RR No. 12-2010: Prescribes the policies, guidelines and procedures in the implementation of the tax subsidy to be granted by the Fiscal Incentives Review Board to the Millennium Challenge Account-Philippines for the Philippine Compact Program

Key points

1. Scope of the subsidy. The Regulations cover only the tax subsidy as limited by the Certificate of Entitlement to Subsidy (CES) and the FIRB resolution in amount, scope and period. The Compact’s assumption of taxes does not apply to taxes on income, profit or gross receipts of Filipino citizens, permanent residents and Philippine-organized legal persons, except MCA-Philippines and any Philippine-registered subsidiary, branch or representative office of a foreign legal person.
2. VAT and Percentage Tax. MCA-Philippines does not withhold final VAT on payments to Vendors providing MCC Funded Goods and Services. The VAT subsidy accounts for the 12% output VAT liability that Vendors can pass on, and it may be enjoyed by foreign or Filipino Vendors, while any Vendor subject to Percentage Tax on those goods and services may use the Percentage Tax subsidy.
3. Income Tax subsidy. MCA-Philippines and any Covered Employee or Vendor, as qualified under Section 2, may use the subsidy for Income Tax, including Capital Gains Tax and Final Withholding Tax, on income from MCC Funded Goods and Services. Income payments to them are not subject to Creditable Withholding Tax, withholding tax on government money payments, Final Withholding Tax or withholding tax on wages.
4. Excise Tax subsidy. Vendors may use it for Excise Tax on manufacture or production of goods for a Project or the Compact. MCA-Philippines or a Vendor may also use it for petroleum products bought from the local refiner or a dealer who acquired them directly from the refiner, while Excise Tax on importations is not covered.
5. Late payment. The BIR accepts payment of an Assumed Tax without late payment penalty when the delay comes from the Department of Budget and Management in releasing the Special Allotment Release Order, or from Large Taxpayers Regular Audit Division 4 in releasing the Tax Subsidy Availment Certificate or the Tax Subsidy Debit Memo.

Who is affected

• Millennium Challenge Account-Philippines (MCA-Philippines)
• Vendors of MCC Funded Goods and Services
• Covered Employees