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1. RAMO 01-95
-issued to amend and supersede RAMO 01-86; provide guidelines on implementation of policies on the proper
determination of income tax liability of Philippine branches; prescribed the minimum procedure required in the audit of
income tax liability of philippine branches.
-Shall pay only to Philippine branches of Japanese trading firms and registered with Japanese chamber of commerce
and industry and all other foreign trading companies similarly situated as determined by CIR.
-Shall only apply to income tax liabilities of Philippine branches of MNEs.
-Philippine income tax shall be a certain using following formula:
For solicitaion and trading activities
{(Worldwide Operating Sales to the Philippines attribution tax)}
{( Income X Worldwide Sales X rate X rate )}
For construction and other activities
Plus {(Net Income from construction and other activities X tax rate )}
For implememtation, refer to original text.
2. RAMO 01-86
-branch offices as a distinct character, a separate business unit; generally accepted accounting practices dictate that
income and expenses of the branch shall be segregated from those of the home office in order to clearly reflect their
respective operating results
-the Philippine branch solicits purchase orders from local buyers, relay the information to its home office abroad, and
the home office purportedly directly makes the sale.

Such acts shall be considered as sales constructively consummated in the branch office in accordance with
generally accepted accounting practices required under Sec.38 of the Tax Code since branch solicitations are
trading acts. The act of the home office shall be considered as constructive supplying of merchandise to its
branch which eventually constructively sells the same to the Philippine buyers.

-the branch solicits purchase orders from local buyers, relays the information to its home office, and home office solicits
prospective sellers abroad and eventually receives compensation for services rendered.

Branch office as commercial broker; they act as negotiators in bringing other persons together to bargain.

-audit procedure for constructive trading

Determine gross sales generated from branchs constructive trading.

Require the local branch to submit authenticated income statement and statement of cost of sales (worlwide
operation of entire corporation).
Extract the gross income by applying against the gross contructive sales the gross profit rate in the cost of
sales statement in paragraph b.
Check from the records of Bureau of Customs all shipments of branch home office to determine the
constructive sale.
Require the branch to reconcile computation of its constructive sales.

-audit procedure for broker activity

Verify accuracy of the amount of compensation alocation to the branch.

Requires submission of sworm declaration from home office on the correctness of the allocated share.


Require the branch to pay fixed tax as a commercial broker.

Require the branch to pay the commercial brokers groos receipt tax.
Determine the income tax obligation for the said income.
RAMO 04-86

-in order to avoid delay and conflict in the determination of Philippine sources taxable net income of foreign
taxpayers for purposes of Philippine income tax.
-difficulty in verifying the deductions because there are amounts incurred in the head office or elsewhere as the
supporting documents are not accessible to local tax authorities.
-only audit certificate is available to substantiate the deductions incurred abroad
-need for adequate proof in order that the claimed deductions of the foreign taxpayers may be allowed for income tax
-detailed examination of the functions performed by both head and local office

Functions should be determined and listed. Who does what? What is required to do it? Who needs
whom for what?
After having listed the functions performed, must be analyzed.

-on the basis of the above-mentioned functional analysis, the claimed deduction properly allocable can be determined
by applying the tests of relevance (necessary) to the local branch and reasonable charges (ordinary) keeping always in
the mind the arms length principle in the transactions of related parties.
-deductions cannot be properly allocated, require:

Breakdown or schedule of home or foreign office expenses being pro-rated

-in all instances, look for:

Charges applicable to newly opened foreign branch but claimed as deductions in the Philippines
Functioned being performed for some branches but not for others, no adjustments made on the allocation
Other scheme of over-allocating in the Philippine branch.


1) Republic Act No. 10026
-the inclusion of local water districts to those which are exempt from paying income taxes as imposed by Section 27(C)
-that the amount saved by virtue of such exemption shall be used by the local water districts for capital equipment
expenditure in order t5o expand water services coverage and improve water quality in order to provide safe and clean
-all unpaid taxes or any portion thereof due from a local water district for the period starting August 13, 1996 until the
effectivity shall be condoned, provided:

That the BIR establishes its finacial incapacity after providing for its maintenance, and operation
expenses, debt servicing and reserve fund, to meet the obligations
Shall submit to Congress a program for internal reforms, duly certified by the local utilities

2) Republic Act No. 8502

Jewelry Industry Development Act of 1998

Development Incentives:
Shall be available to qualified jewelry enterprises:
o Entitlement to zero (0) duty on imported raw materials which include precious metals, loose gems,
precious stones, jewelry parts, accessories and supplies for use by jewelry enterprise

Exemption from the imposition of excise tax on all goods commonly or commercially known as jewelry,
whether real or imitation pearls, precious and semi-precious stones and imitations thereof; all goods
made of, or ornamented, mounted or fitted with precious metals or imitations thereof, as specifically
mentioned in Sec. 150(a) of the National Internal Revenue Code of the Philippines, as amended;

Entitlement to zero (0) duty on imported capital equipment, including spare parts and toolings thereof
falling within Chapter 69 of Sec. XIII, Chapter 82 of Sec. XV, Chapters 84 and 85 of Sec. XVI, and
Chapter 90 of Sec. XVIII of the Tariff and Customs Code, as amended;

Additional deduction from taxable income of fifty percent (50%) of expenses incurred in training
schemes approved by the appropriate agency and which shall be deductible during the financial year
the expenses were incurred;

Gold and silver sales by the Bangko Sentral ng Pilipinas to jewelry enterprises wider minimal margins;

Authority for jewelry enterprises to buy gold and silver directly from other sources;

Inclusion of locally-manufactured jewelry in the government's tourist duty free shops including the
promotion, advertisement and sale thereof; and

Jewelry enterprises availing of incentives provided under this Act shall still be eligible to incentives
provided by other special laws such as Republic Act No. 7844 (Export Development Act of 1994),
Republic Act No. 7916 (Special Economic Zone Act of 1995), Executive Order 226 (BOI Omnibus
Investments Code), among others: Provided, That the activity is export-oriented and that there is no
double availment of the same incentives.

3) Republic Act No. 8525

Adopt-a-School Act of 1998
Adopt-a-School Program:
Will allow private entities to assist a public school(elementary, secondary, tertiary) preferab ly located in any of
the 20 poorest provinces
Additional Deduction for expenses incurred for the adoption:
Expenses incurred by the adopting entity shall be allowed an additional deduction from the gross income
equivalent to 50% of such expenses
Valuation assistance other than money shall be based on the aquisition cost of the property. Such valuation
shall take into consideration the depreciated value of the property in case said property has already been used.

4)Republic Act No. 9999

Free Legal Assistance Act of 2010
Requirements for Availment:
Secure a certification from PAO, DOJ, or accredited association of SC indicating that the legal services to be
provided are within the legal services as defined

The agencies cannot provide legal services to be provided by the private counsel
To determine the number of hours actually provided by lawyers, associations shall issue certification that said
legal services were actually undertaken
Certification issued by PAO, DOJ and accredited assoc. shall be submitted to BIR to determine tax deductions
and to DOJ for monitoring
Incentives to lawyers:
For those rendering services under such act, shall be entitled to an allowable tax deduction from the gross
income, the amount that could have been collected for the actual free legal services rendered or up to ten
percent (10%) of the gross income derived from the actual performance of the legal profession, whichever is
lower: Provided, That the actual free legal services herein contemplated shall be exclusive of the minimum
sixty (60)-hour mandatory legal aid services rendered to indigent litigants