Armed Forces of the Philippines Commissary and Exchange Service

August 14, 2003 FIRB RESOLUTION NO. 003-03 SUBJECT : Armed Forces of the Philippines Commissary and Exchange Service WHEREAS, commissary services and post exchange facilities are intended to augment the benefits of military personnel in recognition of their work in national security and defense; WHEREAS, such services and facilities are recognized as integral adjuncts of the military sector on a global basis; WHEREAS, to ensure that said commissary services and post exchange facilities would be able to achieve their objective, the Armed Forces of the Philippines Commissary and Exchange Service (AFPCES) has applied for tax subsidy to cover the taxes due on items purchased and sold by it to its intended beneficiaries in the amount of P195,133,300; WHEREAS, there is also a need to ensure that the benefits of these services and facilities are extended only to their intended beneficiaries; NOW THEREFORE BE IT RESOLVED, AS IT IS HEREBY RESOLVED, to approve the application for subsidy availment of the AFPCES in the amount of P97,566,650 only , representing the taxes on items purchased and subsequently sold by its outlets to their intended beneficiaries only, for the year 2003, in accordance with the following breakdown: Coverage Amount (Pesos) Ratio to total 1. VAT on general merchandise and alcohol/beer 76,348.150 78% 2. Excise tax on petroleum 6,989,000 7% 3. Excise tax on alcohol/beer 4,579,500 5% 4. Excise tax on cigarettes 5,650,000 6% 5. VAT (output) 4,000,000 4% Total 97,566,650 100.00% Provided, however , that this approval is without prejudice to further application for tax subsidy by the AFPCES: Provided further , that the AFPCES shall: (1) submit to the FIRB the progress reports on the results of its programs to turn around its operations; (2) formulate a system by which commissary privileges would be confined solely to intended beneficiaries and monitor the amount of purchases made by said beneficiaries to conform with the prescribed limits; (3) submit itself to an annual audit by the Commission on Audit; (4) cause to be marked on all items entitled to tax subsidy herein granted the words "Tax Subsidized by the FIRB"; (5) submit the prices of commodities sold by its outlets; and (6) submit a breakdown of its sales by outlet: Provided furthermore , that such availment shall be in accordance with the terms and conditions of Section 13 of the 2003 General Appropriations Act, subject to the availability of funds therefor, pursuant to the terms and conditions of the Rules and Regulations to Implement the Subsidy Provision Under Executive Order No. 93. HTaSEA (SGD.) NIEVES L. OSORIO Undersecretary of Finance Presiding Officer FIRB Reference: FIRB Meeting August 14, 2003 DOF JOINT CIRCULAR NO. 001-03 August 15, 2003 FOR : The Chief Justice and the Judiciary; The Senate President; The Speaker of the House; The Chairman of Constitutional Commissions; All Heads of Departments, Bureaus, Offices and Other Commissions; Heads of All Other National Government Agencies, Including their Regional Offices; Heads of State Universities And Colleges, Schools, Hospitals and Sanitaria; Heads of Government Owned and/or Controlled Corporations Including Government Financial Institutions; and All Others Concerned SUBJECT : Rules, Guidelines and Procedures Implementing the Tax Expenditure Subsidy Section Under the General Provisions of the Annual General Appropriations Act I. PURPOSE This Circular is issued to prescribe the rules, guidelines and procedures relative to the implementation of the tax expenditure subsidy Section under the General Provisions of the annual General Appropriations Act (GAA), specifically Section 13 of Republic Act No. 9206 or the 2003 GAA, quoted as follows: "National Internal Revenue Taxes and Import Duties. National internal revenue taxes and import duties, payable by national government agencies to the National Government arising from foreign donations, grants and loans are deemed automatically appropriated. In addition, tax expenditure subsidy to the following entities shall likewise be deemed automatically appropriated: (a) Bureau of the Treasury For Documentary Stamp Taxes on domestic securities issued; (b) Light Rail Transit Authority (LRTA) Line 1 Capacity Expansion Phase 2 and Metro Manila Strategic Mass Rail Transit Development (Line 2); (c) Specialty Hospitals, Department of National Defense (DND) and Philippine National Police (PNP) importations of military hardwares, softwares, munitions, arms and equipment, and the Armed Forces of the Philippines Commissary and Exchange Service (AFPCES); (d) National Food Authority (NFA) for the importation of rice and corn as recommended by the NFA Council and approved by the President of the Philippines, in case of calamities or fortuitous event or shortfall in production; (e) Department of Transportation and Communications (DOTC) for the Metro Rail Transit Line 3 System, incurred starting FY 1997 in accordance with the provisions of the Build-Lease-Transfer Agreement executed thereon; and (f) PHIVIDEC Industrial Authority (PIA) for the Mindanao Container Terminal Project on importations of materials and equipment for the project. Provided, That the tax expenditure subsidy to the LRTA, NFA, and Specialty Hospitals, PIA and the AFPCES shall be subject to approval by the Fiscal Incentives Review Board pursuant to Executive Order No. 93 s. of 1986, as amended: PROVIDED, FURTHER, That the amounts pertaining to such taxes and duties covered by this Section shall be considered as revenue and expenditure of the government. The implementation of this Section shall be in accordance with guidelines jointly issued by the DOF and the DBM" 2. DEFINITION OF TERMS For purposes of this Circular, the following terms used herein shall be construed to mean as follows: 2.1. NATIONAL GOVERNMENT AGENCIES (NGAs) shall refer to the Judiciary, the Senate and the House of Representatives, Constitutional Commissions, departments, bureaus, offices, other commissions and all other agencies of the national government, including state universities and colleges, schools, hospitals, except Specialty Hospitals as defined in Section 2.3, below, sanitaria, and government-owned and/or controlled corporations as defined in Section 2.2. of this Circular. 2.2. GOVERNMENT-OWNED AND/OR CONTROLLED CORPORATIONS (GOCCs) shall refer to any government agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) per cent of its capital stock: Provided, That government-owned or controlled corporations may be further categorized by the Department of Budget and Management, the Civil Service Commission, and the Commission on Audit for purposes of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations. 2.3. SPECIALTY HOSPITALS shall refer to any of the following: the Philippine Heart Center; the National Kidney and Transplant Institute; the Philippine Children's Medical Center; and the Lung Center of the Philippines. 2.4. NATIONAL INTERNAL REVENUE TAXES any form of imposition under the National Internal Revenue Code excluding interests, surcharges and penalties. 2.5. CUSTOMS DUTIES any levy on imported goods under the Tariff and Customs Code excluding interests, surcharges and penalties. 2.6. IMPORTATIONS the bringing into the Philippine territory of goods or commodities in any form acquired from any foreign country by a government entity out of its appropriation or financed by a grant, donation and/or loan. It is understood that the term does not include services performed relative to the grant, donation and/or loan. 2.7. GRANTS/DONATIONS assistance, in cash or in kind, received from foreign governments, international and local agencies or organizations, private entities or individuals, covered by grant agreements, Memorandum of Understanding, Exchange of Notes/Deed of Donation between the donor-entity and the donee-government unit to finance specific projects or procurement of goods without any obligation on the part of the recipient to pay. 2.8. LOAN funds whether in cash or in kind received from foreign governments, international and local agencies, private entities or individuals covered by a loan agreement to finance specific projects or procurement of goods and which must be repaid with interest over a prescribed period of time. 2.9. OTHER FEES AND CHARGES all other forms of fees and charges other than those covered by the National Internal Revenue Code and the Tariff and Customs Code. 2.10. REVENUE COLLECTING AGENCY (RCA) shall refer to either the Bureau of Internal Revenue (BIR) or the Bureau of Customs (BOC). 2.11. CERTIFICATE OF ENTITLEMENT TO SUBSIDY (CES) refers to a document issued by the FIRB certifying to the amount of subsidy that is granted in favor of qualified GOCCs. 2.12. PAYMENT COMPLIANCE CERTIFICATE (PCC)/TAX COMPLIANCE CERTIFICATE (TCC) refers to a document certifying to the amount of taxes and duties paid to the BIR and/or BOC. 2.13. STATEMENT OF ACCOUNT refers to the document issued by the BIR and/or BOC certifying to the amount of customs duties and taxes due them. 3. COVERAGE 3.1. This Circular covers the application for, approval and processing of tax expenditure subsidies on: (a) customs duties and taxes payable by NGAs arising from foreign donations, grants and loans; (b) documentary stamp taxes on domestic securities issued, incurred by the Bureau of the Treasury; and (c) customs duties and taxes payable by DND and PNP on importations of military hardwares, softwares, munitions, arms and equipment, and by DOTC for the Metro Rail Transit Line 3 System, incurred starting FY 1997 in accordance with the provisions of the Build-Lease-Transfer Agreement executed thereon; This Circular also covers, with respect to GOCCs, Specialty Hospitals and AFPCES, the processing of the tax expenditure subsidy after the FIRB shall have issued a CES in favor thereof. 3.2. For importations explicitly enumerated in Sections 3.1, only those which are made in pursuance of functions and programs of concerned government entities, and in the case of regulated importations, only those which are duly authorized by the Bangko Sentral ng Pilipinas, the Department of Trade and Industry and/or other government entities empowered to regulate said importations are covered by this Circular. 4. GENERAL GUIDELINES 4.1 All National Government Agencies shall be liable for all forms of national internal revenue taxes and customs duties arising out of transactions subject to assessment by the BIR and/or BOC, pursuant to the provisions of Joint Circular No. 3-98. 4.2. For National Government Agencies, national internal revenue taxes and customs duties to be settled under this Circular shall include only those imposed on: (a) acquisitions by NGAs arising from foreign grants, donations, and loans; (b) domestic securities issued, by the Bureau of the Treasury; (c) importations of military hardware, software, munitions, arms and equipment by the DND and PNP; and (d) those incurred by the DOTC for the Metro Manila Rail Transit Line 3 System starting FY 1997 in accordance with the provisions of the Build-Lease-Transfer Agreement executed thereon; 4.3. The processing of tax expenditure subsidy of Specialty Hospitals, AFPCES, LRTA, NFA, and PIA, under this Circular shall be made only after a CES shall have been issued and distributed by the FIRB. 4.4. National Government Agencies, including GOCCs, that are entitled to tax expenditure subsidy, shall not be required to pay in cash or in kind their obligations for internal revenue taxes and customs duties covered by this Circular. All other National Government Agencies, including GOCCs, that are not entitled to tax expenditure subsidy, shall pay the total amount due in cash to the RCA chargeable against their own funds. The imported goods subject to tax shall not be released unless the taxes and customs duties due thereon have been paid. 4.5. For transparency purposes, the BIR and BOC shall merely footnote in the Monthly Report of Actual Income, the internal revenue taxes and customs duties to be recorded out of the Special Allotment Release Orders (SARO) of DBM, pursuant to Section 13 of RA No. 9206. The SARO releases are for booking purposes only, thus DBM will not issue corresponding Notices of Cash Allocation. (NCAs). Since theme are neither cash inflows nor cash outflows; the tax subsidy and tax expenditures shall be treated as memorandum items in the Cash Operations Report (COR) of the Bureau of Treasury. 4.6. All importations done thru grants or donations shall be supported by a deed of donation from the donor entity to be coursed thru and authenticated by the Philippine Embassy/Consulate at the donor's country, and a deed of acceptance from the recipient agency. 5. SPECIFIC PROCEDURAL GUIDELINES 5.1. Application for, Approval and Processing of Tax Expenditure Subsidy For National Government Agencies 5.1.1. For importations of NGAs arising from foreign donations, grants and loans 5.1.1.1. At least ten (10) working days prior to the arrival of the non-commercially imported goods, the importing agency (IA) shall submit to the BOC - Collection Service the original copy of the Certification of Official Importation (Form 1). This shall be supported by the authenticated copy of the Bill of Lading and all other documentations required by the BOC establishing the authority for and the authenticity of the importation. 5.1.1.2. Upon arrival of shipment, the IA shall secure an Authority to Release Imported Goods (ATRIG) for VAT and excise tax purposes from the BIR and upon completion of documents by the IA, the BOC - Collection Service shall cause the release of the imported goods. If the IA has an unsettled obligation with BOC relative to importations made more than two quarters prior to the current importation, the imported goods shall be withheld. 5.1.1.3. The RCA shall issue the Statement of Account/Assessment Notice to the IA, upon release of the goods in four (4) copies to be distributed as follows: Original and quadruplicate IA Duplicate RCA (Collection Service) Triplicate RCA, file copy with entry 5.1.1.4. Within ten (10) working days after the end of each quarter, the IA shall prepare a Quarterly Report of Taxes and Duties Availments (QRTDA), Form 2, based on the Statements of Accounts/Assessment Notices issued by RCAs, in three (3) copies to be distributed as follows: Original and Triplicate DBM Budget Operations Bureau Duplicate RCA 5.1.1.5. Upon completion of the QRTDA, the IA shall request for the issuance of SARO from the DBM, supported by the original and triplicate copies of QRTDA and a compilation of original copies of Statements of Accounts/Assessment Notices issued by the RCA and a duplicate copy of the Certification of Official Importation (Form 1). 5.1.1.6. Within fifteen (15) working days from receipt of the request at the DBM-Central Records Division, the DBM shall issue to the IA the necessary SARO corresponding to the verified amount indicated in the QRTDA. Such issuance of SARO does not require a covering Notice of Cash Allocation. The SARO shall serve as basis for recording both the obligation and liquidation of the expenditure item. The DBM shall accomplish the appropriate portion of the QRTDA indicating the SARO number and date thereof and forward the same to the BOC or BIR. 5.1.1.7. Upon receipt of the approved SARO from the DBM, the IA shall record the amount as agency expenditure. It shall prepare a Journal Voucher (JV) based on the SARO issued by the DBM to liquidate, the obligation, copy furnished the BTr-National Cash Accounting Division (NCAD) 5.1.1.8. Within ten (10) working days upon receipt of a copy of the agency JV, the BTr-NCAD shall issue a JV debiting the account of the IA and crediting the account of the RCA. 5.1.1.9. Upon receipt of the NCAD JV, the RCA Chief Accountant shall record the income in the RCA's books. 5.1.2. For certain importations by the DND and PNP 5.1.2.1. In case of importations of military hardwares, softwares, munitions, arms and equipment by the DND and PNP, the procedures set forth in Section 5.1.1 of this Circular shall apply. 5.1.3. For issuance of domestic securities by the Bureau of Treasury 5.1.3.1. On the liability of the Bureau of Treasury for documentary stamp taxes on domestic securities issued by it, the procedures set forth in Sections 5.1.1.7. to 5.1.1.9. of this Circular shall be observed, subject to the submission by the BTR of pertinent documents relative thereto as may be required. 5.1.4. For certain transactions of the DOTC 5.1.4.1. On customs duties and taxes payable by the DOTC for the Metro Rail Transit Line 3 System, incurred starting FY 1997 in accordance with the provisions of the Build-Lease-Transfer Agreement executed thereon, the procedures set forth in Section 5.1.1. of this Circular as may be deemed applicable shall be observed. 5.2. Processing of Tax Expenditure Subsidies for GOCCs. Specially Hospitals and AFPCES 5.2.1. After a CES is issued by the FIRB, and copies thereof have been distributed, the RCA collection unit on the basis of the CES shall prepare PCC/Statement of Accounts for customs duties and taxes payable in four (4) copies to be distributed as follows: Original and Quadruplicate Grantee Duplicate RCA (Collection Service) Triplicate RCA, for transmittal to DOF when completely utilized 5.2.2. Within ten (10) working days after the end of each quarter, the Grantee shall prepare the QRTDA to be distributed as follows: Original and Triplicate DBM Budget Operations Bureau Duplicate Grantee 5.2.3. Upon completion of the QRTDA, the Grantee shall request for the issuance of SARO from the DBM supported by the original and triplicate copy of the QRTDA, original copy of CES and the compilation of original copies of Payment Compliance Certificates/Statement of Accounts/Assessment Notices issued by the BOC/BIR. 5.2.4. From the issuance of SARO, the procedures in Sections 5.1.1.6. to 5.1.1.9. of this Circular shall be observed. 6. ACCOUNTING REQUIREMENTS Pertinent accounting entries for transactions relating to above procedures shall be recorded in accordance with the Circular/Guidelines which may be issued by the Commission on Audit for the purpose. 7. SANCTIONS The head of a national government agency, GOCC or Specialty Hospital who, by fault or negligence, fraudulently misrepresents importations as official, is liable to the appropriate penalties provided by law, either administratively or criminally or both. The concerned tax subsidy applicant shall be responsible for ensuring that all procedural guidelines prescribed in this Circular insofar as these affect their application are strictly adhered to. 8. REPEALING PROVISIONS All pertinent issuances and other existing rules and regulations inconsistent with this Circular are hereby repealed or modified accordingly. 9. EFFECTIVITY This Circular shall take effect CY 2003 . HaTISE (SGD.) JOSE ISIDRO N. CAMACHO (SGD.) EMILIA T. BONCODIN Secretary Secretary Department of Finance Department of Budget and Management