RR 2000

(1)
November 20, 2000
REVENUE REGULATIONS NO. 14-00
SUBJECT : Amending Sections 2(2), 3 and 6 of Revenue Regulations

No. 13-99 vis-a-vis Sale, Exchange or Disposition, by a
Natural Person, of His "Principal Residence"
TO : All Internal Revenue Officers and Others Concerned
SECTION 1. Scope. — Pursuant to the provisions of Section 244, in

relation to Section 24 (D) (2) of the National Internal Revenue Code of 1997 ,
these regulations are hereby promulgated in order to streamline and make more
efficient the collection of the capital gains tax, if any, presumed to have been
realized from the sale, exchange or disposition, by a natural person, of his
"Principal Residence." HCSEIT
SECTION 2. Amendments. —
2.1. Section 2 (2) of Revenue Regulations No. 13-99 is hereby

amended, to read as follows:
"(2) Principal Residence. — (a) The term "Principal Residence"

shall refer to the dwelling house, including the land on which it is situated,
where the husband and wife or an unmarried individual, whether or not
qualified as head of family, and members of his family reside. Actual
occupancy of such principal residence shall not be considered interrupted or
abandoned by reason of the individual's temporary absence therefrom due to
travel or studies or work abroad or such other similar circumstances. Such
principal residence must be characterized by permanency in that it must be
the dwelling house in which, whenever absent, the said individual intends to
return.
"(b) Where ownership of the land and the dwelling house thereon
belongs to different persons, e.g., where the land is leased to the dwelling
house owner, only the dwelling house shall be treated as Principal Residence
of the dwelling house owner. Thus, if the said land and the dwelling house
thereon be jointly sold or disposed by the said owners, only the-sale or
Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2017 1
disposition of the dwelling house shall be entitled to the benefit of
exemption from the capital gains tax herein prescribed: Provided, however,
that where both the owner of the land and owner of the dwelling house
actually reside in the said dwelling house, then both the said land and
dwelling house shall be treated as their Principal Residence (e.g., owner of
the land is the parent while owner of the house is his child, or vice versa).
"(c) Where the land and the dwelling house thereon be owned by
several co-owners, e.g., inherited by two or more heirs through hereditary
succession, and where the said property is actually used as Principal
Residence by one or more of the said co-owners, including the members of
.his/their family, the said property shall be treated as the Principal Residence
of the co-owner/s actually occupying and using the same as his/their
Principal Residence but to the extent of his/their proportionate share in the
value of the principal residence. Conversely, the capital gains tax exemption
benefit herein prescribed shall not apply in respect of the other co-owners
who do not actually use and occupy the same as their Principal Residence.
"(d) The residential address shown in the latest income tax return
filed by the vendor/transferor immediately preceding the date of sale of the
said real property shall be treated, for purposes of these Regulations, as a
conclusive presumption about his true residential address, the certification of
the Barangay Chairman, or Building Administrator (in case of a
condominium unit), to the contrary notwithstanding, in accordance with the
doctrine of admission against interest or the principle of estoppel (e.g., if the
property was sold on May 1, 2000, the vendor's annual income tax return for
the year 1999, which he filed on or before April 15, 2000, showing his
residential address, shall be treated as a conclusive presumption that his true
residential address is that which is shown in his aforesaid income tax return).
If the vendor is exempt from filing any tax return, in which case, he has no
tax record immediately prior to the sale of his property, then the
aforementioned certification from the Barangay Chairman or Building
Administrator, as the case may be, shall suffice." ACaDTH
2.2. Section 3 of Revenue Regulations No. 13-99 is hereby amended, to

read as follows:
"SEC. 3. Conditions for Exemption. — The general provisions of

the Code to the contrary notwithstanding, capital gains presumed to have
been realized from the sale, exchange or disposition by a natural person of
his Principal Residence shall not be imposed with six percent (6%) capital
gains tax, subject to compliance with the following:
"(1) Escrow Agreement. — The six percent (6%) capital gains tax
otherwise due on the presumed capital gains derived from the sale, exchange
or disposition of his Principal Residence shall be deposited in cash or
manager's check in interest-bearing account with an Authorized Agent Bank
(AAB) under an Escrow Agreement (ANNEX A hereof) between the
concerned Revenue District Officer, the Seller/Transferor and the AAB to
the effect that the amount so deposited, including its interest yield, shall only
be released to such Seller/Transferor upon certification by the said RDO that
the proceeds of sale or disposition thereof has, in fact, been utilized in the
acquisition or construction of the Seller/Transferor's new Principal
Residence within eighteen (18) calendar months from date of the said sale or
disposition. The date of sale or disposition of a property refers to the date of
notarization of the document evidencing the transfer of said property. In
general, the term "Escrow" means "A scroll, writing or deed, delivered by
the grantor, promisor or obligor into the hands of a third person, to be held
by the latter until the happening of a contingency or performance of a
condition, and then by him delivered to the grantee, promisee or obligee."
"(2) Capital Gains Tax Return. — The Seller/Transferor shall file,

in duplicate, his Capital Gains Tax Return (BIR FORM No. 1706) covering
the sale or disposition of his Principal Residence with the concerned
Revenue District Office within thirty (30) days from date of its sale or
disposition: Provided, however, that the Seller/Transferor shall not be
required to pay any capital gains tax during the 18-month period on the sale
of his principal residence duly established as such. Provided, further, that for
purposes of the capital gains tax otherwise due on the sale, exchange or
disposition of the said Principal Residence, the execution of the Escrow
Agreement referred to in the immediately preceding Section 3 (1) hereof
shall be considered sufficient.
"The following shall be submitted with the Capital Gains Tax Return
herein required to be filed:
(a) Proof of payment of the documentary stamp tax imposed under

Sec. 196 of the Tax Code of 1997 on the deed of sale or conveyance of
the said "Principal Residence;"
(b) A sworn statement from the Barangay Chairman that the

taxpayer's Principal Residence is located within the jurisdiction of that
Barangay and that the same has been his residence immediately prior to the
date of its sale or disposition: Provided, however, that if the taxpayer's
Principal Residence sold or disposed is a condominium unit, in lieu of the
said Barangay Chairman, the certification shall be issued by the Building
Administrator of the Condominium building.
(c) A duplicate original copy of the Deed of Conveyance of his

Principal Residence;
(d) A certified xerox copy of the Transfer Certificate of Title
(TCT) or Condominium Certificate of Title (CCT), in case of a
condominium unit, covering the Principal Residence sold or disposed;
(e) A certified xerox copy of the latest Tax Declaration covering

the said Principal Residence (land and improvement); and
(f) If the building or improvement thereon has been constructed on

or after the year 1990, the Building Permit or Occupancy Permit issued by
the concerned city or municipality, showing the amount of the construction
cost thereof.
"(3) Post Reporting Requirement. — The proceeds from the sale,

exchange or disposition of his old Principal Residence must be fully utilized
in acquiring or constructing his new Principal Residence within eighteen
(18) calendar months from date of its sale, exchange or disposition. in order
to show proof that positive action was undertaken to utilize the proceeds for
the acquisition or construction of his new Principal Residence within the
18-month reglementary period, he shall submit to the RDO concerned,
within thirty (30) days from the lapse of the said period, the following
documents:
(a) A sworn statement that the total proceeds from the sale or
disposition of his old Principal Residence has been actually utilized in the
acquisition or construction of his new Principal Residence or, if the
construction of his new Principal Residence is still in progress, a sworn
statement that such amount shall be fully utilized to procure the necessary
materials and pay for the cost of labor and other expenses for the
construction thereof; CHATcE
(b) A certified statement from his architect or engineer, or both,

showing the cost of materials and labor for the construction of his new
Principal Residence;
(c) A certified copy of the Building Permit issued by the Office of

the Building Official of the City or Municipality where his new Principal
Residence shall be constructed as well as xerox copies of documents (e.g.,
building specification plan, construction plans, or construction cost
estimates) submitted with his application for the said Building Permit on
which computation of the amount of the building license fee has been based;
(d) In case his new Principal Residence is acquired by purchase, a

duplicate original copy of the Deed of Absolute Sale covering the purchase
of his new Principal Residence.
"(4) Release from the Escrow Agreement. — Upon a showing, based
on the foregoing documents, that the proceeds of sale, exchange or
disposition of his old Principal Residence have already been fully utilized in
the acquisition or construction of his new Principal Residence, the
concerned Revenue District Officer shall, within fifteen (15) days from date
of submission by the Seller/Transferor of the foregoing documents, release
the Escrow on the aforesaid bank deposit in favor of the Seller/Transferor
(ANNEX B hereof).
"(5) Limitation on Tax Exemption Privilege. — The tax exemption

herein granted may be availed of only once every ten (10) years;
"(6) Cost Basis of the New "Principal Residence". — The historical

cost or adjusted cost basis of his old Principal Residence sold, exchanged or
disposed shall be carried over to the cost basis of his new Principal
Residence; and
"(7) Assessment for Deficiency Capital Gains Tax; Application of

the Escrowed Bank Deposit Against the Deficiency Tax. — If the
Seller/Transferor fails to submit documentary evidence within thirty (30)
days after the lapse of the aforesaid 18-month period, showing that he has
utilized the proceeds of sale, exchange or disposition of his old Principal
Residence to acquire or construct his new Principal Residence, it shall be
presumed that he did not, in fact, utilize the aforesaid proceeds of sale for the
construction or acquisition of his new Principal Residence, in which case, he
shall be treated deficient in the payment of his capital gains tax from the sale
or disposition of his aforesaid Principal Residence, and shall be accordingly
be assessed for deficiency capital gains tax, inclusive of the 20% interest per
annum, pursuant to the provisions of Section 228 of the Code, as
implemented by Revenue Regulations No. 12-99 , in relation to Section
249 of the said Code.
Pursuant to the provisions of Revenue Regulations No. 12-99, the

taxpayer shall be issued with the required Post Reporting Notice informing
him, in writing, of the aforementioned facts, in order that he may present his
side of the case through informal conference, and the required Preliminary
Assessment Notice, before issuance of the Formal Assessment Notice. If, at
this point in time, the escrowed tax money is still in the custody of the
Depository Bank, the full amount thereof, including its interest earnings,
shall be applied in computing for the taxpayer's deficiency capital gains tax.
Upon the time that the said deficiency tax assessment has become final and
executory, the deposit in escrow, inclusive of its interest earnings, shall be
forfeited and applied against the taxpayer's deficiency capital gains tax
liability. The depository Bank shall forthwith be informed of this action, and
shall, upon demand in writing, by the Commissioner or his duly authorized
representative (ANNEX C hereof), turn over the money for application in
payment of the taxpayer's deficiency tax liability. If the same is insufficient
to cover the entire amount assessed, the seller/transferor shall remain liable
for the remaining balance of the assessment. On the other hand, the excess of
the deposit in escrow, if any, shall forthwith be returned to the
Seller/Transferor, by the Bank, upon written authorization from the
Commissioner or his duly authorized representative.
"(8) Partial Utilization of the Proceeds of Sales Exchange or

Disposition. — If there is no full utilization of the proceeds of sale,
exchange or disposition of his old Principal Residence for the acquisition or
construction of his new Principal Residence, he shall be liable for deficiency
capital gains tax, inclusive of 20% interest per annum, computed from the
31st day after the date of sale or disposition of the said old Principal
Residence."
2.3. Section 6 of Revenue Regulations No. 13-99 is hereby amended,

to read as follows:
"SEC 6. Issuance of Certificate Authorizing Registration (CAR)

or Tax Clearance Certificate (TCL). — The seller/transferor's compliance
with the preliminary conditions for exemption under Sec. 3(1) and (2) of
these Regulations shall be sufficient basis for the RDO to approve and issue
the CAR or TCL of the principal residence sold, exchanged or disposed by
the aforesaid taxpayer. Said CAR or TCL shall state that the said sale;
exchange or disposition of the taxpayer's principal residence is exempt from
capital gains tax pursuant to Sec. 24 (D)(2) of the Code but subject to
compliance with the post-reporting requirements imposed under Sec. 3(3) of
these Regulations. TAEcCS
SECTION 3. Penalty Clause. — (1) Any Barangay Chairman, or

Building Administrator, as the case may be, who shall falsely certify that the
property sold or disposed is the vendor/transferor's Principal Residence when, in
truth and in fact, it is not, shall be punished under the penalty of perjury, at the
discretion of the Court.
(2) Any other violation of the provisions of these Regulations shall, upon
conviction for each act or omission, be punishable under Section 275 of the
Code by a fine of not more than One Thousand Pesos (P1,000.00) or imprisonment
of not more than six (6) months, or both, at the discretion of the Court.
SECTION 4. Repealing Clause. — Any revenue issuance, if

inconsistent herewith, shall be considered revoked, amended, or modified
accordingly.
SECTION 5. Effectivity Clause. — These Regulations shall take effect
fifteen (15) days after its publication in any newspaper of general circulation.
(SGD.) JOSE T. PARDO

Secretary
Department of Finance
Recommending Approval:
(SGD.) DAKILA B. FONACIER

Commissioner
Bureau of Internal Revenue
ANNEX "A"
Republic of the Philippines
BUREAU OF INTERNAL REVENUE
Revenue Region No. _____
RDO No. _______
ESCROW AGREEMENT
The Bureau of Internal Revenue, herein represented by _____________, Revenue

District Officer, RDO No. _____, ______; the Seller/Transferor _______________ with
postal address at _________________; and the Authorized Agent Bank (AAB),
_________________ with office address at _____________________ herein represented
by _____________________, in his capacity as _______________, hereby agree:
That, the sum of _____________ (P______). representing six percent (6%) of the
selling price or fair market value, whichever is higher, of the Seller/Transferor's
"Principal Residence," which he sold/disposed on _____________, shall be deposited
with the above mentioned AAB on or before , 200_;
That, the said amount shall be placed in an interest bearing bank deposit account
under the account name of the taxpayer in trust for the Bureau of Internal Revenue:
Provided, however, that this account may be readily withdrawn at any time, upon
presentation of "Release from Escrow Agreement" signed by the CIR or his authorized
representative or the concerned Revenue District Office (RDO) when the proceeds of
sale/disposition has been utilized in the acquisition or construction of a new principal
residence within 18 months from the date of sale or disposition of the old principal
residence: Provided, further, that the AAB shall, at any time, upon written request of the
RDO, furnish the latter with information on the amount of interests earned by the said
bank deposit in escrow; cSEDTC
That, no part of the said bank deposit may be withdrawn, delivered and paid to
any person except upon express and written order from the said Revenue District Office.
DONE THIS ________ DAY OF _________, IN THE YEAR OF OUR LORD,

200___.
The Parties have signed this Agreement subject to the penalties of Perjury.
Commissioner of Internal Revenue
By:
_____________________________
Name and Signature of the Revenue
District Officer, RDO NO. ________
_______________________________
Name and Signature of Seller/Transferor
_____________________________
Name of the AAB, Name and
Signature of the AAB's Duly
Authorized Representative
Revenue District No. ____

Revenue Region No. 7
Quezon City
ANNEX "B"
RELEASE FROM ESCROW AGREEMENT
To : (State name and address of the AAB)
Subject : (State name of the taxpayer)
Date : ___________________
This refers to the sum of ___________________ (P__________) which was

deposited with your Bank under our Escrow Agreement, representing six percent (6%) of
the selling price or the fair market value, whichever is higher, of the "Principal
Residence" which was sold by Mr./Ms. ____________________ on _______________,
200_, a copy of which Agreement is attached herewith for your ready reference.
In accordance with our agreement, you are now hereby directed to turn over,
deliver and pay to the aforementioned Mr./Ms. ______________, the entire amount of the
aforesaid deposit in escrow, including its interest yield, considering that all the conditions
for the release of the deposit in escrow have already been fully complied with by the said
Seller/Transferor.
Very truly yours,
BY:
________________________
Name and signature of RDO
Revenue District No. _____

Revenue Region No. 7
Quezon City
ANNEX "C"
FORFEITURE OF THE BANK DEPOSIT IN ESCROW
To : (State name and address of the AAB)
Subject : (State name of taxpayer)
Date : ___________________
This refers to the sum of ___________________ (P____________) which was

deposited with your Bank under our Escrow Agreement, dated _________, 200_,
representing six percent (6%) of the selling price or the fair market value, whichever is
higher, of the "Principal Residence," which was sold by Mr./Ms. _______________, on
_______________, a copy of which Agreement is attached herewith for your ready
reference. TCDcSE
[INSTRUCTION. — The RDO shall state under this paragraph (1) whether
only a partial portion thereof may be so delivered are paid to the Seller/Transferor,
with the balance to be applied in payment of the Seller/Transferor's capital gains
tax, due to non-utilization, in full, of the proceeds of sale of his "Principal
Residence"; or (2) whether the entire escrowed deposit, including interest yield
thereof, shall be forfeited in favor of the Government and applied against the
taxpayer's capital gains tax, due to non-utilization of the entire proceeds thereof in
the acquisition or construction of the taxpayer's new "Principal Residence." If any
portion thereof is forfeited in favor of the Government, the RDO shall prepare
Authority to Accept Payment or Payment Order, addressed to the said AAB,
directing that such amount be receipted in the name of the taxpayer in payment of
his capital gains tax. The taxpayer's copy of the official receipt shall be sent to the
taxpayer, by mail or personal delivery]
Very truly yours,
Commissioner of Internal Revenue:
BY:
________________________
Name and signature of the RDO
RDO No.
(2)
November 20, 2000
SUBJECT : Implementing Section 34(B) of the Tax Code of 1997 on the

Requirements for Deductibility of Interest Expense from the
Gross Income of a Taxpayer
SECTION 1. Scope. — Pursuant to the provisions of Section 244

of the Tax Code of 1997, these Regulations are hereby promulgated to implement
the provisions of Section 34(B) of the same Code on the requirements for
deductibility of interest expense from the gross income of a corporation or an
individual engaged in trade, business or in the practice of profession.
SECTION 2. Definition of Terms. — For purposes of these

Regulations, the following words and phrases shall have the following meanings,
viz:
(a) Interest — shall refer to the payment for the use or forbearance
or detention of money, regardless of the name it is called or
denominated. It includes the amount paid for the borrower's use
of money during the term of the loan, as well as for his
detention of money after the due date for its repayment. cAaETS
(b) Taxpayer — shall refer to a person, whether natural or juridical,

engaged in trade, business or in the exercise of profession,
except one earning compensation income arising from personal
services rendered under an employer-employee relationship.
SECTION 3. Requisites for Deductibility of Interest Expense. — In

general, subject to certain limitations, the following are the requisites for the
deductibility of interest expense from gross income, viz:
(a) There must be an indebtedness;
(b) There should be an interest expense paid or incurred upon such

indebtedness;
(c) The indebtedness must be that of the taxpayer;
(d) The indebtedness must be connected with the taxpayer's trade,

business or exercise of profession;
(e) The interest expense must have been paid or incurred during the
taxable year;
(f) The interest must have been stipulated in writing;
(g) The interest must be legally due;
(h) The interest payment arrangement must not be between related

taxpayers as mandated in Sec. 34(B)(2)(b), in relation to Sec.
36(B), both of the Tax Code of 1997 ;
(i) The interest must not be incurred to finance petroleum

operations; and
(j) In case of interest incurred to acquire property used in trade,

business or exercise of profession, the same was not treated as a
capital expenditure.
SECTION 4. Rules on the Deductibility of Interest Expense. —
(a) General Rule. — In general, the amount of interest expense
paid or incurred within a taxable year on indebtedness in
connection with the taxpayer's trade, business or exercise of
profession shall be allowed as a deduction from the taxpayer's
gross income.
(b) Limitation. — The amount of interest expense paid or incurred

by a taxpayer in connection with his trade, business or exercise
of a profession from an existing indebtedness shall be reduced
by an amount equal to the following percentages of the interest
income earned which had been subjected to final withholding
tax depending on the year when the interest income was earned,
viz:
Forty-one percent (41%) beginning January 1, 1998;
Thirty-nine percent (39%) beginning January 1, 1999; and
Thirty-eight percent (38%).beginning January 1, 2000 and thereafter.
This limitation shall apply regardless of whether or not a tax
arbitrage scheme was entered into by the taxpayer or regardless of
the date when the interest bearing loan and the date when the
investment was made for as long as, during the taxable year, there is
an interest expense incurred on one side and an interest income
earned on the other side, which interest income had been subjected to
final withholding tax. This rule shall be observed irrespective of the
currency the loan was contracted and/or in whatever currency the
investments or deposits were made. DTAIaH
Illustration: Supposing on January 15, 1998, Company A,

who has a deposit account with BCD Bank, obtained a loan from
XYZ Financing Corporation in connection with the operation of its
business. Assume that Company A's net income for the year 1998
before the deduction of the interest expense amounted to P1,000,000.
For the year 1998, the interest income it derived from the said
deposit with BCD Bank amounted to P180,000 on which a final tax
of P36,000 had been withheld. Its interest expense on the loan
obtained from XYZ Financing Corporation during the same year
amounted to P150,000.
Under this illustration, the deductible interest expense, the

taxable income and the income tax due of Company A shall be
computed as follows:
1998
Net income before interest expense P1,000,000
Less: Interest expense P150,000
Less: 41% of interest income from
deposit (41% x P180,000) 73,800
————
Deductible interest expense 76,200
————
Taxable income P923,800
————
Income tax due for taxable year 1998 (34%) P314,092
========
(c) Interest on Unpaid Taxes. — Provisions of Sec. 4(b) hereof to
the contrary notwithstanding, interest incurred or paid by the
taxpayer on all unpaid business-related taxes shall be fully
deductible from gross income and shall not be subject to the
limitation on deduction heretofore mentioned. Thus, such
interest expense incurred or paid shall not be diminished by the
percentage of interest income earned which had been subjected
to final withholding tax.
(d) Other cases where interest expense is not deductible from gross
income. — No interest expense shall be allowed as deduction
from gross income in any of the following cases:
(1) If within the taxable year, an individual taxpayer

reporting income on the cash basis incurs an
indebtedness on which an interest is paid in advance
through discount or otherwise: Provided, That such
interest shall be allowed as a deduction in the year the
indebtedness is paid: Provided, further, That if the
indebtedness is payable in periodic amortization, the
amount of interest which corresponds to the amount of
the principal amortized or paid during the year shall be
allowed as deduction in such taxable year.
Illustration: Mr. Cruz, a self-employed individual,

consistently employs the cash-basis accounting method
in keeping his books of accounts. Assuming that on
January 1, 1998, he contracted a loan of P1,000,000 from
XYZ Bank for use in his business operations. Terms:
Payable in two (2) years at 15% interest per annum,
payable in advance. On January 1, 1998, he received
from the bank the proceeds of his loan in the sum of
P700,000, net of interest paid in advance in the amount
of P300,000.
In general, the interest expense shall be taken for

the taxable year in which "paid or incurred" or "paid or
accrued" depending upon the method of accounting upon
the basis of which the net income is computed, unless in
order to clearly reflect the income, the deduction should
be taken as of a different period. Thus, a self-employed
individual is allowed to deduct from his gross income the
entire amount of interest expense actually paid during the
taxable year. However, if the interest expense is paid in
advance and the accounting method used by the
self-employed individual is the cash-basis accounting
method, such interest expense paid in advance shall only
be allowed as deduction in the year when he has fully
paid his liability. So that if the said debtor has fully paid
his loan as of the end of the taxable year 1999, his
interest expense paid in advance on January 1, 1998 in
the amount of P300,000 shall only be allowed as
deduction from his gross income in the taxable year
1999.
On the other hand, even if the interest expense is

paid in advance but the indebtedness is payable in
periodic amortization, the amount of interest expense
which corresponds to the amount of the principal
amortized or paid during the respective years 1998 and
1999 shall be allowed as deduction in such respective
taxable years. EATcHD
(2) If both the taxpayer and the person to whom the payment
has been made or is to be made are persons specified
under Sec. 36(B) of the Tax Code of 1997, viz:
(i) Between members of a family. For purposes of

this paragraph, the family of an individual shall
include only his brothers and sisters (whether by
the whole or half-blood), spouse, ancestors and
lineal descendants; or
(ii) Between an individual and a corporation more

than fifty percent (50%) in value of the
outstanding stock of which is owned, directly and
indirectly, by or for such individual; or
(iii) Between two corporations more than fifty percent

(50%) in value of the outstanding stock of each of
which is owned, directly or indirectly, by or for
the same individual; or
(iv) Between the grantor and a fiduciary of any trust;

or aCTHEA
(v) Between the fiduciary of a trust and the fiduciary

of another trust if the same person is a grantor
with respect to each trust; or
(vi) Between a fiduciary of a trust and a beneficiary of

such trust.
(3) If the indebtedness on which the interest expense is paid

is incurred to finance petroleum exploration in the
Philippines. The non-deductible interest expense herein
referred to pertains to interest or other consideration paid
or incurred by a Service Contractor engaged in the
discovery and production of indigenous petroleum in the
Philippines in respect of the financing of its petroleum
operations, pursuant to Section 23 of P.D. No. 8
, as amended by P.D. No. 87 , otherwise known as
"The Oil Exploration and Development Act of 1972."
(e) Optional treatment of interest expense on capital expenditure.

— At the option of the taxpayer, interest expense on a capital
expenditure incurred to acquire property used in trade, business
or exercise of a profession may be allowed as a deduction in full
in the year when incurred, the provisions of Sec. 36 (A)(2) and
(3) of the Tax Code of 1997 to the contrary
notwithstanding, or may be treated as a capital expenditure for
which the taxpayer may claim only as a deduction the periodic
amortization of such expenditure.
SECTION 5. Repealing Clause. — The provisions of any revenue
regulations or any revenue issuance or ruling inconsistent with these Regulations
are hereby repealed, amended, or modified accordingly.

immediately.

Secretary

Commissioner
December 22, 2000
SUBJECT : Extending Further the Deadline for the Accreditation of

Tax Agents, Amending for this Purpose Revenue
Regulations No. 15-99 as Amended by Revenue
Regulations 3-2000
Pursuant to Section 244 of the Tax Code of 1997, in relation to Section
6(G) of the same Code, these Regulations are hereby promulgated to extend
further the deadline for the accreditation of tax agents previously set under
Revenue Regulations 15-99 as amended by Revenue Regulations 3-2000.
SECTION 1. Amendment. — Section 13 of Revenue Regulations

No. 15-99 as amended by Revenue Regulations 3-200 is hereby further amended to
read as follows:
"SEC. 13. Transitory Provision. — The requirements

imposed by these Regulations shall be mandatory after FEBRUARY 28,
2001. After the said period, all returns, statements, reports, protests, requests
for ruling, official correspondence and other papers filed on behalf of a
taxpayer shall bear the following information below the signature of the
accredited tax representative. HcaDIA
A. ...
B. . . ."
SECTION 2. Effectivity. — These Regulations shall take effect

immediately.

Secretary

Commissioner
December 12, 2000
SUBJECT : Regulations Prescribing the Registration and the Manner

of Filing of Income Tax Returns and Payment of Income
Tax, if any, of Marginal Income Earners with Gross
Sales/Receipts Not Exceeding P100,000.00 During any
Twelve (12)-Month Period
SECTION 1. Scope. — Pursuant to Section 244 of the National

Internal Revenue Code of 1997 and in relation to Revenue Memorandum Circular
No. 4-98 dated January 21, 1998, these Regulations are hereby promulgated to
establish the policy and guidelines in the registration of marginal income earners
and the filing of their income tax returns and payment of the tax, if any.
SECTION 2. Policy. — It is the declared policy of the State to free the

people from poverty through policies that promote full employment, rising
standard of living and an improved quality of life. Towards this end, the gross
sales/receipts of marginal income earners, as herein defined, shall be subject to the
special tax treatment as prescribed by these Regulations. For this purpose, marginal
income earners shall be given the opportunity to register with the Bureau of
Internal Revenue, with no charge and without complying with the usual
documentary requirements, and in the process afford them the chance to be
included within the mainstream of registered taxpayers.
SECTION 3. Marginal Income Earners. — "Marginal income

earners" shall refer to individuals not otherwise deriving compensation as an
employee under an employer-employee relationship but who are self-employed and
deriving gross sales/receipts not exceeding P100,000.00 during any 12-month
period. Under this qualification, the activities of such marginal income earners are
considered principally for subsistence or livelihood. As such, they are exempt from
the 10% Value Added Tax (VAT) and any percentage tax imposed under the
National Internal Revenue Code of 1997 since they are not considered
engaged in trade or business with a view to profit for which these business taxes
are imposed. Moreover, they are not required to pay any registration fee although
they are required to register as taxpayers for being a possible income tax and
withholding tax filers. cTADCH
SECTION 4. Tax Compliance Requirement. — "Marginal income
earners", who are possible income tax filers and recipients or payors of income
payments subject to withholding tax and registered with the Bureau of Internal
Revenue, shall be entitled to the following privileges and minimum tax compliance
requirements:
A. Compliance to Registration and Bookkeeping Rules —
(1) Exemption from the payment of registration fee as

prescribed under Sec. 236(B) of the Tax Code upon
registration with the Bureau of Internal Revenue after
submission of minimal basic documentary requirements.
(2) Issuance of Taxpayer Identification Number (TIN) with

TIN card.
(3) Exemption from compliance with the issuance of

registered receipts or sales/commercial invoices
prescribed under Section 237 of the Tax Code of
1997.
(4) Exemption from the requirement of maintenance of

books of accounts.
(5) Exemption from attaching Financial Statements or

Account Information Form to the filed Income Tax
Return.
B. Tax Return of Marginal Income Earners
"Marginal income earners" are required to file the Annual

Income Tax Return (Form No. 1700) reflecting income from
whatever source. They may or may not be liable to any income tax
depending upon the existence of net taxable income. Provided,
however, that the Commissioner of Internal Revenue or his duly
authorized representative shall not be precluded from ascertaining
the veracity of taxpayer's claim that he is a marginal income earner
and, if warranted, shall assess the proper and correct taxes pursuant
to Section 6 of the Tax Code of 1997.
SECTION 5. Repealing Clause. — All rules and regulations or any

part thereof inconsistent with the provisions of these Regulations are hereby
amended or repealed accordingly.
SECTION 6. Effectivity. — These Regulations shall take effect fifteen
(15) days after publication in the Official Gazette or in any newspaper of general
publication. HTCSDE

Secretary

Commissioner
December 14, 2000
SUBJECT : Further Amendments to Revenue Regulations No. 2-98 and

3-98, as Last Amended by Revenue Regulations No. 8-2000
TO : All Internal Revenue Officials and Others Concerned
Pursuant to Sections 244 and 4 of the Tax Code of 1997 , in relation to

the provisions of Executive Order No. 291 , these Regulations are hereby
promulgated to further amend Revenue Regulations No. 2-98 and Revenue
Regulations No. 3-98 , as last amended by Revenue Regulations No. 8-2000
, with respect to the exemption of Monetized Leave Credits of Government
Officials and Employees and the enumeration of "De Minimis" benefits which are
exempt from the income tax on compensation as well as from the fringe benefits
tax. AEDISC
SECTION 1. Section 2.78.1(A)(3), (6)(b)(ii) and (7) of Revenue

Regulations No. 2-98, as last amended by Revenue Regulations No. 8-2000, is
hereby further amended to read as follows:
"Sec. 2.78.1. Withholding of Income Tax on Compensation

Income. —
"(A) . . .
"(1) Compensation paid in kind. — . . .
"xxx xxx xxx
"(3) Facilities and privileges of relatively small value. —
"xxx xxx xxx
"The following shall be considered as "de minimis" benefits not

subject to INCOME TAX AS WELL AS withholding tax on compensation
income of both managerial and rank and file employees:
(a) Monetized unused vacation leave credits of PRIVATE

employees not exceeding ten (10) days during the year AND THE
MONETIZED VALUE OF LEAVE CREDITS PAID TO GOVERNMENT
OFFICIALS AND EMPLOYEES;
(b) Medical cash allowance to dependents of employees not

exceeding P750.00 per employee per semester or P125 per month;
(c) Rice subsidy of P1,000.00 or one (1) sack of 50-kg. rice per
month amounting to not more than P1,000.00;
(d) Uniform and clothing allowance not exceeding P3,000 per

annum;
(e) Actual yearly medical benefits not exceeding P10,000 per

annum;
(f) Laundry allowance not exceeding P300 per month;
(g) Employees 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 P10,000 received by the employee under an established
written plan which does not discriminate in favor of highly paid employees;
(h) Gifts given during Christmas and major anniversary

celebrations not exceeding P5,000 per employee per annum;
(i) Flowers, fruits, books, or similar items given to employees

under special circumstances, e.g., on account of illness, marriage, birth of a
baby, etc., and
(j) Daily meal allowance for overtime work not exceeding twenty
five percent (25%) of the basic minimum wage."
"xxx xxx xxx
"(6) Fixed or variable transportation, representation and other

allowances —
"xxx xxx xxx
"(b) . . .
"(i) . . .
"(ii) The employee is required to account/liquidate for the expenses

in accordance with the specific requirements of substantiation for each
category of expenses pursuant to Sec. 34 of the Code. The excess of
ADVANCES MADE over ACTUAL EXPENSES 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 requirements of
substantiation and to withholding."
"(iii) . . .
"(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 IS paid notwithstanding his absence from work constitutes
compensation. However, the monetized value of unutilized vacation leave
credits of ten (10) days or less which ARE paid to PRIVATE employees
during the year AND THE MONETIZED VALUE OF LEAVE CREDITS
PAID TO GOVERNMENT OFFICIALS AND EMPLOYEES SHALL NOT
BE SUBJECT TO INCOME TAX AND CONSEQUENTLY TO
WITHHOLDING TAX." aTEScI
"xxx xxx xxx
SECTION 2. Section 2.33 (C) of Revenue Regulations No. 3-98, as
last amended by Revenue Regulations No. 8-2000, is hereby further amended to
read as follows:
"Sec. 2.33. Special Treatment of Fringe Benefits
(A) Imposition of Fringe Benefits Tax —
xxx xxx xxx
(B) Definition of Fringe Benefit —
xxx xxx xxx
(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) ...
(2) ...
(3) ...
(4) De minimis benefits as defined in these Regulations;
(5) ...
(6) ...
xxx xxx xxx
The term "DE MINIMIS" benefits which are exempt from the fringe
benefits 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:
(a) Monetized unused vacation leave credits of PRIVATE

employees not exceeding ten (10) days during the year AND THE
MONETIZED VALUE OF LEAVE CREDITS PAID TO GOVERNMENT
OFFICIALS AND EMPLOYEES;
(b) Medical cash allowance to dependents of employees not

exceeding P750.00 per employee per semester or P125 per month;
(c) Rice subsidy of P1,000.00 or one (1) sack of 50-kg. rice per
month amounting to not more than P1,000.00;
(d) Uniform and clothing allowance not exceeding P3,000 per

annum;
(e) Actual yearly medical benefits not exceeding P10,000 per

annum; DTSIEc
(f) Laundry allowance not exceeding P300 per month;
(g) Employees 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 P10,000 received by the employee under an established
written in which does not discriminate in favor of highly paid employees;
(h) Gifts given during Christmas and major anniversary

celebrations not exceeding P5,000 per employee per annum;
(i) Flowers, fruits, books, or similar items given to employees

under special circumstances, e.g., on account of illness, marriage, birth of a
baby, etc., and
(j) Daily meal allowance for overtime work not exceeding

twenty-five percent (25%) of the basic minimum wage."
"xxx xxx xxx"
SECTION 3. Transitory Provision. — The benefits under Executive

Order No. 291 as incorporated in these regulations shall apply to income earned for
the year 2000.
SECTION 4. Repealing Clause. — All existing rules and regulations

or parts thereof which are inconsistent with the provisions of these regulations are
hereby revoked, repealed or modified accordingly.

immediately upon approval.

Secretary
Commissioner
August 31, 2000
SUBJECT : Mode of Payment and/or Remittance of the Documentary

Stamp Tax (DST) Under Certain Conditions
SECTION 1. Scope. — Pursuant to Section 244 , in relation to

Sections 173, 200 and 245 of the National Internal Revenue Code of 1997 ,
these Regulations are hereby promulgated in order to specifically identify the
persons liable for the documentary stamp tax, and who under certain conditions,
shall be responsible for the payment/remittance of the aforesaid tax.
SECTION 2. Nature of the Documentary Stamp Tax and Persons

Liable for the Tax. —
(a) In General. — The documentary stamp taxes under Title VII of

the Code is a tax on certain transactions. It is imposed against
"the person making, signing, issuing, accepting, or
transferring" the document or facility evidencing the aforesaid
transactions. Thus, in general, it may be imposed on the
transaction itself or upon the document underlying such act.
Any of the parties thereto shall be liable for the full amount of
the tax due: Provided, however, that as between themselves, the
said parties may agree on who shall be liable or how they may
share on the cost of the tax. DaAIHC
(b) Exception. — Whenever one of the parties to the taxable

transaction is exempt from the tax imposed under Title VII of
the Code, the other party thereto who is not exempt shall be the
one directly liable for the tax.
SECTION 3. Mode of Payment and Remittance of the Tax. —
(a) In general. — Unless otherwise provided in these Regulations,

any of the aforesaid parties to the taxable transaction shall pay
and remit the full amount of the tax in accordance with the
provisions of Section 200 of the Code.
(b) Exceptions. —
(1) If one of the parties to the taxable transaction is exempt

from the tax, the other party who is not exempt shall be
the one directly liable for the tax, in which case, the tax
shall be paid and remitted by the said non-exempt party,
unless otherwise provided in these Regulations.
(2) If the said tax-exempt party is one of the persons

enumerated in Section 3(c)(4) hereof, he shall be
constituted as agent of the Commissioner for the
collection of the tax, in which case, he shall remit the tax
so collected in the same manner and in accordance with
the provisions of Section 200 of the Code: Provided,
however, that if he fails to collect and remit the same as
herein required, he shall be treated personally liable for
the tax, in addition to the penalties prescribed under Title
X of the Code for failure to pay the tax on time.
(3) The said tax-exempt party, who is constituted as agent

for the collection of the tax, shall issue an
acknowledgment receipt in respect of the documentary
stamp tax so collected from the aforesaid another party
and the same shall be remitted in accordance with the
provisions of these Regulations.
(c) Person liable to remit the DST. — In general, the full amount of
the tax imposed under Title VII of the Code may be remitted by
any of the party or parties to the taxable transaction, except in
the following cases:
(1) Stamp tax on bonds, debentures, certificates of

indebtedness, deposit substitute, or other similar
instruments. — The tax shall be remitted by the person
who issued the instrument (e.g., "X" CORPORATION
borrowed funds from the public though the issuance and
sale of its interest-bearing Bonds. In this case, the stamp
tax due thereon shall be remitted by "X"
CORPORATION.)
(2) Stamp tax on original issue of shares of stock in a

corporation. — The corporation, which issued the share
or shares of stock, shall remit the tax due on the said
issuance. The share of stock is considered issued upon
acceptance by the corporation of the subscriber's
subscription for stock in the corporation, the actual
delivery by the corporation of the certificate evidencing
the share of stock to the contrary notwithstanding.
(3) Stamp tax on Jai-Alai, Horse Race, Lotto or other

Authorized Numbers Games. — The proprietor or
operator shall remit the tax. If such proprietor or operator
is exempt from the tax, he shall collect the tax from the
other party who is not exempt from the tax, and shall
remit the same in the manner as prescribed in these
Regulations.
EXAMPLE:
(a) The Philippine Charity Sweepstakes Office

(PCSO), as a charitable institution under R.A. No.
1160, as amended, is exempt from all taxes for
which it may otherwise be directly liable pursuant
to the provisions of ART. VI, Sec. 28 (3) of the
1987 Constitution. The PCSO sells sweepstakes
and Lotto tickets to the public who, however, does
not enjoy the same tax exemption privilege.
Pursuant to Section 173 of the Code which
provides that, whenever one of the parties to the
taxable document or transaction is exempt from
the stamp tax, the other party who is not exempt
shall be liable for the tax. Consequently, the
PCSO shall collect the tax from sweepstakes and
Lotto tickets buyers, and shall remit the tax so
collected in accordance with the provisions of
these Regulations.
(b) The Philippine Amusement and Gaming

Corporation (PAGCOR), either by itself or
through its licensees or grantees, undertake
"Number Games" and sell "betting cards" to the
betting public (e.g., "Bingo Cards"). In this case,
PAGCOR or its licensees/grantees shall remit the
documentary stamp tax to the Bureau on their
respective sale of "betting cards" to the betting
public.
(4) When one of the parties to the taxable document or

transaction is included in any of the entities enumerated
below, such entity shall be responsible for the remittance
of the stamp tax prescribed under Title VII of the Code:
Provided, however, that if such entity is exempt from the
tax herein imposed, it shall remit the tax as a collecting
agent, pursuant to the preceding paragraph 3(b)(2)
hereof, any provision of these Regulations to the contrary
notwithstanding
(a) A bank, a quasi-bank or non-bank financial

intermediary, a finance company, or an insurance,
a surety, a fidelity, or annuity company;
(b) The proprietor or operator of Jai-alai,

Horse-racing, Lotto and other Authorized
Numbers Games, as provided in these
Regulations; TCASIH
(c) The Philippine Stock Exchange (PSE), in the case

of shares of stock and other securities traded in
the local stock exchange;
(d) A pre-need company on sale of pre-need plans as

provided under Section 186 of the Code. For
purposes of these Regulations, the term
"Pre-need" company shall include those providing
pre-need health care services, educational plan,
memorial plan, pension plan, and other similar
services.
(e) An educational institution in respect of issuance

of taxable certificates (e.g., Diploma, Transcript
of Records, and other documents taxable as
certificates under Section 188 of the Code);
(f) Warehouse operators in respect of warehouse

receipts taxable under Section 189 of the
Code;
(g) The Corporation vis-a-vis the stamp tax on

"Proxies" in the exercise of the stockholders'
voting right, taxable under Section 192 of
the Code (e.g., appointment of a proxy in the
election of the corporation's members of the
Board);
(h) The transportation contractor vis-a-vis the Bills of

Lading or Receipts taxable under Section 191
of the Code;
(i) Franchise grantees and other taxpayers paying a

fixed percentage of the prescribed taxable base in
lieu of all internal revenue taxes; and
SECTION 4. Use of "On-Line Electronic DST Imprinting Machine."

— Unless expressly exempted by the Commissioner on meritorious grounds, the
following class of taxpayers shall use the "on-line electronic DST imprinting
machine" in the payment and remittance of their documentary stamp taxes:
(a) A bank, a quasi-bank or a non-bank financial intermediary, a

finance company, or an insurance, a surety, a fidelity, or annuity
company;
(b) The Philippine Stock Exchange (PSE), in the case of shares of

stock and other securities traded in the local stock exchange;
(c) Shipping and airline companies;
(d) A pre-need company on sale of pre-need plans as provided

under Section 186 of the Code; and
(e) Such other industries as may be required by the Commissioner
to use the "on-line electronic DST imprinting machine".
The term "on-line electronic DST imprinting machine" shall refer to a

device capable of imprinting the value of the stamp tax and other data on the
taxable document, with remote loading and resetting feature, and/or with built-in
modem which enables users to load/purchase the stamp tax value through an
on-line set-up or electronic data transmission with the BIR, thereby enabling the
latter to monitor actual usage or stamp consumption of the users.
SECTION 5. Repealing Clause. — Any revenue issuance inconsistent

herewith shall be considered amended, modified or revoked accordingly. DSETac

fifteen (15) days after publication in a newspaper of general circulation.

Secretary

Commissioner
August 21, 2000
SUBJECT : Amending Sections 2.78.1(A)(1), (A)(3), (A)(6), (A)(7) * (3),
and (B)(11)(b) of Revenue Regulations No. 2-98, as
Amended , and Section 2.33(C) of Revenue Regulations
No. 3-98 , with Respect to "De Minimis" Benefits,
Additional Compensation Allowance (ACA),
Representation and Transportation Allowance (RATA) and
Personal Economic Relief Allowance (PERA)
SECTION 1. Scope. — Pursuant to Section 244 of the 1997 Tax Code,

in relation to Section 78 thereof pertaining to the withholding of income tax
on compensation income, these Regulations are hereby promulgated amending
Sections 2.78.1(A)(1), (A)(3), (A)(6), (A)(7) * (4), and (B)(11)(b) of Revenue
Regulations No 2-98, as amended, to further clarify certain benefits/privileges
received by the employees which are not considered as items of income and
therefore not subject to income tax and consequently, to the withholding tax.
Likewise amended is the enumeration of the items of de-minimis benefits which
are exempt from fringe benefits tax as appearing under Sec. 2.33(C) of Revenue
Regulations No. 3-98. IHcTDA
SECTION 2. Amendments. — Sec. 2.78.1(A)(1), (A)(3), (A)(6),

(A)(7) * (5), (B)(11)(b) and(B)(13) are hereby amended to read as follows:
"Sec. 2.78.1. Withholding of Income Tax on Compensation

Income. —
"(A) . . .
"(1) Compensation paid in kind. — . . .
''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.
"(3) Facilities and privileges of relatively small value. —

Ordinarily, facilities and privileges (such as entertainment, medical services,
or so-called "courtesy discounts" on purchases), otherwise known as "de
minimis benefits," furnished or offered by an employer to his employees, are
not considered as compensation subject to INCOME TAX AND
CONSEQUENTLY TO withholding tax, if such facilities are offered or
furnished by the employer merely as means of promoting the health,
goodwill, contentment, or efficiency of his employees.
"THE FOLLOWING SHALL BE CONSIDERED AS "DE MINIMIS"
BENEFITS NOT SUBJECT TO WITHHOLDING TAX ON
COMPENSATION INCOME OF BOTH MANAGERIAL AND RANK
AND FILE EMPLOYEES:
(a) MONETIZED UNUSED VACATION LEAVE CREDITS OF

EMPLOYEES NOT EXCEEDING TEN (10) DAYS DURING THE YEAR
;
(b) MEDICAL CASH ALLOWANCE TO DEPENDENTS OF

EMPLOYEES NOT EXCEEDING P750.00 PER EMPLOYEE PER
SEMESTER OR P125 PER MONTH;
(c) RICE SUBSIDY OF P1,000.00 OR ONE (1) SACK OF 50-KG.

RICE PER MONTH AMOUNTING TO NOT MORE THAN P1,000.00.
(d) UNIFORMS AND CLOTHING ALLOWANCE NOT

EXCEEDING P3,000 PER ANNUM;
(e) ACTUAL YEARLY MEDICAL BENEFITS NOT EXCEEDING

P10,000 PER ANNUM;
(f) LAUNDRY ALLOWANCE NOT EXCEEDING P300 PER

MONTH;
(g) EMPLOYEES 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 P10,000.00 RECEIVED BY THE EMPLOYEE
UNDER AN ESTABLISHED WRITTEN PLAN WHICH DOES NOT
DISCRIMINATE IN FAVOR OF HIGHLY PAID EMPLOYEES;
(h) GIFTS GIVEN DURING CHRISTMAS AND MAJOR

ANNIVERSARY CELEBRATIONS NOT EXCEEDING P5,000 PER
EMPLOYEE PER ANNUM;
(i) FLOWERS, FRUITS, BOOKS, OR SIMILAR ITEMS GIVEN

TO EMPLOYEES UNDER SPECIAL CIRCUMSTANCES, E.G., ON
ACCOUNT OF ILLNESS, MARRIAGE, BIRTH OF A BABY, ETC.; AND
(j) DAILY MEAL ALLOWANCE FOR OVERTIME WORK NOT

EXCEEDING TWENTY FIVE PERCENT (25%) OF THE BASIC MINIMUM
WAGE."
THE AMOUNT OF "DE MINIMIS' BENEFITS CONFORMING TO
THE CEILING HEREIN PRESCRIBED SHALL NOT BE CONSIDERED IN
DETERMINING THE P30,000 CEILING OF "OTHER BENEFITS"
PROVIDED UNDER SECTION 32(B)(7)(e) OF THE CODE.
HOWEVER, IF THE EMPLOYER PAYS MORE THAN THE CEILING
PRESCRIBED BY THESE REGULATIONS, THE EXCESS SHALL BE
TAXABLE TO THE EMPLOYEE RECEIVING THE BENEFITS ONLY IF
SUCH EXCESS IS BEYOND THE P30,000.00 CEILING. PROVIDED,
FURTHER, THAT ANY AMOUNT GIVEN BY THE EMPLOYER AS
BENEFITS TO ITS EMPLOYEES, WHETHER CLASSIFIED AS DE
MINIMIS BENEFITS OR FRINGE BENEFITS, SHALL CONSTITUTE AS
DEDUCTIBLE EXPENSE UPON SUCH EMPLOYER.
"(4) . . .
(5) ..
"(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 of a
private entity, in addition to the regular compensation fixed for his position
or office, is compensation subject to withholding. PROVIDED, HOWEVER,
THAT REPRESENTATION AND TRANSPORTATION ALLOWANCE
(RATA) GRANTED TO PUBLIC OFFICERS AND EMPLOYEES
UNDER THE GENERAL APPROPRIATIONS ACT AND THE PERSONNEL
ECONOMIC RELIEF ALLOWANCE (PERA) WHICH ESSENTIALLY
CONSTITUTE REIMBURSEMENT FOR EXPENSES INCURRED IN THE
PERFORMANCE OF GOVERNMENT PERSONNEL'S OFFICIAL DUTIES
SHALL NOT BE SUBJECT TO INCOME TAX AND CONSEQUENTLY TO
WITHHOLDING TAX. PROVIDED FURTHER, THAT PURSUANT TO E.O.
219 WHICH TOOK EFFECT ON JANUARY 1, 2000, ADDITIONAL
COMPENSATION ALLOWANCE (ACA) GIVEN TO GOVERNMENT
PERSONNEL SHALL NOT BE SUBJECT TO WITHHOLDING TAX
PENDING ITS FORMAL INTEGRATION INTO THE BASIC PAY.
CONSEQUENTLY, AND EFFECTIVE FOR THE TAXABLE YEAR 2000,
ACA SHALL BE CLASSIFIED AS PART OF THE "OTHER BENEFITS"
UNDER SECTION 32(B)(7)(e) OF THE CODE WHICH ARE EXCLUDED
FROM GROSS COMPENSATION INCOME PROVIDED THE TOTAL
AMOUNT OF SUCH BENEFITS DOES NOT EXCEED P30,000.00. ADETca
"(b) Any amount paid specifically, either as advances or

reimbursements for traveling, representation and other bona fide 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 traveling 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 traveling 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 requirements of
substantiation and to withholding. "
"xxx xxx xxx
"(B) Exemptions from withholding tax on compensation. The

following income payments are exempted from the requirement of
withholding tax on compensation:
"xxx xxx xxx
"(11) Thirteenth (13th) month pay and other benefits. —
"(a) . . .
"(b) Other benefits such as Christmas bonus, productivity

incentives, loyalty award, gift in cash or in kind and other benefits of similar
nature actually received by officials and employees of both government and
private offices, INCLUDING THE ADDITIONAL COMPENSATION
ALLOWANCE ("ACA") GRANTED AND PAID TO ALL OFFICIALS AND
EMPLOYEES OF THE NATIONAL GOVERNMENT AGENCIES (NGAs)
INCLUDING STATE UNIVERSITIES AND COLLEGES (SUCs),
GOVERNMENT-OWNED AND/OR CONTROLLED CORPORATIONS
(GOCCs), GOVERNMENT FINANCIAL INSTITUTIONS (GFIs) AND
LOCAL GOVERNMENT UNITS (LGUs)
"The above stated exclusions (a) and (b) shall cover benefits paid or
accrued during the year provided that 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) ...
"(13) FACILITIES AND PRIVILEGES OF RELATIVELY
SMALL VALUE OR 'DE MINIMIS' BENEFITS AS DEFINED UNDER
THESE REGULATIONS."
SECTION 3. Repealing Clause. — Sections 2.78.1(A)(1), (A)(3),

(A)(6), (A)(7), and (B)(11)(b) of Revenue Regulations No. 2-98, including the
enumeration of the items of de-minimis benefits which are exempt from fringe
benefits tax as appearing under Sec. 2.33(C) of Revenue Regulations No.
3-98 are hereby modified and the inclusion of Sec. 2.78.1(B)(13) in accordance
with the amendments under these Regulations. All other existing rules and
regulations or parts thereof which are inconsistent with the provisions of these
Regulations are hereby revoked, modified or amended accordingly.

fifteen (15) days after publication in any newspaper of general circulation.

Secretary

Commissioner
(6) (7)
June 16, 2000
SUBJECT : Amending Revenue Regulations No. 2-98
Pursuant to the provisions of Section 244, in relation to Section 6(H), both

of the National Internal Revenue Code of 1997 , these Regulations are hereby
promulgated to further implement Sec. 58(C) and to amend Revenue
Regulations No. 2-98 .
SECTION 1. Section 2.83.3 of Revenue Regulations No. 2-98 is

hereby amended to read as follows:
"SEC. 2.83.3. Requirement for list of Income Payees — In

lieu of the manually prepared alphabetical list of employees and list of
payees and income payments subject to creditable and final withholding
taxes which are required to be attached as integral part of the Annual
Information Returns (Form No. 1604CF/1604E) , the Withholding
Agent may, at his option. submit 3.5 inch floppy diskettes, containing the
said lists.
However, for large taxpayers , excise taxpayers and other

taxpayers whose number of employees or income payees are fifty (50) or
more, the said list of employees and income payees shall be submitted in
magnetic form using 3.5-inch floppy diskettes to the Large Taxpayers
Assistance Division, Large Taxpayers District Offices, Excise Taxpayers
Assistance Division or to the respective Revenue District Office having
jurisdiction over the taxpayer on or before January 31 of the succeeding year,
for income payments subject to compensation and final withholding taxes
and on or before March 1 of the following year for those subject to creditable
expanded withholding taxes. The list shall conform to the technical
specifications prescribed under Annex A hereof."
SECTION 2. Repealing Clause. — All rules and regulations and parts

thereof inconsistent with the provisions of these regulations are hereby amended
accordingly.

(15) days after publication in a newspaper of general circulation in the Philippines.
DTCSHA

Commissioner
APPROVED:

Secretary
ANNEX A
(8)
September 5, 2000
SUBJECT : Implementing Sections 7(c), 204(A) and 290 of the Tax

Code of 1997 on Compromise Settlement of Internal
Revenue Tax Liabilities
SECTION 1. Scope and Objectives. — Pursuant to Section 244 of the

Tax Code of 1997, these Regulations are hereby promulgated for the purpose of
implementing Sections 7(c), 204(A) and 290 of the same Code, thereby giving an
authority to the Commissioner of Internal Revenue to compromise the payment of
internal revenue tax liabilities of certain taxpayers with outstanding receivable
accounts and disputed assessments with the Bureau.
SECTION 2. Cases Which May be Compromised. —
The following cases may, upon taxpayer's compliance with the basis set
forth under Section 3 of these Regulations, be the subject matter of compromise
settlement, viz:
1. Delinquent accounts;
2. Cases under administrative protest pending in the Regional

Offices, Revenue District Offices, Legal Service, Large
Taxpayer Service (LTS), Enforcement Service (ES), Excise
Taxpayer Service (ETS) and Collection Service;
3. Civil tax cases being disputed before the courts, e.g, CTA, CA,
SC;
4. Collection cases filed in courts; and
5. Criminal violations, other than those already filed in court, or

those involving criminal tax fraud.
EXCEPTIONS:
1. Withholding tax cases;
2. Criminal tax fraud cases;
3. Criminal violations already filed in court; and
4. Delinquent accounts with duly approved schedule of installment

payments.
SECTION 3. Basis for Acceptance of Compromise Settlement. —
The Commissioner may compromise the payment of any internal revenue

tax on the following grounds:
1. Doubtful validity of the assessment. — The offer to compromise

a delinquent account or disputed assessment under these
Regulations on the ground of reasonable doubt as to the validity
of the assessment may be accepted when it is shown that:
(a) The delinquent account or disputed assessment is one

resulting from a jeopardy assessment (For this purpose, "
jeopardy assessment" shall refer to a delinquency tax
assessment which was assessed without the benefit of
complete or partial audit by an authorized revenue
officer, who has reason to believe that the assessment
and collection of a deficiency tax will be jeopardized by
delay because of the taxpayer's failure to comply with the
audit and investigation requirements to present his books
of accounts and/or pertinent records, or to substantiate all
or any of the deductions, exemptions, or credits claimed
in his return); or cSTCDA
(b) The assessment seems to be arbitrary in nature,

appearing to be based on presumptions and there is
reason to believe that it is lacking in legal and/or factual
basis; or
(c) The taxpayer failed to file an administrative protest on

account of the alleged failure to receive notice of
assessment or preliminary assessment and there is reason
to believe that the assessment is lacking in legal and/or
factual basis; or
(d) The taxpayer failed to file a request for

reinvestigation/reconsideration within 30 days from
receipt of final assessment notice and there is reason to
believe that the assessment is lacking in legal and/or
factual basis; or
(e) The taxpayer failed to elevate to the Court of Tax

Appeals (CTA) an adverse decision of the
Commissioner, or his authorized representative, in some
cases, within 30 days from receipt thereof and there is
reason to believe that the assessment is lacking in legal
and/or factual basis; or
(f) The assessments were issued on or after January 1, 1998,

where the demand notice allegedly failed to comply with
the formalities prescribed under Sec. 228 of the Tax
Code,
2. Financial Incapacity. — The offer to compromise based on

financial incapacity may be accepted upon showing that:
(a) The inability to pay is evident as when the audited

Balance Sheet for the taxable year preceding the year
when the offer is made shows a capital deficit of at least
5% or the Balance Sheet reflects a negative networth of
at least 5%; or
(b) The taxpayer is declared by competent court to be

bankrupt or insolvent; or
(c) The taxpayer has already been dissolved; or
(d) The taxpayer is a compensation income earner with no

other source of income and the family's gross annual
income does not exceed P250,000, it appearing that
taxpayer possesses no other leviable/distrainable assets.
DaACIH
Circumstances that would place the taxpayer applicant's inability to pay in

serious doubt can be a ground to refuse the offer of compromise based on financial
incapacity to pay. Furthermore, application for compromise settlement by reason of
financial incapacity shall not be considered unless and until the taxpayer waives in
writing his privilege of the secrecy of bank deposits under Republic Act No. 1405
or under other general or special laws, and such waiver shall constitute the
authority of the Commissioner to inquire into the bank deposits of the taxpayer.
SECTION 4. Prescribed Minimum Percentages of Compromise

Settlement. — The compromise settlement of the subject internal revenue tax
liabilities of taxpayers, reckoned on a per tax type assessment basis, shall be
subject to the following minimum rates:
1. For cases of financial incapacity — a minimum compromise

rate equivalent to ten percent (10%) of the basic assessed tax;
2. For doubtful validity — a minimum compromise rate equivalent

to forty percent (40%) of the basic assessed tax.
Delinquent accounts and disputed assessments of taxpayers registered under

the Large Taxpayers Service (LTS) and the Excise Taxpayers Service (ETS) shall
not be compromised for less than fifty percent (50%) of the basic assessed tax. Any
offer of compromise lower than fifty percent (50%) by said taxpayers shall be
subject to the approval of the NEB.
The herein prescribed minimum percentages shall likewise apply in

compromise settlement of assessments consisting solely of increments, i.e.,
surcharge, interest, etc., based on the total amount assessed.
SECTION 5. Creation of the National Evaluation Board and Regional

Evaluation Board. — A National Evaluation Board in the National Office and a
Regional Evaluation Board in each Revenue Region all over the country are hereby
created to evaluate and approve/disapprove the applications for settlement of each
delinquent account/disputed assessment, the composition of such Boards and the
cases under their respective jurisdictions are as follows:
A. National Evaluation Board (NEB)

Commissioner of Internal Revenue Chairman
Four (4) Deputy Commissioners Members
Where the basic assessed tax involved exceeds One million pesos
(P1,000,000.00) or where the settlement offered is less than the prescribed
minimum rates of 40% (in cases of doubtful validity), 10% (in cases of financial
incapacity), and 50% (in cases of taxpayers registered under LTS and ETS) of the
basic tax, the compromise shall be subject to the approval by the NEB. ACTaDH
For compromise offers on delinquent accounts and disputed assessments
where the assessment notices were issued by the Regional Offices and the basic
assessed tax exceeds Five hundred thousand pesos (P500,000.00) but not over One
million pesos (P1,000,000.00), or for assessments issued by the National Office
where the basic assessed tax does not exceed One million pesos (P1,000,000.00),
the compromise offer, after evaluation by the Technical Working Group (TWG),
shall be approved by the Commissioner.
B. Regional Evaluation Board (REB)
Regional Director Chairman
Members:
• Assistant Regional Director
• Chief, Legal Division
• Chief, Assessment Division
• Chief, Collection Division
• Revenue District Officer having jurisdiction over the

taxpayer-applicant
The REB may compromise assessments issued by the regional offices

involving basic assessed taxes of Five Hundred Thousand Pesos (P500,000.00) or
less and minor criminal violations discovered by the Regional and District
Officials.
The evaluation of offers of compromise shall, in all cases, be conducted by

a Technical Working Group (TWG), in the National and Regional levels,
respectively, to be constituted for the purpose through the issuance of a Revenue
Special Order (RSO). HAECID
The NEB and the REBs of the Revenue Regions shall each create a
SECRETARIAT to handle the administrative functions of their respective TWGs.
SECTION 6. Report of the Commissioner on the Exercise of his

Authority to Compromise to the Congressional Oversight Committee. — The
Commissioner shall submit to the .Congressional Oversight Committee through the
Chairmen of the Committee on Ways and Means of both the Senate and House of
Representatives, every six (6) months of each calendar year, a report on the
exercise of his powers to compromise the tax liabilities of taxpayers,
SECTION 7. Repealing Clause. — All existing rules and regulations
or parts thereof which are contrary to or inconsistent with the provisions of these
Regulations are hereby amended, modified or repealed accordingly.
SECTION 8. Effectivity. — The provisions of these Regulations shall

take effect fifteen (15) days after publication in any newspaper of general
circulation.

Secretary

Commissioner
July 19, 2000
SUBJECT : Prescribing the Regulations Governing the Manner of the

Issuance of Tax Credit Certificates, and the Conditions for
their Use, Revalidation and Transfer
Pursuant to Section 244 in relation to Sections 76 , 112 , 130
, 135, 204 and 230 all of the Tax Code of 1997, these Regulations
are hereby promulgated to prescribe the rules governing the issuance of BIR-issued
Tax Credit Certificates (TCCs), and the conditions for their use, conversion,
revalidation and transfer. HAcaCS
SECTION 1. Definition of Terms. —
A. Tax Credit — For purposes of these Regulations, the term "tax

credit" shall refer to the amount due to a taxpayer resulting from
an overpayment of a tax liability or erroneous payment of a tax
due.
B. Tax Credit Certificate — means a certification, duly issued to

the taxpayer named therein, by the Commissioner or his duly
authorized representative, reduced in a BIR Accountable Form
in accordance with the prescribed formalities, acknowledging
that the grantee-taxpayer named therein is legally entitled a tax
credit, the money value of which may be used in payment or in
satisfaction of any of his internal revenue tax liability (except
those excluded), or may be converted as a cash refund, or may
otherwise be disposed of in the manner and in accordance with
the limitations, if any, as may be prescribed by the provisions of
these Regulations.
C. Tax Debit Memo — means a certification, duly issued by the

Commissioner or his duly authorized representative, reduced in
a BIR Accountable Form in accordance with the prescribed
formalities, acknowledging that the taxpayer named therein has
duly paid his internal revenue tax liability in the form of and
through the use of a Tax Credit Certificate, duly issued and
existing in accordance with the provisions of these Regulations.
The Tax Debit Memo shall serve as the official receipt from the
BIR evidencing a taxpayer's payment or satisfaction of his tax
obligation. The amount shown therein shall be charged against
and deducted from the credit balance of the aforesaid Tax
Credit Certificate.
D. Direct Internal Revenue Tax Liability — shall refer to taxes for

which the taxpayer is made statutorily liable. In essence, "direct
internal revenue tax liability" pertains to the liability of a person
mandated by law to file the tax return and pay the tax due
thereon.
SECTION 2. Sources of Tax Credit. — A tax credit is being granted

for the following:
(a) At the option of the taxpayer, excess quarterly income taxes

paid reflected in the final adjustment return.
(b) At the option of the taxpayer, overwithholding at source of

income taxes to the extent that the amount of such overpayment
was not deducted or applied against income tax due.
(c) Input taxes as follows:
i. Attributed to zero-rated sales made by VAT-registered

taxpayer including export sales by a VAT-registered
exporter;
ii. Attributed to effectively zero-rated sales made by

VAT-registered taxpayer; and
iii. On capital goods imported or locally-purchased by a

VAT-registered taxable person.
(d) Unused input taxes resulting from cancellation of VAT

registration due to retirement from or cessation of business, or
due to changes in or cessation of status as a VAT taxable
taxpayer under Section 106(C) of the Tax Code.
(e) Excise taxes paid on:
i. Petroleum products sold to tax-exempt entities and

international carriers;
ii. Goods locally produced or manufactured and actually

exported without returning to the Philippines;
(f) Taxes erroneously or illegally paid or penalties imposed without

authority.
Any taxpayer who is erroneously registered as a VAT person will not be

covered by paragraphs (c) and (d) of this Section.
In no case shall a tax refund or tax credit certificate be given resulting from
availment of incentives granted pursuant to special laws for which no actual tax
payment was made.
SECTION 3. Uses of Tax Credit Certificate. — Whenever a Tax

Credit Certificate (TCC) is issued to a taxpayer to acknowledge the existence of a
valid tax credit, such Tax Credit Certificate may be used by the grantee or his
assignee in the payment of his direct internal revenue tax liability, such as income
tax; documentary stamp tax, excise tax, value added tax, percentage tax and other
internal revenue taxes. However, in no case shall the TCC be used in payment of
the following:
(a) Payment or remittance for any kind of withholding tax.
(b) Payment arising from the availment of tax amnesty declared

under a legislative enactment.
(c) Payment of deposits on withdrawal of exciseable articles.
(d) Payment of taxes not administered or collected by the Bureau of

Internal Revenue. ASETHC
(e) Payment of compromise penalty.
SECTION 4. Assignment or Transfer. —
a) Transferability of TCC. — Taxpayers with TCCs issued by the

BIR in their name hold the same in the concept of an owner.
Consequently, BIR-issued TCCs may be transferred in favor of
an assignee subject only to the following conditions:
(i) The transfer must be with prior approval of the

Commissioner or his duly authorized representative who
shall verify whether or not the TCC sought to be
transferred is still valid in the hands of the original
holder;
(ii) The transfer should be limited to one transfer only.
(iii) The transferee shall use the TCC assigned to him strictly
in payment of his direct internal revenue tax liability and
in no case shall the same be available for conversion to
cash in his hands.
b) Assignment Procedures. — The transfer or assignment of a

TCC from the original holder to his or its assignee shall be
subject to the following procedures:
(i) The TCC sought to be assigned or transferred shall be

presented before the Commissioner or his duly
authorized representative for verification. If found to be
valid and still with creditable balance, the TCC shall be
marked "Valid for Transfer", countersigned by the said
officer.
(ii) Upon execution of the Deed of Assignment, the

transferor shall present the same, together with the
original copy of the TCC.
(iii) The original copy of the TCC shall still be cancelled

even if only a portion of its face value is transferred or
assigned, in which case, new TCC(s) shall be issued
representing the respective portions pertaining to the
transferee(s) and/or the balance remaining for the
account of the transferor.
(iv) Any TCC issued in favor of the transferee or assignee

shall by valid for five (5) years, but subject to the
following conditions which must be annotated therein, as
follows:
1. Not valid for further transfer;
2. Not valid for cash conversion.
SECTION 5. Period of Validity, Conversion and Revalidation. —
a) Validity Period. — Any Tax Credit Certificate (TCC) issued in

accordance with the pertinent provision of the Tax Code of
1997 which remains unutilized after five (5) years from date of
issue shall, unless revalidated before the end of the fifth year, be
considered invalid and shall not be allowed for use in payment
of any of the taxpayer's internal revenue tax liability nor
allowed to be transferred and the unutilized amount thereof
shall revert to the General Fund of the National Government.
The revalidated TCC shall be valid for a period of five

years from the date of issue.
b) Conversion Period. — Any request for conversion into cash

refund of unutilized tax credits may be allowed during the
validity period of the TCC. Provided, however, that the original
copy of the Tax Credit Certificate showing a creditable balance
is surrendered to the Asst. Commissioner, Collection Service or
other duly authorized Revenue Officer for verification and
cancellation. Provided, further, that a refund check or treasury
warrant issued in accordance with the pertinent provisions of
the Tax Code of 1997, which shall remain uncashed or
unclaimed within five (5) years from the date of issue, mailing
or delivery, whichever comes later, shall be forfeited in favor of
the Government and the amount thereof shall revert to the
general fund.
c) Revalidation Period. — In general, a TCC may be revalidated

prior to the expiration of its validity period. Provided, however,
that any TCC issued prior to January 1, 1998 in which the
grantee's holding period therefor as of said date is less than five
(5) years counted from date of issue, may be submitted for
revalidation by the holder within six (6) months prior to the end
of the fifth (5th) year. For example, a TCC issued on December
31, 1997 shall be presented for revalidation within the
six-month period prior to expiration, i.e., from July 1 to
December 31, 2002.
d) Procedure for Revalidation. — The revalidation of any TCC

validly issued and subsisting in accordance with the provisions
of law and Regulations shall be initiated by the filing of an
application therefor with the Collection Service or other duly
authorized Office of the Bureau of Internal Revenue.
The revalidation shall be accomplished through the

issuance of a new TCC, reflecting its unutilized amount or
creditable balance. Provided, however, that no revalidated TCC
shall be issued unless the Commissioner's duly authorized
representative has certified that the applicant taxpayer has no
outstanding tax liability. If the holder has any outstanding tax
liability, said liability shall be applied first against the TCC
sought to be revalidated through the issuance of a Tax Debit
Memo (TDM). CacISA
For this purpose, the term "outstanding tax liability" shall

refer to an assessment that is already final and executory.
SECTION 6. Repealing Clause. — Revenue Regulations No. 7-98
and any other revenue issuance inconsistent with these Regulations are hereby
repealed, amended or modified accordingly.

(15) days from publication in any newspaper of general circulation.

Secretary
Recommended by:

Commissioner
July 18, 2000
SUBJECT : Prescribing the Posting of Notice for the Issuance of

Sales/Commercial Invoice and/or Official Receipt by
Persons Required by Law to Issue Sales/Commercial
Invoices and/or Official Receipts and Providing the
Penalties for Non-Compliance Thereof
SECTION 1. Scope. — Pursuant to the provisions of Section 244, in
relation to Sections 237, 238, 264 and 275 of the Tax Code of 1997 , these
Regulations are hereby promulgated to prescribe the posting of a notice on the
requirement for the issuance of sales/commercial invoice and/or official receipts by
persons engaged in trade or business, including the exercise of profession, who are
required by law or regulations to issue sales/commercial invoice and/or official
receipts, define violations thereof and provide the penalties for non-compliance
therewith. IESTcD
SECTION 2. Policy. — These Regulations are intended to improve

revenue collection through the enforcement of the legal provision on the issuance
of sales/commercial invoice and/or official receipt by persons required by law or
regulations to issue sales/commercial invoices and/or official receipts and to
inculcate upon the minds of the taxpaying public that the issuance of sales
invoice/official receipt is mandated by law such that every seller is obligated to
issue sales/commercial invoice and/or official receipt on sales transactions with or
without demand from the buyer of goods and services.
SECTION 3. Exhibition of Notice at Place of Business. — Persons

required to issue sales/commercial invoices and official receipts under existing
rules shall cause to be posted in their places of business, including branches and
mobile stores, in such area conspicuous to the public, a notice containing and
showing in bold letters the following:
NOTICE TO THE PUBLIC:
THIS BUSINESS ESTABLISHMENT IS REQUIRED BY LAW TO

ISSUE SALES/COMMERCIAL INVOICE/OFFICIAL RECEIPT.
VIOLATION HEREOF IS PUNISHABLE BY FINE AND/OR
IMPRISONMENT. PLEASE REPORT ANY VIOLATION TO THE
BUREAU OF INTERNAL REVENUE.
(Issuance of sales/commercial invoice and/or official receipt is not required

for every sale valued at P25 or below by a Non-VAT taxpayer)
At no time shall the above notice be detached, removed or covered from

public view. For uniformity, the size specification of the notice shall be twelve
(12) inches in width and eight (8) inches in length,
SECTION 4. Violations and Penalties. — The following acts or

omissions shall constitute violation of these Regulations:
a) Failure and neglect to post the notice required herein; and/or
b) Deliberate removal of the notice.
Any person who commits any of the above acts or omissions shall, upon
conviction, be punished by a fine of not more than One Thousand Pesos (P1,000)
or suffer imprisonment of not more than six (6) months, or both, pursuant to the
provisions of Section 275 of the National Internal Revenue Code (NIRC) of
1997.
SECTION 5. General Provisions. — In case of corporations,

partnerships or associations, the penalty shall be imposed on the president, partner,
general manager, branch manager, officer-in-charge and/or employees responsible
for the violation.
SECTION 6. Repealing Clause. — All rules and regulations and other

revenue issuances or parts thereof inconsistent with the provisions of these
regulations are hereby amended accordingly.
SECTION 7. Effectivity. — These Regulations shall take effect after

fifteen (15) days from publication in any newspaper of general circulation. SDHAcI

Secretary

Commissioner
June 14, 2000
SUBJECT : Extending the Deadline for the Accreditation of Tax Agents

Amending for this Purpose Revenue Regulations No. 15-99
Pursuant to Section 244 of the Tax Code of 1997, in relation to Section

6(G) of the same Code, these Regulations are hereby promulgated to extend
the deadline for the accreditation of tax agents previously set under Revenue
Regulations No. 15-99. ECaSIT
SECTION 1. Amendment. — Section 13 of Revenue Regulations

No. 15-99 is hereby amended to read as follows:
SEC. 13. Transitory Provision. — The requirements

imposed by these Regulations shall be mandatory after December 31, 2000.
After the said period, all returns, statements, reports, protests, requests for
ruling, official correspondence and other papers filed on behalf of a taxpayer
shall bear the following information below the signature of the accredited
tax representative." DAEICc
A. For CPAs and others (individual practitioners and members of

GPPs):
a.1 Taxpayer Identification Number (TIN); and
a.2 Certificate of Accreditation Number, Date of Issuance,

and Date of Expiry.
B. For members of the Philippine Bar (individual practitioners,

members of GPPs):
b.1 Taxpayers Identification Number (TIN);and
b.2 Attorneys Roll number or Accreditation Number, if any.

(15) days after publication in a newspaper of general circulation.
Secretary

Commissioner
January 15, 2000
SUBJECT : Procedures to be Adopted During the Transition Period in

the Phase-out of Leaded Gasoline in Metro Manila
TO : All Revenue Officials and Others Concerned
Pursuant to the provisions of EO 446 mandating the phase-out of

leaded gasoline as one of the means of solving air pollution, in relation to Republic
Act No. 8749 , otherwise known as the Philippine Clean Air Act of 1999, these
Revenue Regulations are hereby promulgated to prescribe the procedures to be
adopted during the transition period of the phasing out of leaded gasoline in Metro
Manila. cdphil
SECTION 1. Definition of Terms. — For purposes of these

Regulations, the following words and phrases shall have the meaning indicated
below:
a) Transition Period — refers to the period required to totally
dilute leaded gasoline to Unleaded gasoline (ULG) meeting the
quality specifications prescribed in the Philippine National
Standard issued by the Bureau of Product Standards of the
Department of Trade and Industry. The period shall be reckoned
from the day of inventory taking which will be conducted
within five (5) days from the effectivity of these regulations and
shall last not more than forty five (45) days or whichever is
earlier until such time that the leaded gasoline has been diluted
to ULG according to the prescribed standards in the storage
tanks at the terminals/depots and gasoline stations in Metro
Manila. cdrep
b) Memorandum of Agreement — refers to the agreement among

the concerned oil companies pertaining to the implementation
of the total switch to ULG at all gasoline service stations in
Metro Manila, as politically defined, consisting of the following
seventeen (17) cities and municipalities: City of Manila,
Quezon City, Parañaque City, Pasig City, Mandaluyong City,
Navotas, Caloocan City, Valenzuela City, Taguig, Pasay City,
San Juan, Malabon, Las Piñas City, Muntinlupa, Marikina,
Makati City and Pateros.
c) Leaded gasoline — synonymous with leaded premium gasoline

and defined under Revenue Regulations No. 8-96 as a
gasoline containing a maximum of 0.15 gram per liter lead
additive and a minimum octane number of 93 Research Octane
Number (RON).
d) Unleaded gasoline — synonymous with unleaded premium

gasoline and defined under Revenue Regulations No. 8-96 as a
gasoline containing a mixture of hydrocarbons, petrochemicals
and/or additives, with a minimum octane number of 93 RON
and a maximum lead content of 0.013 gram per liter prescribed
by national standards. cdphil
e) New Industry Participants — shall refer to new participants in a

particular sub-sector of the downstream oil industry with
investments and initial business operations commencing after
January 1, 1994 as provided under Republic Act No. 8479,
otherwise known as the "Downstream Oil Industry Deregulation
Act of 1998".
f) Commingling process — refers to the process of diluting the
lead content of leaded gasoline in the storage tank by
adding/mixing unleaded gasoline until the prescribed maximum
lead content of 0.013 gram per liter for unleaded gasoline shall
have been met.
SECTION 2. Procedures. — The following procedures shall be

followed during the transition period:
1. Conduct of Physical Inventory. — Within five (5) days after the

effectivity of these regulations, the Bureau of Internal Revenue
(BIR), in coordination with the representatives of the
Department of Energy, shall conduct a physical inventory of all
stocks on hand of leaded and unleaded gasoline at the refinery
plants and depot/terminals in Metro Manila being stored by the
local oil refineries, as well as, those stored at the respective
depots of the new industry participants, in the presence of the
representative(s) of the concerned oil company who shall jointly
attest to the fact of witnessing and verifying the results thereof
by affixing their signatures on the attestation clause in the
inventory certificate.
2. Monitoring of the commingling process — Each removal of the

remaining stocks of leaded gasoline subjected to inventory
taking shall be accompanied by a Withdrawal Certificate duly
issued by the BIR personnel assigned on the premises of the
subject taxpayers. In the event that the said volume has been
completely exhausted and the remaining stock of gasoline
which is the result of the dilution process does not meet the
prescribed maximum level of lead content as determined by the
authorized representatives of DOE, each subsequent removal of
such gasoline shall be considered Leaded gasoline and an
additional tax of one peso (P1.00) per liter of said gasoline shall
be due therefrom and shall be paid in accordance with the
provisions of Revenue Memorandum Order No. 99-98 . The
said procedure shall continue until such time that the content of
the storage tank shall conform with the prescribed standard for
unleaded gasoline certified by the authorized representatives of
DOE, with the concurrence of the representatives of the BIR
and the concerned Oil Companies. The gasoline classification
and additional tax due shall be duly reflected on the face of the
Withdrawal Certificate accompanying the said removal. A
weekly report of inventory utilization indicating therein the date
and volume of removal and the corresponding Withdrawal
Certificate Number, shall be submitted to the Assistant
Commissioner, Excise Tax Service, on or before Tuesday of the
following week until such time that said inventories are fully
exhausted. Provided, however, the said report shall no longer be
required on such inventories that will not be subjected to the
commingling process. cdll
3. Method of Accounting to be Adopted in the Commingling of

Unleaded and Leaded Gasoline. — The First-In-First-Out
Method of accounting shall be used in the receipt of unleaded
gasoline and removal of leaded gasoline from the storage tank.
Illustration:
A manufacturer removed 100,000 liters of unleaded gasoline from the place

of production (refinery) on February 15, 2000 and paid an excise tax of P4.35 per
liter and shipped directly to Pandacan terminal and commingled the same with
leaded gasoline stored in a storage tank containing a remaining balance of 10,000
liters. On February 20, 2000, the company sold 110,000 liters of such commingled
product as leaded gasoline.
Solution:
Tax Due on Leaded Gasoline Sold (110,000 ltrs. x P5.35) P588,500.00
—————
Less: Tax Paid on Leaded Gasoline (10,000 ltrs. x P5.35) 53,500.00
Tax paid on Unleaded Gasoline (100,000 x P4.35) 435,000.00
—————
P488,500.00
—————
Balance of Excise Tax Due P100,000.00
=========
4. Application for Permit to Change Content of Storage Tanks. —
Before the end of the transition period, the concerned taxpayers
shall file an application with the Excise Taxpayers Service a
permit to change the content of their storage tanks from leaded
gasoline to unleaded gasoline.
5. Prohibition Against Commingling after the Transition Period.

— All tanks intended for storage of unleaded and leaded
gasoline at the Metro Manila Terminals as well as those of the
new industry participants shall be separately identified. After
the transition period, all deliveries from the refineries and
importation of leaded gasoline shall be strictly stored at the
storage tanks for leaded gasoline and the commingling of such
leaded gasoline with the content of storage tanks containing
unleaded gasoline is therefore prohibited.
SECTION 3. Penalties. — Any violation of these Regulations shall be

subject to the pertinent penalties prescribed under Title X of the National Internal
Revenue Code of 1997.
SECTION 4. Repealing Clause. — All regulations, rulings, orders or

portions thereof which are inconsistent with the provisions of these regulations are
hereby revoked and/or modified accordingly. prcd
SECTION 5. Effectivity. — These Regulations shall take effect

immediately.

Secretary

Commissioner
(9)
November 12, 1999
SUBJECT : Regulations Implementing Section 4 of RA. No. 8748,

Entitled "An Act Amending Republic Act No. 7916, "
Otherwise Known as the Special Economic Zone Act of
1995, Amending for this Purpose Revenue Regulations No.
12-97
TO : All Internal Revenue Officers Concerned
SECTION 1. Scope. — Pursuant to Section 4 of Republic Act No.

8748, amending R.A. No. 7916 as implemented by Revenue Regulations No.
12-97, these Regulations are hereby promulgated to amend the provisions of the
aforesaid Revenue Regulations No. 12-97 in respect of sharing, distribution and
manner of disposition of the two percent (2%) share of local government units
from the five percent (5%) special tax on gross income earned, in lieu of all taxes,
except the real property tax, imposed on PEZA-registered enterprises registered
under and operating pursuant to the Special Economic Zone Act, as implemented
by the Philippine Economic Zone Authority (PEZA).
SECTION 2. Sharing and Distribution of the Proceeds From the 5%

Special Tax Paid by PEZA-Registered Enterprises. — Pursuant to Section 24
of R.A. No. 7916, as amended by R.A. 8748, PEZA-registered enterprises shall, in
lieu of all taxes (except the real property tax on land owned by developers), pay a
tax equivalent to five percent (5%) based on gross income earned, which shall be
shared and distributed as follows:
(a) To the National Government 3%

(b) To the Treasurer's Office of the 2%
Municipality or City where the
registered enterprise is located
SECTION 3. Rules of Apportionment. — In case the Special

Economic Zone (ECOZONE) is situated and encompasses the territorial
jurisdiction of more than one (1) city or municipality, the share of each city or
municipality from the 2% special tax paid by ECOZONE enterprises shall be
determined in accordance with the implementing PEZA regulations on the subject.
The Philippine Economic Zone Authority (PEZA) shall issue certification as to the
exact share of the concerned cities or from the 2% tax as allocated under the
implementing rules of PEZA. cdphil
SECTION 4. Nature of the 5% Tax and Extent of Tax Exemption.—
The above 5% tax is imposed on "gross income earned" hence, income tax
in nature and a national internal revenue law in character. Registered ECOZONE
enterprises shall be exempt from all other taxes, national or local, except the real
property tax on land owned by developers, pursuant to Section 24 of R.A. No.
7916, as amended by R.A. No. 8748.
SECTION 5. Returns and Payment of the Tax. —
(a) Quarterly and Final Adjustment Tax Return. — Every ECOZONE

registered enterprise subject to the herein 5% special income tax shall file a
quarterly and a final adjustment income tax return showing, among others, (1) its
"gross income earned" for such period; (2) the amount representing the 5% tax on
such "gross income earned;" (3) the amount representing the aforementioned 2%
share of the city/municipality; (4) in case the enterprise occupies a parcel of land
situated within the territorial boundaries of two or more cities/municipalities, the
area of land within the jurisdiction of each city/municipality and the share from the
tax of each city/municipality.
The aforesaid enterprise shall file quarterly income tax return within sixty
(60) days after the close of each of the first three (3) quarters and a final
adjustment income tax return covering the entire taxable year, not later than the
fifteenth (15th) day of the fourth (4th) month following the close of its taxable
year, whether a calendar or a fiscal year accounting period, in accordance with
Title II, Chapter XII, of the National Internal Revenue Code of 1997:
Provided, however, that it shall prepare and accomplish at least five (5) copies
thereof for filing, as follows: (1) Original and duplicate original copies thereof for
filing with the duly authorized representative of the Commissioner of Internal
Revenue, for the purpose of payment of the aforementioned 3% share of the
National Government; (2) two (2) copies thereof for the purpose of payment of the
aforesaid 2% share of the city/municipality; and (3) one (1) copy thereof for the
file of the said enterprise: Provided, further, that if two or more
cities/municipalities are entitled to a share in the two percent (2%) tax share of
cities/municipalities, as many copies shall be accomplished for the purpose of
filing at least two (2) copies thereof with the concerned cities/municipalities.
(b) Filing Procedure. — The ECOZONE enterprise shall present and

submit its aforementioned tax return to the duly authorized representative of the
Commissioner of Internal Revenue. After payment of the 3% tax share of the
National Government, all copies thereof shall be stamped received The said duly
authorized representative of the Commissioner shall secure the original and
duplicate original copies thereof for BIR purposes. The remaining copies thereof
shall be returned to the said enterprise, one (1) copy thereof for its file, and the
remaining copy, duly stamped received by the said authorized representative, shall
be submitted to the concerned city/municipal treasurer.
(c) Additional Attachment. — The said enterprise shall submit with its
quarterly income tax return a separate schedule showing (1) the "gross income
earned" for the quarter without, however, showing the details on how the same has
been computed; (2) the 5% special tax due thereon; (3) the 3% tax share of the
National Government; and (4) the share of each city/municipality from the 2% tax
share of cities and municipalities. The same schedule, in addition to its duly
audited financial statements, shall be submitted with its annual final adjustment
return: Provided, however, that for this purpose, the said schedule shall show the
details how its "gross income earned" has been computed. Provided, finally, that
all ECOZONE establishments shall secure on an annual basis a certification from
PEZA that (1) the establishment is a bona-fide PEZA-registered establishment
entitled to the 5% special tax on gross income and that (2) whenever applicable,
the percentage allocation of the 2% share in case of overlapping
municipalities/cities.
SECTION 6. Authority to Issue Any Deficiency 5% Special Income

Tax Assessment. —
(a) Jurisdiction. — Pursuant to Section 6 of the National Internal

Revenue Code of 1997, in relation to R.A. No. 7916, as amended by R.A. No.
8748, the power to audit and assess the herein 5% special income tax shall be
under the exclusive jurisdiction of the Commissioner of Internal Revenue or his
duly authorized representative. cdll
(b) Distribution and Collection of the Deficiency Tax Assessed. —

Three-fifth (3/5th) or sixty percent (60%) of the 5% special income tax assessed,
inclusive of increments, representing the share of the National Government, shall
be collected by the Commissioner or his duly authorized representative. Two-fifth
(2/5th) or forty percent (40%) thereof shall be collected by the concerned
city/municipality, representing its share from the 5% special income tax on
ECOZONE enterprises.
(c) Related Party Information. — The Commissioner or his duly

authorized representative shall furnish the concerned city/municipal treasurer with
one (1) certified copy of the formal deficiency 5% special income tax assessed
against an ECOZONE enterprise at the same time the same is issued to the said
taxpayer. Hence, formal deficiency tax assessment for issuance to such enterprises
shall show the following:
"CERTIFIED COPY:
The Treasurer
City/Municipality of _________________________
__________________________________________
Unless the taxpayer has duly protested against the deficiency tax
assessment, the same shall be paid by the taxpayer not later than the date
prescribed for its payment, as shown in the assessment notice, otherwise, the
corresponding delinquency increments shall be imposed.
Unless the taxpayer has duly protested against the deficiency tax
assessment, the same shall be paid by the taxpayer not later than the date
prescribed for its payment, as shown in the assessment notice, otherwise, the
corresponding delinquency increments shall be imposed.
The taxpayer shall inform the Treasurer of the city/municipality concerned,

in writing, whenever it protested against the aforesaid deficiency tax assessment
and shall submit therewith a copy of the letter of protest duly filed with the BIR.
(d) Refund/Credit For Erroneously Paid 5% Special Income Tax. —
(1) In The Case Of The 3% Tax Share Of The National

Government. — In case of erroneous payment of the tax, the
same may be refunded or credited by the BIR, pursuant to the
provisions of Section 204 of the National Internal Revenue
Code of 1997.
(2) In The Case Of The 2% Tax Share Of The City/Municipality. —

In case of erroneous payment of the tax, the amount erroneously
paid to the city/municipality shall be refunded by such
city/municipality .
SECTION 7. Repealing Clause. — The provisions of Revenue

Regulations No. 12-97 and all other revenue issuances which are inconsistent
herewith are hereby modified or amended accordingly. cdphil

fifteen (15) days after publication in a newspaper of general circulation.
(SGD.) EDGARDO B. ESPIRITU
Secretary
(SGD.) BEETHOVEN L. RUALO

Commissioner
Endnotes
1 (Popup - Popup)
Annex A
Annex B
Annex C
2 (Popup - Popup)
RA 8424
3 (Popup - Popup)
* Note from the Publisher: Amendments to Section 2.78.1(A)(7) of RR 2-98 not
indicated in the official copy.
4 (Popup - Popup)
5 (Popup - Popup)
6 (Popup - Popup)
RA 8424
7 (Popup - Popup)
Annex A
8 (Popup - Popup)
RR 30-2002
RA 1405
RA 8424
9 (Popup - Popup)
RA 7916
RA 8748

RR 2000

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(1)

November 20, 2000

REVENUE REGULATIONS NO. 14-00

SUBJECT : Amending Sections 2(2), 3 and 6 of Revenue Regulations

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to the provisions of Section 244, in

2.1. Section 2 (2) of Revenue Regulations No. 13-99 is hereby

"(2) Principal Residence. — (a) The term "Principal Residence"

2.2. Section 3 of Revenue Regulations No. 13-99 is hereby amended, to

"SEC. 3. Conditions for Exemption. — The general provisions of

"(2) Capital Gains Tax Return. — The Seller/Transferor shall file,

(a) Proof of payment of the documentary stamp tax imposed under

(b) A sworn statement from the Barangay Chairman that the

(c) A duplicate original copy of the Deed of Conveyance of his

(e) A certified xerox copy of the latest Tax Declaration covering

(f) If the building or improvement thereon has been constructed on

"(3) Post Reporting Requirement. — The proceeds from the sale,

(b) A certified statement from his architect or engineer, or both,

(c) A certified copy of the Building Permit issued by the Office of

(d) In case his new Principal Residence is acquired by purchase, a

"(4) Release from the Escrow Agreement. — Upon a showing, based

"(5) Limitation on Tax Exemption Privilege. — The tax exemption

"(6) Cost Basis of the New "Principal Residence". — The historical

"(7) Assessment for Deficiency Capital Gains Tax; Application of

Pursuant to the provisions of Revenue Regulations No. 12-99, the

"(8) Partial Utilization of the Proceeds of Sales Exchange or

2.3. Section 6 of Revenue Regulations No. 13-99 is hereby amended,

"SEC 6. Issuance of Certificate Authorizing Registration (CAR)

SECTION 3. Penalty Clause. — (1) Any Barangay Chairman, or

SECTION 4. Repealing Clause. — Any revenue issuance, if

SECTION 5. Effectivity Clause. — These Regulations shall take effect

(SGD.) JOSE T. PARDO

(SGD.) DAKILA B. FONACIER

The Bureau of Internal Revenue, herein represented by _____________, Revenue

DONE THIS ________ DAY OF _________, IN THE YEAR OF OUR LORD,

Commissioner of Internal Revenue

Revenue District No. ____

RELEASE FROM ESCROW AGREEMENT

To : (State name and address of the AAB)

Subject : (State name of the taxpayer)

This refers to the sum of ___________________ (P__________) which was

Very truly yours,

Commissioner of Internal Revenue

Revenue District No. _____

FORFEITURE OF THE BANK DEPOSIT IN ESCROW

To : (State name and address of the AAB)

Subject : (State name of taxpayer)

This refers to the sum of ___________________ (P____________) which was

Very truly yours,

Commissioner of Internal Revenue:

November 20, 2000

REVENUE REGULATIONS NO. 13-00

SUBJECT : Implementing Section 34(B) of the Tax Code of 1997 on the

TO : All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to the provisions of Section 244

SECTION 2. Definition of Terms. — For purposes of these

(b) Taxpayer — shall refer to a person, whether natural or juridical,

SECTION 3. Requisites for Deductibility of Interest Expense. — In

(a) There must be an indebtedness;

(b) There should be an interest expense paid or incurred upon such

(c) The indebtedness must be that of the taxpayer;

(d) The indebtedness must be connected with the taxpayer's trade,

(f) The interest must have been stipulated in writing;

(g) The interest must be legally due;

DONE THIS DAY OF _, IN THE YEAR OF OUR LORD,

This refers to the sum of _________ (P) which was

This refers to the sum of _______ (P) which was