Guidelines in the Filing of Income Tax Returns by Entities Affected by Presidential Decree No. 778

March 29, 1976 REVENUE MEMORANDUM CIRCULAR NO. 13-76 SUBJECT : Guidelines in the Filing of Income Tax Returns by Entities Affected by Presidential Decree No. 778 TO : All Internal Revenue Officers and others concerned In order to facilitate the filing of income tax returns of entities affected by Presidential Decree No. 778, the following guidelines are hereby promulgated for the guidance of all concerned: 1. General registered partnerships . General registered partnerships which are heretofore exempt from income tax shall become subject to income tax as corporations beginning August 24, 1975. The said partnerships shall file two (2) income tax returns: One (1) under BIR Form 17.04 covering the gross income or earnings and allowable deductions from January 1, 1975 to August 23, 1975, and another return under BIR Form 17.02 covering the gross income or earnings and allowable deductions from August 24, 1975 to December 31, 1975. While it is required that each of these returns must be accompanied with separate financial statements (Balance Sheet and Profit and Loss Statements), it may not be feasible for all of these partnerships to prepare two (2) sets of financial statements if inventories are required at the cut-off date (August 23, 1975) for the purpose of determining the correct income for each period covered by the two (2) returns to be filed. In cases, therefore, where it is not feasible to compute the net income for each of the said periods, the bureau will accept the two (2) income tax returns required to be filed accompanied with only one (1) set of financial statements covering the period from January 1, 1975 to December 31, 1975 provided that the same should be accompanied with a computation showing the allocation of gross income and deductions of the two (2) periods, based on the number of days covered by each of the period covered by the returns. The said financial statements shall be duly certified by a Certified Public Accountant if during any quarter of the year 1975 the gross receipts exceeded P25,000.00. 2. Partners . The partners should report in their individual income tax returns their respective shares in the net distributable income of the partners shown in the two (2) returns filed by the partnerships. In other words, an individual partner shall file only one (1) return for the whole year 1975 but must include his share in the profits while the partnership as such was still tax-exempt and his share in the net income after the partnership has become taxable as a corporation. 3. Building and Loan Associations . Two (2) returns should likewise be filed by building and loan associations showing the net income for the period from January 1 to August 23, 1975 which is taxable at the rate of 12% and another return covering the net income for the period from August 24 to December 31, 1975 which is subject to the normal corporate rates of 25% and 35%. While it is required to submit separate financial statements for each return, one (1) set of financial statements covering the whole year (January 1 to December 31, 1975) may be accepted if the preparation of two (2) financial statements will work undue hardship on the building and loan association. If only one (1) set of the financial statements will accompany the two (2) returns, a computation showing the allocation of gross income and deduction of the two (2) periods based on the number of days covered by each of the period covered by the two (2) returns should be attached. 4. Life Insurance Companies . Two income tax returns should likewise be filed by life insurance companies for the calendar year 1975. The return covering the period from January 1 to August 23, 1975 should be accompanied with the Profit and Loss Statement showing the net investment income and another return covering the period from August 24, 1975 to December 31, 1975 showing the ordinary net income taxable at the normal corporate rate of 25% and 35%. However, if during the period from January to August 23, 1975 the life insurance company is otherwise subject to the normal corporate rate of 25% and 35% instead of the 8-3/4% rate on investment income, the life insurance company should file only one (1) income tax return for the year 1975 taxable at the normal corporate rates of 25%-35%. All those concerned are hereby enjoined to give as wide a publicity as possible to the provisions of this Revenue Memorandum Circular. EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3