PREFERENTIAL TAXATION

Presented by: GROUP 4

DAZA, RANCE HARRY DUANO, CHARLENE SUAL, HAZEL MYKA
DELA CRUZ, MARJORIE LUMAPAS, AIRA
DOMECILLO, MARY OLENDAN, JHEMALOU

Senior Citizens Law

Exemptions from Income Tax
General Rule: Qualified SCs deriving income during the taxable year, whether from compensation or otherwise,
are required to file income tax returns
Exceptions:
I. If the income of SC is compensation and he/she is a minimum wage earner(MWE), SC is exempt from
income tax to existing rules on MWE
II. If the aggregate amount of gross income during the taxable year does not exceed his/her personal
exemptions , SC is exempt from tax and NOT required to file annual ITR
Tax Incentives to Qualified Establishments
Kinds of discounts on qualified goods and services for SCs:

Promotional Discount
20% discount
5% discount on water and electric consumption by SCs
50% discount on electricity, water and telephone consumption by the Senior Citizen Center
Treatment of Discounts:
 Ordinary and Necessary Expenses
 Deductible from the gross income of the seller falling under the category of itemized deductions
 Can be only claimed if the seller does not opt for optional standard deduction during the taxable year.
Conditions for Deductions:
• Only that portion of the gross sales exclusively used, consumed or enjoyed by the SC shall be eligible
for the deductible sales discount;
• The gross selling price and the sales discount must be separately indicated in the official receipt or the
sales invoice issued by the establishment
• Only the actual amount of the discount granted or a sales discount not less than the statutory rate (20%,
5% and 50% when applicable
• The seller must record its sales inclusive of the discount granted
• The business establishment giving sales discount to qualified SCs is required to keep a separate and
accurate record of sales, which shall be include the name of the SC, the SC ID, gross sales/gross
receipts, dates of transactions and invoice numbers for every sale to SCs
• Only business establishments selling any of the qualified goods and services to SCs where an actual
discount was granted may claim the deduction
• The seller must not opt for OSD
Additional Deduction Due to Compensation Paid to Senior Citizens
Private establishments employing SCs shall be entitled to additional deductions from their gross income
equivalent 15% of the total amount paid as salaries and wages to SCs subject to the provisions of Section 34 of
the Tax Code and its implementing rules and regulations
Conditions for Additional Deduction
 • The employment shall have to continue for a period of at least six months
• The annual taxable income of the SC does not exceed the poverty level as may be determined NEDA
thru the NCSB. For this purpose, the SC shall submit to his employer a sworn certification that his
annual taxable income does not exceed the poverty level
Magna Carta for Persons with Disability (PWD) RA 7277
Disabled persons are those suffering from restriction or different abilities, as a result of a mental, physical or
sensory impairment, to perform an activity in the manner or within the range considered normal for a human
being.
Income Tax for PWD
PWD deriving returnable taxable income during the taxable year, whether from compensation or otherwise, are
required to file their income tax returns and pay the tax as they file the return. However, if the returnable
income tax of a PWD is in the nature of compensation income but he qualifies as a minimum wage earner under
RA No. 9504, he shall be exempt from income tax on the said compensation income subject to the rules
provided under RR10-2008 applicable to minimum wage earners.
PWDs shall be entitled to the following BENEFITS AND PRIVILEGES under RA No. 10754
a) At least 20% discount and exemption from the VAT, if applicable, on the following sale of goods and
services for the exclusive use and enjoyment or availment of the PWD:
1. On hotel accommodations, restaurants and recreation centers
2. On admission fees in theaters, cinema houses, concert halls, circuses and carnivals.
3. Purchases of medicines in all drugstores
4. On medical and dental services, including diagnostic and laboratory fees such as, but not limited to, x-
rays, computerized tomography, scans and blood test and professional fees of attending doctors in all
government facilities, subject to the guidelines to be issued by the DOH in coordination with the
PhilHealth.
5. On medical and dental services, including diagnostic and laboratory fees and professional fees of
attending doctors in all private hospitals and medical facilities, in accordance with the rules and
regulations to be issued by the DOH in coordination with the PhilHealth.
6. On funeral and burial services for the death of the PWD
b) Educational assistance to PWD
c) To the extent practicable and feasible, the continuance of the same benefits and privileges
d) To the extent possible, the government may grant special discounts in special programs for PWD on
purchase of basic commodities, subject to the guidelines issued by the DTI and DA.
e) Provision of express lanes for PWD in all commercial and government establishments
The above mentioned privileges are available only to PWD who are Filipino citizens upon submission of any of
the following as proof of his/her entitlement thereto:
(i) An identification card issued by the city or municipal mayor or the brgy captain of the place where the
PWD resides;
(ii) The passport if the PWD concerned; or
(iii) Transportation discount fare Identification Card issued by the National Council for the Welfare of
Disabled Person.
Additional Compensation Expense
Private entities that employ PWDs either as regular employees, apprentices or learners. Said incentives include
an additional deduction from gross income of 25 percent of the total amount paid as salaries and wages to
disabled persons.
Treatment of Input VAT attributable to sale to a PWD
The input tax attributable to the vat exempt sale is considered as cost or an expense account by business
establishments and shall not be allowed as input tax credit. If there is no name of PWD or ID No. indicated the
records of sales, the input tax attributable to the vat exempt sale claimed by establishments shall be disallowed.
Invoicing Requirement
The business establishment giving sales discount to a PWD is required to keep a separate and accurate records
of sales, which shall include the name of the PWD, PWD ID No., gross sales/receipts, sales discounts granted,
date of transactions and invoice number for every sales transaction to a PWD.

Special Economic Zone Act of 1995

(a) "The State recognizes the indispensible role of the private sector, encourages private enterprise, and provides
incentives to needed investments." (Sec. 20, Art II)

(b) "The State shall promote the preferential use of Filipino labor, domestic materials and locally produced
goods and adopt measures that help make them competitive." (Sec. 12, Art XII)

In pursuance of these policies, the government shall actively encourage, promote, induce and accelerate a sound
and balanced industrial, economic and social development of the country in order to provide jobs to the people
specially those in the rural areas, increase their productivity and their individual and family income, and thereby
improve the level and quality of their living condition through the establishment, among others, of special
economic zones in suitable and strategic locations in the country and through measures that shall effectively
attract legitimate and productive foreign investments.
Definition of Terms:
(a) "Special Economic Zones (SEZ)" – hereinafter referred to as the ECOZONES, are selected areas with highly
developed or which have the potential to be developed into agro-industrial, Industrial tourist/recreational,
commercial, banking, investment and financial centers. An ECOZONE may contain any or all of the following:
Industrial Estates (IEs), Export Processing Zones (EPZs), Free Trade Zones, and Tourist/Recreational Centers.

(b) "Industrial Estate (IE)" – refers to a tract of land subdivided and developed according to a comprehensive
plan under a unified continuous management and with provisions for basic infrastructure and utilities, with or
without pre-built standard factory buildings and community facilities for the use of the community of industries.

(c) "Export Processing Zone (EPZ)" – a specialized industrial estate located physically and/or administratively
outside customs territory, predominantly oriented to export production. Enterprises located in export processing
zones are allowed to import capital equipment and raw materials free from duties, taxes and other import
restrictions.

(d)"Free Trade Zone" - an isolated policed area adjacent to a port of entry (as a seaport) and/or airport where
imported goods may be unloaded for immediate transshipment or stored, repacked, sorted, mixed, or otherwise
manipulated without being subject to import duties. However, movement of these imported goods from the free-
trade area to a non-free-trade area in the country shall be subject to import duties.

Enterprises within the zone are granted preferential tax treatment and immigration laws are more lenient.
(e) “Philippine Economic Zone Authority (PEZA)” - is the Philippine government agency tasked to promote
investments, extend assistance, register, grant incentives to and facilitate the business operations of investors in
export-oriented manufacturing and service facilities inside selected areas throughout the country proclaimed by
the President of the Philippines as PEZA Special Economic Zones.
Taxation of PEZA Registered Enterprise
Generally, PEZA registered enterprise are taxable as follows:

● INCOME TAX HOLIDAY (ITH)

PEZA registered enterprise shall be exempt from the payment of income taxes reckoned from the
scheduled start of commercial operations, as follows:
» New project with a pioneer status for six (6) years;
» New project with a non-pioneer status for six (6) years;
» Expansion projects for three (3) years.

● 5% SPECIAL TAX ON GROSS INCOME

PEZA registered enterprises are subject to 5% Special tax on Gross Income and IN LIEU of all taxes,
national and local, except real property taxes.

Gross Sales/Revenues Pxx

Less:
Sales discountsPxx
Sales returns and allowances xx (xx)
Net Sales Pxx
Less: Cost of sales/direct costs (xx)
Gross IncomePxx

Fiscal incentives to PEZA-Registered Economic Zone Enterprises include

1. Economic Zone Export Manufacturing Enterprises
a. Income Tax Holiday (ITH) – 100 percent exemption from corporate income tax
● 4 years ITH for Non-pioneer Project
● 6 years ITH for Pioneer Project
ITH EXTENSION years may be granted
● The average net foreign exchange earnings of the project for the first three years of operations is at least
US$500,000: and
● The capital equipment to labor ratio of the project does not exceed US$10,000 to 1 for the year immediately
preceding the ITH extension year being applied for.
● The average cost of indigenous raw materials used in the manufacture of the registered product is at least 50%
of the total cost of raw materials for the preceding years prior to the ITH extension year.

b. Upon expiry of the Income Tax Holiday — 5% Special Tax on Gross Income, and exemption from all
national and local taxes.
c. Tax and duty free importation of raw materials, capital equipment, machineries and spare parts.
d. Exemption from wharfage dues and export tax, impost or fees.
e. VAT zero-rating of local purchases subject to compliance with BIR and PEZA requirements.
f. Exemption from payment of any and all local government imposts, fees, licenses or taxes. However, while
under Income Tax Holiday, no exemption from real estate tax, but machineries installed and operated in the
economic zone for manufacturing, processing or for industrial purposes shall be exempt from real estate taxes
for the first three (3) years of operation of such machineries. Production equipment not attached to real
estate shall be exempt from real property taxes.
g. Exemption from expanded withholding tax.

2. Information Technology Enterprise

a, b and gis the same as number 1

c. Tax and duty free importation of equipment and parts.

d. Exemption from wharfage dues on import shipments of equipment.
e. VAT zero-rating of local purchases of goods and services, including land-based telecommunications,
electrical power, water bills, and lease on the building, subject to compliance with Bureau of Internal Revenues
and PEZA requirements.
f. Exemption from payment of any and all local government imposts, fees, licenses or taxes. However, while
under Income Tax Holiday, no exemption from real estate tax, but machineries installed and operated in the
economic zone for manufacturing, processing or for industrial purposes shall not be subject to payment of
real estate taxes for the first three (3) years of operation of such machineries. Production equipment not
attached to the real estate shall be exempt from real property taxes.

3. Tourism Economic Zone Locator Enterprise

a. Four (4) years of Income Tax Holiday ITH
b. Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and exemption from all national
and local taxes.
c. Tax and duty-free importation of capital equipment.
d. VAT Zero Rating on local purchases of goods and services, including land-based telecommunications,
electric power, and water bills.
e. Exemption from expanded withholding tax.

4. Medical Tourism Enterprise

a. Four (4) years of Income Tax Holiday on income solely from servicing foreign patients
b. Upon expiry of the Income Tax Holiday - 5% Special tax on Gross Income upon in lieu of all national and
local taxes.
c. Tax and duty-free importation of medical equipment, including spare parts and equipment supplies, required
for the technical viability and operation of the registered activity/ies of the enterprise.
d. VAT Zero Rating on local purchases of goods and services, including land-based telecommunications,
electric power, and water bills
e. Exemption from expanded withholding tax.

5. Agro-Industrial Economic Zone Enterprise

a. Four (4) years of Income Tax Holiday
b. Upon expiry of the Income Tax Holiday - 5% Special tax on Gross Income and exemption from all national
and local taxes.
c. Tax and duty free importation of production equipment and machineries, breeding stocks, farm implements
including spare parts and supplies of the equipment and machineries
d. Exemption from export taxes, wharfage dues, impost and fees
e. VAT Zero Rating on local purchases of goods and services, including land-based telecommunications,
electric power, and water bills
f. Exemption from payment of local government fees.

6. Economic Zone Logistics Services Enterprise

a. Exemption from duties and taxes on raw materials, semi-finished goods for re-sale to - or for
packing/covering, cutting, altering for subsequent sale to PEZA-registered Export Manufacturing Enterprises,
for direct export or for consignment to PEZA-registered export enterprise.
b. VAT Zero Rating on raw materials for checking, packing, visual inspection, storage and shipping to be
sourced locally

7. Economic Zone Developer / Operator

7.a. Manufacturing Economic Zone Developer / Operator
a. Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax
on land owned by the Economic Zone Developer.
b. VAT Zero rating of local purchases
c. Exemption from expanded withholding tax
7.b. IT Park Developer / Operator
a. Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax
on land owned by the IT Park Developer.
b. VAT Zero rating of local purchases
c. Exemption from expanded withholding tax
7.c. Tourism Economic Zone Developer / Operator
a. Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax
on land owned by the Tourism Economic Zone Developer.
b. VAT Zero rating of local purchases
c. Exemption from expanded withholding tax
7.d. Medical Tourism Economic Zone Developer / Operator
a. Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax
on land owned by Medical Tourism Zone Developer.
b. VAT Zero rating of local purchases
c. Exemption from expanded withholding tax
7.e. Agro-Industrial Economic Zone Developer / Operator
a. Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax
on land owned by the Agro-Industrial Economic Zone Developer.
b. VAT Zero rating of local purchases
c. Exemption from expanded withholding tax
7.f. Retirement Economic Zone Developer / Operator
a. Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax
on land owned by the Retirement Economic Zone Developer.
b. VAT Zero rating of local purchases
c. Exemption from expanded withholding tax

8. Facilities Enterprises
8.a. Economic Zone Facilities Enterprise
8.b. IT Park Facilities Enterprise
8.c. Retirement Economic Zone Facilities Enterprise
9. Economic Zone Utilities Enterprise

a. Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax on
land owned by developers.
b. VAT Zero rating of local purchases
c. Exemption from expanded withholding tax

Non-Fiscal Incentives:
● Simplified Import-Export Procedures (Electronic Import Permit System and Automated Export
Documentation System).

● Non-resident foreign nationals may be employed by PEZA-registered Economic Zone Enterprises in

supervisory, technical, or advisory positions.

● Special Non-Immigrant Visa with Multiple Entry Privileges for the following non-resident foreign nationals
in a PEZA-registered Economic Zone Enterprise.

PEZA BOARD
● The Board shall have a director general with the rank of department undersecretary who shall be appointed by
the President.
● The director general shall be assisted by three (3) deputy directors general who shall be appointed by the
PEZA Board, upon the recommendation of the director general.
● The Board shall be compose director general as ex officio chairman with eight (8) members.

Summary of the business activities that are eligible for PEZA tax incentives as of December 31, 2016:
● Export Manufacturing
● Information Technology Service Export
● Tourism
● Medical Tourism
● Agro-industrial Export Manufacturing
● Agro-industrial Bio-Fuel Manufacturing
● Logistics and Warehousing Services
● Economic Zone Development and Operation
● Facilities Providers
● Utilities

Operating Economic Zone Map as of December 31, 2016:

73 Manufacturing Economic Zone
243 Information Technology Parks/Centers
21 Agro-Industrial Economic Zone
19 Tourism Economic Zones
2 Medical Tourism Parks/Centers

BOARD OF INVESTMENT
(BOI)
PHILIPPINES

 (BOI), an attached agency of Department of Trade and Industry (DTI), is the lead government agency
responsible for the promotion of investments in the Philippines.

 assists Filipino and foreign investors to venture and prosper in desirable areas of economic activities.

 The BOI is your one-stop shop in doing business in the Philippines.

 provides tax breaks and other incentives to registered entities that engage in activities identified as
investment priorities or those which promote the general economic development of the Philippines.

THE OMNIBUS INVESTMENT CODE OF 1987 .

 " The state recognizes the indispensable role of the private sector, encourages private enterprise, and
provides incentives to needed investments." ( Sec.20 Art.II )
 "The state shall promote preferential use of Filipino labor, domestic materials and locally produced goods,
and adopt measures that help them competitive." ( Sec.12 , Art. XII )

PIONEER AND NON-PIONEER ENTERPRISE

Pioneer Enterprise

 Involves the manufacturing or processing (not merely assembly or packaging of goods or raw materials
that have not been produced in the Philippines on a commercial scale; or
 Uses a design, formula, scheme, method, process or system of production or transformation of any element
or raw material or finished good which is new and untried; or

 Engages in agricultural activities/services essential to the achievement of the country’s self-sufficiency

program; or

 Engages in agricultural activities/services essential to the achievement of the country’s self-sufficiency

program; or

 Conforms to other specific criteria as provided for in the annually drawn investments Priorities Plan

Non- Pioneer Enterprise

 Shall include all registered producer enterprise other than pioneer enterprise.

PREFERRED AREAS OF INVESTMENT

 In determining the preferred and pioneer areas of investment and their corresponding measured capacities
the Board shall determine which areas of investment best accomplish the policy declared in this Act,

 Any area of investment where an enterprise: (1) is engaged in the exportation of finished products
completely processed and manufactured in the Philippines with at least seventy (70%) per cent of the peso
value of its total raw material content being Philippine raw material; (2) is exporting more than fifty (50%)
per cent of its total production; and (3) does not enjoy any preferential treatment arising from any
agreement or arrangement between the Philippine government and the importing country; shall be
considered a preferred area of investment and included in the Investment Priorities Plan.

The Board shall take into account all the following criteria:
(a) The gaps between prospective demand and existing supply for specific products, commodities and services,
and the additional production capacities that must be induced where such gaps exist;

(b) The potential of such areas of investments for creating new markets both domestic and foreign, for domestic
suppliers of raw materials and/or intermediate goods, or new sources of supply for domestic consumers of the
products;

(c) The potential of such areas of investment for creating productive employment, considering the necessity for
the dispersal of industries in the country on a planned and balanced basis to the extent that is economically
feasible and practicable;

(d) The extent to which investment in such areas will integrate existing production facilities;

(e) The amounts of import substitution or of new exports such areas of investment will promote;

(f) The amount of capital normally needed thereby;

(g) The nature of the risks, commercial or otherwise, which may be entailed;

(h) The proportion of the required capital, raw material and labor inputs of indigenous origin;

(i) The rate of profitability;

(j) The rate of return to the economy;

(k) The maintenance of competition; and

(l) Such other criteria as the Board may adopt.

 The National Economic Council, within sixty (60) days from receipt of the plan from the Board, shall
evaluate and submit the same, with its recommendation on the entire plan or portions of it, to the President
for his approval.


INVESTMENT PRIORITY PLAN

 it is a list of promoted areas of investment eligible for government incentives.

 Annually the BOI submitted IPP to the President, at every end of the march of the year, however the
President may extend the submission
 NO ECONOMIC INCLUDED IN IPP unless:
- it is shown to be economically, technically and financially sound after the thorough investigation and analysis
by the board

APPROVAL OF INVESTMENT PRIORITY PLAN

 the President shall issue all necessary directives to all departments, bureaus, agencies and instrumentalities
of the government to ensure the implementation of the plan by the agencies concerned in a synchronized
and integrated manner
 AMENDMENTS TO IPP

 Subject to publication requirement

 The board of investment may, at any time, add, additional areas in the plan, after any of the terms of
declaration of an investment or terminate the status of preference.

PUBLICATION

 Upon approval of the plan specifying and declaring the preferred area of investment And their measured
capacity shall be published in atleast one (1) newspaper of general circulation and all such areas shall be
open for application until publication of amendment and deletion thereof, until the board approves
registration of enterprise which fill the measured capacity.

REGISTRATION OF ENTERPRISE

1. He is the Citizen of the Phil. In case the applicant is natural person, partnership, or any other association . He
owned 60% of the capital and controlled by citizen of the Phil.

In case of corporation 60% of the capital stock and entitled to vote is owned and held by Phil. National

And at least 60% of the board are citizen of the Phil.

2. The applicant is proposing a preferred project listed or authorized in IPP within a reasonable time fixed by
board.

Or at least 50% of the total production is export.

3. The applicant is capable of operating on sound and efficient basis of contributing to national development of
the preferred area.

4. If the applicant proposes undertaking to other activities, it has installed or undertake to install accounting
system adequate to identify investment, revenue, cost, and profit and losses of preferred project undertaken by
the enterprise separately from the aggregate investment or to establish a separate corporation for each preferred
projects.

APPROVAL AND REGISTRATION PROCEDURE

 The board is authorized to adopt the rules and regulation to facilitate action of application filed with it;
 Application filed should be automatically approved
If not acted upon the board within 20 days

APPEAL TO THE BOARD

 Any decision of the board should be final and executory within 30 days from its promulgation . The
decision may be appealed At the office of the president.
 When appeal had been filed shall be final and executory within 90 days after the perfection of the appeal

CERTIFICATE OF REGISTRATION

 Registered enterprise shall be issued a Certificate of registration under the seal of BOI and signature of the
chairman of the board or other employee as it may empower and designate the purpose.

 The Certificate shall be in such form and style of the of the board may determine and shall state among
other matters:

1. The registered name of the enterprise

2. The IPP of the registered enterprise proposing to engage
3. The nature of the activity. Undertaking or proposing undertake wether pioneer or non pioneer and the
registered capacity of the enterprise
4. The other terms and condition of the registered enterprise to be observed by virtue of the organization
Fiscal Incentives

• lncome tax holidays

• six (6) years for projects with pioneer status and for projects located in a Less Developed Area (LDA)
• four (4) years for new projects with non-pioneer status
• three (3) years for expansion/*modernization projects
• duty exemption on imported capital equipment, spare parts, and accessories
-A registered enterprise with a bonded manufacturing warehouse shall be exempt form the customer duties and
national internal revenue taxes on its important if required supplies/spare parts for consigned equipment those
imported with incentives.
• exemption from wharfage dues and export tax, duty, impost, and fees
-And fees all enterprises registered under the IPP will be given a ten (10) year period from the date of
registration to avail of the exemption from wharfage dues and any export tax impost and fees on it’s non-
traditional export products
• tax exemption on breeding stocks and genetic materials
-Agriculturals producers will be exempted from the payment of all the taxes and duties on their importion of
breeding stocks and genetic materials within ten (10) years from the date of registration or commercial
operations
• tax credits
-tax and duty portion of domestic breeding stock and genetic materials. A tax credit equivalent to one 100% of
the value of national revenue taxes and customer duties on local breeding stocks within 10yrs.
• tax and duty-free importation of consigned equipment
-The firm may qualify to import capital equipment quit spare part and accessories at 1% duty rate from the date
of registration pr up to june 5 2006 pursuant to executive order number 313 and it’s implementing rules and
regulation
• additional deduction for labor expense
-The first 5yrs from date of registration a registered enterprise shall be allowed additional deductions from
taxable income equivalent to 50%of the wages of additional skilled.This additional deductions shall be doubled
or become 100%.

Non-Fiscal Incentives

• employment of Foreign Nationals

• simplification of customs procedures for imported products
• importation of consigned equipment
• privilege to operate a bonded manufacturing/trading warehouse (subject to custom rules and regulations)

BMBE(Barangay Micro Business Enterprise)

• RA 9178 "known as BMBE act 0f 2002"

• Encourages the formation and growth of barangay micro business enterprise by granting them incentives and
other benefits.
• The act primarily aim to integrate micro enterprise in the informal sector into mainstream of the economy.
• Strengthening BMBEs would mean more jobs and livelihood , and a better quality of life for filipino.
• The act was signed into law by President Gloria Macapagal-Arroyo on Nov.13 2002 .
Implemebting rules and regulations which issued in Fed 7 2002

• It is engaged in production, processing, or manufacturing of products, including agro-processing, as well as

trading and services

• It has total assets of not more than P 3 million, including those arising from loans but not the land on which
the plant and equipment are located.

• The business or service provider, in connection with the exercise of his or her profession, is not a professional
duly licensed by the government after having passed a government licensure examination, such as accountants,
lawyers, doctors, and the like.

• It is not a branch, subsidiary, division, or office of a large-scale enterprise and its policies and business modus
operandi are not determined by such enterprise or by persons who are not owners or employees of said
enterprise, as mandated by the Department of Finance Order No. 17-04.

BMBE Registration Procedures

The process for registration is as follows:

a. Accomplish BMBE Form 01 in triplicate and submit to the Office of the Municipal or City Treasurer.
b. The Municipal or City Treasurer evaluates the application. The application shall be processed within 15
working days upon submission; otherwise, the BMBE shall be deemed registered.

c. A registered BMBE shall be issued a Certificate of Authority as proof of registration, effective for two years.
The application is renewable every two years.
Incentives of BMBEs

Registered BMBES can avail of the following incentives:

1. Income tax exemption from income arising from the operation of enterprise.
2. Exemption from the coverage of the minimum wage law.
3. Priority to a special credit window set up physically for the financing requirement of BMBES.
Funding agencies designated to set up special credit window for BMBES:
-Land bank of the Philippines
-Development bank of the Philippines
-Small business guarantee and finance corporation
-Peoples credit and finance corporation
-Quedan and rural credit guarantee corporation
-Government service insurance system (for members only) and social security system (for members only)
4. Technology transfer, production and management training, and marketing assistance programs for BMBE
beneficiaries.
Agencies mandated to provide assistance:
*Department of trade and industry( DTI)
*Department of science and technology (DOST)
*University of the Philippines institute for small scale industries (UP-ISSI)
*Cooperative development authority (CDA)
*Technical education and skills development authority (TESDA)
*Technology and livelihood resource center (TLRC)

5. the LGU’s are also encourage to either reduce the amount of local taxes, fees, and charges imposed or exempt
the BMBEs from local taxes, fees, and charges.

DOUBLE TAXATION AGREEMENTS

There are two types of double taxation: economical and juridical (international). The first one is double
economical taxation which is related to situations where people or companies pay two or more taxes from one
tax basis. The most common situation where double economical taxation arises is when a company pays taxes
over the profit the made, and after that they are paying out dividend to their stockholders. That amount of
dividend is also taxed, but now it is dividend tax.

INTERNATIONAL DOUBLE TAXATION AGREEMENT

It is not unusual for a business or individual who is resident in one country to make a taxable gain (earnings,
profits) in another country. It could happen that a person need to pay tax on that gain locally and also need to
pay tax to the country in which the gain was made. Since this is inequitable, many nations make bilateral double
taxation agreements with each other.
In some cases, this agreement requires that the tax will be paid in the country of residence, to avoid double
taxation it will be exempt in the country in which it arises. In the remaining cases, the resident needs to pay tax
to the country where the profit is made("withholding tax") and the taxpayer receives a compensating foreign
tax credit in the country of residence to reflect the fact that tax has already been paid. To do this, the taxpayer
must declare himself (in the foreign country) to be non-resident there. So the second aspect of the agreement is
that the two taxation authorities exchange information about such declarations. Because of the communication
between the countries they also have a better view on individuals and companies who are trying to avoid the
tax.
NATURE AND PURPOSE OF DOUBLE TAXATION AGREEMENTS
Double taxation conventions, treaties, double taxation agreements have all the same purpose of avoiding double
taxation. “Double tax treaties are agreements, usually bilateral, between two taxing states (the contracting
states). In the context of double tax treaties, we therefore refer to 'states' rather than to 'countries'. No two states
have exactly the same tax system they will have different definitions of what constitutes tax residence, different
interpretations of the source principle and may have adopted different systems of giving double tax relief". The
nature of taxation agreements is mainly bilateral, although some of the treaties have a multilateral nature

PHILIPPINE DOUBLE TAXATION AGREEMENTS ("DTA")

Country Effectivity Date and Venue of Signature

May 11, 1979

January 1, 1980
Manila, Philippines
Australia

April 4, 1981
January 1, 1983
Vienna, Austria
Austria

November 7, 2001
January 1, 2004
Manila, Philippines
Bahrain

January 1, 2004
Bangladesh
January 1, 1981
January 1, 2000
Belgium
September 8, 1997
Manila, Philippines
October 2, 1976
Manila, Philippines
May 11, 1996
Manila, Philippines
 September 29, 1983
January 1, 1992
Brasilia, Brazil
Brazil

March 11, 1976

January 1, 1977
Manila, Philippines
Canada

November 18, 1999

January 1, 2002
Beijing, China
China

November 13, 2000

January 1, 2004
Manila, Philippines
Czech

June 30, 1995

January 1, 1998
Copenhagen, Denmark
Denmark

October 13, 1978

January 1, 1982
Manila, Philippines
Finland
January 9, 1976
January 1, 1978
Kingston, Jamaica
June 26, 1995
January 1, 1998
France Paris, France

September 9, 2013
January 1, 2016
Berlin
Germany

June 13, 1997

January 1, 1998
Budapest, Hungary
Hungary

February 12, 1990

January 1, 1995
Manila, Philippines
India
 June 18, 1981
January 1, 1983
Manila, Philippines
Indonesia

June 9, 1992
January 1, 1997
Manila, Philippines
Israel

December 5, 1980
January 1, 1990
Rome, Italy
Italy
February 13, 1980
January 1, 1981
Tokyo, Japan
December 9, 2006
January 1, 2009
Japan Manila, Philippines

February 21, 1984

January 1, 1987
Seoul, Korea
Korea

November 3, 2009
January 1, 2014
Kuwait City, Kuwait
Kuwait

April 27, 1982

January 1, 1985
Manila, Philippines
Malaysia

November 17, 2015

January 1, 2019
Manila, Philippines
Mexico

March 9, 1989
January 1, 1992
Manila, Philippines
Netherlands
February 21, 2002
December 2, 2008
Wellington, New Zealand
April 29, 1980
January 1, 1981
New Zealand Manila, Philippines
 January 1, 2014 September 30, 1997 Manila, Philippines

Nigeria
July 9, 1987
January 1, 1998
Manila, Philippines
May 22, 1989
January 1, 1998
Norway Manila, Philippines

February 22, 1980

January 1, 1979
Manila, Philippines
Pakistan

September 9, 1992
January 1, 1998
Manila, Philippines
Poland

December 14, 2008

January 1, 2016
Doha
Qatar

May 18, 1994

January 1, 1998
Bucharest, Romania
Romania

April 26, 1995

January 1, 1998
Manila, Philippines
Russia

August 1, 1977
January 1, 1977
Manila, Philippines
Singapore

December 11, 2000

January 1, 2019
Manila, Philippines
Sri Lanka

March 14, 1989

January 1, 1994
Manila, Philippines
Spain
 June 24, 1998
January 1, 2002
Manila, Philippines
Switzerland
June 21, 2013
January 1, 2019
Manila, Philippines
March 18, 2009
January 1, 2017
Turkey Ankara, Turkey

September 21, 2003

January 1, 2009
Dubai, United Arab Emirates
United Arab Emirates

June 10, 1976

January 1, 1979
United Kingdom of London, United Kingdom
Great Britain and
Northern Ireland

October 1, 1976
January 1, 1983
Manila, Philippines
United States of
America

November 14, 2001

January 1, 2004
Manila, Philippines
Vietnam
Manner of giving relief from double taxation

Double Taxation of Income shall be avoided in the following method. There are two methods which countries
can use to reduce or relief the double taxation. These methods called the Exemption and Credit Method.

1. The Exemption Method provides relief from double taxation by exempting income that is subject to tax in the
state of source from tax in the state of residence.

Example:
Your taxable income from work and home is 25,000 pesos. Suppose your calculated income tax is 1,250 pesos.
Your income consists of wage from Philippines amounting to 10,000 and wage from Korea amounting to
15,000 pesos. You owe Korea tax on the Korea income and are entitled to double tax relief in the Philippines.
Therefore, the relief is:
15,000 / 25,000 × 1,250 = 750
2. The Credit Method provides relief from double taxation by allowing taxpayers a credit for foreign taxes paid
by a resident.

Example:
You have received 5,000 pesos from foreign sources, and you have paid 1,000 pesos in tax abroad. The
Philippines tax on your income is 1,300 pesos. The tax you have paid abroad is deducted from your Philippines
tax (1,300 - 1,000). You must only pay 300 pesos of taxes in Philippines

Procedure for Availment of Tax Treaty Benefits

1. Nonresidents claiming tax treaty relief shall submit a duly accomplished CORTT Form (Part I and II) or the
prescribed certificate of residency with Part I (A, B, and C) and II of the CORTT Form to their withholding
agents/income payors before income is paid or credited.

• Certificate of Residence for Tax Treaty Relief (CORTT) Form - This is the newly created BIR Form that
replaces the old 0901 Forms intended for tax treaty relief application for dividend, interest and royalty incomes.
This is composed of two parts:

Part I:
A. Applicable Tax Treaty;
B. Information of Income Recipient/ Beneficial Owner (Individual);
C. Information of Income Recipient/ Beneficial Owner (Non-Individual); and
D. Certification of Competent Authority or Authorized Tax Office of Country of Residence.

Part II:
A. Information of Withholding Agent/ Income Payor;
B. Details of Withholding of Tax;
C. Type of Income Earned within the Philippines in Respect to which Relief is claimed;
D. Declaration of Income Recipient/ Beneficial Owner; and
E. Declaration of Withholding Agent/ Income Payor.

2. The withholding agent/income payors shall file BIR Form 1601-F and BIR Form 1604 -CF and shall pay the
withholding taxes due in accordance with the Tax Code and existing Revenue Issuances.

3. The withholding agents/ income payor shall submit an original of the duly accomplished CORTT (Part I and
II) or the prescribed certificate of residency with Part I (A, B and C) and II of the CORTT Form to Tax Affairs
Division (ITAD) and Revenue District Office (RDO) No. 39 within 30 days after payment of withholding taxes
due on dividends, interest and royalty income of nonresident based on applicable tax traety.

4.The witholding agent shall submit an updated Part II of the CORTT Form within 30 days after payment of
withholding taxes due in the following cases:

A. If the CORTT Form filed with ITAD and RDO No. 39 is used for another dividend payment within the
prescribed period of validity; and

B. In case of staggered payment interest and royalty income.