RR No. 1-2016: Amends certain provisions of Revenue Regulations No. 3-2005

Key points

1. Tax returns as pre-condition. Under EO 398, persons bidding for or entering government contracts submit a copy of their latest income tax and business tax returns with their proposal or bid. These returns and taxes must be filed and paid through eFPS, and only eFPS-filed returns are accepted.
2. Validation by the procuring entity. Returns are checked against the list of issued Tax Clearances on the BIR website. Attachments such as Audited Financial Statements are validated with the Large Taxpayers Service office or the RDO where the bidder is registered.
3. Where and how to apply. Tax Clearance is issued by the Accounts Receivable Monitoring Division (ARMD). Applications under RA No. 9184 and EO No. 398 are filed manually with the ARMD until an on-line application is available.
4. Criteria for issuance. A Tax Clearance valid for six (6) months is issued to an applicant with no unpaid annual registration fee, no open valid stop-filer cases, and no pending criminal charge with the Department of Justice or any competent court. The applicant must also be a regular eFPS user for at least two (2) consecutive months before applying (new applicants only), and have no delinquent account or judicially protested assessments with a decision favorable to the BIR.
5. Protested assessments and escrow. Assessments timely protested administratively under RR No. 12-99, as amended by RR No. 18-2014, or elevated to the CTA or a higher court, are not delinquent accounts. For judicially protested assessments already covered by a BIR-favorable court decision under appeal, or delinquent accounts under Section 204 abatement or compromise, clearance requires an escrow deposit with an authorized agent bank. The escrow equals the protested liabilities, or for Section 204 cases the liabilities plus delinquency penalties net of amounts paid, and none is needed where the higher court decision favors the taxpayer.
6. Contents and spurious clearances. The Tax Clearance shows current assets and current liabilities from the latest audited Financial Statements, for the bidder’s Net Financial Contracting Capacity (NFCC), plus details of protested liabilities. Bidders who submit a spurious Tax Clearance are referred to the Prosecution Division, the procuring agency imposes the penalty under Section 69 of RA No. 9184, and no clearance is issued until the case is resolved or sanctions are lifted.

Who is affected

• Persons, natural or juridical, local or foreign, bidding for or entering government contracts
• Procuring government entities and agencies

Deadlines and effectivity

• Tax Clearance validity: six (6) months from the date of issuance
• eFPS usage requirement: at least two (2) consecutive months before the application (new applicants)