATIR/ABR under Section 305 of the NIRC of 1997, as amended, or Rule 11, Section 2 of the CREATE Act IRR; d.) Violation of any provisions under Titles VI (Excise Taxes on Certain Goods) and X (Statutory Offenses and Penalties) of the NIRC of 1997, as amended, or any statute, or a finding of a violation of the relevant issuances of the BIR or BOC, as recommended by them to the FIRB; e.) Violation of the relevant rules and/or issuances of the concerned IPA, as recommended by the concerned IPA to the FIRB; and, f.) Any such violation deemed material by the concerned IPA or the FIRB. The FIRB or concerned IPA, as the case may be, shall exercise its sound discretion in discharging its mandate and decide on the penalty to be imposed with due regard to the circumstances surrounding each case and the frequency and gravity of the violation, as well as the impact to the economy. SECTION 4. Cancellation of the COR . The COR of an RBE may, after due process, be cancelled involuntarily by the concerned IPA or by the FIRB for any of the following violations: a.) Material misrepresentation or false statements made by the RBE in any documents submitted in connection with its registration with the concerned IPA. Misrepresentation shall be material if such misrepresentation refers to a false statement to which the concerned IPA would attach importance in deciding whether or not the misrepresenting RBE would be eligible for registration; b.) Unjustified noncompliance, for the third time, with the filing and reportorial requirements under Section 3 (c) of these Guidelines; and, c.) Any other circumstance that warrants the cancellation of a COR as may be deemed proper and necessary by the concerned IPA or the FIRB; Provided, that the concerned IPA may also cancel the COR based on Section 3 of these Guidelines. HEITAD SECTION 5. Initiation of Proceedings . An action for the suspension or withdrawal of tax incentives or the cancellation of the COR of an RBE may be initiated by any of the following, upon determination based on initial findings that an RBE may have committed a material violation: a) The FIRB motu proprio ; b) The FIRB acting upon the recommendation of the concerned IPA, the BIR, or the BOC; c) The concerned IPA motu proprio ; d) The concerned IPA acting upon the recommendation from the BIR or the BOC; e) The concerned IPA acting upon the verified complaint of a private party. Such complaint shall contain the complainant's name, address, and legal capacity to file the complaint; the name and address of the registered enterprise subject of the complaint; and the factual and legal grounds for the suspension or withdrawal of incentives or cancellation of COR. SECTION 6. Show Cause Order . Upon the initiation of proceedings under Section 5 of these Guidelines, a Show Cause Order shall be issued requiring the RBE to file its Justification within fifteen (15) calendar days from receipt of the order. SECTION 7. Contents of the Show Cause Order . The Show Cause Order for the suspension or withdrawal of tax incentives or cancellation of the COR shall be addressed to the RBE, copy furnished the concerned IPA or the FIRB, as the case may be, and shall contain the following: a.) The project registration details of the RBE; b.) The grounds for the suspension or withdrawal of tax incentives or cancellation of the COR, a statement of the acts or omissions constituting the same, the law and evidence in support of its findings, and the imposable penalty of either suspension or withdrawal of tax incentives or cancellation of COR; c.) Recommended fines, if applicable; and, d.) Order for the RBE to file its Justification within fifteen (15) calendar days from receipt of said Show Cause Order, with a statement that failure or inability to respond within such period shall constitute a waiver to present any such evidence in relation to the alleged violation. A sample template of the Show Cause Order is attached as Annex A of these Guidelines. aDSIHc SECTION 8. Show Cause Order as Notice to the RBE . The Show Cause Order shall be sent to all available email address/es, i.e. , the official email address/es stated in the RBE's application for registration, application for tax incentives, and the current email address on record, whichever is more recent. The Rules of Court, as amended, and the Rules on Electronic Evidence shall apply suppletorily, especially insofar as matters of service of the notice, completeness of service, and proof of service are concerned. The RBE has the burden to prove any allegation of non-receipt of the notice or Show Cause Order sent by the concerned IPA or FIRB, as the case may be. SECTION 9. Justification . The RBE may file its Justification to the Show Cause Order within fifteen (15) calendar days counted from the date of receipt of the said Show Cause Order. The RBE may also file its Justification with the concerned IPA in case the RBE anticipates that any such performance commitment stated in its COR and terms and conditions may be violated for circumstances beyond its control. The Justification shall be written in single space with one-and-a-half (1.5) space between paragraphs, using Calibri font style, of 14-size font, and on a 13-inch by 8.5-inch white bond paper. Such Justification shall be verified by an affidavit of an officer or authorized representative of the RBE duly authorized to sign said verification. Such authority shall be supported by an original copy of the RBE's Board Resolution or Secretary's Certificate to that effect, a copy of which must be attached to the Justification. The verified Justification shall contain the following: a.) The caption setting forth the name of the concerned IPA/FIRB and a blank space where the IPA/FIRB Secretariat will indicate the docket number; b.) The name of the RBE as the party, the RBE's registered project or activity, IPA-issued COR No., office address, and two (2) official email addresses where notices may be sent electronically; c.) The title "JUSTIFICATION," the FIRB or the concerned IPA that sent the Show Cause Order, and the date of the Show Cause Order; d.) Specific material dates showing the timeliness of the filing of the Justification; ATICcS e.) Concise statement of the facts, issues, grounds, and arguments relied upon for the Justification, clearly addressing each point or finding in the IPA or FIRB's Show Cause Order; f.) Evidence in support of the arguments with an indication of exhibit markings; g.) Relief sought; h.) Date; and, i.) Signature of the party or authorized representative. The original or certified true copies of documentary evidence, with proper markings indicated, shall be filed with the Justification. If the original or certified true copy of the documentary evidence cannot be obtained in time for submission within the period allowed for the filing of the Justification, the RBE shall file copies of the documentary evidence, if available, or a description of the contents thereof containing the necessary data in support of the purpose for which the documentary evidence is presented, and thereafter file the original or certified true copy within an additional fifteen (15) calendar days counted from the last calendar date for the period of filing of the Justification. Documentary evidence, the copies, description, and original or certified true copy, not submitted within the required period may be expunged from the record and may not be considered in the decision on the Justification. The Justification shall be filed with the FIRB Secretariat or the concerned IPA which issued the notice or Show Cause Order, as the case may be, within the time allotted in these Guidelines. Should the deadline fall on a Saturday, a Sunday, a legal holiday in the place where the office of the concerned IPA or FIRB Secretariat is located, or on a day when work suspension in the office of the concerned IPA or FIRB Secretariat is declared in whole or in part, it shall be moved to the next working day of the concerned IPA or FIRB Secretariat, as the case may be. Only one (1) Justification to the Show Cause Order shall be allowed. No Motion for an extension of time to file the Justification, or to file an amended Justification or supplement to the Justification, shall be entertained. Sample templates of the Justification and Verification are attached as Annexes B and C of these Guidelines. The decision of the IPA or FIRB, as the case may be, on the suspension or withdrawal of incentives or cancellation of the COR shall be without prejudice to the payment of fines under Section 308 of the NIRC of 1997, as amended. ETHIDa SECTION 10. Filing of the Justification . The Justification shall be filed with the concerned IPA or the FIRB, as the case may be, through (1) personal delivery, via registered mail, or through a licensed courier service, and (2) electronic mail (email). Both hard copies and scanned copies (in case of email) of the verified Justification, as well as the original or duly certified supporting documents, shall be sent to the official address and email address of the concerned IPA, or in case of the FIRB, to the FIRB Secretariat at the office address as found in the official website www.firb.gov.ph, and the FIRB Secretariat email address [emailprotected] copy furnished [emailprotected] . The subject of the email should at least include "Justification in reply to Show Cause Order" and the name of the RBE. The RBE shall submit one (1) original copy thereof, along with one (1) set of copies of the original or duly certified supporting documents, to the concerned IPA or the FIRB Secretariat at the IPA or FIRB's office address, as the case may be. Non-compliance with the preceding paragraphs may be considered a ground to consider the justification as not filed. The date of the receipt of the hard copy of the Justification, if filed personally, or the date of mailing through registered mail or licensed courier service, if sent by mail, shall be considered as the date of filing to determine the timeliness of filing. Failure on the part of the RBE to timely file its Justification along with its supporting documents shall render the said RBE in default and shall be deemed a waiver to present any such evidence the RBE may have to justify the alleged violation. Consequently, the case shall be considered submitted for the decision of the IPA or the FIRB, as the case may be. The RBE has the burden to adduce sufficient evidence in support of its Justification, and to prove the timely filing thereof under these Guidelines. SECTION 11. Proceedings before the Concerned IPA . Proceedings before the concerned IPA shall be conducted in accordance with Sections 6 to 10 of these Guidelines for cases falling under the concerned IPA's jurisdiction, as provided under Section 2 of these Guidelines. The concerned IPA may require the submission of additional evidence and/or set the case for hearing after due notice, as it may deem necessary. For cases under Section 2 of these Guidelines where the suspension or withdrawal of the tax incentives of registered projects with investment capital exceeding One Billion pesos (P1,000,000,000.00) may be recommended by the concerned IPA to the FIRB, the process under Sections 6 to 10 of these Guidelines may be adopted by the concerned IPA. SECTION 12. IPA's Decision on the Violation Committed; Remedies . The concerned IPA shall decide on the case within ninety (90) calendar days after the case is deemed submitted for decision. TIADCc Upon receipt of the RBE's Justification or after the lapse of the period to file a Justification without the RBE filing said Justification, the case shall be deemed submitted for decision, unless the concerned IPA calls for a clarificatory hearing and/or requests for additional documents; Provided, that the case shall be deemed submitted for decision not later than thirty (30) calendar days from the receipt of the Justification. Any decision by the concerned IPA shall be communicated in writing through email to the RBE, stating, among others, the complete factual and legal bases used to support the decision. Any Motion for Reconsideration or appeal from the IPA's decision sought by the RBE shall be governed by the provisions of the IPA's charter or internal rules of procedure. However, subject to Section 2 of these Guidelines, the recommendation by the concerned IPA to either suspend or withdraw the tax incentives of registered projects with investment capital exceeding One Billion pesos (P1,000,000,000.00) shall be endorsed to the FIRB through the FIRB Secretariat for proper action. No Motion for reconsideration or appeal from the said recommendation shall be allowed. The recommendation or decision stated in this Section shall contain the following: a.) Name, business address, and two (2) official email addresses of the RBE being complained of; b.) Grounds for the suspension or withdrawal of tax incentives, or the cancellation of COR and the acts or omissions being complained of; c.) A statement of facts and at the very least, a reference to the evidence supporting the recommendation or decision; and, d.) The recommended penalty or the penalty to be imposed, as may be applicable. The FIRB shall be furnished a copy of any decision suspending or withdrawing the incentives of registered projects not exceeding One Billion Pesos (P1,000,000,000.00), or any decision cancelling the COR of an RBE's project or activity within thirty (30) calendar days from the date of such order. SECTION 13. Proceedings before the FIRB . Proceedings before the FIRB shall be conducted in accordance with Sections 6 to 10 of these Guidelines. The FIRB may require the submission of additional evidence and/or set the case for hearing after due notice, as it may deem necessary. cSEDTC To aid in the proceedings, the FIRB may likewise direct the concerned IPA to furnish documents in relation to the RBE's registration and/or availment of incentives. SECTION 14. Decision by the FIRB . The FIRB shall decide on matters presented before it for appropriate action within ninety (90) calendar days counted from the date the case is deemed submitted for decision. Upon receipt of the RBE's Justification or after the lapse of the period to file a Justification without the RBE filing said Justification, the case shall be deemed submitted for decision, unless the FIRB calls for a clarificatory hearing and/or requests for additional documents; Provided, that the case shall be deemed submitted for decision not later than thirty (30) calendar days from the receipt of the Justification. The decision shall be in the form of an FIRB Resolution and shall contain the following: a.) Name and business address of the RBE being complained of; b.) Grounds for the suspension or withdrawal of tax incentives, or the cancellation of COR and the acts or omissions being complained of; c.) A statement of facts and the evidence supporting the Resolution; and d.) The penalty to be imposed upon the RBE if warranted. The FIRB Secretariat shall, within thirty (30) calendar days from the issuance of the FIRB's decision on the Justification, send a scanned copy thereof in pdf format to the RBE's official email address/es stated in its Justification, copy furnished the concerned IPA. Service through such email address/es shall be presumed valid unless the RBE makes prior notification to the FIRB Secretariat of any change in email address. Should the electronic transmission be unsuccessful, such as when the FIRB Secretariat receives a notification of delivery failure for any reason, the proof of unsuccessful transmission shall be forwarded to the IPA concerned. Such IPA shall be responsible for sending the notice and copy of the FIRB's decision to the concerned RBE. Any reconsideration or appeal from the FIRB decision sought by the concerned RBE shall be governed by Section 15 herein. SECTION 15. Motion for Reconsideration or Appeal from Decisions of the FIRB . An RBE adversely affected by the decision of the FIRB may file a Motion for Reconsideration or appeal following and subject to the rules and terms under FIRB Memorandum Circular No. 001-22 or the Guidelines of Motions for Reconsideration under Title XIII of the NIRC of 1997, as amended by the CREATE Act . SECTION 16. Effect of Suspension or Withdrawal of Tax Incentives . In case of a suspension or withdrawal order which has become final and executory, the IPA or FIRB, as the case may be, shall endorse to the BIR or BOC such order for the assessment of the appropriate amount of taxes and duties that need to be paid by the RBE whose incentives have been suspended or withdrawn, reckoned from the first day of the taxable period in which the RBE committed the violation. AIDSTE The suspension of tax incentives shall cover only the taxable period/s within which the violation was committed, and does not automatically disqualify an RBE's registered project or activity from the issuance, in its favor, of the Certificate of Entitlement to Incentives (CETI), Value-Added Tax (VAT) certification, or Certificate of Authority to Import (CAI) pertaining to a taxable period prior to or subsequent to the period covered by such suspension. An RBE whose tax incentives have been withdrawn shall have its fiscal incentives revoked and, as such, will not be entitled to fiscal incentives corresponding to the taxable period the RBE committed the violation and to subsequent taxable periods therefrom. However, the availment of non-fiscal incentives, if any, corresponding to the project/activity, shall not be affected by the suspension or withdrawal of tax incentives. SECTION 17. Effect of Cancellation of COR . The cancellation order shall contain an express revocation of the RBE's outstanding CETI, VAT certification, or CAI issued prior to said cancellation. In case of cancellation of COR, the project or activity of the RBE shall cease to be registered and shall be required to pay all appropriate and necessary taxes, fees, and penalties, if applicable, from the time the cancellation order has become final and executory. The deregistered project or activity shall not be allowed to register for a new set of incentives unless the same is for a new project or activity or a qualified expansion. SECTION 18. Prima Facie Validity of the CETI, VAT Certification, or CAI Issued in Favor of an RBE . In the absence of a final order of withdrawal or suspension of tax incentives or the cancellation of the COR, the BOC or BIR shall recognize the validity of the CETI, VAT certification/endorsement, or CAI issued in favor of an RBE as evidence that the RBE has complied with all the imposed performance target metrics and terms and conditions. An order issued by the IPA or FIRB, as the case may be, suspending or withdrawing the tax incentives, or cancelling the COR of an RBE shall be final and executory upon the lapse of the period to file a Motion for Reconsideration or appeal and no Motion for Reconsideration is filed or no appeal is perfected within such period. SDAaTC SECTION 19. Applicability of These Guidelines . The provisions of these Guidelines shall apply prospectively to new actions for the suspension or withdrawal of tax incentives or cancellation of COR instituted upon the effectivity of these Guidelines; Provided, that suspension or withdrawal of tax incentives and cancellation of COR of registered projects or activities of RBEs granted tax incentives prior to the effectivity of the CREATE Act, regardless of amount, shall be governed by the IPA's existing rules, if any; Provided further, that these Guidelines shall apply to actions for suspension or withdrawal of incentives or cancellation of COR initiated by the FIRB pursuant to Section 297 (A) (5) of the NIRC of 1997, as amended. Any pending actions or orders of suspension or withdrawal of tax incentives or cancellation of COR prior to the effectivity of these Guidelines shall be governed by the pertinent rules of the concerned IPA; Provided, IPAs that have no relevant rules in such a case shall adopt these Guidelines. SECTION 20. Separability Clause . If any provision or part of these Guidelines is held invalid or unconstitutional, the provisions or parts not otherwise affected shall remain valid and subsisting. SECTION 21. Effectivity Clause . These Guidelines shall take effect immediately upon publication in a newspaper of general circulation. For the guidance of the IPAs and RBEs. (SGD.) JUVY C. DANOFRATA Assistant Secretary of Finance Head of the Fiscal Incentives Review Board (FIRB) Secretariat ANNEX A Sample Show Cause Order ANNEX B Sample Template of RBE's Justification to IPA or FIRB ANNEX C Sample Verification ANNEX D Flowchart of the Process in Suspending, Withdrawing, and Cancelling Tax Incentives