Clarification on Certain Provisions of Joint Administrative Order No. 1-2016 Dated June 23, 2016, entitled "Rules and Regulations to Implement Republic Act No. 10708, Otherwise Known as the "Tax Incentives Management and Transparency Act (TIMTA)"

September 1, 2016 JOINT DOF-DTI MEMORANDUM CIRCULAR NO. 001-16 TO : Incentives Promotion Agencies, the Bureau of Internal Revenue and the Bureau of Customs, the Registered Business Entities, and Others Concerned SUBJECT : Clarification on CertainProvisions of Joint Administrative Order No.1-2016 Dated June 23, 2016, entitled "Rules and Regulations to Implement Republic Act No.10708, Otherwise Known as the "Tax IncentivesManagement and TransparencyAct (T IMT A)" 1. Objectives This Circular is issued to clarify certain provisions of Joint Administrative Order No. 1-2016 relating to the implementation of Republic Act No. 10708, entitled "An Act Enhancing Transparency in the Management and Accounting of Tax Incentives Administered by Investment Promotion Agencies, otherwise known as the Tax Incentives Management and Transparency Act (TIMTA). 2. Rule II Section 2 and Rule III Section 1 (b) 2.1 Only Registered Business Entities (RBEs) availing of incentives are mandated to submit the Annual Tax Incentives Report (Annex A.1 and Annex A.2) to their respective Investment Promotions Agency (IPA). Thus, the following are no longer required to submit the Annual Tax Incentives Reports: 2.1.1 International organizations invoking tax treaties or international agreements to which the Philippines is a signatory; 2.1.2 Business entities registered with an IPA but are not qualified for incentives; 2.1.3 Business entities registered with an IPA that are qualified for incentives but have not availed or applied for any incentive during the taxable year; 2.1.4 Business entities registered with an IPA but are no longer availing any incentives after their incentives entitlement period; 2.1.5 Business entities registered with an IPA that utilize special or preferential treatment by virtue of Free Trade Agreements; and 2.1.6 Regional or Area Headquarters and Regional Operating Headquarters under Book III of Executive Order No. 226, as amended by Republic Act No. 8756. CAIHTE RBEs falling under Item 2.1.2 shall still be included in the Master List (Annex C of JAO 1-2016) required under Rule III Section 1 (a). 2.2 For purposes of reporting of incentives for taxable year 2017 and subsequent years, the RBEs shall file with their respective IPAs their Annual Tax Incentives Reports, within thirty (30) days from the statutory deadline for filing of Final Adjustment Return for Income Tax, and payment of tax due thereon, if any, such that: Year Ending Statutory Deadline for Filing the Final Adjustment Return and Payment of Tax Due Thereon, if Any* Submission of Annual Tax Incentives Report to IPA** Accounting Period 31 January 2017 15 May 2017 14 June 2017 Fiscal Year 29 February 2017*** 15 June 2017 15 July 2017 31 March 2017 15 July 2017 14 August 2017 30 April 2017 15 August 2017 14 September 2017 31 May 2017 15 September 2017 15 October 2017 30 June 2017 15 October 2017 14 November 2017 31 July 2017 15 November 2017 15 December 2017 31 August 2017 15 December 2017 14 January 2018 30 September 2017 15 January 2018 14 February 2018 31 October 2017 15 February 2018 17 March 2018**** 30 November 2017 15 March 2018 14 April 2018 31 December 2017 15 April 20178 n 15 May 2018 Calendar Year * Based on Section 77 (B) of the National Internal Revenue Code of 1997, as amended. ** Applying computation of number of days under Article 13 of the New Civil Code. *** 2016 is a leap year, thus, this may change. **** May move, if year ends on a leap year. 2.3 RBEs employing the Fiscal Year accounting period shall state in the title of their Annual Tax Incentives Report Income-based Tax Incentives (Annex A.1) the ending date of their fiscal year. 3. Rule IX Section 1 3.1 The period on the submission of the reports both for income-based tax incentives and value-added tax (VAT) duty exemptions covering Taxable Year 2015 requited under R.A. No. 10708 and its implementing rules and regulations is amended to read as: Submission by Submission by IPAs to Submission of Submission by IPA RBEs to IPAs BIR of Consolidated BIR to DOF to NEDA Annual Tax Incentives Secretariat of Report and to the NEDA Other Relevant Secretariat of Aggregate Date or Annual Tax Incentives Information Report From September On December 30, 2016 On February 28, April 14, 2017 15, 2016 to 2017 November 15, 2016 3.2 3.3R.A. No. 10708 and its implementing rules and regulations are as follows: Year Ending Statutory Deadline for Filing the Final Adjustment Return and Payment of Tax Due Thereon, if Any* Submission of Annual Tax Incentives Report to IPA** 31 January 2016 15 May 2016 15 December 2016 29 February 2016*** 15 June 2016 31 March 2016 15 July 2016 30 April 2016 15 August 2016 31 May 2016 15 September 2016 30 June 2016 15 October 2016 31 July 2016 15 November 2016 31 August 2016 15 December 2016 14 January 2017 30 September 2016 15 January 2017 14 February 2017 31 October 2016 15 February 2017 17 March 2017**** 30 November 2016 15 March 2017 14 April 2017 * Based on Section 77 (B) of the National Internal Revenue Code of 1997, as amended. ** Applying computation of number of days under Article 13 of the New Civil Code. For your guidance. September 1, 2016, Makati City, Philippines. (SGD.) CARLOS G. DOMINGUEZ III Secretary of Finance (SGD.) RAMON M. LOPEZ Secretary of Trade and Industry Who are required to submit Annual Tax Incentives Report for RBEs? ANS.: RBEs who are registered with tax incentives are required to submit Annual Tax Incentives Report under Annexes A.1 and A.2. DETACa ANNEX A.1 (Based on Accounting Period. If fiscal year, please specify) Column (A) Registration No. refers to the registration number indicated in the Certificate of Registration issued by PEZA or TIEZA Column (B) Date of Registration refers to the date of signing of Registration/Supplemental Agreement (R.A./S.A.) Column (C) Registered Activities/Actual Activities refer to the registered activity indicated in the CRTE R.A./S.A. Column (D) ITH Extension (Y or N) If Y whether Expansion or Bonus Year If ITH is an extension of 4-year or 6-year indicate Y and also state if Expansion Column (E) Entitlement Period of Tax Incentives Start refers to the date of commercial operation which is the start ITH entitlement per registered activity; * PEZA provided a separate column for the start of the 5% of the GIE Column (F) Entitlement Period of Tax Incentives End refers to the last date of the ITH entitlement or 4th year if it's a 4-year ITH; 6th year if it's a 6-year ITH; including extension/bonus year/s per registered activity Column (G) Net Sales Net Sales per registered activity under ITH (if more than 1 registered activity) and consolidated Net Sales for projects under 5% of the GIE Column (H) Cost of Sales Cost of Sales per registered activity under ITH (if more than 1 registered activity) and consolidated Cost of Sales for projects under 5% of the GIE Column (I) Gross Income Net Sales minus Cost of Sales per registered activity under ITH (if more than 1 registered activity) and consolidated Gross Income for projects under 5% of the GIE Column (J) Net Taxable Income Gross Income minus operating expenses presented per registered activity under ITH (if more than 1 registered activity) and consolidated for projects under 5% of the GIE Column (K) Tax Rate refers to the preferential income tax rate such as 0% on ITH or 5% on GIE Column (L) Income Tax Otherwise Due Special Rate Net Taxable Income (column J) multiplied by 30% Column (M) Income Tax Otherwise Due ITH Net Taxable Income (column J) multiplied by 30% Column (N) Income Tax Paid amount paid on 5% of the GIE; 0% if under ITH regime Column (O) Net Tax Relief same amount with Column M, if under ITH regime; the difference between Columns L and N, if under 5% of the GIE regime Column (P) Other Income Tax Incentives Indicate other income tax incentives claimed, if there's any, under RA 7916 as amended and other laws e.g. , Magna Carta for PWD; or TIEZA Column (Q) Total Tax Incentives Claimed Net Tax Relief plus Other Income Tax Incentives ANNEX A.2 (Based on Calendar Year) Column (A) Registered Activity/Actual Activities refers to the registered activity indicated in the Registration/Supplemental Agreements (R.A./S.A.) Column (B) Date of Registration refers to the date of signing of the R.A./S.A. Column (C) Description Raw Materials/Inputs, CE, Motor Vehicle, Consumer Goods refers to the description of VAT and Duty exempt imported commodities classified as Raw Material/Inputs, Capital Equipment, Motor Vehicle, Consumer Goods, Fuel, others Column (D) District Ports & Number of Import Entries/Admission Entry refers to the Port of Entry of the exempt importation with the corresponding total number of Import Entries/Admission Permit (for 2015 and 2016 reports) Columns (E) and (F) Volume of Imports-Quantity & Unit of Measure refers to the volume of cargo in kilograms (net weight) reflected in Box 38 of Transhipment Single Administrative Documents (TSAD) Column Value of Imports in US$ refers to the FOB value in dollars, commonly used in shipping documents or arrived at by deducting other factors such as freight and/or insurance reflected in Box 22 of TSAD (for Direct Import), invoice value for CBW and interzone/intrazone transfers. Includes imports on consignment basis. Column Value of Imports in Php refers to the Total Dutiable Value in Peso which is the basis for the computation of Duties and Taxes reflected in Box 46 of TSAD (for Direct Import), the invoice value in Peso for CBW and interzone/intrazone transfers Columns (G) & (J) Direct Import refers to the value of VAT and duty exempt commodities directly sourced from foreign suppliers Columns (H) & (K) Customs Bonded Warehouse (CBW) refers to value of VAT and duty exempt commodities sourced from bonded warehouse duly licensed by the Commissioner of Customs Columns (I) & (L) Interzone Transfer (including intrazone) refers to value of VAT and duty exempt commodities sourced from another Ecozone/Freeport zone locators Columns (M), (N) & (O) Tax and Duty Waived from Direct Import Duty, VAT, Excise refers to amount of Duties, VAT and/or Excise that should have been collected on exempt imported commodities (Box 47 of TSAD) aDSIHc Column (P) Value of Sales to Domestic Market refers to the Value of Sales to the Domestic Market Columns (Q) to (T) Duty and Tax Payments on Local Sales refers to the amount of Duties, VAT and/or Excise Tax payments on local sales Columns (U), (V) & (W) Net Tax and Duty Waived Duties, VAT & Excise the difference between the amount of Duties, VAT and Excise Waived and the amount paid on local sales respectively Columns (X) & (Y) VAT and Duty Credit Claimed Applicable to BOI RBEs Columns (Z) & (AA) VAT and Duty Credit Granted Applicable to BOI RBEs Column (BB) Value of VAT Zero Rated Purchases (in Php) refers to the total value of local purchases with 0% VAT Column (CC) Value of VAT Zero Rated Export Sales (in Php) refers to the Total Value of Export Sales (indicate whether Direct or Indirect Export Sales) n Note from the Publisher: Copied verbatim from the official copy.