Amendment to the Agreement Between the Bureau of Internal Revenue and the Authorized Agent Bank (AAB) Relative to the Collection of Internal Revenue Tax Liabilities Through the Banking System Pursuant to Executive Order No. 937, as Implemented by Revenue Regulations No. 5-84, as Amended.

November 6, 2001 REVENUE REGULATIONS NO. 19-01 SUBJECT : Amendment to the Agreement Between the Bureau of Internal Revenue and the Authorized Agent Bank (AAB) Relative to the Collection of Internal Revenue Tax Liabilities Through the Banking System Pursuant to Executive OrderNo.937, as Implemented by Revenue RegulationsNo.5-84, as Amended TO : All Internal Revenue Officers and Others Concerned SECTION 1 . Scope . Pursuant to the provisions of Executive Order No. 937 dated March 1, 1984, as implemented by Revenue Regulations No. 5-84 (RR 5-84) as amended by Revenue Regulations No. 1-85 (RR 1-85), Revenue Regulations No. 15-94 (RR 15-94) and Revenue Regulations No. 13-96 (RR 13-96), these Regulations are hereby promulgated to amend/update the provisions contained in the Agreement between the Bureau of Internal Revenue (BIR) and Authorized Agent Bank (AAB) relative to the collection of internal revenue tax liabilities through the banking system attached as Annex "A" of RR 5-84. SECTION 2 . Criteria For The Selection Of Banks And The Conditions Under Which They May Be Accredited Or Authorized To Collect Internal Revenue Taxes . Section 2(3) of RR 5-84, as amended, is hereby further amended to read as follows: "(3) The bank shall, upon approval of the application, execute a Memorandum of Agreement with the Bureau of Internal Revenue in the prescribed format attached as Annex 'A' and which forms an integral part hereof." SECTION 3 . Responsibilities Of Offices Involved In The Collection Of National Internal Revenue Taxes Thru The Banking System . Section 5(B) of RR 5-84, as amended, is hereby further amended to read as follows: "B. The Bureau of Internal Revenue shall xxx xxx xxx 13. be authorized to waive penalties, surcharges and interest due on delayed collections, and/or delayed or erroneous reports as well as procedural errors committed. Such waiver of penalties, surcharges and interest due shall, in all instances, be approved by the Commissioner of Internal Revenue (CIR), upon the recommendation of the Bank Accreditation Committees (BAC). The BAC may recommend for a condonation of penalties, surcharges and interest, provided that the delay in the remittance of collections and/or delay in the submission of reports, and/or submission of erroneous reports as well as procedural errors committed, are caused by civil disturbance or fortuitous events such as: typhoons, floods, fires, earthquakes, labor disputes or strikes. Provided, further that if the same is caused by other reasons which the BAC deems meritorious, the waiver of penalties/sanctions for such meritorious cases (other than those caused by civil disturbance or fortuitous events) shall not be more than sixty percent (60%) of the total amount of penalties imposed. Provided, finally, that should the BAC, after its evaluation, recommend for a waiver of penalties by more than sixty percent (60%), such request for waiver, together with the BAC's recommendation, shall be elevated to the Management Committee (MANCOM) for confirmation before the same is submitted to the CIR for his approval." SECTION 4 . Transitory Provisions . 4.1. Payment of Standing Penalties . AABs, which have outstanding penalties due to non-compliance with the procedures prescribed for the collection of taxes, submission of reports, period of remittance, as well as procedural errors in receiving taxpayers' returns, may request for a waiver of penalties/sanctions by offering an amount of compromise not less than the minimum rates provided hereunder covering the years when the violations have been committed: 4.1.1. Procedural Errors/Delay in Submission of Reportorial Requirements . For Calendar Year 2000 (CY 2000) and prior years 20% For Calendar Year 2001 (CY 2001) 40% 4.1.2. Late Remittance of Tax Collections . An amount of compromise not less than the prevailing interbank borrowing rate at the time the collection becomes due for remittance plus five percent (5%). Offers of compromise for penalties, surcharges and interest imposed on violations committed for Calendar Year 2000 and prior years based on rates provided above shall be submitted to the BAC on or before December 15, 2001 for evaluation and consideration. The BAC shall thereupon submit its recommendation to the CIR for his approval. The payment of the approved offer of compromise should be made not later than January 15, 2002. Offers of compromise for penalties, surcharges and interest imposed on violations committed for Calendar Year 2001 based on the rates provided above, shall, on the other hand, be submitted to the BAC within thirty (30) days from receipt of formal notice for payment from the BIR, for its evaluation and consideration. The BAC shall thereupon submit its recommendation to the CTR for his approval. Payment of the approved offer should be made not later than thirty (30) days from receipt of written notice of approval of compromise offer from BAC. The periods for the offer and payment of compromise as provided above shall be deemed final, thus, shall not be subject to any grant of extension. The AABs shall be required to pay in full their outstanding liabilities if the offer of compromise for penalties, surcharges and/or interest as approved by the CIR is not paid within the prescribed period. Such failure shall constitute a ground for the revocation/non-renewal of their accreditation. 4.2. Execution of New MOA After December 31, 2001 . All banks presently authorized to collect internal revenue taxes may continue to do so until such time that a new MOA as prescribed in Annex "A" hereof shall thereupon be executed between the BIR and the banks which have qualified for accreditation. SECTION 5 . Repealing Clause . The provision of any revenue regulations, revenue memorandum order, revenue memorandum circular, or any other revenue issuances inconsistent with these Regulations are hereby repealed, amended, or modified accordingly. SECTION 6 . Effectivity Clause . These Regulations shall take effect fifteen (15) days after publication in a newspaper of general circulation. (SGD.) JOSE ISIDRO N. CAMACHO Secretary of Finance Recommending Approval: (SGD.) RENE G. BAEZ Commissioner of Internal Revenue ANNEX A MEMORANDUM OF AGREEMENT KNOW ALL MEN BY THESE PRESENTS: This Memorandum of Agreement is executed and entered into by and between: The BUREAU OF INTERNAL REVENUE (BIR), a government agency created and existing under the laws of the Philippines with principal office at the BIR National Office Building, BIR Road, East Triangle, Diliman, Quezon City, represented herein by its Commissioner, _____________, herein referred to as "BIR", and The Name of Bank , herein referred to as the "BANK', represented by its Name of Authorized Representative and Position , with principal office located at __________________________________________ ; WITNESSETH: WHEREAS, to protect the interest of the Government, there is a need to secure payments made by taxpayers through authorized agent banks (AABs) and enable timely generation and submission of accurate tax collection information and management reports; WHEREAS, the AAB's obligation to collect, pursuant to government auditing rules and regulations, carries with it the responsibility to remit accurately and on time all such collections to the Bureau of Treasury; WHEREAS, both the AAB and the BIR recognize the need to adopt security measures to safeguard the collections of revenues and put in place a system which will ensure that access to information on such transactions shall be limited only to the duly authorized representative of the AABs and the BIR; WHEREAS, to assure taxpayer convenience; there is a need for sufficient number of offices/locations where the taxpayers can make their payments; WHEREAS, authorized field auditors of the Commission on Audit (COA) and the BIR may, at any reasonable time, examine any document or record of the bank pertaining to the collection and remittance of internal revenue taxes; WHEREFORE, for and in consideration of the foregoing premises, the parties hereto have mutually agreed, as they hereby agree, that: The BANK shall 1. Comply with and submit all requirements prescribed in Annex "A-1", herewith attached, and such other issuance that may be subsequently issued by BIR, and shoulder all expenses concerning the accomplishment and submission thereof; 2. Abide by the rules and regulations promulgated by the BIR in connection with this Agreement such as: 2.1 Have adequate infrastructure (manpower, branch offices, computer and communication technology) to remit accurate daily tax collections and transmit all documents and information on time; 2.2 Comply with BIR reporting requirements as to timeliness and accuracy, i.e., error-free collection information within 24-hours for banks under the Electronic Data Transmission System (EDTS), except during transition period upon approval of the BIR and during deadlines where a 48-hour transmission is authorized; 3. Pay the penalties in accordance with existing issuances and abide by the sanctions, if any, in accordance with the schedule of penalties and sanctions as provided Annex "A-2". Imposition of penalties, surcharges and interest may, however, be waived by the Commissioner, upon the recommendation of the Bank Accreditation Committee (BAC) on grounds that the delay in the remittance of collections, submission of reports and/or submission of erroneous reports, as well as procedural errors committed are caused by civil disturbance or fortuitous events or by some other reasons which the BAC deems meritorious The BAC may recommend for a condonation of penalties, surcharges and interest, provided, that the delay in the remittance of collections and/or delay in the submission of reports and/or submission of erroneous reports as well as procedural errors committed, are caused by civil disturbance or fortuitous events such as: typhoons, floods, fires, earthquakes, labor disputes or strikes. Provided, however, that if the same is caused by other reasons which the BAC deems meritorious, the waiver of penalties/sanctions for such meritorious cases (other than those caused by civil disturbance or fortuitous events) to be recommended by BAC, shall in no case be more than sixty percent (60%) of the total amount of penalties imposed. Provided, finally, that should the BAC, after its evaluation, recommend for a waiver of more than sixty percent (60%) of the total amount of penalties imposed, such request for waiver together with the BAC's recommendation shall be elevated to the Management Committee (MANCOM) for confirmation before the same is submitted to the Commissioner for his approval. Cancellation of accreditation shall be resorted to for continued non-compliance; 4. Hold tax payments in a fiduciary capacity for the account of the national government (Bureau of Treasury). Such funds held in trust must then be considered as separate from other funds in its custody; 5. Authorize the BSP, through its Accounting Department, to debit its Demand Deposit Accounts (DDA) corresponding to the total daily collections due for remittance on Day 6 or 5 Calendar Days after the date of collection or receipt of tax payment, such amount to be credited by BSP to the "Special Account-BIR Collection" of the Treasurer of the Philippines. Remittances of AABs own tax liabilities shall follow the procedure defined in RMO 4-99 dated October 27, 1998; 6. Authorize the BSP, through its Accounting Department, to debit its DDA corresponding to the unremitted collections and accumulated penalties, surcharge and interest, net of whatever penalties waived by the BIR, after four (4) months from date of the Final Demand; 7. Allow authorized field auditors of the COA and the BIR to verify any document or record of the bank pertaining to collection and remittance of internal revenue taxes, provided the law on secrecy of bank deposits is strictly observed, and provided, further, that such verification shall be made only during banking days, subject to prior written notice to the BANK; 8. Accept and process all tax returns with payment; and 9. Inform the BIR of any planned structural changes such as merger, buy-out, consolidation and similar changes. The BIR shall 1. Reserve the right to limit or withdraw the authority of the BANK to accept tax payments for cause or to limit the areas where the BANK can collect or to direct the BANK to provide bank services in area/s it has branches not adequately served by other collecting banks subject to the BANK's agreement of such moves; 2. Conduct field verification of BANK's compliance with BIR rules and regulations with regard to its responsibility as collecting agents; 3. Suspend the authority to collect internal revenue taxes or terminate this Agreement in case of violation of any term and condition stated herein, or at anytime cancel the BANK's accreditation if the interest of the government is prejudiced; 4. Notwithstanding the payment of penalties for violations or acts of omission, suspend/cancel the BANK's accreditation. The suspension/cancellation of the BANK's branch accreditation does not necessarily result in the suspension/cancellation of the BANK's Head Office (AAB-HO) accreditation. However, the suspension/cancellation of the AAB-HO accreditation automatically results in the suspension/cancellation of the AAB-branch accreditation; 5. Request the BSP, thru its Accounting Department, to debit the DDA of the Bank for the amount of unremitted collections and accumulated penalties, surcharge and interest, net of penalties waived by the BIR after four (4) months from the Date of Final Demand; 6. Initiate civil or other special actions against the BANK or the officers thereof, if necessary, pursuant to Revenue Regulations No. 4-97, Sec. 7(b) for any diversion, non-remittance, under-remittance or other violations through the fault or gross negligence of the bank; 7. Initiate criminal actions necessary pursuant to Revenue Regulations No. 4-97, Sec. 7 (b) against any BANK officer or employee concerned for any willful diversion, non-remittance, under-remittance or other violations through the fault or gross negligence of said BANK officer or employee; 8. Inform officers of the BANK, through the Bankers Association of the Philippines (BAP), and the individual bank of advises/updates, bulletins, issuances, etc., not later than forty eight (48) hours from issuance thereof by the Commissioner or his duly authorized representative; 9. Advise the BANK on Revenue Memorandum Orders (RMOs) and system amendments affecting the collection system within two (2) days from the signing of the RMO or approval of system amendments. Amendments affecting technology or system changes and its implementation should take effect not later than thirty (30) days from the availability of the new BIR technology or system; 10. Train the trainers of the BANK on Limited Bank Data Entry System (LBDES), Electronic Data Transmission System (EDTS), Large Taxpayers System (LTs) and enhancements thereto, including the effects thereof on AABs; 11. Provide the BANK with ample supply of tax return forms and other pertinent documents; 12. Provide information to the BANK's central collection units regarding exception reports from Revenue District Offices (RDOs), the Revenue Data Center (RDC) and the Information Systems Operations Service (ISOS), including penalties thereon, on a monthly basis, within ten (10) days after receipt of the Collection Service (CS) of said reports; 13. Respond formally to classifications on procedural and technical issues raised by the BANK within fifteen (15) days from receipt of the request. Classifications affecting all AABs shall be disseminated to the AAB membership through the BAP; 14. Request BSP to credit the DDA of BANK for the amount representing its over-remittance of internal revenue collections fifteen (15) days after confirmation by the BIR of such over-remittance; 15. Ensure utmost confidentiality of data and information provided by the BANK in connection with this Agreement. This Agreement shall be effective from the date of signing hereof until such time that it is terminated by both parties, or by the AAB subject to the approval of the BIR, or by the BIR in case of violation of any terms and conditions stated herein or for any reasonable cause, with thirty (30) days advance notice. Provided, however, that additional terms and conditions may be entered into between the BIR and the AAB servicing taxpayers under the jurisdiction of the Large Taxpayers Service which shall be embodied in a supplemental Memorandum of Agreement (MOA) to be executed by both parties. IN WITNESS WHEREOF, we sign this Agreement this _________ day of ___________________, 2001. BUREAU OF INTERNAL REVENUE ___________________________ Name of Bank By: By: _______________________________ __________________________ Commissioner of Internal Revenue President A C K N O W L E D G M E N T REPUBLIC OF THE PHILIPPINES ) _____________________________) s.s BEFORE ME, this _________________ day of ________________ 2001, at ____________________________________ personally appeared the following: COMMUNITY TAX DATE/ NAME CERTIFICATE NO. PLACE ISSUED (Commissioner BIR) (Bank Representative/Position) Known to me and to me known to be the same persons who executed the foregoing instrument and acknowledged to me that the same is their free and voluntary act and deed and those of the agency and bank represented. IN WITNESS WHEREOF, I have hereunto set my hand and seal this __________ day of _____________, 2001. NOTARY PUBLIC Doc. No. ________ Page No. ________ Book No. _______ Series of _______ ANNEX A-1 ANNEX A-2