Rates and Returns

Income may arise from service, labor or capital.

C. Tax Rates

1. Individuals a. Graduated income tax rates on taxable incomeb. Capital gains – flat rate

i . on sales of shares of stock of domestic corporation (except dealers in securities)aa. ½ of 1% Gross Selling price – listed shares

bb. 5% for 1st 100,000 and 10% in excess of 100,00 of net Capital gains – shares not listed and exchanged in stock exchange

ii. On sale of real property classified as capital asset by individual – flat rate 6% located in Ph

c. Passive income subject to final tax at preferential ratestax base is gross income – p. 27 syllabustaxpayers – locators of Special Econ Zone – tax 5% on Gross income in lieu of all other taxes(they just pay 1 tax : PCDA SBMA Peza registered, Apeco)Definition of Gross income is different from that in the tax code: because the locators are governed by special laws.

Tax basestaxable incomegross income (deduction of cost of goods sold) – NFRC , NRENETBIf on the sale of Rp classified as capital asset whether by ind or corp= tax base = 6% imposed on gross selling price or zonal value whichever is higher (cost of property is not allowed as deduction)

- gain or loss on the part of seller is immaterial; even if sold at a loss, still liable for 6% FCGT-Gain from sale of RP ordinary asset – tax bases is Gross income (selling price-adjusted basis= gain)- engaged in real estate business – allowed to claim deductions

Sale of unlisted shares = tax bases is Selling price less basis (cost of shaires) = gain gain may be offset of capital loss to obtain capital gain first 100k 5%, next = 10%

Listed and traded shares = gain derived is exempt, but subject to stock transaction tax (10%?)= tax base is GSP, tax rate ½ of 1%listed not traded =

2. Corporations

a. Domestici . Regular of normal income tax rate – flat rate 30% starting 2009ii. MCIT

SEC 27 NIRC Rates of Income tax on Domestic Corporations. -

(E) Minimum Corporate Income Tax on Domestic Corporations. -

(1) Imposition of Tax. - A minimum corporate income tax of two percent (2%0 of the gross income as of the end of the taxable year, as defined herein, is hereby imposed on a corporation taxable under this Title, beginning on the fourth taxable year immediately following the year in which such corporation commenced its business operations, when the minimum income tax is greater than the tax computed under Subsection (A) of this Section for the taxable year.

(2) Carry Froward of Excess Minimum Tax. - Any excess of the minimum corporate income tax over the normal income tax as computed under Subsection (A) of this Section shall be carried forward and credited against the normal income tax for the three (3) immediately succeeding taxable years.

(3) Relief from the Minimum Corporate Income Tax Under Certain Conditions. - The Secretary of Finance is hereby authorized to suspend the imposition of the minimum corporate income tax on any corporation which suffers losses on account of prolonged labor dispute, or because of force majeure, or because of legitimate business reverses.

The Secretary of Finance is hereby authorized to promulgate, upon recommendation of the Commissioner, the necessary rules and regulation that shall define the terms and conditions under which he may suspend the imposition of the minimum corporate income tax in a meritorious case.

(4) Gross Income Defined. - For purposes of applying the minimum corporate income tax provided under Subsection (E) hereof, the term 'gross income' shall mean gross sales less sales returns, discounts and allowances and cost of goods sold. "Cost of goods sold' shall include all business expenses directly incurred to produce the merchandise to bring them to their present location and use.

REVENUE REGULATIONS 12-07 SEC. 2. AMENDATORY PROVISION. – Pertinent portions of Sec.

2.27(E)

of Revenue Regulations No. 9-98 are hereby amended to read as follows:

“Sec. 2.27(E) MINIMUM CORPORATE INCOME TAX (MCIT)DOMESTIC CORPORATIONS –

“(1) Imposition of the Tax. - A minimum corporate income tax (MCIT) of two percent (2%) of the gross income as of the end of the taxable year (whether calendar or fiscal year, depending on the accounting period employed) is hereby imposed upon any domestic corporation beginning on the fourth (4th) taxable year immediately following the taxable year in which such corporation commenced its business operations. The MCIT shall be imposed whenever such corporation has zero or negative taxable income or whenever the amount of minimum corporate income tax is greater than the normal income tax due from such corporation. XXX

For purposes of these Regulations, the term, “normal income tax” means the income tax rates prescribed under Sec. 27 (A) and Sec. 28(A)(1) of the Code at 34% on January 1, 1998; 33% effective January 1, 1999; at 32% effective January 1, 2000 and 35% effective November 1, 2005 and thereafter.Provided, however, that effective January 1, 2009 the rate of income tax shall be thirty percent (30%), pursuant to RA No. 9337.

“ In the case of a domestic corporation xxx xxx xxx

“(2) Carry forward of excess minimum corporate income tax — xxx xxx xxx

“Illustration on howto carry forward excess minimum corporate income tax

presented on annualized basis -“Excess of MCIT

“Normal Income

Over the Normal

“Year Tax MCIT

Income Tax

“1998 P50,000 P 75,000 P25

,000

“1998 amount of tax payable P 75,000

“1999 P60,000 P100,000

P40,000

“1999 amount of tax payable P100,000“2000 P100,000 P60,000

“Computation of Net Amount of Tax Payable in 2000:“Amount of tax payable“Less:

“1998 excess MCIT (25,000)“1999 excess MCIT (40,000)

“Net amount of tax payable

“The taxpayer shall pay the MCIT whenever it is greater than the regular or normal corporate income tax which is imposed under Sec. 27(A) and Sec. 28(A)(1) of the Code. The final comparison between the normal income tax payable by the corporation and the MCIT shall be made at the end of the taxable year and the payable or excess payment in the Annual Income TaxReturn shall be computed taking into consideration corporate income tax payment made at the time of filing of quarterly corporate income tax returns whether this be MCIT or normal income tax Thus, under the example, the taxpayer should have paid the MCIT of P75,000.00 since this amount is greater than the normal income tax of P50,000.00 in 1998.

“ xxx xxx xxx

“(3) Relief from the Minimum Corporate Income Tax under Certain Conditions –xxx xxx xxx

“ xxx xxx xxx

“ (4) Definition of Terms

“(a) “Gross income” defined – For purposes of the minimum corporate income tax prescribed under this Subsection, the term “gross income” means gross sales less sales returns, discounts, and allowances and cost of goods sold, in case of sale of goods, or gross revenue less sales returns, discounts, allowances and cost of services/direct cost, in case of sale of services . This rule, notwithstanding, if apart from deriving income from these core business activities there are other items of gross income realized or earned by the taxpayer during the taxable period which are subject to the normal corporate income tax, the same items must be included aspart of the taxpayer’s gross income for computing MCIT. This means that the term “gross income” will also include all items of gross income enumerated under Section 32(A) of the Tax Code, as amended, except income exempt from jncome tax and income subject to final withholding tax described in the succeeding subparagraph.

“Gross sales” shall include only sales contributory to income taxable under Sec. 27(A) of the Code.” “Cost of goods sold” shall include all business expenses directly incurred to produce the merchandise to bring them to their present location and use. Gross Revenue shall include income from sale of services, likewise, taxable under Sec. 27(A). Cost of Services or Direct Cost of Services shall include business expenses directly incurred or related to the gross revenue from rendition of services.

“Passive incomes which are subject to final tax at source shall not form part of gross income for purposes of minimum corporate income tax.

“ xxx xxx “(5) Specific Rules for Determining the Period When a Corporation Becomes

Subject to the MCIT-“ xxx xxx xxx

“(6) Manner of filing and payment — The minimum corporate income tax (MCIT) shall be paid in the same manner prescribed for the payment of the normal corporate income tax which is on a quarterly and on a yearly basis. It shall be covered by a tax return designed for the purpose which will be submitted together with the corporation's annual final adjustment income tax return. Domestic corporations shall be required to pay the minimum corporate income tax on a quarterly basis, pursuant to the provisions of Sec. 75 and Sec. 77 of theCode in relation to Section 245 of the same Code, as amended.

“ xxx xxx xxx” XXXXX

MAMALATEO: MCIT 2% of Gross income (no allowable deductions)When is tax payer liable (RFC / DC has to compute regular income tax and MCIT → it has to pay the higher amount; if MCIT is higher than the Regular Income tax, MCIT shall be paid)

Not applicable to corporations that are subject to special tax rates:proprietary educational institutionNRFC – tax base already GInon profit hospitalsdepository banks under FCD (foreign currency deposit)ROHQlocators of special economic zones – applied are special laws.

Will only apply on the 4th year of operation, reckoned from the start of its commercial operations; reckoning point is BIR registration.

Individuals ETB = just like CORPS ETB= file quarterly; and reporting of income is quarterly

RELIEF FROM MCIT CORP that suffers losses, force majeur, legitimate business losses

Gross receipt and cost of services per industry

For purposes of applying MCIT the gross receipts and cost of services of taxpayers engaged in the following types of services, or any other kind but of a similar nature, shall be determined as follows:

i) banks and non bank financial intermediaries performing quasi banking activities pursuant to sec V,W, and X of NIRC xxxxii) insurance and pension funding companiesiii) finance companies and other financial intermediaries not performing quasi banking activitiesiv) brokers of securities (excluding banks)v) customs, insurance, real estate, immigration, and commercial brokersvi) general engineering and/or building contractorsvii) common carriers or transportation contractorsviii)hotel, motel, rest/pension/lodging house and resort operatorsix) food service establishmentsx) lessors of propertyxi) telephone and telegraph electric gas, and water utilitiesxii) radio and/or television broadcasting xiii) relief from minimum corporate income tax under certain conditions

xv) specific rules for determining period when a corporation becomes subject to MCITxvi) manner and filing and paymentxvii) accounting treatment of the excess minimum corporate income tax paidxviii) exceptions

iii. Improperly Accumulated Earnings Tax (IAET)DC → classified as closely, more than 50% of its outstanding shares or voting shares are held by no more than 20 individualsMay continue accumulating retained earning! To discourage them, IAET was imposed at 10% of Improperly accumulated earnings, regardless of the composition or identity of shareholdersThe 10% is in the form of penalty → because when the corporation declares dividends, shareholders will pay again the taxes, withholding of taxes based on the different rates.

Not applicable:

1. RFC2. NRFC3. DC - publicly-held4. Bank and non-bank - 5. Insurance companies – common to accumulate earnings for 3, 4 and 56. Taxable partnerships and JV's – constructive receipt principle ; income taxable to partners whether actually received or not (6, 7, 8)7. GPP8. exempt JV9. PEZA, SBMA, BCDA – subject to 5% in lieu of all other taxes

WHEN IS ACCUMULATION PROPER IF RETAINED EARNINGS ARE MORE THAN PAID IN CAPITAL → IMPROPER

EX : PAID IN 10M , AND R.E. IS GREATER THAN 10M IF EQUAL OR LESS THAN PAID IN CAPITAL → NO NEED TO TEST IF ACCUMULATION IS PROPER OR IMPROPER

◦ JUSTIFY BY BOARD RESOLUTION THAT EARNINGS WERE RETAINED FOR BUSINESS EXPANSION, CONSTRUCTION OF BLDGS, ACQUISITION OF LAND, CAPITAL EXPENDITURES, OR DUE TO LEGAL REQUIREMENTS;

◦ LOAN AGREEMENTS BY CREDITORS, COVENANTS WHICH WOULD RESTRICT TP FROM DECLARING DIVIDENDS◦ OR BY REQUIREMENTS OF THE LAW.

WHEN IMPROPERimmediacy test → To determine the “reasonable needs” of the business in order to justify an accumulation of earnings, these Regulations hereby adhere to the so-called “Immediacy test”.

Accordingly, the term reasonable needs” means the immidate needs of the business, including reasonably anticipated needs.

In either case, the corporation should be able to prove an immediate need for the accumulation of the earnings and profits , or the direct correlation of anticipated needs to such accumulation of profits.

Otherwise such accumulation would be deemed to be not for the reasonable needs of the business, and the penalty tax would apply.

IF IN THE BALANCE SHEET, THE TOTAL ASSETS WILL BE FUNDED BY LIABILITIES OR EQUITY: (A = L + E)AND EQUITY IS COMPOSED OF ADDITIONAL CAPITAL PAID IN CAPITAL AND RETAINED EARNINGSTHESE RETAINED EARNINGS WILL HAVE A COUNTER PART ASSET

IF THERE R. EARNINGS WERE EARMARKED FOR UNRELATED ACTIVITIES WITH THE BUSINESS → INDICATION THAT THE RETENTION IS NOT REASONABLE BECAUSE IT IS INVESTED THAT IS UNRELATED.

ADDITIONAL PAID IN CAPITAL PAID IN CAPITAL AND RETAINED EARNINGSTHE PORTION ALLOCATED FOR STOCK DIVIDENDS WILL BE RECLASSIFIED INTO PAID IN CAPITALSO THE PAID IN CAPITAL REPRESENTS THE TOTAL PAR VALUE OF THE SHARES ISSUED

ADDITIONAL PAID IN CAPITAL IS PREMIUM OVER PAR (EXCESS OVER PAR)

Section 29. Imposition of Improperly Accumulated Earnings Tax. -

(A) In General. - In addition to other taxes imposed by this Title, there is hereby imposed for each taxable year on the improperly accumulated taxable income of each corporation described in Subsection B hereof, an improperly accumulated earnings tax equal to ten percent (10%) of the improperly accumulated taxable income.

(B) Tax on Corporations Subject to Improperly Accumulated Earnings Tax. -

(1) In General. - The improperly accumulated earnings tax imposed in the preceding Section shall apply to every corporation formed or availed for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation, by permitting earnings and profits to accumulate instead of being divided or distributed.

(2) Exceptions. - The improperly accumulated earnings tax as provided for under this Section shall not apply to:

(a) Publicly-held corporations;(b) Banks and other nonbank financial intermediaries; and

(c) Insurance companies.

(C) Evidence of Purpose to Avoid Income Tax. -

(1) Prima Facie Evidence. - the fact that any corporation is a mere holding company or investment company shall be prima facie evidence of a purpose to avoid the tax upon its shareholders or members.(2) Evidence Determinative of Purpose. - The fact that the earnings or profits of a corporation are permitted to accumulate beyond the reasonable needs of the business shall be determinative of the purpose to avoid the tax upon its shareholders or members unless the corporation, by the clear preponderance of evidence, shall prove to the contrary.(D) Improperly Accumulated Taxable Income. - For purposes of this Section, the term 'improperly accumulated taxable income' means taxable income' adjusted by:

(1) Income exempt from tax;(2) Income excluded from gross income;(3) Income subject to final tax; and(4) The amount of net operating loss carry-over deducted;

And reduced by the sum of:

(1) Dividends actually or constructively paid; and(2) Income tax paid for the taxable year.

Provided, however, That for corporations using the calendar year basis, the accumulated earnings under tax shall not apply on improperly accumulated income as of December 31, 1997. In the case of corporations adopting the fiscal year accounting period, the improperly accumulated income not subject to this tax, shall be reckoned, as of the end of the month comprising the twelve (12)-month period of fiscal year 1997-1998.

(E) Reasonable Needs of the Business. - For purposes of this Section, the term 'reasonable needs of the business' includes the reasonably anticipated needs of the business.

Rev Regulations 2-2001 Digest

REVENUE MEMORANDUM ORDER NO. 2-2001 issued January 18, 2001 defines and delineates the functions and processes of the National Office Management Information System (NOMIS)-Management Reporting through Executive Information System (EIS) Capability (Release 4).

The following officials will have access on the NOMIS (Release 4):1) Commissioner;2) Deputy Commissioners;3) concerned Assistant Commissioners;4) concerned Head Revenue Executive Assistants;5) Regional Directors;6) Asst. Regional Directors of Metro Manila and Cebu City; and7) selected Division Chiefs and Section Chiefs.The reports and screens that can be generated, printed or viewed through NOMIS (Release 4) are specified in the Order, including the Office Scorecard that will be used in the monitoring of performance of concerned BIR offices.

Notes: IAET! in addition to other income taxes imposed under Income tax, an improperly accumulated earnings tax equal to 10% of the improperly accumulated taxable income for each taxable year is imposed.

CONCEPT OF IMPROPERLY ACCUMULATED EARNINGS TAXa tax equal to 10% of the improperly accumulated taxable income of corporation formed or availed of for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any corporation to accumulate instead of dividing them among or distributing them to the shareholders is imposed.

The rationale is that if the earnings and profits were distributed, the shareholders would then be liable to income tax thereon, whereas if the distribution were not made to them they would not incur in respect to the undistributed earnings and profits of the corporation.

Thus a tax being imposed in the nature of a penalty to the corporation for the improper accumulation of its earnings and as a form of deterrent to the avoidance of tax upon shareholders who are supposed to pay dividends tax on the earnings distributed to them .

If there is a determination that a corporation has accumulated income beyond the reasonable needs of the business , the 10% improperly accumulated earnings tax shall be imposed.

DETERMINATION OF REASONABLE NEEDS OF THE BUSINESSAn accumulation of earnings or profits (including undistributed earnings or profits of prior years ) is unreasonable if it is not necessary for the purpose of the business , considering all the circumstances of the case.To determine the “reasonable needs” of the business in order to justify an accumulation of earnings, these Regulations hereby adhere to the so-called “Immediacy test”.

Accordingly, the term reasonable needs” means the immidate needs of the business, including reasonably anticipated needs.

In either case, the corporation should be able to prove an immediate need for the accumulation of the earnings and profits , or the direct correlation of anticipated needs to such accumulation of profits.

Otherwise such accumulation would be deemed to be not for the reasonable needs of the business, and the penalty tax would apply.

The following constitute accumulation of earnings for the reasonable needs of the business:a) allowance for increase in the accumulation of earnings up to 100% of the paid up capital of the corporation as of Balance sheet date inclusive of accumulations taken from the years.b) earnings reserved for definite corporate expansion projects or programs requiring considerable capital expenditures as approved by the BOD or equivalent bodyc)Earnings reserved for building, plants or equipment acquisition as approved by the BOD or equiv bodyd) earnings body reserved for compliance with any loan covenant or pre existing obligation established under a legitimate business agreemente) earnings required by law or applicable regulations to be retained by the corporation or in respect of which there is a legal prohibition against its distributionf) in the case of subsidiaries of foreign corporations in the Ph, all undistributed earnings intended or reserved for investments within the Ph as can be proven by corporate records and / or relevant documentary evidence.

THE 10% IAET imposed on improperly accumulated taxable income earned starting 1998 Jan 1 by domestic

corporation as defined under NIRC and which are classified as closely-held corporations. However, IAET shall not apply to the ff corps:a) banks and other non bank financial intermediariesb) insurance companiesc) publicly held corpsd) taxable partnershipse) GPPf) non taxable JV’sg) enterprises duly registered with PEZA under RA 7916 and enterprises registered pursuant to the Bases Conversion and Devt Act as well as other enterprises duly registered under special economic zones declared by law which enjoy payment of a special tax rate on their registered operations or activities in lieu of other taxes, national or local.

For purposes of there Regulations, closely held corporations are those corporations atleast 50% in value of the OCS or atleast 50% of the total combined voting power of all classes of stock entitled to vote is owned directly or indirectly by or for not more than individuals.Domestic corporations not falling under the aforesaid definitions are, therefore, publicly-held corporations.

When is a corporation a closely held corp = p. 466

Tax base of improperly accumulated earnings tax: For corporations subject to tax, the “Improperly Accumulated Taxable income” for a particular year is first determined by adding to that year’s taxable income the following:

a) income exempt from taxb) income excluded from gross income c) income subject to final tax; andd) the amount of NOLCO deducted

The taxable income as thus determined shall be reduced by the sum of:a) income tax paid/payable during the taxable yearb) dividends actually or constructively paid / issued from the applicable year’s taxable income;c) amount reserved for the reasonable needs of the business as defined in these Regulations emanating from the covered year’s taxable income.

The resulting “Improperly Accumulated Taxable income” is thereby multiplied by 10% to get the Improperly accumulated earnings tax.

Once the profit has been subjected to IAET, the same shall no longer be subjected to IAET in later years even if not declared as dividend.

Profits which have been subjected to IAET when finally declared as dividends shall nevertheless be subject to Tax on dividends imposed under NIRC except those instances where the recipient

The dividends shall be deemed to have been paid out of the most recently accumulated profits or surplus and shall constitute a part of the annual income of the distributee for the year in which received pursuant to Sec 73 C

Dividends must be declared and paid or issue not later than one year following the close of the taxable year otherwise the IAET if any should be paid within 15 days thereafter.

The following are prima facie instances of accumulation of profits beyond the reasonable needs of a business and indicative of purpose to avoid income tax upon shareholders:a) investment of substantial earnings and profits of the corporation in unrelated business or in stock or securities of unrelated business

b) investment in bonds and other long term securities

c) accumulation of earnings in excess of 100% of paidup capital not otherwise intended for the reasonable needs of the business as defined in these Regulations.

In order to determine whether profits are accumulated for the reasonable needs of the business as to avoid the imposition of the improperly accumulated earnings tax, the controlling intention of the taxpayer is that which is manifested at the time of the accumulation , not subsequently declared intentions which are merely product of afterthought.

iv. Domestic Corporations entitled to preferential tax rates

aa. Proprietary educational institutions – 10% of taxable income

Section 27. Rates of Income tax on Domestic Corporations. -

(B) Proprietary Educational Institutions and Hospitals. - Proprietary educational institutions and hospitals which are nonprofit shall pay a tax of ten percent (10%) on their taxable income except those covered by Subsection (D) hereof: Provided, that if the gross income from unrelated trade, business or other activity exceeds fifty percent (50%) of the total gross income derived by such educational institutions or hospitals from all sources, the tax prescribed in Subsection (A) hereof shall be imposed on the entire taxable income. For purposes of this Subsection, the term 'unrelated trade, business or other activity' means any trade, business or other activity, the conduct of which is not substantially related to the exercise or performance by such educational institution or hospital of its primary purpose or function. A 'Proprietary educational institution' is any private school maintained and administered by private individuals or groups with an issued permit to operate from the Department of Education, Culture and Sports (DECS), or the Commission on Higher Education (CHED), or the Technical Education and Skills Development Authority (TESDA), as the case may be, in accordance with existing laws and regulations.

bb. Foreign currency deposit unit of local universal or commercial bank - 10% final tax

Section 27. Rates of Income tax on Domestic Corporations. - (D) Rates of Tax on Certain Passive Incomes. -

(3) Tax on Income Derived under the Expanded Foreign Currency Deposit System. - Income derived by a depository bank under the expanded foreign currency deposit system from foreign currency transactions with local commercial banks, including branches of foreign banks that may be authorized by the Bangko Sentral ng Pilipinas (BSP) to transact business with foreign currency depository system units and other depository banks under the expanded foreign currency deposit system, including interest income from foreign currency loans granted by such depository banks under said expanded foreign currency deposit system to residents, shall be subject to a final income tax at the rate of ten percent (10%) of such income.

Any income of nonresidents, whether individuals or corporations, from transactions with depository banks under the expanded system shall be exempt from income tax.

cc. Firms taxed under special income tax regimes eg registered entities under PEZA law and Bases Conversion Development Act - 5% final tax on gross income

v. Resident Foreign Corporations – that puts a branch in the Ph

2 corps : Parent companysubsidiary (branch in PH): RFC → only one juridical entity; extension of parent companyBut Tax Rate also 30% and tax base is taxable income (of the branch)when it remits branch profits → subject to branch profit remiitance tax of 15% imposed on profit remitted by Ph branch to its foreign office is the total profit applied or earmarked p. 53 book 2 taxpayers subject to income from within and within : RC/DC

aa. General Rule : 30% of the net taxable income from sources within the Philippines

Section 22. Definitions - When used in this Title: (H) The term 'resident foreign corporation' applies to a foreign corporation engaged in trade or business within the Philippines.

Section 28. Rates of Income Tax on Foreign Corporations. - A) Tax on Resident Foreign Corporations. -

(1) In General. - Except as otherwise provided in this Code, a corporation organized, authorized, or existing under the laws of any foreign country, engaged in trade or business within the Philippines, shall be subject to an income tax equivalent to thirty-five percent (35%) of the taxable income derived in the preceding taxable year from all sources within the Philippines: provided, That effective January 1, 1998, the rate of income tax shall be thirty-four percent (34%); effective January 1, 1999, the rate shall be thirty-three percent (33%), and effective January 1, 2000 and thereafter, the rate shall be thirty-two percent (32%).

In the case of corporations adopting the fiscal-year accounting period, the taxable income shall be computed without regard to the specific date when sales, purchases and other transactions occur. Their income and expenses for the fiscal year shall be deemed to have been earned and spent equally for each month of the period.

The reduced corporate income tax rates shall be applied on the amount computed by multiplying the number of months covered by the new rates within the fiscal year by the taxable income of the corporation for the period, divided by twelve.

Provided, however, That a resident foreign corporation shall be granted the option to be taxed at fifteen percent (15%) on gross income under the same conditions, as provided in Section 27 (A).

(2) Minimum Corporate Income Tax on Resident Foreign Corporations. - A minimum corporate income tax of two percent (2%) of gross income, as prescribed under Section 27 (E) of this Code, shall be imposed, under the same conditions, on a resident foreign corporation taxable under paragraph (1) of this Subsection.

(5) Tax on Branch Profits Remittances. - Any profit remitted by a branch to its head office shall be subject to a tax of fifteen (15%) which shall be based on the total profits applied or earmarked for remittance without any deduction for the tax component thereof (except those activities which are registered with the Philippine Economic Zone Authority). The tax shall be collected and paid in the same manner as provided in Sections 57 and 58 of this Code: provided, that interests, dividends, rents, royalties, including remuneration for technical services, salaries, wages premiums, annuities, emoluments or other fixed or determinable annual, periodic or casual gains, profits, income and capital gains received by a foreign corporation during each taxable year from all sources within the Philippines shall not be treated as branch profits unless the same are effectively connected with the conduct of its trade or business in the Philippines.

bb. Exempt entities

1. Regional or Area HQ’s

22 (DD) The term 'regional or area headquarters' shall mean a branch established in the Philippines by multinational companies and which headquarters do not earn or derive income from the Philippines and which act as supervisory, communications and coordinating center for their affiliates, subsidiaries, or branches in the Asia-Pacific Region and other foreign markets.

Section 28. Rates of Income Tax on Foreign Corporations. -

(A) Tax on Resident Foreign Corporations. -

(6) Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies. -

(c) Capital Gains from Sale of Shares of Stock Not Traded in the Stock Exchange. - A final tax at the rates prescribed below is hereby imposed upon the net capital gains realized during the taxable year from the sale, barter, exchange or other disposition of shares of stock in a domestic corporation except shares sold or disposed of through the stock exchange:

Not over P100,000………………… 5%

On any amount in excess of P100,000…… 10%

2. Representative Office

cc. RFC’s subject to preferential tax rates

1. International carrier = 28 A (3) International Carrier. - An international carrier doing business in the Philippines shall pay a tax of two and one-half percent (2 1/2%) on its 'Gross Philippine Billings' as defined hereunder: xxxxx

RA 10378. “SEC. 28. Rates of Income Tax on Foreign Corporations. —

“(A) Tax on Resident Foreign Corporations. — XX

“(3). International – Carrier. — An international carrier doing business in the Philippines shall pay a tax of two and one-half percent (21/2 %) on its ‘Gross Philippine Billings’ as defined hereunder:

“(a) International Air Carrier. — ‘Gross Philippine Billings’ refers to the amount of gross revenue derived from carriage of persons, excess baggage, cargo, and mail originating from the Philippines in a continuous and uninterrupted flight, irrespective of the place of sale or issue and the place of payment of the ticket or passage document: Provided, That tickets revalidated, exchanged and/or indorsed to another international airline form part of the Gross Philippine Billings if the passenger boards a plane in a port or point in the Philippines: Provided, further, That for a flight which originates from the Philippines, but transshipment of passenger takes place at any part outside the Philippines on another airline, only the aliquot portion of the cost of the ticket corresponding to the leg flown from the Philippines to the point of transshipment shall form part of Gross Philippine Billings.

“(b) International Shipping. — ‘Gross . Philippine Billings’ means gross revenue whether for passenger, cargo or mail originating from the Philippines up to final destination, regardless of the place of sale or payments of the passage or freight documents.

“Provided, That international carriers doing business in the Philippines may avail of a preferential rate or exemption from the tax herein imposed on their gross revenue derived from the carriage of persons and their excess baggage on the basis of an applicable tax treaty or international agreement to which the Philippines is a signatory or on the basis of reciprocity such that an international carrier, whose home country grants income tax exemption to Philippine carriers, shall likewise be exempt from the tax imposed under this provision.

2. OBU’S – 10% FINAL TAX

28 A (4) Offshore Banking Units. - The provisions of any law to the contrary notwithstanding, income derived by offshore banking units authorized by the Bangko Sentral ng Pilipinas (BSP) to transact business with offshore banking units, including any interest income derived from foreign currency loans granted to residents, shall be subject to a final income tax at the rate of ten percent (10%) of such income.

Any income of nonresidents, whether individuals or corporations, from transactions with said offshore banking units shall be exempt from income tax.

3. Regional Operating HQs - 10% taxable income


(A) Tax on Resident Foreign Corporations. - (6) Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies. - (b) Regional operating headquarters as defined in Section 22(EE) shall pay a tax of ten percent (10%) of their taxable income.Section 28. Rates of Income Tax on Foreign Corporations. -

(A) Tax on Resident Foreign Corporations. - (6) Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies. - (b) Regional operating headquarters as defined in Section 22(EE) shall pay a tax of ten percent (10%) of their taxable income.

4. Foreign currency deposit unit in Ph of foreign bank – 10% final tax

Section 28. Rates of Income Tax on Foreign Corporations. - (A) Tax on Resident Foreign Corporations. - (7) Tax on Certain Incomes Received by a Resident Foreign Corporation. -(b) Income Derived under the Expanded Foreign Currency Deposit System. - Income derived by a depository bank under the expanded foreign currency deposit system from foreign currency transactions with local commercial banks including branches of foreign banks that may be authorized by the Bangko Sentral ng Pilipinas (BSP) to transact business with foreign currency deposit system units, including interest income from foreign currency loans granted by such depository banks under said expanded foreign currency deposit system to residents, shall be subject to a final income tax at the rate of ten percent (10%) of such income.

Any income of nonresidents, whether individuals or corporations, from transactions with depository banks under the expanded system shall be exempt from income tax.

5. Branch of foreign corp registered with PEZA, SBMA , CDA, etc – 5% final tax on gross income

6. Qualified service contractor or subcontractor engaged in petroleum operations in the PH – 8% of gross income in lieu of any and all local and international taxesPD 87, PD 1354

dd. Branch Profits remittance tax (BPRT)


(A) Tax on Resident Foreign Corporations. - (5) Tax on Branch Profits Remittances. - Any profit remitted by a branch to its head office shall be subject to a tax of fifteen (15%) which shall be based on the total profits applied or earmarked for remittance without any deduction for the tax component thereof (except those activities which are registered with the Philippine Economic Zone Authority). The tax shall be collected and paid in the same manner as provided in Sections 57 and 58 of this Code: provided, that interests, dividends, rents, royalties, including remuneration for technical services, salaries, wages premiums, annuities, emoluments or other fixed or determinable annual, periodic or casual gains, profits, income and capital gains received by a foreign corporation during each taxable year from all sources within the Philippines shall not be treated as branch profits unless the same are effectively connected with the conduct of its trade or business in the Philippines.

1. Entities exempt from BPRT: PEZA, SBMA – registered entities

2. Not deemed remittance of profit: remittable profit transferred to Ph Corporation; remittance of assigned capital

3. Deemed Profit remittance

Revenue Memo Ruling No 1-2001

MARUBENI V CIR : Marubeni Corporation is a Japanese corporation licensed to engage in business in the Philippines.When the profits on Marubeni’s investments in Atlantic Gulf and Pacific Co. of Manila were declared, a 10% final dividend tax was withheld from it, and another 15% profit remittance tax based on the remittable amount after the final 10% withholding tax were paid to the Bureau of Internal Revenue. Marubeni Corp. now claims for a refund or tax credit for the amount which it has allegedly overpaid the BIR

Issues and Ruling: 1. W/N the dividends Marubeni received from Atlantic Gulf are effectively connected with its conduct or business in the Philippines as to be considered branch profits subject to 15%profit remittance tax imposed under NIRC 24(b)(2) – NO!

Pursuant to Sec 24(b)(2), only profits remitted abroad by a branch office to its head office which are effectively connected with its trade or business in the Philippines are subject to the 15% profit remittance tax. The dividends received by Marubeni from Atlantic Gulf are not income arising from the business activity in which Marubeni is engaged. Accordingly, said dividends if remitted abroad are not considered branch profits for purposes of the 15% profit remittance tax imposed by Section 24(b)(2).

2. Whether Marubeni is a resident or NRFC -- NRFC, with respect to the transaction. Marubeni’s head office in Japan is a separate and distinct income taxpayer from the branch in the Phil. The investment on Atlantic Gulf was made for purposes peculiarly germane to the conduct of the corporate affairs of Marubeni in Japan, but certainly not of the branch in the Phil.

3. At what rate should Marubeni be taxed? 15%. The applicable provision is Sec 24(b)(1)(iii) in conjunction with the Philippine-Japan Tax Treaty of 1980. As a general rule, it is taxed 35% of its gross income from all sources within the Phil. However, a discounted rate of 15% is given to Marubeni on dividends received from Atlantic Gulf on the condition that Japan, its domicile state, extends in favor of Marubeni a tax credit of not less than 20% of the dividends received. This 15% tax rate imposed on the dividends received under Section 24(b)(1)(iii) is easily within the maximum ceiling of 25% of the gross amount of the dividends as decreed in Article 10(2)(b) of the Tax Treaty.

Notes:Each tax has a different tax basis. Under the Philippine-Japan Tax Convention, the 25% rate fixed is the maximum rate, as reflected in the phrase ³shallnot exceed.´ This means that any tax imposable by the contracting state concerned should not exceed the 25%limitation and said rate would apply only if the tax imposed by our laws exceeds the same.

vi. Non-resident Foreign corporations NRFC

aa. General Rule: 30% of gross income Section 22. Definitions - When used in this Title: (I) The term 'nonresident foreign corporation' applies to a foreign corporation not engaged in trade or business within the Philippines.

Section 28. Rates of Income Tax on Foreign Corporations. - (B) Tax on Nonresident Foreign Corporation. -xx

bb. NRFCs subject to preferential tax rates

1. Non resident Cinematographic film onwer, lessor, or distributor - 25% gross income

28 B (2) Nonresident Cinematographic Film Owner, Lessor or Distributor. - A cinematographic film owner, lessor, or distributor shall pay a tax of twenty-five percent (25%) of its gross income from all sources within the Philippines.

2. Nonresident owner or lessor of vessels chartered of Ph nationals - 4.5% of gross rentals or charter fees

28 B (3) Nonresident Owner or Lessor of Vessels Chartered by Philippine Nationals. - A nonresident owner or lessor of vessels shall be subject to a tax of four and one-half percent (4 1/2%) of gross rentals, lease or charter fees from leases or charters to Filipino citizens or corporations, as approved by the Maritime Industry Authority.

3. Nonresident owner on Lessor of Aircraft Machineries and other Equipment - 7.5% of gross rentals or fees

Section 28. Rates of Income Tax on Foreign Corporations. - (B) Tax on Nonresident Foreign Corporation. -

(4) Nonresident Owner or Lessor of Aircraft, Machineries and Other Equipment. - Rentals, charters and other fees derived by a nonresident lessor of aircraft, machineries and other equipment shall be subject to a tax of seven and one-half percent (7 1/2%) of gross rentals or fees.

VIII. RETURNS AND PAYMENT OF TAX

a. Individual return NIRC 51, 56, 74

1. Who are required to file

(a) Every Filipino citizen residing in the Philippines;(b) Every Filipino citizen residing outside the Philippines, on his income from sources within the Philippines;(c) Every alien residing in the Philippines, on income derived from sources within the Philippines; and(d) Every nonresident alien engaged in trade or business or in the exercise of profession in the Philippines.

2. Who are not required to file ITR:

(a) An individual whose gross income does not exceed his total personal and additional exemptions for dependents under Section 35: Provided, That a citizen of the Philippines and any alien individual engaged in business or practice of profession within the Philippine shall file an income tax return, regardless of the amount of gross income;

(b) An individual with respect to pure compensation income, as defined in Section 32 (A)(1), derived from sources within the Philippines, the income tax on which has been correctly withheld under the provisions of Section 79 of this Code: Provided, That an individual deriving compensation concurrently from two or more employers at any time during the taxable year shall file an income tax return: Provided, further, That an individual whose compensation income derived from sources within the Philippines exceeds Sixty thousand pesos (P60,000) shall also file an income tax return;

(c) An individual whose sole income has been subjected to final withholding tax pursuant to Section 57(A) of this Code; and

(d) An individual who is exempt from income tax pursuant to the provisions of this Code and other laws, general or special.

3. Where to file: Except in cases where the Commissioner otherwise permits, the return shall be filed with an authorized agent bank, Revenue District Officer, Collection Agent or duly authorized Treasurer of the city or municipality in which such person has his legal residence or principal place of business in the Philippines, or if there be no legal residence or place of business in the Philippines, with the Office of the Commissioner.

4. When to file:

(1) The return of any individual specified above shall be filed on or before the fifteenth (15th) day of April of each year covering income for the preceding taxable year.

(2) Individuals subject to tax on capital gains;

(a) From the sale or exchange of shares of stock not traded thru a local stock exchange as prescribed under Section 24(c) shall file a return within thirty (30) days after each transaction and a final consolidated return on or before April 15 of each year covering all stock transactions of the preceding taxable year; and(b) From the sale or disposition of real property under Section 24(D) shall file a return within thirty (30) days following each sale or other disposition.

5. Where to pay: Section 56. Payment and Assessment of Income Tax for Individuals and Corporation. -

(A) Payment of Tax. -

(1) In General. - The total amount of tax imposed by this Title shall be paid by the person subject thereto at the time the return is filed. In the case of tramp vessels, the shipping agents and/or the husbanding agents, and in their absence, the captains thereof are required to file the return herein provided and pay the tax due thereon before their departure. Upon failure of the said agents or captains to file the return and pay the tax, the Bureau of Customs is hereby authorized to hold the vessel and prevent its departure until proof of payment of the tax is presented or a sufficient bond is filed to answer for the tax due.

(2) Installment of Payment. - When the tax due is in excess of Two thousand pesos (P2,000), the taxpayer other than a

corporation may elect to pay the tax in two (2) equal installments in which case, the first installment shall be paid at the time the return is filed and the second installment, on or before July 15 following the close of the calendar year. If any installment is not paid on or before the date fixed for its payment, the whole amount of the tax unpaid becomes due and payable, together with the delinquency penalties.

6. Capital gains on shares of stock and real estate: 56 (3)

(3) Payment of Capital Gains Tax. - The total amount of tax imposed and prescribed under Section 24 (c), 24(D), 27(E)(2), 28(A)(8)(c) and 28(B)(5)(c) shall be paid on the date the return prescribed therefor is filed by the person liable thereto: Provided, That if the seller submits proof of his intention to avail himself of the benefit of exemption of capital gains under existing special laws, no such payments shall be required : Provided, further, That in case of failure to qualify for exemption under such special laws and implementing rules and regulations, the tax due on the gains realized from the original transaction shall immediately become due and payable, subject to the penalties prescribed under applicable provisions of this Code: Provided, finally, That if the seller, having paid the tax, submits such proof of intent within six (6) months from the registration of the document transferring the real property, he shall be entitled to a refund of such tax upon verification of his compliance with the requirements for such exemption.

"In case the taxpayer elects and is qualified to report the gain by installments under Section 49 of this Code, the tax due from each installment payment shall be paid within (30) days from the receipt of such payments.

7. Quarterly declaration of income tax - Section 74

Section 74. Declaration of Income Tax for Individuals. -

(A) In General. - Except as otherwise provided in this Section, every individual subject to income tax under Sections 24 and 25(A) of this Title, who is receiving self-employment income, whether it constitutes the sole source of his income or in combination with salaries, wages and other fixed or determinable income, shall make and file a declaration of his estimated income for the current taxable year on or before April 15 of the same taxable year. In general, self-employment income consists of the earnings derived by the individual from the practice of profession or conduct of trade or business carried on by him as a sole proprietor or by a partnership of which he is a member. Nonresident Filipino citizens, with respect to income from without the Philippines, and nonresident aliens not engaged in trade or business in the Philippines, are not required to render a declaration of estimated income tax. The declaration shall contain such pertinent information as the Secretary of Finance, upon recommendation of the Commissioner, may, by rules and regulations prescribe. An individual may make amendments of a declaration filed during the taxable year under the rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner.

(B) Return and Payment of Estimated Income Tax by Individuals. - The amount of estimated income as defined in Subsection (C) with respect to which a declaration is required under Subsection (A) shall be paid in four (4) installments. The first installment shall be paid at the time of the declaration and the second and third shall be paid on August 15 and November 15 of the current year, respectively. The fourth installment shall be paid on or before April 15 of the following calendar year when the final adjusted income tax return is due to be filed.

(C) Definition of Estimated Tax. - In the case of an individual, the term 'estimated tax' means the amount which the individual declared as income tax in his final adjusted and annual income tax return for the preceding taxable year minus the sum of the credits allowed under this Title against the said tax. If, during the current taxable year, the taxpayer reasonable expects to pay a bigger income tax, he shall file an amended declaration during any interval of installment payment dates.

NOTES:Income tax returns covering income, profits, and gains

1. Individuals deriving purely compensation income must file his income tax return (BIR FORM 1701) not later than April 15 of the following year.

2. This requirement of filing tax returns is no longer required beginning 2002. 3. SUBSTITUTED FILING OF TAX RETURNS: is allowed where an employee receives purely compensation income

from a single employer who deducted and remitted to the BIR the correct amount of withtholding tax from the

employee’s compensation income during the year.4. In lieu of the regular tax returns to be filed by the employees, BIR FORM 1643 shall be filed by the

employer with the BIR.5. NRC who receive purely foreign source income are no longer required to file their PH income tax returns,

although they must still file an income tax return covering the income from sources within the PH6. MARRIED INDIVIUDAL ETB may die during the year in this case two income tax returns must be filed by his

executor or administrator (1) regular ITR covering his business from Jan 1 up to date he lived, and (2) regular ITR to be filed by the estate of the deceased covering business income from the date of death up to December 31.

There will also be two exemptions allowed :50 k as married, claimed by the taxpayer in his ITR50 k claimed by the estate in its tax return.

RMC 1-2003 SUBSTITUTED FILING SYSTEM The Bureau of Internal Revenue (BIR), in its mission of providing an efficient and convenient service to its taxpayers, is implementing a “hassle-free” method of filing Individual Income Tax Returns (BIR Form 1700). This method of filing recognizes under certain circumstances, the employer’s Annual Information Return (BIR Form No. 1604CF) as the “substitute” income tax return filed by the employee since it contains the same information found in the income tax return ordinarily filed.

This Circular aims to provide some basic information and answers to questions frequently asked on substituted filing.

What is “Substituted Filing”?

Substituted Filing is when the employer’s annual return (BIR Form 1604CF) may be considered as the “substitute” Income Tax Return (ITR) of employee inasmuch as the information provided in his income tax return (BIR Form 1700) would exactly be the same information contained in the employer’s annual return (BIR Form No. 1604-CF).

How is “Substituted Filing” different from “Non-Filing”?

Under “substituted filing”, an individual taxpayer although required under the law to file his income tax return, will no longer have to personally file his own income tax return but instead the employer’s annual information return filed will be considered as the “substitute” income tax return of the employee inasmuch as the information in the employer’s return is exactly the same information contained in the employee’s return.

“Non-filing” is applicable to certain types of individual taxpayers who are not required under the law to file an income tax return. An example is an employee whose pure compensation income does not exceed P60,000, and has only one employer for the taxable year and whose tax withheld is equivalent to his tax due.

Who are qualified and under what conditions will substituted filing of BIR Form No. 1700 apply?

Substituted filing applies only to individuals who meet all the following conditions: 1 The employee receives purely compensation income (regardless of amount) during the taxable year 2 The employee receives the income only from one employer in the Philippines during the taxable year 3 The amount of tax due from the employee at the end of the year equals the amount of tax withheld by the em-

ployer 4 The employee’s spouse also complies with all three (3) conditions stated above. 5 The employer files the annual information return (BIR Form No. 1604-CF) 6 The employer issues BIR Form 2316 (Oct 2002 ENCS) version to each employee

Who are not qualified for substituted filing of BIR Form 1700? The following individuals are

not qualified for substituted filing:

1 Individuals deriving compensation income from two or more employees, concurrently or successively at any-

time during the taxable year 2 Employees deriving compensation income, regardless of amount, whether from a single or several employers

during the calendar year, the income tax of which has not been withheld correctly (i.e. tax due is not equal to the tax withheld) resulting to a collectible or refundable return

3 Employees whose monthly gross compensation income does not exceed Five Thousand Pesos (P5,000) or the statutory minimum wage, whichever is higher, and opted for non-withholding of tax on said income

4 Individuals deriving other non-business, non-profession-related income in addition to compensation not other-wise subject to final tax

5 Individuals deriving purely compensation income from a single employer, although the income of which has been correctly subjected to withholding tax, but whose spouse is not entitled to substituted filing

6 Non-resident aliens engaged in trade or business in the Philippines deriving purely compensation income or compensation income and other business or profession related income

2

5. What will be presented in case an ITR is required?

BIR Form 2316 (Oct 2002 ENCS version) is a statement signed by both the employee and the employer and serves the same purpose as if BIR Form No. 1700 had been filed. This, however, is not to be submitted or filed with the BIR if the employee is qualified for substituted filing.

7. Who shall prepare and issue BIR Form 2316?

In general, every employer or other person who is required to deduct and withhold the tax on compensation including fringe benefits given to rank and file employees, shall furnish every employee from whose compensation taxes have been withheld the Certificate of Compensation Payment/Tax Withheld (BIR Form 2316 Oct 2002 ENCS version).

8. When should the employer issue BIR Form 2316?

Employers should issue BIR Form 2316 to the employee on or before January 31 of the succeeding calendar year, or if employment is terminated before the close of such calendar year, on the day on which the last payment of compensation is made.

9. What is contained in the Substituted Filing signature box in BIR Form 2316?

The lowest portion of BIR Form 2316 (Oct 2002 ENCS version) shall be accomplished only for substituted filing. It consists of two parts namely, matters certified to by the employer and matters certified to by the employee. The employer and employee, under the pain of perjury, shall sign the boxes for substituted filing.

10. For substituted filing, what are the matters being certified to by the EMPLOYER?

The matters being certified to by the employer are as follows: a. That the information contained in BIR Form 2316 (Oct 2002 ENCS version) are the same as reported and declared in BIR Form 1604 CF, i.e.,

· The employee’s information is the same as that declared by the employee in BIR Form 2305 · If employee had previous employer/s, the previous employer’s information is the same as that de-clared in previous employer’s BIR Form 2316 issued to said employee · The information pertaining to the present employer is true and correct · The details of compensation and taxes withheld is true and correct

b. That the employer filed with the BIR the Annual Information Return (BIR Form 1604CF)

11. For substituted filing, what are the matters being certified to by the EMPLOYEE?

The matters being certified to by the employee are as follows: a. That the employee is qualified under the substituted filing of income tax returns (BIR Form 1700), i.e.,

· The employee receives purely compensation income (regardless of amount) during the taxable year · The employee receives the income only from one employer in the Philippines during the taxable year The amount of tax due from the employee at the end of the year equals the amount of tax withheld by the employer

1 If married, that the employee’s spouse also complies with all three (3) conditions stated above. 2 That the employee has none of the instances for disqualification for substituted filing. (refer to question no. 4 of this

issuance) 3 That the BIR Form 1604CF filed by his employer shall constitute as his income tax return 4 That BIR Form 2316 (Oct 2002 ENCS version) shall serve as the same purpose as if BIR Form 1700 had been filed

pursuant to the provisions of RR 3-2002 as amended by RR 19-2002.

This refers to employee’s personal information as declared by him in the Certificate of Update of Exemption and Employer’s and Employee’s Information (BIR Form 2305). The same information should likewise be consistent with the information in the Annual Information Return (BIR Form 1604CF).

· For other government agencies and other offices, public and private, requiring presentation of individual in-come tax return (BIR Form 1700) as proof of income earnings, what would be a replacement for BIR Form 1700 for those qualified for substituted filing?

For those qualified for substituted filing, BIR Form 1700 should no longer be required as proof of financial capacity or proof of income earnings. Presentation of BIR Form 2316 (Oct 2002 ENCS version) is sufficient proof of income earnings since it is a statement signed by both the employee and the employer and it shall serve the same purpose as if BIR Form No. 1700 had been filed.

· What is the use of the BIR Form 2316, for those qualified for substituted filing?

The BIR Form 2316 (Oct 2002 ENCS version) can be used for the following purposes: 1.1 As proof of financial capacity for purposes of loan, credit card, or other application 1.2 As proof of payment of tax or for availing tax credit in the employee’s home country 1.3 In securing travel permits and travel tax exemptions when necessary; and 1.4 For other purposes to meet the requirements of various government/private agencies

· When does substituted filing take effect?

It took effect for taxable year 2001 on a voluntary basis and is mandatory for income/compensation earned starting taxable year 2002. Thus, employees who qualify for substituted filing for taxable year 2002 and beyond will no longer file BIR Form 1700 on or before the 15th of April of every year. · What will an employee do with BIR Form 2316 issued by the employer?

If the BIR Form 2316 was issued by a previous employer as a result of termination of employment and the employee has been subsequently employed within the same calendar year, the employee should submit a copy of BIR Form 2316 issued by the previous employer to his present employer, for consolidation with his current compensation received from the present employer.

If the employee is qualified for substituted filing, the employee concerned should sign the substituted filing signature box of BIR Form 2316 and have the same signed by the employer. A copy of BIR Form 2316 signed both by the employer and employee shall be retained and kept by the employer and the employee.

If an employee is not qualified for substituted filing, he is required by law to file his income tax return (BIR Form 1700 or BIR Form 1701). BIR Form 2316 should be attached as proof of his compensation income and withholding taxes as well as other necessary and applicable attachments, like financial statements, certificate of creditable withholding taxes.

· For those qualified for substituted filing, is it necessary to have BIR Form 2316 notarized?

No, it is not necessary to have BIR Form 2316 notarized for those qualified for substituted filing.

· Can an employee file an ITR (BIR Form No. 1700) even if he is qualified for substituted filing?

No, for taxable year 2002 and beyond, substituted filing is mandatory for qualified employees.

B. CORPORATE REGULAR RETURNS (SEC 52, 53, 56 )

1. Quarterly income taxSection 52. Corporation Returns. -

(A) Requirements. - Every corporation subject to the tax herein imposed, except foreign corporations not engaged in trade or business in the Philippines, shall render, in duplicate, a true and accurate quarterly income tax return and final or adjustment return in accordance with the provisions of Chapter XII of this Title. The return shall be filed by the president, vice-president or other principal officer, and shall be sworn to by such officer and by the treasurer or assistant treasurer.

2. Final adjustment return Section 76. Final Adjustment Return. - Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made

during the said taxable year is not equal to the total tax due on the entire taxable income of that year, the corporation shall either:

(A)Pay the balance of tax still due; or

(B)Carry-over the excess credit; or

(C)Be credited or refunded with the excess amount paid, as the case may be.

In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor.

3. When to file : Section 77. Place and Time of Filing and Payment of Quarterly Corporate Income Tax. - (B) Time of Filing the Income Tax Return. - The corporate quarterly declaration shall be filed within sixty (60) days following the close of each of the first three (3) quarters of the taxable year. The final adjustment return shall be filed on or before the fifteenth (15th) day of April, or on or before the fifteenth (15th) day of the fourth (4th) month following the close of the fiscal year, as the case may be.

4. Where to file : Section 77. Place and Time of Filing and Payment of Quarterly Corporate Income Tax. -

(A) Place of Filing. -Except as the Commissioner other wise permits, the quarterly income tax declaration required in Section 75 and the final adjustment return required I Section 76 shall be filed with the authorized agent banks or Revenue District Officer or Collection Agent or duly authorized Treasurer of the city or municipality having jurisdiction over the location of the principal office of the corporation filing the return or place where its main books of accounts and other data from which the return is prepared are kept.

5. When to Pay: Section 77. Place and Time of Filing and Payment of Quarterly Corporate Income Tax. -(C) Time of Payment of the Income Tax. - The income tax due on the corporate quarterly returns and the final adjustment income tax returns computed in accordance with Sections 75 and 76 shall be paid at the time the declaration or return is filed in a manner prescribed by the Commissioner.

6. Capital gains on shares of stock: Shares of stock of a domestic corporation

Listed and traded in a local stock exchange : the transaction is exempt from income tax, but subject to ½ of 1% stock transaction tax, which is required to be withheld and deducted by the stockbroker handling the transaction and remitted to the BIR within 5 working days from the date of sale

Unlisted, or listed but traded outside a local stock exchange: the capital gains tax must be filed within 30 days from the date of sale with the RDO where the principal place of business of the seller is located.

NOTES: ELECTRONIC FILING AND PAYMENT SYSTEM

“3.1 Large Taxpayers. –(a) Beginning the calendar year 2001 and all fiscal years as well as calendar years thereafter, Large Taxpayers shall e-file their final adjustment income tax returns for the said calendar/fiscal years and e-pay the taxes due thereon through the EFPS on or before the 15th day of the fourth month following the close of the taxable year. Nonetheless, e- payment shall be optional for tax returns that will be filed until July 31, 2002. Thus, until July 31, 2002, if a taxpayer does not opt to pay electronically, payment shall be made manually. (b) Beginning July 1, 2002, Large Taxpayers shall e-file all the tax returns that can be filed electronically through the EFPS but e-payment shall nonetheless remain optional until July 31, 2002. However, unless otherwise notified by the Commissioner of Internal Revenue (CIR), for all returns that will be filed starting August 1, 2002, e-payment of the taxes due thereon thru EFPS shall become mandatory.

NOTES: thus, based on the above provisions since July 1 2002 there has been no instance where large taxpayers would have manually filed their tax returns nor would have paid their taxes manually since Aug 1 2002/…

“8.1 Large Taxpayers. - (a) Large Taxpayers who will e-pay shall enroll with any EFPS AAB authorized to serve them and who is capable to accept e-payments. E-payments shall be made within the day the return is electronically filed following the “pay-as-you- file” principle. Accreditation of an existing BIR AAB as an EFPS AAB authorized to service taxpayers classified and notified by the BIR as large taxpayers shall be opened to such number of commercial/universal banks as may be necessary to provide efficient and effective service to all the large taxpayers.Notes: with respect to payment of large taxpyers the same must be made only thru EFPS authorized agent banks AAB and not thru Revenue Collection Officers.Thus all large taxpayers are hereby reminded to refrain from manually paying their taxes thru the RCO’s and to strictly comply with the Regulations mandating them to e-pay their taxes thru their EFPS AAB’s . Other wise the penalty of 25% surcharge for wrong venue is provided for under Sec 248 (a)(2) as amended shall be imposed .

“9.1 e-Filing and e-Payment. - The return is deemed filed, on the date appearing in, and after a Filing Reference Number is generated and issued to the taxpayer via the EFPS. The tax due thereon is deemed paid after a Confirmation Number is issued to the taxpayer and to the BIR by the AAB. In addition, an Acknowledgement Number shall be issued by the AAB to the BIR to confirm that the tax payment has been credited to the account of 3 the government or recognized as revenue (internal revenue tax collection) by the Bureau of Treasury.

IX. WITHHOLDING TAX CIR empowered to specify which items of income is subject to withholding tax.Under this system = payor(withholding agent)-payee (recipient)Withholding agent of BOTH taxpayer (in behalf of payee)and government (collecting and remitting in behalf of gov)Taxes are taxes of the payee; mere collection agentBut if withholding agent fails to withholding tax, liable for amount of withholding tax + surchargesEx: for rent

When is withholding made → BEFORE : upon payment. Since the accrual of tax is upon payment, then between related parties they dont pay; until payment theyre not subject to withholding

NOW: upon accrual of the income , or upon actual payment whichever comes first; ACCRUED AS EXPENSE

To be subject to withholding, there must be a law

if the withholding agent fails to withhold aside from being liable to withholding tax, then expense as deduction will be disallowed.Allowance for deduction is subject to the condition that withholding tax must be withheld and remitted to the government.

If exempt entity ; ex: GPP → exempt from income tax, so payments to a GPP also exempt from withholding.Also exempt JV's, cooperatives and other exempt corporations, GSIS , SSS PCSO, PEZA entitiesBecause withholding is made to implement advanced collection of taxes, so no use in exempt entitities.

Sales of personal properties under installment plan → withholding also based on installment planBut withholding tax will be on Gross seeling price if not withheld

IMPT: for rent = 5% for payment to contractors = 2%between a credit card company and a merchant = the credit card company that pays goods , so when it pays merchant, it will withhold 0.5%if person sold goods to government = government will withhold 1% if its sale of goods, 2% if sale of services, and remits them to BIR

Top 10,000 corporations = revised to Top 20,000 corporationsif client has received notice from BIR that it belongs to top 20000 corps, then all purchases of goods or services will now be subject to withholding tax. 2% services, 1% goods

real property classified as capital asset 6% FCGT based on GSP = paid by seller; not subject to withholding but in practice its the buyer that already retains the withholding tax; 6% is seller's liability

WITHHOLDING TAX FOR RP:If the selling price is below 500 000 – 1.5%more than 3%above 2 million 5%for those TP habitually engaged in real estate business

if not habitually engage also 6% - creditable withholding tax: paid and claimed as credit against regular income tax

if income payment is below 700,000 10% ; if above 20% (???)beneficiaries 10%contractors 2%pre need to funeral parlors 1%embalmers1%

withholding taxes of income tax on compensation income on certain income payments made to resident taxpayers and on income made to NR taxpayers is impt because the obligation to withhold and remit the tax is mandatory. the amount of withholding tax that should have been withheld and remitted to the BIR plus penalties are assessed by the BIR against the withholding agent. expenses claimed as deductions from gross income may however be allowed as deductions

A. final withholding tax at source – sec 57 (entire)

Section 57. Withholding of Tax at Source. – xx

(B) Withholding of Creditable Tax at Source. - The Secretary of Finance may, upon the recommendation of the Commissioner, require the withholding of a tax on the items of income payable to natural or juridical persons, residing in the Philippines, by payor-corporation/persons as provided for by law, at the rate of not less than one percent (1%) but not more than thirty-two percent (32%) thereof, which shall be credited against the income tax liability of the taxpayer for the taxable year.

Notes: Since withholding taxes are deducted by withholding agents (who have control custody or receipt of funds) when the income payments are paid or payable, they are described as “withholding taxes at source.”

In other words the income tax of the recipient of the income is withheld and deducted atr the source and at the time of accrual or payment of the expense by the withholding agent-payor of income

The withholding of income tax is particularly significant where the payee is a NRA ind or NRFC over whom the Ph gov has no jurisdiction and cannot therefore enforce collection of deficiency tax assessments.

Withholding of tax is also an effective way of collecting income tax on interest on bank deposits of taxpayers who enjoy confidentiality of their deposits under RA No 1405.

B. CREDITABLE WITHHODOING TAX here taxes withheld on certain income payments are intended to equal or atleast approximate the tax due of the payee on said income. the income tax recipient is still required to file quarterly and annual ITR to report income and/or to pay the difference between the tax withheld and the tax due on the income.taxes withheld on income payments covered by the expanded withholding tax and compensation income are creditable in nature against the income tax liability for the year, provided the same are evidenced by the appropriate withholding tax certificate (BIR 2317) that is attached to the income tax return filed with the BIR.

There are 3 types of creditable withholding taxes, namely:(1) expanded withholding tax on certain income payments made by private persons to resident taxpayers;(2) withholding tax on compensation income for services done in the PH and(3) withholding tax on money payments made by the government.

1. Expanded withholding tax: 390-392

Essential Requisites for EWT

An income payment is subject to the expanded withholding tax, if the ff conditions concur:

a. An expense is paid or payable by the taxpayer, which is income to the recipient thereof subject to income tax;b. income is fixed or determinable at the time of payment;c. the income is one of the income payments listed in the regulations that is subject to withholding tax; If the payor of income is one of the top 20000 corporations, the income payment, although not listed as subject to EWT under the

regulations is subject to CWT of 1% if it insolves purchase of goods, or 2% if it insolves purchase of services.d. the income recipient is a resident of the Ph liable to income taxe. the payor-withholding agent is also a resident of the PH.

An expense is paid or payable by the taxpayer , which is income to the recipient thereof subject to income tax. The payment must represent income to the recipient thereof and it is subject to income tax. Unless income gain or profit is expressly exempt under the Tax Code or special law, it is presumed to be taxable.

The withholding of creditable withholding tax shall not apply to income payments made to the ff: pp 394

REVENUE REGULATION 2-98


SECTION 2.57. Withholding of Tax at Source(A) Final Withholding Tax. — Under the final withholding tax system the amount of income tax withheld by the withholding agent is constituted as a full and final payment of the income tax due from the payee on the said income. The liability for payment of the tax rests primarily on the payor as a withholding agent. Thus, in case of his failure to withhold the tax or in case of under withholding, the deficiency tax shall be collected from the payor/withholding agent. The payee is not required to file an income tax return for the particular income. The finality of the withholding tax is limited only to the payee's income tax liability on the particular income. It does not extend to the payee's other tax liability on said income, such as when the said income is further subject to a percentage tax. For example, if a bank receives income subject to final withholding tax, the same shall be subject to a percentage tax.

(B) Creditable Withholding Tax. — Under the creditable withholding tax system, taxes withheld on certain income payments are intended to equal or at least approximate the tax due of the payee on said income. The income recipient is still required to file an income tax return, as prescribed in Sec. 51 and Sec. 52 of the NIRC, as amended, to report the income and/or pay the difference between the tax withheld and the tax due on the income. Taxes withheld on income payments covered by the expanded withholding tax (referred to in Sec. 2.57.2 of these regulations) and compensation income (referred to in Sec. 2.78 also of these regulations) are creditable in nature.

SECTION 2.57.1. Income Payments Subject to Final Withholding Tax. — The following forms of income shall be subject to final withholding tax at the rates herein specified;

(A) Income payments to a citizen or to a resident alien individual;

(1) Interest from any peso bank deposit, and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements; royalties (except on books as well as other literary works and musical compositions), prizes (except prizes amounting to ten thousand pesos (P10,000.00) or less which shall be subject to tax under Sec. 24 (A) of the Code) and other winnings (except Philippine Charity Sweepstakes winnings and lotto winnings) derived from sources within the Philippines — Twenty percent (20%).

(2) Royalties on books, as well as other literary works and musical compositions — Ten percent (10%).

(3) Interest income received by a resident individual taxpayer from a depository bank under the Foreign Currency Deposit System — Seven and one-half percent (7.5%).

(4) Interest income from long-term deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas which was pre-terminated by the holder before the fifth (5th) year at the rates herein prescribed to be deducted and withheld from the proceeds thereof based on the length of time that the instrument was held by the taxpayer —Holding Period RateFour (4) years to less than five (5) years 5%Three (3) years to less than four (4) years 12%Less than three (3) years 20%

(5) Cash and/or property dividends actually or constructively received from a domestic corporation, joint stock company, insurance or mutual fund companies or on the share of an individual partner in the distributable net income after tax of a partnership (except general professional partnership) or on the share of an individual in the net income after tax of an association, a joint account or a joint venture or consortium of which he is a member or a co-venturer.6% - beginning January 1, 19988% - beginning January 1, 1999 and

10% - beginning January 1, 2000 and thereafterThe tax on cash and property dividends shall only be imposed on dividends which are declared from profits of corporations made after December 31, 1997.

(6) On capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales based on the gross selling price or fair market value as determined in accordance with Sec. 6(E) of the Code (i.e. the authority of the Commissioner to prescribe the real property values), whichever is higher — Six percent (6%).

In case of dispositions of real property made by individuals to the government or any of its political subdivisions or agencies or to government-owned or controlled corporations, the tax to be imposed shall be determined either under Section 24(A) of the Code for normal income tax for individual citizens and residents or under Section 24(D)(1) of the Code for the final tax on capital gains from sale of property at six percent (6%), at the option of the taxpayer.

WITHHOLDING AGENT: SECTION 2.57.3. Persons Required to Deduct and Withhold. — The following persons are hereby constituted as withholding agents for purposes of the creditable tax required to be withheld on income payments enumerated in Section 2.57.2:

(A) In general, any juridical person, whether or not engaged in trade or business;(B) An individual, with respect to payments made in connection with his trade or business. However, insofar as taxable sale, exchange or transfer of real property is concerned, individual buyers who are not engaged in trade or business are also constituted as withholding agents;(C) All government offices including government-owned or controlled corporations, as well as provincial, city and municipal governments.

SECTION 2.57.4. Time of Withholding. — The obligation of the payor to deduct and withhold the tax under Section 2.57 of these regulations arises at the time an income is paid or payable, whichever comes first, the term "payable" refers to the date the obligation become due, demandable or legally enforceable.

SECTION 2.57.5. Exemption from Withholding. — The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following:

(A) National government and its instrumentalities, including provincial, city or municipal governments;(B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following:(1) Sales of real property by a corporation which is registered with and certified by the Housing and Land Use Regulatory Board (HLURB) or HUDCC as engaged in socialized housing project where the selling price of the house and lot or only the lot does not exceed one hundred eighty thousand pesos (P180,000) in Metro Manila and other highly urbanized areas and one hundred fifty thousand pesos (P150,000) in other areas or such adjusted amount of selling price for socialized housing as may later be determined and adopted by the HLURB, as provided under Republic Act No. 7279 and its implementing regulations;

(2) Corporations registered with the Board of Investments and enjoying exemption from the income tax provided by Republic Act No. 7916 and the Omnibus Investment Code of 1987;

(3) Corporations which are exempt from the income tax under Sec. 30 of the NIRC, to wit: the Government Service Insurance System (GSIS), the Social Security System (SSS), the Philippine Health Insurance Corporation (PHIC), the Philippine Charity Sweepstakes Office (PCSO) and the Philippine Amusement and Gaming Corporation (PAGCOR); However, the income payments arising from any activity which is conducted for profit or income derived from real or personal property shall be subject to a withholding tax as prescribed in these regulations.

2. WITHHOLDING TAX ON COMPENSATION

REVREG 2-98SECTION 2.78. Withholding Tax on Compensation. — The withholding of tax on compensation income is a method of collecting the income tax at source upon receipt of the income. It applies to all employed individuals whether citizens or aliens, deriving income from compensation for services rendered in the Philippines. The employer is constituted as the withholding agent.

SECTION 2.78.1. Withholding of Income Tax on Compensation Income. —(A) Compensation Income Defined. — In general, the term "compensation" means all remuneration for services performed by an employee for his employer under an employer-employee relationship, unless specifically excluded by the

Code.The name by which the remuneration for services is designated is immaterial. Thus, salaries, wages, emoluments and honoraria, allowances, commissions (e.g. transportation, representation, entertainment and the like); fees including director's fees, if the director is, at the same time, an employee of the employer/corporation; taxable bonuses and fringe benefits except those which are subject to the fringe benefits tax under Sec. 33 of the Code; taxable pensions and retirement pay; and other income of a similar nature constitute compensation income.

The basis upon which the remuneration is paid is immaterial in determining whether the remuneration constitutes compensation. Thus, it may be paid on the basis of piece-work, or a percentage of profits; and may be paid hourly, daily, weekly, monthly or annually. repRemuneration for services constitutes compensation even if the relationship of employer and employee does not exist any longer at the time when payment is made between the person in whose employ the services had been performed and the individual who performed them.

(1) Compensation paid in kind. — Compensation may be paid in money or in some medium other than money, as for example, stocks, bonds or other forms of property. If services are paid for in a medium other than money, the fair market value of the thing taken in payment is the amount to be included as compensation subject to withholding. If the services are rendered at a stipulated price, in the absence of evidence to the contrary, such price will be presumed to be the fair market value of the remuneration received. If a corporation transfers to its employees its own stock as remuneration for services rendered by the employee, the amount of such remuneration is the fair market value of the stock at the time the services were rendered.

(2) Living quarters or meals. — If a person receives a salary as remuneration for services rendered, and in addition thereto, living quarters or meals are provided, the value to such person of the quarters and meals so furnished shall be added to the remuneration paid for the purpose of determining the amount of compensation subject to withholding. However, if living quarters or meals are furnished to an employee for the convenience of the employer, the value thereof need not be included as part of compensation income.

(3) Facilities and privileges of a relatively small value. — Ordinarily, facilities and privileges (such as entertainment, medical services, or so called "courtesy" discounts on purchases), furnished or offered by an employer to his employees generally, are not considered as compensation subject to withholding if such facilities or privileges are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees.Where compensation is paid in property other than money, the employer shall make necessary arrangements to ensure that the amount of the tax required to be withheld is available for payment to the Commissioner.

(4) Tips and gratuities. — Tips or gratuities paid directly to an employee by a customer of the employer which are not accounted for by the employee to the employer are considered as taxable income but not subject to withholding.

(5) Pensions, retirement and separation pay. — Pensions, retirement and separation pay constitute compensation subject to withholding, except those provided under Subsection B of this section.

(6) Fixed or variable transportation, representation and other allowances —

(a) IN GENERAL, fixed or variable transportation, representation and other allowances which are received by a public officer or employee or officer or employee of a private entity, in addition to the regular compensation fixed for his position or office, is compensation subject to withholding.

(b) Any amount paid specifically, either as advances or reimbursements for travelling, representation and other bonafide ordinary and necessary expenses incurred or reasonably expected to be incurred by the employee in the performance of his duties are not compensation subject to withholding, if the following conditions are satisfied:

(i) It is for ordinary and necessary travelling and representation or entertainment expenses paid or incurred by the employee in the pursuit of the trade, business or profession; and(ii) The employee is required to account/liquidate for the foregoing expenses in accordance with the specific requirements of substantiation for each category of expenses pursuant to Sec. 34 of the Code. The excess of actual expenses over advances made shall constitute taxable income if such amount is not returned to the employer. Reasonable amounts of reimbursements/ advances for travelling and entertainment expenses which are pre-computed on a daily basis and are paid to an employee while he is on an assignment or duty need not be subject to the requirement of substantiation and to withholding.

(7) Vacation and sick leave allowances. — Amounts of "vacation allowances or sick leave credits" which are paid to an employee constitute compensation. Thus, the salary of an employee on vacation or on sick leave, which are paid notwithstanding his absence from work, constitutes compensation. However, the monetized value of unutilized vacation leave credits of ten (10) days or less which were paid to the employee during the year are not subject to income tax and to the withholding tax.

(8) Deductions made by employer from compensation of employee. — Any amount which is required by law to be deducted by the employer from the compensation of an employee including the withheld tax is considered as part of the employee's compensation and is deemed to be paid to the employee as compensation at the time the deduction is made.

(9) Remuneration for services as employee of a nonresident alien individual or foreign entity. — The term "compensation" includes remuneration for services performed by an employee of a nonresident alien individual, foreign partnership or foreign corporation, whether or not such alien individual or foreign entity is engaged in trade or business within the Philippines. Any person paying compensation on behalf of a non-resident alien individual, foreign partnership, or foreign corporation which is not engaged in trade or business within the Philippines is subject to all provisions of law and regulations applicable to an employer.

(10) Compensation for services performed outside the Philippines. — Remuneration for services performed outside the Philippines by a resident citizen for a domestic or a resident foreign corporation or partnership, or for a non-resident corporation or partnership, or for a non-resident individual not engaged in trade or business in the Philippines shall be treated as compensation which is subject to tax.A non-resident citizen as defined in these regulations is taxable only on income derived from sources within the Philippines. In general, the situs of the income whether within or without the Philippines, is determined by the place where the service is rendered.

(B) Exemptions from withholding tax on compensation. — The following income payments are exempted from the requirement of withholding tax on compensation:

(1) Remunerations received as an incident of employment, as follows:

(a) Retirement benefits received under Republic Act under 7641 and those received by officials and employees of private firms, whether individual or corporate, under a reasonable private benefit plan maintained by the employer which meet the following requirements:(i) The plan must be reasonable;(ii) The benefit plan must be approved by the Bureau;(iii) The retiring official or employee must have been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the time of retirement; and(iv) The retiring official or employee should not have previously availed of the privilege under the retirement benefit plan of the same or another employer.

(b) Any amount received by an official or employee or by his heirs from the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee, such as retrenchment, redundancy, or cessation of business. repThe phrase "for any cause beyond the control of the said official or employee" connotes involuntariness on the part of the official or employee. The separation from the service of the official or employee must not be asked for or initiated by him. The separation was not of his own making. Whether or not the separation is beyond the control of the official or employee, being essentially a question of fact, shall be determined on the basis of prevailing facts and circumstances. It shall be duly established by the employer by competent evidence which should be attached to the monthly return for the period in which the amount paid due to the involuntary separation was made.

Amounts received by reason of involuntary separation remain exempt from income tax even if the official or the employee, at the time of separation, had rendered less than ten (10) years of service and/or is below fifty (50) years of age.

Any payment made by an employer to an employee on account of dismissal, constitutes compensation regardless of whether the employer is legally bound by contract, statute, or otherwise, to make such payment.

(c) Social security benefits, retirement gratuities, pensions and other similar benefits received by residents or non-resident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions private or public;

(d) Payments of benefits due or to become due to any person residing in the Philippines under the law of the United States administered by the United States Veterans Administration;

(e) Payments of benefits made under the Social Security System Act of 1954 as amended; and

(f) Benefits received from the GSIS Act of 1937, as amended, and the retirement gratuity received by government officials and employees.

(2) Remuneration paid for agricultural labor —

(a) Remuneration for services which constitute agricultural labor and paid entirely in products of the farm where the labor

is performed is not subject to withholding. In general, however, the term, "agricultural labor" does not include services performed in connection with forestry, lumbering or landscaping.

(b) Remuneration paid entirely in products of the farm where the labor is performed by an employee of any person in connection with any of the following activities is excepted as remuneration for agricultural labor:(i) The cultivation of soil;(ii) The raising, shearing, feeding, caring for, training, or management of livestock, bees, poultry, or wildlife; or(iii) The raising or harvesting of any other agricultural or horticultural commodity. The term "farm" as used in this subsection includes, but is not limited to stock, dairy, poultry, fruits and truck farms, plantations, ranches, nurseries ranges, orchards, and such greenhouse and other similar structures as are used primarily for the raising of agricultural or horticultural commodities.

(c) The remuneration paid entirely in products of the farm where labor is performed for the following services in the employ of the owner or tenant or other operator of one or more farms is not considered as remuneration for agricultural labor, provided the major part of such services is performed on a farm:(i) Services performed in connection with the operation, management, conservation, improvement, or maintenance of any such farms or its tools or equipments; or(ii) Services performed in salvaging timber, or clearing land brush and other debris left by a hurricane or typhoon.The services described in (i) above may include for example, services performed by carpenters, painters, mechanics, farm supervisors, irrigation engineers, bookkeepers, and other skilled or semi-skilled workers, which contribute in any way to the conduct of the farm or farms, as such, operated by the person employing them, as distinguished from any other enterprise in which such person may be engaged. Since the services described in this paragraph must be performed in the employ of the owner or tenant or other operator of the farm, the exception does not extend to remuneration paid for services performed by employees of a commercial painting concern, for example, which contracts with a farmer to renovate his farm properties.

(d) Remuneration paid entirely in products of the farm where labor is performed by an employee in the employ of any person in connection with any of the following operations is not considered as remuneration for agricultural labor without regard to the place where such services are performed:(i) The making of copra, stripping of abaca, etc.;(ii) The hatching of poultry;(ii) The raising of fish;(iv) The operation or maintenance of ditches, canals, reservoirs, or waterways used exclusively for supplying or storing water for farming purposes; and(v) The production or harvesting of crude gum from a living tree or the processing of such crude gum into gum spirits or turpentine and gum resin, provided such processing is carried on by the original producer of such crude gum.

(e) Remuneration paid entirely in products of the farm where labor is performed by an employee in the employ of a farmer or a farmer's cooperative, organization or group in the handling, planting, drying, packing, packaging, processing, freezing, grading, storing or delivering to storage or to market or to carrier for transportation to market, of any agricultural or horticultural commodity, produced by such farmer or farmer-members of such organization or group, is excepted as remuneration for agricultural labor. Services performed by employees of such farmer or farmer's organization or group in handling, planting, drying, packaging, processing, freezing, grading, storing, or delivering to storage or to market or to carrier for transportation to market of commodities produced by persons other than such farmer or members of such farmer's organization or group are not performed "as an incident to ordinary farming operation".All payments made in cash or other forms other than products of the farm where labor is performed, for services constituting agricultural labor as explained above, are not within the exception.

(3) Remuneration for domestic services. — Remuneration paid for services of a household nature performed by an employee in or about the private home of the person by whom he is employed is not subject to withholding. However, the services of household personnel furnished to an employee (except rank and file employees) by an employer shall be subject to the fringe benefits tax pursuant to Sec. 33 of the Code, as amended.

A private home is the fixed place of abode of an individual or family. If the home is utilized primarily for the purpose of supplying board or lodging to the public as a business enterprise, it ceases to be a private home and remuneration paid for services performed therein is not exempted.

In general, services of a household nature in or about a private home include services rendered by cooks, maids, butlers, valets, laundresses, gardeners, chauffeurs of automobiles for family use.

The remuneration paid for the services above enumerated which are performed in or about rooming or lodging houses, boarding houses, clubs, hotels, hospitals or commercial offices or establishments is considered as compensation;Remuneration paid for services performed as a private secretary, even if they are performed in the employer's home is considered as compensation;

(4) Remuneration for casual labor not in the course of an employer's trade or business. — The term "casual labor" includes labor which is occasional, incidental or regular. The expression "not in the course of the employer's trade or business" includes labor that does not promote or advance the trade or business of the employer.

Thus, any remuneration paid for labor which is occasional, incidental or irregular, and does not promote or advance the employer's trade or business, is not considered as compensation.

(5) Compensation for services by a citizen or resident of the Philippines for a foreign government or an international organization. — Remuneration paid for services performed as an employee of a foreign government or an international organization is exempted. The exemption includes not only remuneration paid for services performed by ambassadors, ministers and other diplomatic officers and employees but also remuneration paid for services performed as consular or other officer or employee of a foreign government or as a non-diplomatic representative of such government.

(6) Damages. — Actual, moral, exemplary and nominal damages received by an employee or his heirs pursuant to a final judgment or compromise agreement arising out of or related to an employer-employee relationship.

(7) Life Insurance. — The proceeds of life insurance policies paid to the heirs or beneficiaries upon the death of the insured, whether in a single sum or otherwise, provided however, that interest payments agreed under the policy for the amounts which are held by the insured under such an agreement shall be included in the gross income.

(8) Amount received by the insured as a return of premium. — The amount received by the insured, as a return of premium or premiums paid by him under life insurance, endowment, or annuity contracts either during the term or at the maturity of the term mentioned in the contract or upon surrender of the contract.

(9) Compensation for injuries or sickness. — Amounts received through Accident or Health Insurance or under Workmen's Compensation Acts, as compensation for personal injuries or sickness, plus the amount of any damages received whether by suit or agreement on account of such injuries or sickness.

(10) Income exempt under treaty. — Income of any kind to the extent required by any treaty obligation binding upon the Government of the Philippines.

(11) Thirteenth (13th ) month pay and other benefits. —(a) Thirteenth (13th) month pay equivalent to the mandatory one (1) month basic salary of officials and employees of the government, (whether national or local), including government-owned or controlled corporations, and or private offices received after the twelfth (12th) month pay; and(b) Other benefits such as Christmas bonus, productivity incentive bonus, loyalty award, gifts in cash or in kind and other benefits of similar nature actually received by officials and employees of both government and private offices.The above stated exclusions (a) and (b) shall cover benefits paid or accrued during the year provided that the total amount shall not exceed thirty thousand pesos (P30,000.00) which may be increased through rules and regulations issued by the Secretary of Finance, upon recommendation of the Commissioner, after considering, among others, the effect on the same of the inflation rate at the end of the taxable year.

(12) GSIS, SSS, Medicare and other contributions. — GSIS, SSS, Medicare and Pag-Ibig contributions, and union dues of individual employees.

SECTION 2.78.2. Payroll Period. — The term "payroll period" means the period of services for which a payment of compensation is ordinarily made to an employee by his employer. It is immaterial that the compensation is not always paid at regular intervals.

For the purpose of determining the tax, an employee can have but one payroll period with respect to the compensation paid by any one employer. Thus, if an employee is paid a regular compensation for the weekly payroll and in addition thereto is paid supplemental compensation (for example taxable bonuses) determined with respect to a different period, the payroll period is the weekly payroll period.

C. FRINGE BENFIT TAX

Fringe benefits only to managerial and supervisory employees: same tax rate but fringe benefit is subject to withholding in the form of fringe benefit taxrank and file – subject to regular not subject to withholding

FBT is a tax on the employee but is collected by the employer for remiitance to the BIR; but in reality the burden is on the employer.

FBT :

say the recipient is a RCNRCRANRAETBAMOUNT RECEIVED AS FB BY EMPLOYEE/MANAGER 15000 → NET OF FBT ; SO COMPUTE TAX BASE OF FBT , WHICH IS THE GROSSED-UP AMOUNT. TO COMPUTE THE GROSSED-UP AMOUNT15000 / (100% – 32%) = 15000 → 15000/ 0.68 = P22,059 → FB 15000;

→ 222059 – 15000 → FBT 7059

DEDUCTIBLE EXPENSE: 22059, BUT ONLY 15000 WILL GO TO OFFICER, 7059 WILL GO TO BIR.

NRANETB - NTBK

RAQ RAHQ OBU - NTBK

REVENUE REGULATION 3-98

SEC. 2.33. SPECIAL TREATMENT OF FRINGE BENEFITS

(A) Imposition of Fringe Benefits Tax — A final withholding tax is hereby imposed on the grossed-up monetary value of fringe benefit furnished, granted or paid by the employer to the employee, except rank and file employees as defined in these Regulations, whether such employer is an individual, professional partnership or a corporation, regardless of whether the corporation is taxable or not, or the government and its instrumentalities except when: (1) the fringe benefit is required by the nature of or necessary to the trade, business or profession of the employer; or (2) when the fringe benefit is for the convenience or advantage of the employer. The fringe benefit tax shall be imposed at the following rates:Effective January 1, 1998 - 34%Effective January 1, 1999 - 33%Effective January 1, 2000 - 32%

The tax imposed under Sec. 33 of the Code shall be treated as a final income tax on the employee which shall be withheld and paid by the employer on a calendar quarterly basis as provided under Sec. 57 (A) (Withholding of Final Tax on certain Incomes) and Sec. 58 A (Quarterly Returns and Payments of Taxes Withheld) of the Code.

The grossed-up monetary value of the fringe benefit shall be determined by dividing the monetary value of the fringe benefit by the following percentages and in accordance with the following schedule:Effective January 1, 1998 - 66%Effective January 1, 1999 - 67%Effective January 1, 2000 - 68%

The grossed-up monetary value of the fringe benefit represents the whole amount of income realized by the employee which includes the net amount of money or net monetary value of property which has been received plus the amount of fringe benefit tax thereon otherwise due from the employee but paid by the employer for and in behalf of his employee, pursuant to the provisions of this Section.

Coverage — These Regulations shall cover only those fringe benefits given or furnished to managerial or supervisory employees and not to the rank and file.

The term, "RANK AND FILE EMPLOYEES" means all employees who are holding neither managerial nor supervisory position. The Labor Code of the Philippines, as amended, defines "managerial employee" as one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees. "Supervisory employees" are those who, in the interest of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment. cdtai

Moreover, these regulations do not cover those benefits properly forming part of compensation income subject to withholding tax on compensation in accordance with Revenue Regulations No. 2-98.

Fringe benefits which have been paid prior to January 1, 1998 shall not be covered by these Regulations.Determination of the Amount Subject to the Fringe Benefit Tax — In general, the computation of the fringe benefits tax would entail (a) valuation of the benefit granted and (b) determination of the proportion or percentage of the benefit which is subject to the fringe benefit tax. That the Tax Code allows for the cases where only a portion (i.e. less than 100 per cent) of the fringe

benefit is subject to the fringe benefit tax is clearly stated in Section 33 (a) of R.A. 8424 which stipulates that fringe benefits which are "required by the nature of, or necessary to the trade, business or profession of the employer, or when the fringe benefit is for the convenience or advantage of the employer" are not subject to the fringe benefit tax. Thus, in cases where the fringe benefits entail joint benefits to the employer and employee, the portion which shall be subject to the fringe benefits tax and the guidelines for the valuation of fringe benefits are defined under these rules and regulations.

Unless otherwise provided in these regulations, the valuation of fringe benefits shall be as follows:(1) If the fringe benefit is granted in money, or is directly paid for by the employer, then the value is the amount granted or paid for.(2) If the fringe benefit is granted or furnished by the employer in property other than money and ownership is transferred to the employee, then the value of the fringe benefit shall be equal to the fair market value of the property as determined in accordance with Sec. 6 (E) of the Code (Authority of the Commissioner to Prescribe Real Property Values).(3) If the fringe benefit is granted or furnished by the employer in property other than money but ownership is not transferred to the employee, the value of the fringe benefit is equal to the depreciation value of the property.

Taxation of fringe benefit received by a non-resident alien individual who is not engaged in trade or business in the Philippines — A fringe benefit tax of twenty-five percent (25%) shall be imposed on the grossed-up monetary value of the fringe benefit. The said tax base shall be computed by dividing the monetary value of the fringe benefit by seventy-five per cent (75%).

Taxation of fringe benefit received by (1) an alien individual employed by regional or area headquarters of a multinational company or by regional operating headquarters of a multinational company; (2) an alien individual employed by an offshore banking unit of a foreign bank established in the Philippines; (3) an alien individual employed by a foreign service contractor or by a foreign service subcontractor engaged in petroleum operations in the Philippines; and (4) any of their Filipino individual employees who are employed and occupying the same position as those occupied or held by the alien employees. — A fringe benefit tax of fifteen per cent (15%) shall be imposed on the grossed-up monetary value of the fringe benefit. The said tax base shall be computed by dividing the monetary value of the fringe benefit by eighty-five per cent (85%).

Taxation of fringe benefit received by employees in special economic zones — Fringe benefits received by employees in special economic zones, including Clark Special Economic Zone and Subic Special Economic and Free Trade Zone, are also covered by these regulations and subject to the normal rate of fringe benefit tax or the special rates of 25% or 15% as provided above.

(B) Definition of Fringe Benefit — In general, except as otherwise provided under these regulations, for purposes of this Section, the term "FRINGE BENEFIT" means any good, service, or other benefit furnished or granted by an employer in cash or in kind, in addition to basic salaries, to an individual employee (except rank and file employee as defined in these regulations) such as, but not limited to the following:(1) Housing;(2) Expense account;(3) Vehicle of any kind;(4) Household personnel, such as maid, driver and others;(5) Interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted;(6) Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations;(7) Expenses for foreign travel;(8) Holiday and vacation expenses;(9) Educational assistance to the employee or his dependents; and(10) Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows.For this purpose, the guidelines for valuation of specific types of fringe benefits and the determination of the monetary value of the fringe benefits are give below. The taxable value shall be the grossed-up monetary value of the fringe benefit.(1) Housing privilege —(a) If the employer leases a residential property for the use of his employee and the said property is the usual place of residence of the employee, the value of the benefit shall be the amount of rental paid thereon by the employer, as evidenced by the lease contract. The monetary value of the fringe benefit shall be fifty per cent (50%) of the value of the benefit.(b) If the employer owns a residential property and the same is assigned for the use of his employee as his usual place of residence, the annual value of the benefit shall be five per cent (5%) of the market value of the land and improvement, as declared in the Real Property Tax Declaration Form, or zonal value as determined by the Commissioner pursuant to Section 6(E) of the Code (Authority of the Commissioner to Prescribe Real Property Values), whichever is higher. The monetary value of the fringe benefit shall be fifty per cent (50%) of the value of the benefit. cdaThe monetary value of the housing fringe benefit is equivalent to the following:MV = [5%(FMV or ZONAL VALUE] X 50%WHERE:MV = MONETARY VALUEFMV = FAIR MARKET VALUE(c) If the employer purchases a residential property on installment basis and allows his employee to use the same as his usual place of residence, the annual value of the benefit shall be five per cent (5%) of the acquisition cost, exclusive of interest. The monetary value of fringe benefit shall be fifty per cent (50%) of the value of the benefit.

(d) If the employer purchases a residential property and transfers ownership thereof in the name of the employee, the value of the benefit shall be the employer's acquisition cost or zonal value as determined by the Commissioner pursuant to Section 6(E) of the Code (Authority of the Commissioner to Prescribe Real Property Values), whichever is higher. The monetary value of the fringe benefit shall be the entire value of the benefit.(e) If the employer purchases a residential property and transfers ownership thereof to his employee for the latter's residential use, at a price less than the employer's acquisition cost, the value of the benefit shall be the difference between the fair market value, as declared in the Real Property Tax Declaration Form, or zonal value as determined by the Commissioner pursuant to Sec. 6(E) of the Code (Authority of the Commissioner to Prescribe Real Property Values), whichever is higher, and the cost to the employee. The monetary value of the fringe benefit shall be the entire value of the benefit.(f) Housing privilege of military officials of the Armed Forces of the Philippines (AFP) consisting of officials of the Philippine Army, Philippine Navy and Philippine Air Force shall not be treated as taxable fringe benefit in accordance with the existing doctrine that the State shall provide its soldiers with necessary quarters which are within or accessible from the military camp so that they can be readily on call to meet the exigencies of their military service.(g) A housing unit which is situated inside or adjacent to the premises of a business or factory shall not be considered as a taxable fringe benefit. A housing unit is considered adjacent to the premises of the business if it is located within the maximum of fifty (50) meters from the perimeter of the business premises.(h) Temporary housing for an employee who stays in a housing unit for three (3) months or less shall not be considered a taxable fringe benefit. (2) Expense account —(a) In general, expenses incurred by the employee but which are paid by his employer shall be treated as taxable fringe benefits, except when the expenditures are duly receipted for and in the name of the employer and the expenditures do not partake the nature of a personal expense attributable to the employee.(b) Expenses paid for by the employee but reimbursed by his employer shall be treated as taxable benefits except only when the expenditures are duly receipted for and in the name of the employer and the expenditures do not partake the nature of a personal expense attributable to the said employee.(c) Personal expenses of the employee (like purchases of groceries for the personal consumption of the employee and his family members) paid for or reimbursed by the employer to the employee shall be treated as taxable fringe benefits of the employee whether or not the same are duly receipted for in the name of the employer.(d) Representation and transportation allowances which are fixed in amounts and are regular received by the employees as part of their monthly compensation income shall not be treated as taxable fringe benefits but the same shall be considered as taxable compensation income subject to the tax imposed under Sec. 24 of the Code.(3) Motor vehicle of any kind —(a) If the employer purchases the motor vehicle in the name of the employee, the value of the benefit is the acquisition cost thereof. The monetary value of the fringe benefit shall be the entire value of the benefit, regardless of whether the motor vehicle is used by the employee partly for his personal purpose and partly for the benefit of his employer.(b) If the employer provides the employee with cash for the purchase of a motor vehicle, the ownership of which is placed in the name of the employee, the value of the benefits shall be the amount of cash received by the employee. The monetary value of the fringe benefit shall be the entire value of the benefit regardless of whether the motor vehicle is used by the employee partly for his personal purpose and partly for the benefit of his employer, unless the same was subjected to a withholding tax as compensation income under Revenue Regulations No. 2-98.(c) If the employer purchases the car on installment basis, the ownership of which is placed in the name of the employee, the value of the benefit shall be the acquisition cost exclusive of interest, divided by five (5) years. The monetary value of the fringe benefit shall be the entire value of the benefit regardless of whether the motor vehicle is used by the employee partly for his personal purpose and partly for the benefit of his employer.(d) If the employer shoulders a portion of the amount of the purchase price of a motor vehicle the ownership of which is placed in the name of the employee, the value of the benefit shall be the amount shouldered by the employer. The monetary value of the fringe benefit shall be the entire value of the benefit regardless of whether the motor vehicle is used by the employee partly for his personal purpose and partly for the benefit of his employer. (e) If the employer owns and maintains a fleet of motor vehicles for the use of the business and the employees, the value of the benefit shall be the acquisition cost of all the motor vehicles not normally used for sales, freight, delivery service and other non-personal used divided by five (5) years. The monetary value of the fringe benefit shall be fifty per cent (50%) of the value of the benefit.The monetary value of the motor vehicle fringe benefit is equivalent to the following:MV = [(A)/5] X 50%where:MV = Monetary valueA = acquisition cost(f) If the employer leases and maintains a fleet of motor vehicles for the use of the business and the employees, the value of the benefit shall be the amount of rental payments for motor vehicles not normally used for sales, freight, delivery, service and other non-personal use. The monetary value of the fringe benefit shall be fifty per cent (50%) of the value of the benefit.(g) The use of aircraft (including helicopters) owned and maintained by the employer shall be treated as business use and not be subject to the fringe benefits tax.(h) The use of yacht whether owned and maintained or leased by the employer shall be treated as taxable fringe benefit. The value of the benefit shall be measured based on the depreciation of a yacht at an estimated useful life of 20 years.(4) Household expenses — Expenses of the employee which are borne by the employer for household personnel, such as

salaries of household help, personal driver of the employee, or other similar personal expenses (like payment for homeowners association dues, garbage dues, etc.) shall be treated as taxable fringe benefits.(5) Interest on loan at less than market rate(a) If the employer lends money to his employee free of interest or at a rate lower than twelve per cent (12%), such interest foregone by the employer or the difference of the interest assumed by the employee and the rate of twelve per cent (12%) shall be treated as a taxable fringe benefit.(b) The benchmark interest rate of twelve per cent (12%) shall remain in effect until revised by a subsequent regulation.(c) This regulation shall apply to installment payments or loans with interest rate lower than twelve per cent (12%) starting January 1, 1998. (6) Membership fees, dues, and other expenses borne by the employer for his employee, in social and athletic clubs or other similar organizations. — These expenditures shall be treated as taxable fringe benefits of the employee in full.(7) Expenses for foreign travel —(a) Reasonable business expenses which are paid for by the employer for the foreign travel of his employee for the purpose of attending business meetings or conventions shall not be treated as taxable fringe benefits. In this instance, inland travel expenses (such as expenses for food, beverages and local transportation) except lodging cost in a hotel (or similar establishments) amounting to an average of US$300.00 or less per day, shall not be subject to a fringe benefit tax. The expenses should be supported by documents proving the actual occurrences of the meetings or conventions.The cost of economy and business class airplane ticket shall not be subject to a fringe benefit tax. However, 30 percent of the cost of first class airplane ticket shall be subject to a fringe benefit tax.(b) In the absence of documentary evidence showing that the employee's travel abroad was in connection with business meetings or conventions, the entire cost of the ticket, including cost of hotel accommodations and other expenses incident thereto shouldered by the employer, shall be treated as taxable fringe benefits. The business meetings shall be evidenced by official communications from business associates abroad indicating the purpose of the meetings. Business conventions shall be evidenced by official invitations/communications from the host organization or entity abroad. Otherwise, the entire cost thereof shouldered by the employer shall be treated as taxable fringe benefits of the employee.(c) Travelling expenses which are paid by the employer for the travel of the family members of the employee shall be treated as taxable fringe benefits of the employee.(8) Holiday and vacation expenses — Holiday and vacation expenses of the employee borne by his employer shall be treated as taxable fringe benefits.(9) Educational assistance to the employee or his dependents —(a) The cost of the educational assistance to the employee which are borne by the employer shall, in general, be treated as taxable fringe benefit. However, a scholarship grant to the employee by the employer shall not be treated as taxable fringe benefit if the education or study involved is directly connected with the employer's trade, business or profession, and there is a written contract between them that the employee is under obligation to remain in the employ of the employer for period of time that they have mutually agreed upon. In this case, the expenditure shall be treated as incurred for the convenience and furtherance of the employer's trade or business.(b) The cost of educational assistance extended by an employer to the dependents of an employee shall be treated as taxable fringe benefits of the employee unless the assistance was provided through a competitive scheme under the scholarship program of the company. (10) Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows — The cost of life or health insurance and other non-life insurance premiums borne by the employer for his employee shall be treated as taxable fringe benefit, except the following: (a) contributions of the employer for the benefit of the employee, pursuant to the provisions of existing law, such as under the Social Security System (SSS), (R.A. No. 8282, as amended) or under the Government Service Insurance System (GSIS) (R.A. No. 8291), or similar contributions arising from the provisions of any other existing law; and (b) the cost of premiums borne by the employer for the group insurance of his employees.(C) Fringe Benefits Not Subject to Fringe Benefits Tax — In general, the fringe benefits tax shall not be imposed on the following fringe benefits:(1) Fringe benefits which are authorized and exempted from income tax under the Code or under any special law;(2) Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans;(3) Benefits given to the rank and file, whether granted under a collective bargaining agreement or not;(4) De minimis benefits as defined in these Regulations;(5) If the grant of fringe benefits to the employee is required by the nature of, or necessary to the trade, business or profession of the employer; or(6) If the grant of the fringe benefit is for the convenience of the employer.The exemption of any fringe benefit from the fringe benefit tax imposed under this Section shall not be interpreted to mean exemption from any other income tax imposed under the Code except if the same is likewise expressly exempt from any other income tax imposed under the Code or under any other existing law. Thus, if the fringe benefit is exempted from the fringe benefits tax, the same may, however, still form part of the employee's gross compensation income which is subject to income tax, hence, likewise subject to a withholding tax on compensation income payment.The term "DE MINIMIS" benefits which are exempt from the fringe benefit tax shall, in general, be limited to facilities or privileges furnished or offered by an employer to his employees that are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees such as the following:(1) Monetized unused vacation leave credits of employees not exceeding ten (10) days during the year;

(2) Medical cash allowance to dependents of employees not exceeding P750 per semester or P125 per month;(3) Rice subsidy of P350 per month granted by an employer to his employees;(4) Uniforms given to employees by the employer;(5) Medical benefits given to the employees by the employer;(6) Laundry allowance of P150 per month;(7) Employee achievement awards, e.g. for length of service or safety achievement, which must be in the form of a tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding one-half (½) month of the basic salary of the employee receiving the award under an established written plan which does not discriminate in favor of highly paid employees; dctai(8) Christmas and major anniversary celebrations for employees and their guests;(9) Company picnics and sports tournaments in the Philippines and are participated exclusively by employees; and(10) Flowers, fruits, books or similar items given to employees under special circumstances, e.g. on account of illness, marriage, birth of a baby, etc(D) Tax Accounting for the Fringe Benefit Furnished to the Employee and the Fringe Benefit Tax Due Thereon. — As a general rule, the amount of taxable fringe benefit and the fringe benefits tax shall constitute allowable deductions from gross income of the employer. However, if the basis for computation of the fringe benefits tax is the depreciation value, the zonal value as determined by the Commissioner pursuant to Section 6(E) of the Code or the fair market value as determined in the current real property tax declaration of a certain property, only the actual fringe benefits tax paid shall constitute a deductible expense for the employer. The value of the fringe benefit shall not be deductible and shall be presumed to have been tacked on or actually claimed as depreciation expense by the employer.Provided, however, that if the aforesaid zonal value or fair market value of the said property is greater than its cost subject to depreciation, the excess amount shall be allowed as a deduction from the employer's gross income as fringe benefit expense.

RMC 30 – 08 REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCEBUREAU OF INTERNAL REVENUE

Quezon City

April 1, 2008

REVENUE MEMORANDUM CIRCULAR NO. 30-2008

Subject : Clarifying the Taxability of Insurance Companies for MCIT,

Business Tax, and Documentary Stamp Tax Purposes.

To : All Internal Revenue Officers and Others Concerned.

The primary and predominant business activity of an insurance company is the writing of insurance or the reinsuring of risks underwritten by insurance companies which are subject to the supervision by the Insurance Commission.

Section 2 of Presidential Decree No. 612 (PD 612), otherwise known as the “The Insurance Code” defines the term “doing an insurance business” or “transacting an insurance business” to include: “(a) making or proposing to make, as insurer, any insurance contract; (b) making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; (c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; (d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code. X x x”

In proposing to indemnify another against any loss, damage or liability arising from an unknown or contingent event through the issuance of insurance policies, these companies engaged in the insurance business receive, as consideration for the services rendered, “premium” payment from the insured/policyholder.

The insurance business may pertain to life insurance or non- life insurance business.

Life insurance company is a company which deals with the insurance on human lives and insurance appertaining thereto or connected therewith. The service likewise includes soliciting group insurance, and health and accident insurance policies which the company is nevertheless authorized to pursue as part of its business activity. Group insurance is essentially a single insurance contract that provides coverage for many individuals. In its original and most common form, group insurance provides life or health insurance coverage for the employees of one employer. In an accident insurance,

Page 1 of 11

the insured’s beneficiary has the burden of proof in demonstrating that the cause of death is due to the covered peril. Once the fact is established, the burden then shifts to the insurer to show any excepted peril that may have been stipulated by the parties. An accident insurance is not thus to be likened to an ordinary life insurance where the insured's death, regardless of the cause thereof, would normally be compensable.

Non-life insurance company, on the other hand, is one which solicits insuranceon the secur ity of property such as: marine, fire and casualty insurance companies;

surety, fidelity, indemnity and bonding companies; and such other persons as may be

authorized by the Insurance Commission.

Determination of the Minimum Corporate Income Tax For Life and Non-Life Insurance Companies. - For purposes of computing the gross income on the sale of services which shall be the basis of the 2% Minimum Corporate Income Tax (MCIT) imposed under Section 27(E) and Section 28(A)(2) of the 1997 National Internal Revenue Code (Tax Code), as amended, of life and non- life insurance companies, their gross revenue shall include direct premium and reinsurance assumed (net of returns, cancellations); miscellaneous income; investment income not subject to final tax; released reserve; and, all other items treated as gross income under Section 32 of the said Tax Code, as amended.

Their costs of services or direct cost and identifiable direct revenue-related deductions shall refer to those incurred costs which are exclusively related or otherwise considered indispensable to the creation of the revenue from their business activity as an insurance company, including the generation of investment income not subject to final taxes, and shall be limited to the following:

. 01. Claims, losses, maturities and benefits net of reinsurance recoveries; Additions required by law to reserve fund; and Reinsurance ceded.

Taxability of the Various Business Activities of Life Insurance Company

for Business Tax and Documentary Stamp Tax. -

(a) Business Tax. – While it may be said that thecore revenue source of a

life insurance company is the generation of premiums from

undertaking

life

insurance contracts, its business undertakings have slowly evolved

and expanded

through the years such that aside from the premiums earned from its

main

activity

,

its other ancillary services have likewise brought

forth other types of revenue like

rental income, management fee, interest income, other investment income,

and/or re- issuance fees, reinstatement fees, penalties and the like.

With regard to these types of income, the business tax (i.e., whether

tax, VAT or Gross Receipts Tax ) to be imposed

will depend on the nature of the

activity pursued by the life insurance company in producing such

type of income.

Page 2 of 11

(1) Direct Writings/Premiums - Generally, for the premiums received by a life insurance company in undertaking its insurance activities, the same are subject to premium tax at the rate of five percent (5%) on its direct writings/premiums pursuant to Section 123 of the Tax Code, as amended, to wit:

"SEC. 123. Tax on Life Insurance Premiums. — There shall be collected from every person, company or corporation (except purely cooperative companies or associations) doing life insurance business of any sort in the Philippines a tax of five percent (5%) of the total premium collected, whether such premiums are paid in money, notes, credits or any substitute for money; but premiums refunded within six (6) months after payment on account of rejection of risk or returned for other reason to a person insured shall not be included in the taxable receipts; nor shall any tax be paid upon reinsurance by a company that has already paid the tax; nor upon premiums collected or received by any branch of a domestic corporation, firm or association doing business outside the Philippines on account of any life insurance of the insured who is a nonresident, if any tax on such premium is imposed by the foreign country where the branch is established nor upon premiums collected or received on account of any reinsurance, if the insured, in case of personal insurance, resides outside the Philippines, if any tax on such premiums is imposed by the foreign country where the original insurance has been issued or perfected; nor upon that portion of the premiums collected or received by the insurance companies on variable contracts [as defined in Section 232(2) of Presidential Decree No. 612], in excess of the amounts necessary to insure the lives of the variable contract owners.

" Xxx xxx xxx”

Re- insurance fees, reinstatement fees, renewal fees as well as penalties

paid to the life insurance company which are incidental to or in connectionwith the insurance policy contracts issued are considered akin to premiums,

thus, such types of income are also covered by the above-quoted provision of

Section 123, subject to the 5% premium tax for the gross amount received on

such fees and/or penalties

(2) Management Fees, Rental Income , or Other Income from

Unrelated Services - Management fees, rental income, or

any

oth

er

income earned by the life insurance company from services

which can be

pursued independently of the insurance business activity, are thus not

to the 5% premium tax imposed under Section 123 above but, rather,

the same

are treated as income for services that are subject to the imposition of

pursuant to Section 108 of the Tax Code, as amended, or

to the

percentage tax

imposed under Section 116 of the same Tax Code, as the case may be.

(3) Investment Income -

(3.a) Investment Income Realized from the Investment of

Premiums Earned. - Income realized from investment activities

util

izin

g

the premiums earned by the life insurance company from itspolicyholders is

considered merely a part of, incidental to and is necessary to its

mai

n

business of contracting insurance services.

Page 3 of 11

Such investment income is considered exempt from the furtherimposition of business tax since the premiums, which have been the source

of the funds invested had already been subjected to the imposition of the 5%

premium tax pursuant to Section 123 of the Tax Code, as amended.

(3.b) Investment Income Realized from the Investment of Funds

Obtained from Others . - The income earned by the life insurance companywhereby it uses the funds solicited and pooled from its policyholders to

invest in various marketable securities, instruments, and other financial products,

which funds are recognized as liabilities by the life insurance company andwhich can be withdrawn by the policyholders anytime, is considered as an

income earned from performing a quasi-banking function, thus, subject to the

gross receipts tax imposed under Section 121 of the Tax Code, as amended.

(3.c) Manner of Apportionment to Determine ExemptInvestment Income and Investment Income Subject to Gross Receipts Tax–As has been discussed above, investment income that is exempt from

imposition of business tax only pertains to that portion of investment income

where the source of the funds used in the investment activities comes

the owned funds (i.e., premiums earned ) of the life insurance company.

For that portion of investment income whereby the sourceof the funds

used was solicited from the policyholders for purposes other

than the

payment

of the current premiums due to the life insurance company and wherefunds solicited are treated by the life insurance company as liabilities,

income is considered to have been earned from performing quasi-bankingfunction, and therefore, subject to the imposition of gross receipts tax pursuant

to Section 121 of the Tax Code, as amended.

In order to determine which portion of the investment income earned

for the month is exempt and which portion is taxable, the investment income

earned for the month shall be allocated between the following:

(i) liability account balance pertinent the other funds solicited from the policyholders as of the end of such month; and

(ii) the total premiums earned for the month.

Exempt/Non Taxable Investment Income

Investment Income x ___Item (ii)_above for the Sum of Items (i) & (ii)month above

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Investment Income Subject to Gross Receipts Tax

Investment Income x ___Item (i)_above for the Sum of Items (i) & (ii)

month above

Example : "Akim Life Assurance Corp.", a life insurance company,during the month of April, realized an investment income amounting

P1,000,000. The investment funds used in generating this income come fromboth the premiums earned by the company and the other funds solicited from

its policyholders . For the same month, the premiums earned by thecompany

amounted to P30,000,000 while the liability balance of the end of the said

month pertinent to the other funds solicited amounted to P20,000,000.

The exempt portion of the investment income and the portion to

subject to the gross receipts tax are determined as follows:

Exempt = P1,000,000 x P30,000,000

P50,000,000

= P600,000

========

Taxable for Gross Receipts Tax = P1,000,000 x P20,000,000 P50,000,000

= P 400,000========

(b) Documentary Stamp Tax. - With respect to life insurance policies issued by the life insurance company, the same is subject to documentary stamp tax pursuant to Section 183 of the Tax Code, as amended, as quoted hereunder:

"SEC. 183. Stamp Tax on Life Insurance Policies. — On all policies of insurance or other instruments by whatever name the same may be called, whereby any insurance shall be made or renewed upon any life or lives, there shall be collected a documentary stamp tax of Fifty centavos (P0.50) on each Two hundred pesos (P200), or fractional part thereof, of the amount of premium collected.

For certificates issued, documentary stamp tax is imposed as follows:

Page 5 of 11

SEC. 188. Stamp Tax on Certificates. — On each certificate of damage or otherwise, and on every other certificate or document issued by any customs officer, marine surveyor, or other person acting as such, and on each certificate issued by a notary public, and on each certificate of any description required by law or by rules or regulations of a public office, or which is issued for the purpose of giving information, or establishing proof of a fact, and not otherwise specified herein, there shall be collected a documentary stamp tax of Fifteen pesos (P15.00).

For group insurance policies issued, the premium collected therefrom shall be subject to Section 183 above. For the individual certificates issued to each and every employee covered by the group insurance policy, the issuance of such certificate shall be subject to Section 188 above.

However, with regard to health and accident insurance coverage provided, the basis for the payment of documentary stamp tax shall be the provision prescribed by Section 185 of the same Tax Code, viz:

“SEC. 185. Stamp Tax on Fidelity Bonds and Other Insurance Policies. — On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage or liability made or renewed by any person, association, company or corporation transacting the business of accident, fidelity, employer's liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance), and all bonds, undertakings, or recognizances, conditioned for the performance of the duties of any office or position, for the doing or not doing of anything therein specified, and on all obligations guaranteeing the validity or legality of any bond or other obligations issued by any province, city, municipality, or other public body or organization, and on all obligations guaranteeing the title to any real estate, or guaranteeing any mercantile credits, which may be made or renewed by any such person, company or corporation, there shall be collected a documentary stamp tax of Fifty centavos (P0.50) on each Four pesos (P4.00), or fractional part thereof, of the premium charged.”

Taxability of the Other Financial Services/Products Sold by the Life Insurance Company in addition to the Life Insurance Policy Solicited. - In pursuing its main activity of proposing to undertake for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event throughthe issuance of insurance policies upon payment by the insurer of the premium, it, at

the same time, offers to its policyholder other financial services/products, which upon

acceptance by the policyholder, are made as a rider, clause, warranty or endorsement

attached to and formed part of the insurance policy contract issued.

Examples of such financial products are the Variable Unit Link (VUL) and the Premium Deposit Fund (PDF).

Variable Unit Link (VUL). - Among the salient features of this financial service/product are, as follows:

· In addition to the life insurance policy contracted, policyholders are made to con-tribute to a fund set up by the life insurance company;

Page 6 of 11

· Of the total amount given by the policyholder for the life insurance policy and the contribution to be made to such fund, only 2% to 5% represents the premium payment for the life insurance policy, while 95% to 98% of the rest of the amount paid pertains to the amount contributed to the fund;

· The contribution to the fund is represented by units of shares;

· A fixed amount is set for each unit of share, thus, the percentage of contribution of the policyholder to the fund corresponds to the number of unit of shares he owns therein;

· The amount pooled to the fund is then invested in stocks, securities, debt

instruments, and other similar passive investments,

income

derived

from

which are those that are either exempt from tax orsubject to final tax

The life insurance company merely acts as fund manager.fund is not commingled with the owned funds of the said

company;

The life insurance company does not share in theincome derived by

the fund from the investment activities but ratherderives income by

charging management fees based ona certain fixed rate; and

· The income earned by the fund together with the contributions made are then distributed to the policyholders upon surrender/redemption of units of shares.

The tax consequences insofar as this above financial product/service is concerned are, as follows:

· The premiums received on account of the life insurance solicited from the policy-holder, being the main business activity of the life insurance company is, in addition to the in-come tax imposed under Title II of the Tax Code, as amended, subject to the abovementioned business tax/premium tax and DST;

· For the management fees earned by the life insurance company in managing the investment portfolio of the VUL fund, such

management fees , in addition to the income tax imposed under Title II

of the Tax Code, as amended, is subject to VAT pursuant to Section108 of the Tax Code, as amended, or to the percentage tax imposed

under Section 116 of the same Code, as the case may be;

The certificates issued to the policyholder evidencing his contribution

to the VUL fund which partake the nature of deeds of trust shall be

Page 7 of 11

subject to the imposition of DST prescribed by Section 195 of the Tax Code, as amended; and

For the gain realized by the policyholder from the redemption of hisunits of shares in the VUL fund, the same must be declared and

reported by the said policyholder for income tax purposes.

Premium Deposit Fund (PDF) – Another example of a financial product/service offered by the life insurance company that is made a rider to the life insurance policy contract issued to the policyholder is the premium deposit fund. Among the salient features of the product/service are as follows:

In addition to the life insurance policy contracted, policyholders are made to make deposits for the future premium payment;· Deposits of at least Php500 each may be made to this fund for

payment of future premium on the policy;

The fund will be used in investment activities;

Interest shall be credited to the fund annually on each policy anniversaryat such rates as the life insurance company may declare each

never less than the lowest interest rate prevailing on savings

in banks;· That the balance of the deposit inclusive of the interest earned, maybe withdrawn anytime at the option of the policyholder; and

And that the insurance company treats such deposits in its books of accounts as liabilities to the policyholders.

The tax consequences insofar as this above financial product/service is concerned are, as follows:

· The premiums received on account of the life insurance solicited from the policy-holder, being the main business activity of the life insurance company is, in addition to the in-come tax imposed by the Title II of the Tax Code, as amended, subject to the abovementioned business tax/premium tax and DST;

· The investment income earned by the insurance company from the investment ac-tivities using the fund, in addition to the income tax

imposed by Title II of the Tax Code, as amended, is subject to

gross receipts tax imposed under Section 121 of the Tax Code,

amended;

The instrument issued to the policyholder evidencing deposits made tothe premium deposit fund which is treated as liability in the books of

accounts of the life insurance companies, is considered as Certificate of

Indebtedness subject to the imposition of DST prescribedby Section

Page 8 of 11

179 of the Tax Code, as amended, at the rate of One peso (P1.00) on each Two hundred pesos (P200), or fractional part thereof, of the issue price of any such debt instruments; and

The interest earned by the policyholder from the premium deposit

is subject to 20% final withholding tax imposed by Sections 24(B)(1);25(A)(2); 27((D)(1) and Section 28 (A)(7) of the Tax Code,

amended, which provides that “ a final tax at the rate of twenty percent

(20%) is imposed upon the amount of interest from any currency bankdeposit and yield or any other monetary benefit from deposit substitutes

and from trust funds and similar arrangements.”

This is so because a close perusal of the aforementioned features of

said fund shows that with the manner the insurance company operatesthis fund, the same can be likened to the mode by which banks

accepts deposits from the public whereby deposits received

apparently booked as liabilities and for such liabilities received,

inte

rest

payments based on the agreed interest rate are committed to

be paid

to

the depositors which interest and deposit can be withdrawn by said

depositors anytime.

Inasmuch as insurance companies transact in the same manneras the

business of the banks insofar as the premium deposit fund

concerned, interest paid to their policyholders earned out of

premium deposit fund very well falls within the purview of

what

may

be considered as “similar arrangements” prescribed for byTax Code,

as amended. Thus, such interest payments are subject to the final

withholding tax at the rate of twenty percent (20%).

Taxability of the Non-Life Insurance Company for Business Tax

Documentary Stamp Tax. -

(a) Business Tax. – Pursuant to Section 108 of the Tax Code, as amended,

“gross receipts” of non- life insurance companies (except their crop insurances)subject to the imposition of VAT which includes the total premiums collected whether

such premiums are paid in money, notes, credits or any substitute for money.

Premiums received from a health and accident insurance contractunderwritten

by the non- life insurance companies are likewise included in the ir “gross receipts”

subject to VAT since the same is treated as casualty insurance when

issued by

the

non- life insurance company.

The following non- life insurance companies are subject to VAT on gross premium received beginning January 1, 1996:

a. Marine, fire and casualty insurance companies;

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b. Surety, fidelity, indemnity and bonding companies; c. Mutual benefit associations; d. Government-owned or controlled corporations engaged in the business of non- life insurance; e. Non-stock, non-profit organizations and cooperatives engaged in the business of non-life in-

surance; and f. All other persons, whether individual, trust/estate, partnership, association, joint venture, or

corporation engaging in the non-life insurance business, such as but not limited to resident foreign persons rendering non-life insurance services in the Philippines in the course of its trade or business.

"Gross Receipts" does not include the following::

i. Premiums refunded within six (6) months after payment on account of rejection of risk or re-turned for other reason to the person insured (return premiums);

ii. Premiums on reinsurance of a company that has already paid the tax; iii. Premiums on account of any reinsurance, if the risk insured against covers property located

outside of the Philippines; iv. Documentary stamp and local taxes passed on by the insurance company to the insured; and v. VAT passed on to the insured.

(b) Documentary Stamp Tax. - With respect to insurance policies other than health and accident insurance policies issued by the non- life insurance company, the same are subject to documentary stamp taxes pursuant to Section 184 of the Tax Code, as amended, as quoted hereunder, regardless of the fact that policies may have become ineffective due to non-payment of the corresponding premiums:

"SEC. 184. Stamp Tax on Policies of Insurance Upon Property. — On all policies of insurance or other instruments by whatever name the same may be called, by which insurance shall be made or renewed upon property of any description, including rents or profits, against peril by sea or on inland waters, or by fire or lightning, there shall be collected a documentary stamp tax of Fifty centavos (P0.50) on each Four pesos (P4.00), or fractional part thereof, of the amount of premium charged: Provided , however, That no documentary stamp tax shall be collected on reinsurance contracts or on any instrument by which cession or acceptance of insurance risks under any reinsurance agreement is effected or recorded.

With regard to insurance company, the provision prescribed by

health and accident insurance policies issued by the non-life basis for the payment of documentary stamp tax shall be the Section 185 of the same Tax Code, as amended, viz:

“SEC. 185. Stamp Tax on Fidelity Bonds and Other Insurance Policies. — On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage or liability made or renewed by any person, association, company or corporation transacting the business of accident, fidelity, employer's liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance), and all bonds, undertakings, or recognizances, conditioned for the performance of the duties of

Page 10 of 11

any office or position, for the doing or not doing of anything therein specified, and on all obligations guaranteeing the validity or legality of any bond or other obligations issued by any province, city, municipality, or other public body or organization, and on all obligations guaranteeing the title to any real estate, or guaranteeing any mercantile credits, which may be made or renewed by any such person, company or corporation, there shall be collected a documentary stamp tax of Fifty centavos (P0.50) on each Four pesos (P4.00), or fractional part thereof, of the premium charged.”

For certificates issued, documentary stamp tax is imposed as follows:

SEC. 188. Stamp Tax on Certificates. — On each certificate of damage or otherwise, and on every other certificate or document issued by any customs officer, marine surveyor, or other person acting as such, and on each certificate issued by a notary public, and on each certificate of any description required by law or by rules or regulations of a public office, or which is issued for the purpose of giving information, or establishing proof of a fact, and not otherwise specified herein, there shall be collected a documentary stamp tax of Fifteen pesos (P15.00).

Likewise, Certificate of Cover (COC) issued pertinent to motor vehicleinsurances shall be subject to the documentary stamp tax imposed under Section

188 above.

All revenue rulings and issuances inconsistent herewith are hereby revoked, amended, or modified accordingly.

All internal revenue officers are hereby enjoined to give this Circular as wide a publicity as possible.

(Original Signed)LILIAN B. HEFTI

Commissioner of Internal Revenue

cc:

Secretary of FinanceaPhilippine Insurers and Reinsurers Association (PIRA)Philippine Life Insurance Association, Inc. (PLIA)

Page 11 of 11

Date post:	18-Jul-2016
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