RMC No. 15-2007: Publishes the full text of Memorandum of Agreement between the Philippine Economic Zone Authority and Bureau of Internal Revenue executed on March 1, 2007

Summary

RMC No. 15-2007 publishes the full text of the Memorandum of Agreement between the Philippine Economic Zone Authority (PEZA) and the BIR executed on March 1, 2007. It covers monitoring of income tax incentives of PEZA-registered enterprises.

Key points

1. PEZA requirements for enterprises. PEZA requires registered enterprises to register their area of operations with the BIR RDO having jurisdiction. Enterprises with Income Tax Holiday (ITH) and/or the 5% Gross Income Tax (GIT) incentive secure a yearly PEZA certification and attach it to their annual ITR. They also submit to PEZA a copy of the annual ITR, Audited Financial Statements and attachments, stamped Received by the BIR, within 30 days from the prescribed last day of filing or actual filing, whichever is later.
2. PEZA lists and endorsements to the BIR. PEZA gives the BIR an alphabetical master list of ITH/5% GIT enterprises on or before January 31 each year, with an update not later than July 31 each year. Within one (1) year from receiving the ITR documents, PEZA endorses them to the BIR with its validation of the covered period, its determination of incomes not covered by ITH/5% GIT, and its validation of the actual percentage of export sales.
3. BIR review and audit. Within one (1) year before the end of the three-year prescriptive period under Sec. 203 of the Tax Code, the Assessment Service in the National Office reviews the documents endorsed by PEZA. Findings of deficiency go to the concerned RDOs for immediate collection with increments. The BIR also audits enterprises that claimed exemption but did not submit their final ITR and AFS to PEZA.
4. Information sharing. The BIR informs PEZA of its review findings within 30 days after approval by the concerned BIR official. It also gives PEZA copies of pertinent regulations, rulings and other revenue issuances within 30 days from issuance, subject to Sec. 270 in conjunction with Sec. 71 of the Tax Code.
5. Working Group and guidelines. Within 30 days from signing, PEZA and the BIR create a Working Group with one representative each from the DOF and DTI to oversee implementation and build a database on investment incentives. Within 30 days from its creation, PEZA and the BIR issue their own implementing guidelines.
6. Transmittal dates and coverage. PEZA transmits its endorsement for taxable year 2004 not later than July 31, 2007, and for taxable year 2005 not later than May 31, 2008. The first master list is due not later than July 31, 2007. The agreement applies to ITH or 5% GIT availments for the taxable year ending July 31, 2006 and onwards, unless the parties revoke it.

Who is affected

• PEZA-registered enterprises with ITH and/or 5% GIT incentive
• PEZA and the BIR

Deadlines and effectivity

• Agreement executed March 1, 2007
• Master list: January 31 each year, update not later than July 31 each year
• Taxable year 2004 endorsement: not later than July 31, 2007
• Taxable year 2005 endorsement: not later than May 31, 2008

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.