Professional Documents
Culture Documents
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GROUP 5 – TAX II Tidoso, Sios-e, Tumulak
Tax Treatment of Sales of Goods, Property and Services Made by a Supplier from the Customs Territory to
a PEZA Registered Enterprise; and Sale Transactions Made by PEZA Registered Enterprises WITHIN and
WITHOUT the Eco-zone
1. Sales Made By A VAT Registered Supplier From The Customs Territory, To A PEZA Registered
Enterprise
a. Buyer is a PEZA registered enterprise which is subject to the 5% special tax regime
i. Sale of goods: treated as indirect export - subject to (0%) VAT
ii. Sale of service: (0%) VAT - “cross border doctrine”
b. Buyer is a PEZA registered enterprise, not embraced by the 5% special tax regime, - subject to
taxes under the NIRC
i. Sale of goods: be treated as indirect export - (0%) VAT
ii. Sale of Service: (0%) VAT - “cross border doctrine”
2. Sales Made By A VAT-Exempt Supplier From The Customs Territory, To A PEZA Registered
Enterprise
treated exempt from VAT - regardless of whether or not the PEZA registered buyer is subject to
taxes under the NIRC, or enjoying the 5% special tax regime, or a registered manufacturer-
exporter the “Cross Border Doctrine” of the VAT System to the contrary notwithstanding
ii. The registered enterprise’s “gross income earned” therefrom shall be subject to the 5%
special tax
1. sales in the Customs Territory do not exceed the threshold allowed or
permitted for such sales, pursuant to the pertinent provisions of the PEZA rules
and regulations
2. for income tax purposes, if such sales should exceed the aforesaid threshold,
its income derived from such excess sales shall be imposed with the normal
income tax pursuant to the provisions of Title II, NIRC
3. in computing for the income tax due on such excess sales, its net income from
such excess sales shall be determined in accordance with the method of
general apportionment pursuant to the provisions of Sec. 50, NIRC
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GROUP 5 – TAX II Tidoso, Sios-e, Tumulak
b. Sale of SERVICES by a PEZA Registered Enterprise to a Buyer from the Customs Territory
i. subject to the 12% VAT or to the percentage tax, whichever is applicable, and to the
normal income tax on income derived therefrom
Revenue Regulations No. 16-2005 has amended Revenue Memorandum Circular (“RMC”) no. 74-99 in that
sales to PEZA registered enterprises now require prior application for effective zero-rating with the appropriate
BIR office.
Clarifies Sec 109(1)(R) of the NIRC on the VAT exemption of the sale, importation, printing or publication
of books, newspapers, magazines, reviews or bulletins.
Sale of Room Accommodation, Food and Beverages Services of a Hotel (located within Metro Manila)
to a PEZA-registered enterprises
Note: An MCIT of 2% of the gross income as of the end of taxable year is imposed on a corporation taxable
under Title II of the Tax Code, as amended, beginning on the 4th taxable year immediately following the taxable
year in which such corporation commenced its business operations when the MCIT is greater than the regular
income tax.
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GROUP 5 – TAX II Tidoso, Sios-e, Tumulak
B. SALE OF PRODUCTION “REJECTS AND “SECONDS”, SCRAP, RAW MATERIALS, PACKAGING MATERIALS
and OTHER PRODUCTION SUPPLIES
“Rejects/Seconds” – finished or semi-finished products which are defective or inferior in quality, ushc that any
further processing or manipulation thereof is not technically or economically feasible for the purpose for which
they are originally intended
2. Sale of recovered waste/scrap generated from processing of raw materials, including used
packaging materials and other direct/indirect materials/supplies that have undergone processing or
which have been used in production/processing activity registered with PEZA – considered covered
by the registered activity of an Export Enterprise; Income derived therefrom shall be covered by the
applicable tax incentive
For purposes of proper reckoning of incentives, Eco-zone Export Enterprises with multiple activities are required to
maintain separate books of accounts for each activity.
Primary Registration - the process by which a person, whether an individual, including estates and trusts, or a
corporation and other juridical entities, upon application and full compliance with the registration requirements
prescribed in these Regulations, is registered with and consequently included in the registration database of the
Bureau of Internal Revenue (BIR)
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GROUP 5 – TAX II Tidoso, Sios-e, Tumulak
Primary Registration may involve two scenarios depending on the purpose of the taxpayer applying for
registration as follows:
i. TIN ISSUANCE AND REGISTRATION – refers to issuance of TIN to all persons who will engage in
business, practice of profession or employment and who may or may not be subject to any national internal
revenue tax but may be required to file the corresponding tax return, statement or other documents as
required by the Code such as: income tax, estate and donor’s tax, value added tax, percentage tax,
withholding tax, excise tax and documentary stamp tax (DST), including registration of its branch/es (for
purposes of securing a branch code);
ii. PURELY TIN ISSUANCE – refers to issuance of TIN to applicants under Executive Order (EO) 98, series
of 1998 e.g. in the case of individuals required to incorporate the TIN in all forms, permits, licenses,
clearances, official papers and documents which they secure from other government agencies e.g. Local
Government Unit (LGU), Department of Trade and Industry (DTI), Land Transportation Office (LTO),
Department of Foreign Affairs (DFA), etc. It also includes issuance of TIN to Overseas Filipino Workers
(OFWs)/Overseas Contract Workers (OCWs) as defined under these Regulations as well as to Non-
Resident Foreign Corporations (NRFC)/ Non-Resident Alien not engaged in Trade or Business (NRANETB)
subject to final withholding tax on income derived from sources within the Philippines.
Secondary Registration - shall pertain to subsequent registration activities after the issuance of BIR Certificate of
Registration (COR) relative to the printing and issuance of official receipts/sales invoices; keeping/registering of
books of accounts and other accounting records; applying for certain accreditation requirements and securing other
applicable registration-related permits
To complete the registration requirement pursuant to Section 236(A) of the NIRC of 1997, as amended, the following
persons shall comply with the procedures and requirements in Annex "A" and Section 6 hereof:
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GROUP 5 – TAX II Tidoso, Sios-e, Tumulak
i. Self-employed individuals, estates and trusts, and their branches or facilities, if any;
ii. Corporations, partnerships, cooperatives, associations (whether taxable or non- taxable) and their branches
and facilities, if any;
iii. Government Agencies and/or Instrumentalities (GAIs), GOCCs, LGUs, and their branches and facilities, if
any; and
iv. Employees.
Commencement of business shall be reckoned as defined in Section 3(6) hereof. A person shall be
considered to have violated this provision when he/it proceeded to this stage after the lapse of thirty (30)
calendar days from the issuance of Mayor’s Permit/PTR by the concerned LGU, or COR issued by the
SEC or the date of its first sales transaction prior to its registration.
Subject to the requirements of Section 4(B)(i) hereof, parties to ONETT transactions who, at the time of
their transaction, have not yet been issued a TIN shall apply for issuance thereof at the time of payment of
the tax due. Such TIN issued to the individual shall be permanent and may be updated for future
transactions of such person with the BIR, e.g. subsequent employment, establishing a business, etc.
3. Before or upon filing of any applicable tax return, statement or declaration as required by the
Code, as amended – Partnerships, Associations, Cooperatives, Government Agencies and
Instrumentalities (GAIs): -
Example 1: A General Professional Partnership (GPP) was issued TIN on May 2, 2008, with only Income
Tax and ARF as registered tax types. Subsequently, it paid its advance office rental amounting to
P20,000.00 where an amount of P1,000.00 was withheld and must be remitted to the BIR on or before
June 10, 2008. Under this scenario, the GPP must update its records and register the applicable tax type
e.g. withholding on rental, with its BIR district office on or before the due date for the remittance of the tax
that was withheld.
The submission of the fully accomplished registration forms to the BIR may either be done by the employer
or the employee. However, employees of identified Large Taxpayers (LT) or entities under the Taxpayer
Account Management Program (TAMP), whose TINs were secured by the employer thru the eREG System,
shall submit the prescribed registration form for employment shall be submitted through the employer.
Subject to the provisions of Section 4(B)(iv) hereof, individuals required to secure TIN for their transactions
with government agencies shall apply for their TIN from any BIR district office (thru the eREG system) at
any time before they complete their transaction with such government agency. TINs issued under EO 98,
series of 1998 shall be permanent and may be updated for future transactions of such person with the BIR
(e.g., subsequent employment, establishing a business, etc.).
In any case, the CIR may, for administrative and meritorious reasons, deny or revoke any application for
registration.
1. Persons Entitled to the Issuance of COR. – The COR shall only be issued to individuals engaged in business
or practice of profession and to juridical persons (whether taxable or exempt) by the BIR district office concerned
(i.e., BIR district office of HO/Branch/Facility) upon compliance with the requirements for registration subject to the
provisions of Section 4(4) hereof. Issuance of COR, whether upon registration or upon update of taxpayer’s
information, is not subject to payment of Certification Fee unless the taxpayer requested for a certified copy of said
COR, in which case, the same shall be subject to the payment of Certification Fee, to be prescribed by the CIR,
imposed under Section 13 hereof.
2. Persons Not Covered by the Issuance of COR. – Employees, ONETT taxpayers, and/or persons who have
secured a TIN under EO 98, series of 1998 with the BIR shall not be issued a COR.
5. Posting of COR. – Persons mentioned in Subsection (1) above shall post or exhibit his/its original COR and
duly validated ARF Return at his/its principal place of business and at each branch and/or facility in a way that is
clearly and easily visible to the public.
SECTION 8. ANNUAL REGISTRATION FEE (ARF). – An ARF in the amount of Five Hundred Pesos (P500.00)
for every HO and/or branch shall be paid upon registration and every year thereafter on or before January 31.
SECTION 9. REQUIREMENT FOR THE REGISTRATION OF EACH TYPE OF INTERNAL REVENUE TAX. – Every
person, who is required to register with the BIR under Section 4 of these Regulations, shall register each type of
internal revenue tax for which he/it is obligated to file a return or pay taxes due thereon. Such person shall update
the BIR for any changes in his / its registration information in accordance with Section 11 hereof.
Generally, registration of tax types by a business entity consists of but not limited to the following internal revenue
taxes/fees:
1. Income tax;
2. VAT and/or percentage tax;
3. Withholding tax on compensation;
4. Creditable withholding tax at source on certain income payments;
5. Final withholding tax on certain income payments;
6. Documentary Stamp Tax;
7. Excise tax; and
8. Annual Registration Fee
In order to avoid the generation of invalid “stop-filer” cases in the BIR’s database, only those tax types which the
taxpayer is expected to regularly/periodically file the return and/or pay the tax shall be registered. In case a taxpayer
fails to update his tax types prior to filing/ payment of a tax return, the duly authorized BIR personnel must register
the corresponding tax type for the Tax Return to be filed/paid except for VAT and/or percentage taxes which must
be applied for by the taxpayer. The BIR personnel initiating the update in behalf of the taxpayer must inform him of
such update, in writing, to give due notice on his obligation to subsequently file the return on a regular basis on or
before the prescribed deadline for filing.
The registration of income tax as a tax type does not automatically carry with it the registration of VAT and/or
percentage tax as a covered/registered tax type. An example of this is the seller of agricultural food products. Such
seller, although subject to income tax, is exempt from the imposition of either VAT or percentage tax, pursuant to
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GROUP 5 – TAX II Tidoso, Sios-e, Tumulak
the provisions of Section 109 of the Code, as amended. In which case, VAT or Percentage need not be registered
as a tax type.
For marginal income earners, the activities of such individuals are considered principally for subsistence or livelihood.
Moreover, they are not required to pay any ARF although they are required to register as taxpayers for being
potential income and withholding tax filers. For purposes of registration, they will be registered for the tax type
Income Tax and Form Type 1701. Notwithstanding their exemption from business taxes and ARF, they are liable to
pay Income Taxes similar to any other individual engaged in business or practice of profession, after applying the
allowable deductions against their Gross Income/Sales/Receipts and personal/additional exemptions granted under
the Tax Code.
For those enjoying income tax holidays, or exemption from other taxes for a limited time, as granted pursuant to
special laws, the type of taxes the taxpayer is exempt from paying on the account thereof, the effectivity and expiry
date shall be indicated. However, upon expiration thereof, it shall be the duty of the taxpayer to update his/its
registration and/or the BIR district office must be duly informed in writing.
For purposes of determining the proper tax type (i.e., whether VAT or other percentage taxes) based on the nature
of the business activity of the taxpayer, the following rules shall apply:
i. VAT REGISTRATION, in General. – Any person who, in the course of trade or business, sells, barters,
exchanges goods or properties, or engages in the sale of services subject to VAT imposed in Sections.
106 and 108 of the Code, as amended, shall register the VAT tax type with the BIR district office
having jurisdiction over the HO.
ii. MANDATORY VAT REGISTRATION. - Any person who, in the course of trade or business, sells, barters
or exchanges goods or properties or engages in the sale or exchange of services shall be liable to register
the VAT tax type if:
1) His gross sales or receipts for the past twelve (12) months, other than those that are
exempt under Section 109 (1) (A) to (U) of the Code, as amended, have exceeded One Million
Nine Hundred Nineteen Thousand Five Hundred Pesos (P1,919,500.00); or
2) There are reasonable grounds to believe that his gross sales or receipts for the next
twelve (12) months, other than those that are exempt under Section 109 (1) (A) to (U) of the
Code, as amended, will exceed One Million Nine Hundred Nineteen Thousand Five Hundred
Pesos (P1,919,500.00).
Every person who becomes liable to VAT under paragraph (ii) of this Section shall register with the BIR
district office which has jurisdiction over his HO. IF HE FAILS TO REGISTER, he shall be liable to pay the
output tax under Sections. 106 and/or 108 of the Code, as amended, as if he were a VAT-registered
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GROUP 5 – TAX II Tidoso, Sios-e, Tumulak
person, but without the benefit of input tax credits for the period in which he was not properly
registered.
Moreover, FRANCHISE GRANTEES OF RADIO AND TELEVISION BROADCASTING, whose gross annual
receipt for the preceding calendar year exceeded P10,000,000.00, shall register as VAT taxpayer within
thirty (30) days from the end of the taxable year.
iii. Non-VAT Registration. – The following are not required to register VAT as a tax type:
1) Those persons subject to other percentage taxes under Title V of the Code, as amended;
2) Those whose transactions are VAT-exempt as enumerated under Section 109 of the Code,
as amended.
3) Marginal Income earners as herein defined.
2) Any person who is VAT-registered BUT ENTERS INTO TRANSACTIONS WHICH ARE
EXEMPT FROM VAT (mixed transactions) may opt that the VAT apply to his transactions which
would have been exempt under Section 109 (1) of the Code, as amended.
3) Franchise grantees of radio and/or television broadcasting whose annual gross receipts
of the preceding year do not exceed Ten Million Pesos (P10,000,000.00) derived from the
business covered by the law granting the franchise may opt for VAT registration.
Any person who ELECTS TO REGISTER UNDER SUBSECTIONS (IV.1) AND (IV.2) above shall
not be allowed to cancel his VAT registration for the next three (3) years.
The above-stated taxpayers may apply for VAT registration not later than ten (10) days before the
beginning of the taxable quarter and shall pay the ARF prescribed under Section 8 hereof, unless they
have already paid at the beginning of the year. In any case, the CIR may, for administrative reason, deny
any application for registration. Once registered as a VAT person, the taxpayer shall be liable to output
tax and be entitled to input tax credit beginning on the first day of the month following registration.