Philippine National Railways (PNR) (1)

December 8, 2011 FIRB RESOLUTION NO. 013-11 SUBJECT MATTER : Philippine National Railways (PNR) (1) WHEREAS, the Philippine National Railways (PNR) is a state-owned railway system, organized under the Department of Transportation and Communications (DOTC) as an attached Government Owned and/or Controlled Corporations (GOCC), and is also a part of the Strong Republic Transit System (SRTS) and the overall public transport system in the metropolis; WHEREAS, the PNR is mandated to link key cities within the Philippines, to serve as an instrument in national socio-economic development and as the backbone of all Metro Manila's regional rail services, which extend to the suburbs and provinces; WHEREAS, the PNR is experiencing serious operational problems and financial difficulties, thus resulting in its not being able to pay its tax obligations to the Bureau of Internal Revenue (BIR) for 2008 and 2009; WHEREAS, the PNR entered into an agreement with the Japan East Railway Corporation (JREast) for the donation of eighty three (83) units of used passenger cars/coaches; cEHSIC WHEREAS, Article 4.4 of the Transfer Agreement with JREast, signed on February 7, 2011 provides that the PNR shall bear the reasonable cost incurred for the said cooperation; WHEREAS, it is the policy of the Fiscal Incentives Review Board (FIRB) not to grant tax subsidy on withholding tax liabilities specially if they were previously withheld but not remitted to the BIR; WHEREAS, Section 272 of the National Internal Revenue Code (NIRC) as amended, provides for the punishment by a fine and/or imprisonment for GOCCs' violation of the withholding tax provisions; WHEREAS, the PNR does not have the financial capacity to assume the taxes arising from the donation of the JREast, as well as its 2008 and 2009 VAT and percentage tax liability without further impairing its railway operations; WHEREAS, Section 13 of Republic Act (RA) No. 10147 otherwise known as the 2011 General Appropriations Act, provides that tax subsidies granted by the FIRB to GOCCs, in accordance with EO No. 93, as amended, including those for tax obligations assumed by GOCCs pursuant to a valid agreement are deemed automatically appropriated; NOW, THEREFORE, BE IT RESOLVED AS IT IS HEREBY RESOLVED, to approve the application for tax subsidy of the PNR in the amount of TWO HUNDRED NINETY SIX MILLION THREE HUNDRED TWENTY SEVEN THOUSAND EIGHT HUNDRED FIFTY SIX AND 50/100 PESOS (P296,327,856.50) only, broken down as follows: A. Internal Revenue Taxes 2008 2009 Total VAT P158,967,762.79 P106,760,166.68 P265,727,929.47 Percentage Tax 484,331.28 568,624.75 1,052,956.03 Sub-total 159,452,094.07 107,328,791.43 P266,780,885.50 B. Customs Duties and Taxes (2011) 29,546,971.00 Grand Total P296,327,856.50 ============= Provided, however, that the availment is subject to the following conditions: (a) the initial issuance of the Certificate of Entitlement to Subsidy (CES) shall be limited to the amount of P292,190,038.50 representing the PNR's VAT and percentage tax liabilities for 2008 and 2009 (P266,780,885.50) and taxes and duties due on importations (P25,409,153.00) [three (3) shipments with billings from the Bureau of Customs (BOC)] that have already arrived; (b) the subsequent CES shall be issued upon the submission by the PNR to the FIRB of the required billings and/or documents evidencing the importations; and (c) all materials and equipment for which tax subsidy is granted shall form part of the regular inventory of the PNR (in the case of materials and movable equipment) and/or be located in their designated project stations/operating areas (in the case of immovable equipment) as certified to by the resident Commission on Audit (COA) auditor of the PNR and its Project Station/Operating Area Manager, respectively: Provided, further, that such availment shall be in accordance with the terms and conditions of Section 13 of the 2011 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. HESAIT BE IT FURTHER RESOLVED AS IT IS HEREBY RESOLVED, to deny with finality the request for tax subsidy to cover the expanded withholding tax, withholding tax on compensation, creditable withholding tax on VAT and final VAT withholding tax that were previously withheld but not remitted to the BIR. The BIR, motu propio , may impose the appropriate sanctions under Section 272 of the NIRC, as amended. BE IT FURTHERMORE RESOLVED AS IT IS HEREBY RESOLVED, that the PNR's future applications for tax subsidy shall only be processed by the FIRB upon its submission of proof of remittance of the taxes that were previously withheld but not remitted to the BIR. (SGD.) GIL S. BELTRAN Undersecretary of Finance Presiding Officer-FIRB