Frequently Asked Questions on Fiscal Incentives Registration and Monitoring System (FIRMS), Annual Tax Incentives Report (ATIR) and Annual Benefits Reports (ABR)

June 1, 2022 FIRB ADVISORY NO. 004-2022 FOR : All Investment Promotion Agencies (IPAs),Registered Business Enterprises (RBEs),and Other Registered Entities (OREs) SUBJECT : Frequently Asked Questions on Fiscal Incentives Registration and Monitoring System (FIRMS),Annual Tax Incentives Report (ATIR) and Annual Benefits Reports (ABR) In line with the policymaking and oversight functions of the FIRB under the CREATE Act, the FIRB Secretariat would like to inform all Investment Promotion Agencies (IPAs), Registered Business Enterprises (RBEs), and Other Registered Entities (OREs) of the answers to questions raised during the various Virtual Town Hall Meetings on the following: 1. Fiscal Incentives Registration and Monitoring System (FIRMS) (Annex A) 2. Annual Tax Incentives Report (ATIR) and Annual Benefits Reports (ABR) (Annex B) For further questions, you may reach out to your designated IPAs. Alternatively, the FIRB Secretariat's Monitoring and Evaluation Group (FIRB MEG) can assist you with any inquiries or clarifications. They may be contacted at (02) 8527-2064 or through email at [emailprotected] . Your continued support and collaboration are highly appreciated. Very truly yours, (SGD.) JOSSEF ELEAZAR B. LACSON Deputy Executive Director Monitoring and Evaluation Group, FIRB Secretariat ANNEX A Clarifications on the Questions Received for FIRMS Q.1 If an RBE has a branch (head office) under PEZA and another branch under BOI, should these branches be separately registered under one FIRMS account? FIRMS currently maintains a one-to-one relationship between the user account and the TIN. Hence, one legal entity under the same TIN should only have one FIRMS user account and accomplish only one Form A. Nonetheless, please note that one FIRMS user account can handle multiple registered projects/activities. Hence, one legal entity with multiple registered projects (either with the same or different IPA) should accomplish a separate Form B for each of the registered projects/activities. To illustrate, assume that XYZ Corporation's main office in Manila is registered with PEZA while its branch office in Davao City is registered with the BOI. For FIRMS purposes, XYZ Corporation will only have one FIRMS user account and will only accomplish one Form A. However, the company will need to fill out a separate Form B for its registered project with PEZA (the main office in Manila) and its registered project with BOI (the branch in Davao). Q.2 Is FIRMS registration required? FIRMS registration is required for registered business enterprises that will apply for tax incentives. Applicants will need to complete all applicable forms. FIRMS registration is also required for those currently enjoying tax incentives and will need to accomplish Form A and Form B. RBEs without incentives are encouraged to create an account under FIRMS as they would still form part of the annual master lists, as locators. Also, as electronic submissions will eventually be integrated into FIRMS, data requests are envisioned to be coursed through the FIRMS. Q.3 Who will issue the CETI? What are the requirements? Can the CETI be applied online? The Certificate of Entitlement to Tax Incentives (CETI) will be issued by your respective IPAs. For now, some IPAs are issuing the manual CETI. However, the FIRB Secretariat is in the process of enhancing FIRMS to allow for the online application and issuance of the CETI. To prepare for this, RBEs should already create their own FIRMS account since enterprise-level information is needed for Form A then project-level details are needed for Form B. The requirements are enumerated per FIRMS and can also be found in the instructional manual per FIRB website. Q.4 If our company is a partnership, are we still required to submit GIS? An enterprise is required to submit a GIS, or its equivalent document if the GIS is not applicable. Q.5 What can be a substitute GIS if the RBE is a newly set-up corporation with no available GIS? If the GIS is not yet available, you may upload your Articles of Incorporation as proof of the amount of capitalization, names of stockholders, and officers of the corporation. Q.6 Are projects with expired incentives required to be registered in FIRMS? RBEs are only required to register their projects/activities that are currently entitled to incentives. RBEs which do not have any project/activity availing of or entitled to incentives are not required to submit the ATIR and ABR. However, we would like to emphasize that fiscal incentives are not only limited to income tax incentives but also extend to business taxes such as value-added tax and percentage tax, and other national and local taxes. Q.7 What if our CRTE is renewed every three (3) years, do we have to update our FIRMS profile and report the validity of our tax incentives for every renewal? There is no need to update your FIRMS profile as long as the types of incentives the project is availing of remains the same. As for the "start date" and "end date," kindly indicate the date on which the RBE first availed of the incentive and the last date that the RBE can avail of the same following the transitory provisions of CREATE. Q.8 Until when can RBEs use the CRTE as proof of tax exemption? Under RMC 37-2022, the BIR still allows the certificate of entitlement to income tax holiday, certificate of available incentives, and other similar documents as proof of entitlement to tax incentives for the taxable year 2021. However, starting the taxable year 2022 onwards, the CETI should be used. ANNEX B Clarifications on the Questions Received for Annual Tax Incentives Report (ATIR) and Annual Benefits Report (ABR) Q.1 If an RBE does not maintain separate books for expansion projects, is the RBE required to report the expansion separately in the ATIR and ABR? Assuming the IPA does not require its RBEs to maintain separate books of accounts for registered projects or activities and a separate registration covers the expansion project with PEZA, the expansion project must be separately presented in the ATIR and ABR templates. An allocation method that best suits the distribution of financial statement accounts shall be used. We leave it up to the RBE to determine the most accurate allocation method. Q.2 What rate should be used to convert to Philippine Peso (PHP) if our books are in US Dollar (USD)? For ATIR and ABR preparation, kindly use the same exchange rate used during income tax return preparation. Q.3 Do we still need to report the old TIMTA A.1, A.2, and Other Information sheets? No, the ATIR and ABR supersede the old TIMTA forms. The FIRB has already provided the IPAs with the ATIR and ABR templates for dissemination to the RBEs. Alternatively, you may also download the new templates on the FIRB website. Q.4 Under the applicable tax regime columns in Annex A.1, what tax incentives do we indicate in case our application for ITH is still pending? In case the RBE is not yet entitled to ITH, kindly indicate N/A in the ITH column. Please ensure that the other tax incentives columns ( e.g. ,5% tax on GIE, VAT zero-rating and/or VAT exemption, duty exemption, among others) are still properly filled out, as applicable. Q.5 For Annex A.2a, should the filed amount of total assets per audited financial statements be tied up to the TIMTA report? Where can we encode the other accounts not indicated on Annex A.2a? Please indicate only the asset amounts nominated. For projects which have profit streams declared under regular, exempt, or under the 5% Special Corporate Income Tax (SCIT) or Gross Income Earned (GIE),one total amount can be provided. The total amount of assets for all projects must equal the total asset at the legal entity level, per audited financial statements. Q.6 In Annex A.2a, If the ITH incentive ended in August 2021, will the project still be classified as ITH? Or will such be classified as SCIT as of the end of the year? The columns per Annex A.2a are broken down to regular, exempt, and under 5% SCIT/GIE. For projects that shifted to another tax regime within the year, please indicate all applicable tax regimes for the year using columns R to V. Q.7 What is the covered period for Annex A.3 (VAT, Excise Tax, and Duty Based Incentives per Project)? If the RBE follows the fiscal year, kindly follow the fiscal year reporting. Only Annex B.3 shall be reported using the calendar year, as aligned with the annual alphalist of employees. Q.8 Are managerial employees of the service group considered direct employment? Managerial employees may fall under direct employment if the nature of their work is directly attributable to the project. The definition of direct and indirect employment is provided in the guidelines sheet in the new ATIR and ABR templates, which defined direct employment as "Full and decent employment 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." Q.9 Regarding the compensation data, is the amount to be encoded in the compensation column composed of actual salaries and wages paid, plus employee benefits ( e.g. ,health insurance, life insurance, among others) that we categorized as compensation? Yes, the total compensation data shall include overtime pay, performance incentives and bonuses, 13th-month pay, and other employee benefits ( e.g. ,health insurance and life insurance).This shall also include the employer's share covering statutory contributions. Q.10 On Annex B.2, does the actual amount of investment refer to total assets or the Property, Plant, and Equipment (PPE) only? Investment capital under the CREATE Act refers to the value of investment indicated in Philippine currency, that shall be used to carry out a registered project or activity, such as pre-operating expenses, cost of land and land improvements, buildings, leasehold improvements, working capital, and machinery and equipment, inventory and other current and noncurrent assets. Thus, the amount of investment would refer to total assets, at project/activity level. Q.11 Do we need to fill out the minimum corporate income tax (MCIT) column per project even if the RBE is not under MCIT? If the MCIT does not apply to the entity, kindly encode N/A. Please do not leave any column blank. Q.12 Should tax relief on dividends and duties driven by bilateral agreements be included as incentives in the ATIR and ABR? Only tax relief availed due to incentives under the CREATE Act or those under the transitory provision shall be reported in the ATIR and ABR. Should the tax relief come from other sources ( e.g. ,availment of tax treaty relief, tax-free exchanges, among others),such relief should not be reported in the ATIR and ABR as these are relief measures that are also available to non-registered enterprises. Q.13 If an RBE has other taxable income derived outside their registered projects or activities, how can the RBE reflect them in the ATIR and ABR as they do not belong to any of the projects? Other taxable income and other information regarding unregistered activities should still be reflected in the appropriate fields in the ATIR. In this regard, the company may add a separate row for "unregistered projects" to capture all information/transactions derived outside of registered projects/activities and those that are not attributable to any of the registered projects/activities. However, income and expenses derived from registered projects/activities but are not covered by any tax incentive ( i.e. ,subject to the regular tax rates) should be reported in the same row as that of the registered project/activity but should be separately accounted for under the regular tax regime.