DILG

December 10, 2021 FIRB RESOLUTION NO. 25-21 SUBJECT MATTER : DILG WHEREAS , the Department of the Interior and Local Government (DILG) is an executive department of the Philippine government primarily responsible for promoting peace and order, ensuring public safety, strengthening the capability of local government units (LGUs) aimed towards the effective delivery of basic services to the citizenry; WHEREAS , the DILG is mandated under Republic Act (RA) No. 10121, or the "Philippine Disaster Risk Reduction and Management Act of 2010," to facilitate the development and provision of training programs and equip the LGUs with the necessary skills needed to proactively establish disaster preparedness and resiliency measures of LGUs through the Disaster Risk Management and Institutional Strengthening (DRMIS) Project; WHEREAS , the DRMIS Project is a joint undertaking between the DILG and Agence Franaise de Dveloppement (AFD), with support from the European Union's Asia Investment Facility. The DRMIS Project aims to improve the disaster risk reduction management at the LGU level by supporting the revision of the disaster preparedness audit, pilot-testing and subsequent replication, and related cross-cutting capacity building activities; WHEREAS , the DILG was granted a Special Authority from the Office of the President on August 20, 2015. The European Union, through the AFD, granted a maximum aggregate amount of EUR4,800,000.00, or PHP249,072,000.00, to cover the payment for technical assistance, training and capacity development activities, systems development, project management, support, external project supervision, and other Maintenance and Other Operating Expenses/Capital Outlay-related costs/expenses of the DRMIS Project pursuant to the Financing Agreement between the DILG and AFD dated September 3, 2015; WHEREAS , the DRMIS Project was set to be completed on March 2021 in accordance with Amendment No. 3 of the DRMIS Financing Agreement. However, it was extended up to December 31, 2021 due to the COVID-19 situation in the country that greatly affected the conduct of the scheduled project activities which were mostly face-to-face capacity building trainings; WHEREAS , Part II of Schedule 3 of the DRMIS Financing Agreement provides that EUR120,000.00, or PHP6,226,800.00 out of EUR630,000.00, or PHP32,690,700.00, of the counterpart funds of the DILG for the DRMIS Project is earmarked for taxes; WHEREAS , the Government of the Philippines counterpart fund for 2021, which is to be utilized mainly for the payment of taxes and duties and project management and support to implementation has not been approved to be included in the Fiscal Year (FY) 2021 General Appropriations Act (GAA). The continuing 2020 budget for the DRMIS Project was only PHP6,027,713.00 while the estimated taxes payable by the DILG from the operations of the DRMIS Project in 2021 is PHP25,014,612.90, resulting in a tax deficit of PHP18,986,899.00; WHEREAS , PHP16,574,627.22 of the PHP18,986,899.00 total estimated taxes payable by the DILG for the operation of the DRMIS Project pertains to the income tax withheld from the progress payment, unbilled progress payment, and procurement of 155 units of laptop. Under the final withholding tax system, the amount of income tax withheld by the withholding agent is constituted as a full and final payment of income tax due from the payee of the said income. Under the expanded withholding tax system, however, the amount of income tax withheld by the withholding agent shall be credited against the income tax liability of the payee. In both cases, the obligation of the payor is merely to deduct and remit the said taxes to the Bureau of Internal Revenue; and WHEREAS , Section 15 (c) of RA 11518, or the "FY 2021 GAA," reiterates the authority of the Fiscal Incentives Review Board (FIRB) to grant tax subsidies. NOW, THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED , to grant tax subsidy to the DILG in the amount of TWO MILLION FOUR HUNDRED TWELVE THOUSAND TWO HUNDRED SEVENTY-TWO AND 70/100 PESOS (PHP2,412,272.70) only, to cover for the taxes payable from the operations of the DRMIS Project excluding the amount of final withholding income tax on the progress payment, unbilled progress payment, and creditable withholding tax on procurement of laptops. Provided, That the amount of final withholding tax on the progress payment, unbilled progress payment, and creditable withholding tax on the procurement of laptops shall not be covered by tax subsidy as these are merely deducted from the total payment of the payor to the payees. Under the final withholding tax system, the amount of income tax withheld by the withholding agent, the DILG in this case, is constituted as a full and final payment of income tax due from the payee, or the consultant. Under the expanded withholding tax system, however, the amount of income tax withheld by the withholding agent (DILG) shall be credited against the income tax liability of the payee or seller of procured laptops. In this regard, the said withholding taxes are obligations of the consultant and the private seller or supplier, and not the DILG. The obligation of the DILG is merely to deduct and remit the said taxes to the Bureau of Internal Revenue. Hence, it should not be covered by tax subsidy. Provided, further , that: (a) the initial issuance of the corresponding Certificate of Entitlement to Subsidy (CES) shall be limited to the amount of ONE MILLION NINE HUNDRED EIGHTY-TWO THOUSAND EIGHTY-EIGHT AND 45/100 PESOS (P1,982,088.45) only, representing VAT with actual Bureau of Internal Revenue (BIR) billings/assessment/tax returns for the progress payment from the operations of the DRMIS Project, and (b) the subsequent CES shall be issued only upon the submission by the DILG of its actual tax liability based on BIR billings/assessments/tax returns. Provided, furthermore , that such availment shall be in accordance with the terms and conditions of Section 15 (c) of RA No. 11518, or the "FY 2021 GAA," 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. (SGD.) ANTONETTE C. TIONKO Undersecretary Department of Finance (SGD.) ROLANDO U. TOLEDO Undersecretary Department of Budget and Management (SGD.) RAFAELITA M. ALDABA Undersecretary Department of Trade and Industry (SGD.) ROSEMARIE G. EDILLON Undersecretary National Economic and Development Authority (SGD.) MARISSA O. CABREROS Deputy Commissioner Bureau of Internal Revenue (SGD.) VENER S. BAQUIRAN Deputy Commissioner Bureau of Customs