PREFERENTIAL TAXATION SENIOR CITIZENS LAW EXEMPTION FROM INCOME TAX General Rule: Qualified SCs deriving income during the taxable year, whether from compensation or otherwise, are roquired to file income tax retums. Exceptions: (1) Ifthe income of SC is compensation and he is a minimum wage eamer (MWE), SC is exempt from income tax subject to existing rules on MWE (2) Ifthe aggregate amount of gross income during the taxable year does not exceed his/her personal exemptions. (basie and additional), SC is exempt from tax and NOT required to file annual ITR ‘TAX INCENTIVES TO QUALIFIED ESTABLISHMENTS, Kinds of discounts on qualified goods and services: 4 Promotional discount 4 20% discount + 5% discount on water and electric consumption by SCs 50% discount on electricity, water and telephone consumption by the Senior Citizen Center ‘TREATMENT OF DISCOUNTS: 4 ordinary and necessary expenses 4 deductible from the gross income of the seller falling under the category of itemized deductions + canbe only claimed ifthe seller does not opt for optional standard deduetion during the taxable year. CONDITIONS FOR DEDUCTION 1. Only that portion of the gross sales exclusively used, consumed or enjoyed by the SC shall be eligible for the deductible sales discount; 2. The gross selling price and the sales discount must be separately indicated in the official receipt or the sales invoice issued by the establishment 3. Only the actual amount of the discount granted ora sales discount not less than the statutory rate (20%, 5% and 50% when applicable), whichever is higher, based on the gross selling price can be deducted from the _stoss income, ifapplicable, for income tax purposes, and from the gross sales or gross receipts of the ‘business enterprise concerned, for VAT or OPT purposes. 4, The seller must record its sales inclusive of the discount granted 5. The discount ean only be allowed as a deduction from gross income for the same taxable year the discount is granted 6. The business establishment giving sales discount fo qualified SCs is required to keep a separate and accurate record of sales, which shall include the name of the SC, the SC ID, gross sales/gross receipts, dates of transactions and invoice numbers for every sale to SCs 7. Only business establishments selling any of the qualified goods and services to SCs where an actual discount was granted may claim the deduction 8. The seller must not opt for OSD|ONAL DEDUCTION DUE TO COMPENSATION PAID TO SENIOR CITIZENS CONDITIONS FOR ADDITIONAL DEDUCTION 1, ‘The employment shall have to continue for a period of at least six months 2. The ‘hu the NSCB. For this purpose, the SC shall submit to his employer a sworn certification that his annual taxable income does not exceed the poverty level. ‘MAGNA CARTA FOR DISABLED PERSONS PERSONS WITH DISABILITY (PWD) “those suffering from restriction of different abilities, as a result of a mental, physical or sensory impairment, to perform an activity in the manner or within the range considered normal for a human being”. Judes those who have long term physical, mental, intellectual or sensory impairments which in interaction with various barriers may hinder their full and effective participation in society in equal basis with others” QUALIFIED PWD - refers to an individual with disability who, with reasonable accommodations, ean perform the essential functions of the employment positon that such individual holds or desires. However, consideration shall be given tothe employer's requirement as to what functions of a job are essential, and if an employer has prepared a ‘written description before advertising or interviewing an applicant for the job, this description shall be considered evidence of the essential functions of the job. INCENTIVES FOR EMPLOYERS, eter Tie ETO OC aa Requirements: 1. Entities must present proof as certified by the Department of Labor and Employment that disabled persons are under their employ 2. That the disabled employee is accredited with the Department of Labor and Employment and the Department of Health as to his disability, skills and qualifications. ee Note: Not applicable to improvements or modifications of facilites required under BP 344 (An Act to Enhance the Mobility of Disabled Persons by Requiring Certain Buildings, Institutions, Establishments and Public Utilities to install Facilites and Other Devices).SPECIAL ECONOMIC ZONE ACT Coverage: 1. Policy and the Philippine Economie Zone Authority 2. Registration of investments 3. Fiscal incentives to PEZA-registered economic zone enterprises References: R.A. Nos. 7916; 9593 (Tourism Act, IRR of RA7916, Revenue Regulations Nos. 2-2005; 11-2005, 13-2005; 7-2016 (TIEZA) DECLARATION OF POLICY Itis the declared policy of the government to translate into practical realities the following State poli ‘mandates in the 1987 Constitution, namely: and a) The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments. (See. 20, Art I) bb). The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods and adopt measures that help make them competitive. (See. 12, Art X11) REGISTRATION OF INVESTMENTS Registration of Business Enterprises. - Business enterprises within a designated ECOZONE shall register with the PEZA to avail ofall incentives and benefits provided for in the PEZ.A law Developer / Operator, Domestic Market, Utilities, Facilities, Tourism or Service Enterprises Qualifications: Applications shall comply with the applicable nationality, control and / or ownership requirements of the working capital thereof in accordance with the pertinent provisions of the Philippine Constitution, Foreign Investments Act of 1991 and other existing laws and regulations, Domestic Enterprise Qualifications: Applicants shall be limited to new or expanding business entities subject to the guidelines that shall be promulgated by the Board in addition to the nationality requirements under existing laws and regulations. INCENTIVES TO ECOZONE ENTERPRISES ‘New or expanding ECOZONE Developers / Operators, Export, Free Trade, Domestic Market, Utilities, Facilities and Tourism Enterprises, except ECOZONE Service Enterprises shall be entitled to the fiscal incentives provided in Sections 24 (5% Gross Income Taxation) and 42 (Incentive Scheme of !4 ofthe value of training expenses incurred in developing skilled or unskilled labor or for managerial or other management development programs incurred by enterprises deductible from the national government's share of three percent (3%) of the Act. Additional Incentives to new or expanding ECOZONE Export and Free Trade Enterprises 1. Exemption from Duties and Taxes on Merchandise 2, Exemption from National and Local Taxes and Licenses 3, Tax Credit for Import ‘Substitution 4. Exemption from Wharfage Dues, Export Tax, Impost or Fee 5. Additional Deduction for Training, Expenses 6. Incentives Under Presidential Decree 66 INCENTIVES TO ECOZONE DEVELOPERS/OPERATORS ) Exemption from National and Local Taxes and Licenses including but not limited to gross receipts tax, Value Added Tax, ad valorem and excise taxes, franchise, common carrier or value added taxes and otherpercentage taxes on public and service utilities and enterprises. In lieu thereof, the ECOZONE Developer / Operator Enterprise shall pay a five percent (5%) final tax on gross ineome. bb) Additional Deduction of 1/2 of the value of training expenses incurred in developing skilled or unskilled labor or for managerial or other management development programs incurred by an ECOZONE Developer / Operator which may be deducted from the $% final tax due from the ECOZONE Developer / Operator but rot to exceed the national governments share of three percent (34%) OTHER INCENTIVES UNDER THE CODE. Income Tax Holiday Tax Credit on Domestic Capital Equipment Importation of Breeding Stocks and Genetic Materials Tax Credit on Domestic Breeding Stock and Genetic Materials Additional Deduction for Labor Expense Unrestricted Use of Consigned Equipment INCENTIVES TO DOMESTIC MARKET ENTERPRISE 1, Exemption from national and local taxes in Lieu thereof, payment ofa special tax rate of five percent (5%) on gross income 2. Additional Deduetion for Training Expenses 3. Other incentives available under the Code, as may be determined and subject tothe conditions that ray be prescribed by the Board INCENTIVES TO FACILITIES, UTILITIES AND TOURISM ENTERPRISE, 1. Exemption from national and local taxes and lieu thereof payment ofa special tax rate of five percent (5%) on gross income 2. Additional Deduction for Training Expenses 3. Incentives provided under R.A. 6957 as amended by R.A. 7718, otherwise known asthe Build Operate and Transfer Law 4. Other incentives available under the Code, as may be determined by the Board NON-FISCAL INCENTIVE, Immigration, — Any investor within the ECOZONE whose initial investment shall not be less than One Hundred Fifty Thousand Dollars ($150,000.00), his/her spouse and dependent children under twenty-one (21) years of age shall be granted permanent resident status within the ECOZONE. They shall have freedom of ingress and egress to and from the ECOZONE without any need of special authorization from the Bureau of Immigration. ECOZONE Enterprises may employ Foreign Nationals in executive, supervisory, technical and advisory positions. Executive positions shall pertain only to the president, vice-president, treasurer and general manager, or their equivalents, Percentage of Foreign Nationals in supervisory technical or advisory positions shall not at any time exceed percent (5%) ofits workforce unless expressly authorized by the Secretary of Labor and Employment: Provided, ‘That foreign nationals may be employed in supervisory, technical or advisory positions only ift is certified by the Department of Labor and! Employment that no Filipino within the ECOZONE posse therefor. es the technical skills required‘Customs Territory” shall mean the national territory of the Philippines outside of the proclaimed boundaries of the ECOZONES except those areas specifically declared by other laws andor presidential proclamations to have the status of special economic zones and / oF free ports “Negative List” shall refer to the list of industries drawn up and regularly updated by the PEZA under which ECOZONE Enterprises engaged in any industry listed therein shall not be allowed to sell their products or any portion thercof in the custom tertitory “Certificate of Registration” shall mean the certificate issued by the PEZA to an ECOZONE Enterprise upon its registration. “Registration Agreement” shall refer to the final agreement executed by the PEZA and the ECOZONE Enterpr setting forth the terms and conditions for the laters operation of business or engaged of economic activity within the ECOZONE. “Date of Registration” shall refer tothe date appearing inthe certificate of registration. “Start of Commercial Operations” for purposes of the income tax holiday, SCO shall be the date specified in the Registration Agreement or the date when the particular ECOZONE export enterprise actually begins production of the registered product for commercial purposes, whichever comes frst, irrespective of phases or modules or schedule of development, “Gross Income” refers to gross sales or gross revenues derived from business activity within the ECOZONE, net of sales discounts, sales return and allowances and minus costs of sales or direct costs but before any deduction is made for administrative expenses or incidental losses during a given taxable period. The allowable deductions from “gross income” are specifically enumerated under Section 2, Rule XX of these Rules, FISCAL INCENTIVES OUTSIDE TEZs Accommodation establishments 1, Income Tax Holiday — non-extendible 6 years for substantial expansion 2, Exemption from Taxes on Importation of Capital Investment and Equipment 3. Net Loss Carry Over ~ same with those inside ‘TEZ AVAILMENT OF TAX INCENTIVES, availing of incentives under RA No. 9593 are required to obtain from TIEZA, on an annual ba sate of Entitlement (CE) as proof of their entitlement to such incentives. In availing of incentives, the CE and the TIEZA Certificate of Registration shall be attached to the Income Tax Returns (ITRs) andor the applicable tax return upon filing of the returns. Inthe absence of the CE and the TIEZA Certificate of Registration, the BIR shall disallow any claim of incentive, OTHER IMPORTANT CONSIDERATIONS Withholding agents TEZs not treated as separate customs territories Maintenance of Separate Books of Account for each TIEZAregistered Activity ‘Compliance with RA No. 10708 (TIMTA) No Double Availment of Incentives Schemes Incentive scheme is effective for a period of 10 years from effvetivity of RA 9593 - Tourism Act of 2009 (Note: RR 7- 2016 was issued on November 15, 2016)PAYMENT OF BACK TAXES Ifthe TIEZA registration is down-graded, suspended, revoked, the TIEZA shall order it to pay back taxes in an amount equivalent to the difference between the taxes that it should have paid had it not availed of incentives under RA 9593, The back taxes shall be computed up to three years directly preceding the date of promulgation of the decision or order finding that the enterprise violated the terms ofits accreditation. The back taxes shall be distributed. in the same manner, BARANGAY MICRO BUSINESS ENTERPRISES ACT Coverage: 1, Registration of BMBEs 2. Fiscal Incentives to BMBES. WHO CAN REGISTER? L._ Sole proprietorship 2. Cotporation 3. Partnership 4. Cooperative Association OPERATIONS, Engaged in the production, processing or manufacturing of products or commodities, including agro-processing, trading and services, and which activities are barangay-based and micro-business in nature and scope "Services" shall exclude those rendered by: 1. PRC Licensed professionals 2, Juridical persons such as partnerships or corporations engaged in consultancy, advisory and similar “services where the performance of such services are essentially carried out through licensed professionals — BARANGAY-BASED. A business enterprise shall be considered “barangay-based” if + the majority of its employees are residents of the municipality where its prineipal place of business is “Iocated; oF 4 its principal activity consists inthe application/use ofa particular skill pesto the locality or oP AW materials predominantly sourced from the area; or its business operations are confined within the territorial jurisdiction of the municipality or LGU in which ‘The enterprise may establish subject to pertinent rules anywhere in the Philippines: Warehouses, Buying stations Sales outlets Booking offices Aduninistrative offices veers‘MICRO-BUSINESS IN NATURE AND SCOPE i shall be considered “micro-business in nature and scope” if: ‘its principal stivity is primarily forlivliiood, or determined by the SMED Council or DTT asa priority re for development or government assistance; _ “the enterprise is not a branch, subsidiary, division or office of a large scale enterprise; and ‘its policies and business modus operandi are not determined by large scale enterprise or by persons who are not owners or employees of the enterprise. CERTIFICATE OF AUTHORITY (CA) Issuer : Office of the City or Municipal Treasurer Effect + Period oftwo (2) years, nd renewable fora period of two (2) years fr every renewal Required Form: BMBE Form 02 ‘The Treasurer shall indicate in the CA the date when the registration of the BMBE commences. (CA) Cost of Registration: 1. Free of charge; or 2, Fee not exceeding One Thousand Pesos (P1,000.00) is imposed by the LGU concerned through a properly enacted ordinance, Requirement: Total assets, ral or personal, inclusive of those arising ftom loans but exclusive ofthe land on hich the particular business entity's office, plant and equipment are situated, shall not be more Uuan Three Million Pesos (P3,000,000.00) CANCELLATION OF REGISTRATION a. When the BMBE transfers its place of business to another locality; b. When the value of its total assets as determined pursuant to this Order exceeds Three Million Pesos (3, 000,000.00); ‘c. When the BMBE voluntarily surrenders its Certificate of Authority to the Office of the City or Municipal Treasurer; 4d. Incase of death of the registered individual owner of the BMBE, ifit isa sole proprietorship; ‘e, Incase of violation or non-compliance with the provisions of R.A. 9178, the Implementing Rules and this Order; £ Incase of merger or consolidation with an entity which is not eligible to be a BMBE; g._ Incase of sale or transfer of the BMBE. if it is @ sole proprietorship, without prejudice to the transferee applying for registration should it be qualified under the terms of this Order, h, Submission of fake or false or falsified documents; i, Incase of retirement from business, or cessation/suspension of operations for one year; and J. Making false or omitting required declarations or statements. ‘The BMBE shall surrender its Certificate of Authority to the Treasurer. The Treasurer shall immediately notify the BIR of any cancellation of registration of BMBE,FILING OF CRIMINAL COMPLAINT In cases of: a. yiolation or non-compliance with the provisions of RA 9178, submission of fake or falsified documents, and/or €. making false or omitting required declarations or statements the City or Munieipal ‘Treasurer should initiate the filing of appropriate criminal complaints before the Office of the Public Prosecutor. FISCAL INCENTIVES NOT COVERED BY EXEMPTION 44, Interest, including those from any curreney bank deposit and yield or any other monetary benefit, from deposit substitutes and from trust funds and similar arrangements; Royalties; Prizes and other winnings: Cash and/or property dividends; Capital gains from the sale of shares of stock not traded through the stock exchange: Capital gains from the sale or other disposition of real property: ‘The share of an individual in the net income after tax of an association, a joint account, ora joint ‘venture or consortium; h. The share of an individual in the distributable net income after tax ofa taxable partnership of which he is a partner; i. Income from the practice of profession received directly from the clients or from the professional partnership of which the individual is a partner; J. Compensation; and k. All other forms of passive income and income from revenues not effectively connected with or arising from operations of the BMBEs as such, DETERMINATION OF ASSET VALUATION ¥ Not to exceed Php 3 Million ¥ Include all kinds of properties, both personal propertics and real properties Exclude land on which the particular business entity's office, plant and equipment are situated — Owned and used/to be used, or even if not owned but used/to be used, by the BMBE and/or its affiliates for _ the conduct of its/their business/es AVAILMENT OF TAX INCENTIVES ‘The BMBE shall register with the BIR RDO where the principal office or place of business of the BMBE is located. Its application for registration shall be supported by the following documents: |. Copy of the BMBE’s Certificate of Authority duly authenticated by the Office of the City or Municipal Treasurer; 2. Latest Audited Financial Statement, or Account Information Form or its equivalent containing data lifted from audited financial statements.3, Swom Statement of the values of assets owned and/or usedto be used by the BMBE and/or its affiliates reflecting the current values thereof, The Sworn Statement shall be supported by pertinent information and documents such as: a. Acquisition cost, date of acquisition and depreciated value for existing assets b. Invoices and/or official receipts for newly-acquired assets not yet depreciated; e. Duly-notarized copy of Contract of Lease for assets used in the conduct of business covered by lease agreement; and d. Copy of Loan Contracts, if any, and Duly-Notarized Certification of Amortization Payments on the Loan 4, Certified list of branches, sales outlets, places of production, warehouse and storage places, or such other facility ‘owned and/or operated by the BMBE indicating their respective addresses, whether located in the same ‘municipality or city where the principal place of business is located, or elsewhere. 5. Certified lst of affiliates, indicating addresses, line of business and responsible officers thereof, OTHER IMPORTANT CONSIDERATIONS For purposes of exemption from the creditable withholding tax on income payments, the BMBE shall furnish its customers with a certified true copy of its amended BIR registration certificate ¥ Ifa BMBE is also entitled to exemption from income tax under other law, it shall so state this fact in its registration form and indicate whether it shall avail itself thereof or the privilege under the BMBE. ¥-_ The choice so made shall bind the BMBE for the entire period of validity of its registration with the BIR. No BMBE shall be allowed double or multiple availment of income tax exemption privileges. Y An annual registration fee in the amount of Five Hundred Pesos (PS00.00) shall be paid by a BMBE upon its registration as such, and every year thereafter on ot before the last day of January: ¥ BMBE which is in the form ofa cooperative or a marginal income eamer shall be exempt from payment of registration fee. < Exemption from Gross Receipts Tax - Interests, commissions and discounts derived from the loans granted by the LBP, DBP, PCFC and SBGFC to dulyregistered BMBEs, as well as loans extended by the GSIS and SSS to their respective member-employees for the purpose of establishing BMBEs, shall be exempt from gross receipts tax (GRD). Disqualification from GRT Exemption. In case the amount of loan extended by the abovementioned credit, institution/s to a BMBE borrower resulted to the BMBE’s total assets exceeding the P3 million asset threshold, the said credit institution/s is/are disqualified to enjoy exemption from GRT.