Prescribing the Guidelines and Procedures in Monitoring and Coordinating the Activities of Kalakalan 20 or Countryside Barangay Business Enterprises (CBBE) in Compliance with BIR Requirements

August 10, 1990 REVENUE MEMORANDUM ORDER NO. 39-90 SUBJECT : Prescribing the Guidelines and Procedures in Monitoring and Coordinating the Activities of Kalakalan 20 or Countryside Barangay Business Enterprises (CBBE) in Compliance with BIR Requirements TO : All Internal Revenue Officers and Others Concerned I. Objectives : A. To set-up standards and procedures relative to the monitoring of CBBE's adherence to agreed guidelines on the area of concern of the BIR. B. To define and clarify issues relative to Kalakalan 20 for uniform application of internal revenue laws and regulations. acd II. Policies : In order to attain the above objectives, the following are hereby prescribed for the information and compliance by all concerned: A. All CBBE shall be required at all times to display in a conspicuous place their Certificate of Authority. The Revenue District Office (RDO) shall be furnished by the City or Municipal Treasurer a list of all CBBE approved/denied applications appearing in the registry entries as well as a list of CBBE which had been the subject of revocation, cancellation or suspension of CBBE Certificate of Authority. B. Registered CBBE shall be exempted only from all taxes and fees for which they are directly liable. C. All CBBE shall be exempted from the requirement to issue sales invoice or receipt under Section 238 of the National Internal Revenue Code (NIRC). However, should they opt to issue receipt or sales invoice, they have to comply with the requirement of the BIR with regard to the printing and registration of such receipt and sales invoice. D. The withholding tax schemes, as presently implemented by the BIR with respect to final and creditable withholding taxes shall be required of all CBBE as withholding agents of the Bureau. E. Interest income from bank deposits and deposit substitutes of CBBE shall continue to be subject to the final tax of 20% as presently enforced by the Bureau. F. The Annual Information Return of CBBE (BIR Form No. 1702A-2) is hereby prescribed and shall contain a report on the annual gross receipts, assets, liabilities, and networth of CBBE. (Please see attached form). This return shall serve as a basis in the determination of CBBE's annual fee(s) to be paid to the Municipal or City Treasurer where they are registered, starting on the second year of operations. III. Guidelines and Instructions : A. CBBE Exempted from All Taxes and Fees 1. Exempt activities under RA 6810 . - Production, processing or manufacturing of products or commodities engaged in the countryside (outside Metro Manila and highly urbanized cities) are the exempt activities defined under RA 6810. It does not include professional services, retailing, wholesaling or trading of commodities, products or merchandise. 2. Exemption from taxes and fees . - The exemptions cover taxes and fees for which they are directly liable, including the following internal revenue taxes: a) Excise taxes; b) Income tax; c) Value-Added Tax (VAT) on sale of goods and services; d) Tobacco Inspection Fees; and e) Other percentage taxes under Title V of the Tax Code However, CBBE are still liable to pay the following internal revenue taxes; a) Capital gains taxes; b) Value-Added Tax (VAT) on imported articles; c) Income tax on income not arising from CBBE's productive activity such as interest, royalties, prizes, winnings and dividends; d) Final tax of 20% on interest income from bank deposits and deposit substitutes; and e) Documentary Stamp Tax on documents, instruments and papers. 3. The individual owner or member of the cooperative or association constituting the CBBE shall not be liable for income tax on income receipts and proceeds derived from CBBE operations. 4. Transitory Provisions - a) Existing business entities originally subject to internal revenue taxes desiring to avail of the benefits of Kalakalan 20 shall follow existing procedures on retirement of business upon approval of application for registration as CBBE. b) Registered VAT persons shall apply for cancellation of their VAT or NON-VAT, where applicable, registration in the RDO of the city or municipality where the principal place of business is located. c) A final VAT or percentage tax return shall be filed for the remaining period for which they are registered within 20 days from date of cancellation of registration. B. CBBE Exempted from Issuing Sales Invoice or Receipt 1. In view of their internal revenue exemptions, CBBE are exempt from the issuance of sales invoice or receipt to their customers. acd 2. For those who opt to issue receipts, they are only allowed to issue ordinary NON-VAT receipts, previously registered with the BIR. 3. Since they are not VAT registered persons and their transactions are not subject to VAT, they are not authorized from issuing VAT invoice as it will generate input tax to their customers. C. CBBE as Withholding Agents 1. All CBBE shall register with the proper RDO as a withholding agent, if they have not done so previously. 2. They shall withhold taxes on the wages of their employees pursuant to Sections 71-76 of the NIRC, as implemented by Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 12-86. 3. They shall likewise withhold taxes pursuant to Sections 50-51 of the NIRC, as implemented by Revenue Regulations No. 6-85, as amended by other related regulations, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations. 4. They shall also withhold taxes on government money payments pursuant to RA 1051 as implemented by Revenue Regulations No. 4-88. D. On Filing/Processing of Annual Information Return (AIR) of CBBE 1. AIRs may be secured from all Revenue District Offices/Office of the Collection Officer or duly authorized Municipal Treasurer of the municipality. 2. It shall be prepared by CBBE member in triplicate and filed on or before the fifteenth day of April of each year for the preceding calendar year, or if the taxpayer has designated a fiscal year on or before the fifteenth day of the fourth month following the close of such fiscal year, with the Revenue District Officer or the Collection Officer or duly authorized Treasurer of the City/Municipality where the principal office of CBBE is located and where its books of accounts are kept and distributed as follows: Original - BIR-Revenue District Office Duplicate - Department of Trade and Industry thru the Office of the City or Municipal Treasurer where the business is located Triplicate - CBBE member 3. The Revenue District Office (RDO) shall record pertinent data in a logbook and CBBE's index file. 4. The RDO shall transmit the original copy to the Revenue Information Systems Services, Inc. (RISSI) on a monthly basis, not later than the tenth day of the following month for encoding and update of CBBE's masterfile and preparation of report for submission to the Assistant Commissioner, Planning and Research Service who shall be responsible for recommending to the Information Technology Policy Committee the contents of the said report. On the other hand, the duplicate copy shall be transmitted to Department of Trade and Industry (DTI) thru the Office of the City or Municipal Treasurer where the business is located. E. Processing of Approved/Denied Applications, Cancelled, Revoked or Suspended Certificates of Authority 1. The Revenue District Office shall receive the listings of approved/denied applications, cancelled, revoked or suspended Certificates of Authority from the City or Municipal Treasurer where the business is located and record pertinent data in a logbook and CBBE's index card. 2. The RDO shall transmit said listings to RISSI for the same purpose(s) and under similar circumstances as mentioned in D-4. 3. All appeals on decisions of denial, cancellation or revocation or suspension of the CBBE Certificate of Authority shall be referred to the Bureau of Local Government Finance and not to the BIR. IV. Effectivity : This Order shall take effect immediately. EUFRACIO D. SANTOS Acting Commissioner ATTACHMENT Annual Information Return of Countryside Barangay Business Enterprises