Ross, Yballe, Ruaya, Seballos,

Tidoso, Sios-e, Tumulak

GROUP 5 TAX II
REVENUE MEMORANDUM CIRCULAR 74-1999

Tax Treatment of Sales of Goods, Property and Services Made by a Supplier from the Customs Territory to
a PEZA Registered Enterprise; and Sale Transactions Made by PEZA Registered Enterprises WITHIN and
WITHOUT the Eco-zone

1. Sales Made By A VAT Registered Supplier From The Customs Territory, To A PEZA Registered
Enterprise
a. Buyer is a PEZA registered enterprise which is subject to the 5% special tax regime
i. Sale of goods:

treated as indirect export - subject to (0%) VAT

ii. Sale of service: (0%) VAT - cross border doctrine

b. Buyer is a PEZA registered enterprise, not embraced by the 5% special tax regime, - subject to
taxes under the NIRC
i. Sale of goods:

be treated as indirect export - (0%) VAT

ii. Sale of Service: (0%) VAT - cross border doctrine

2. Sales Made By A VAT-Exempt Supplier From The Customs Territory, To A PEZA Registered
Enterprise
treated exempt from VAT - regardless of whether or not the PEZA registered buyer is subject to
taxes under the NIRC, or enjoying the 5% special tax regime, or a registered manufacturerexporter the Cross Border Doctrine of the VAT System to the contrary notwithstanding
3. Sales Made By A PEZA Registered Enterprise

a. Sale of GOODS to a buyer from the Customs Territory:

i. treated as a technical importation made by the Buyer - Buyer shall be treated as an
importer thereof and shall be imposed with the corresponding import tax/es
ii. The registered enterprises gross income earned therefrom shall be subject to the 5%
special tax

1. sales in the Customs Territory do not exceed the threshold allowed or

permitted for such sales, pursuant to the pertinent provisions of the PEZA rules
and regulations
2. for income tax purposes, if such sales should exceed the aforesaid threshold,
its income derived from such excess sales shall be imposed with the normal
income tax pursuant to the provisions of Title II, NIRC
3. in computing for the income tax due on such excess sales, its net income from
such excess sales shall be determined in accordance with the method of
general apportionment pursuant to the provisions of Sec. 50, NIRC

Ross, Yballe, Ruaya, Seballos,

Tidoso, Sios-e, Tumulak

GROUP 5 TAX II

b. Sale of SERVICES by a PEZA Registered Enterprise to a Buyer from the Customs Territory
i. subject to the 12% VAT or to the percentage tax, whichever is applicable, and to the
normal income tax on income derived therefrom
c.

Sale of GOODS, by a PEZA Registered Enterprise, to Another PEZA Registered Enterprise

i. exempt from VAT

d. Sale of SERVICE by ECOZONE Enterprise, to Another ECOZONE Enterprise

i. If PEZA-Registered Seller is Subject to the 5% Special Tax Regime. Exempt from

VAT or any percentage tax

ii. If PEZA-Registered Seller is Subject to Taxes Under the NIRC

1. Subject to zero percent (0%) VAT pursuant to the Cross Border Doctrine
2. Buyer, since the use for or benefit from such purchase of service shall
eventually be translated to actual export of goods (i.e., shipment of goods to a
foreign country, which is subject to zero percent (0%) VAT, or translated into
technical export of goods
Revenue Regulations No. 16-2005 has amended Revenue Memorandum Circular (RMC) no. 74-99 in that
sales to PEZA registered enterprises now require prior application for effective zero-rating with the appropriate
BIR office.
REVENUE MEMORANDUM CIRCULAR 75-2012
Issued: November 23, 2012

VAT Exemption of the Sale, Importation, Printing or Publication of Books,

Newspapers, Magazines, Reviews of Bulletins

Clarifies Sec 109(1)(R) of the NIRC on the VAT exemption of the sale, importation, printing or publication
of books, newspapers, magazines, reviews or bulletins.

Requisites for VAT Exemption for under Sec. 109 (1)(R)

The newspaper, review or bulletin must satisfy the following conditions:
1. Be printed or published at regular intervals
2. Be available for subscription and sold at fixed prices; and
3. Not be principally devoted to the publication of paid advertisements

Ross, Yballe, Ruaya, Seballos,

Tidoso, Sios-e, Tumulak

GROUP 5 TAX II
Book, Newspaper, Magazine, Review and Bulletin

(as used in the provision) shall refer to printed materials in hard copies, excluding those in digital or
electronic format or computerized versions (including but not limited to e-books, e-journals, electronic
copies, online library resources, CDs and software)

BIR RULING DA-202-2008

Sale of Room Accommodation, Food and Beverages Services of a Hotel (located within Metro Manila)
to a PEZA-registered enterprises
Ruling of the BIR:

Citing Revenue Regulation 4-2007, the BIR ruled that sales of services by VAT-registered entities from the
customs territory to PEZA-registered enterprises are entitled to avail themselves of effective VAT zerorating.

The basis is the fact that RA 7916 (Act Creating Economic Zones in the Philippines), as amended, considers ecozones as separate customs territories which, by legal fiction, are considered foreign soil.

When do the special tax incentives apply?

The special tax incentives only apply with respect to the registered enterprises operations within the eco-zone, and

provided further, that the services are rendered in connection with the registered activities of the
buyers such as PEZA-registered entities.

When will such sale of services be subject to 12% VAT?

Conversely, if the service is rendered within the customs territory, such sale of service by a VAT-registered
person shall be subject to 12-percent VAT regardless of the status of the buyer as eco-zone-registered
enterprise. This is in consideration of the situs of VAT for sale of services being the place where the service is
rendered.

PEZA MEMORANDUM CIRCULAR NO. 2005-032

Issued: September 5, 2005
Subject of the Circular:

A. Gains on Foreign Exchange Transactions

B. Sales of Production Rejects and Seconds, Scrap, Raw Materials,

Packaging Materials and Other Production Supplies

Ross, Yballe, Ruaya, Seballos,

Tidoso, Sios-e, Tumulak

GROUP 5 TAX II

What is an Eco-zone Export Enterprise?

Refers to an individual, association, partnership, corporation or other form of business organizations which
has been registered with PEZA to engage in manufacturing, assembling or processing activity falling within
the purview of the Act and resulting in the exportation of 100% of its production, unless a lower
percentage of its production for exportation is prescribed by the Board subject to such terms and conditions
as the latter may prescribe (Sec, 2, IRR of RA 7916)

A. TAX TREATMENT OF GAINS ON FOREIGN EXCHANGE TRANSACTIONS

- Foreign currency is normally used by Eco-zone Export Enterprises for their registered activities, either as the
functional currency or as a supplemental currency
- Tax treatment of foreign exchange (Forex) gains shall depend on the activities from which these arise
1. Forex Gain attributed to an Activity WITH Income Tax Incentive

Forex gain shall be covered by the same income tax incentive

INCOME TAX INCENTIVE: Income Tax Holiday or 5% Gross Income Tax

Foreign and local businesses in the Philippines that qualify and are registered for tax incentives
can avail of income tax holidays and this may be followed by a special tax rate of 5% in lieu of
any and all taxes if the business is located in a Philippine Special Economic Zone (PEZA).
2. Forex Gain attributed to an Activity WITHOUT Income Tax Incentive

Forex gain shall be without income tax incentive (i.e. subject to normal corporate income
tax)

ACTIVITY

INCOME TAX INCENTIVE

TAX

Registered 1st Project

5% Gross Income Tax

5% Gross Income Tax

Registered 2nd Project

Income Tax Holiday

Income Tax Holiday

Other Activities

None

None

GAIN

TREATMENT

OF

FOREX

Note: An MCIT of 2% of the gross income as of the end of taxable year is imposed on a corporation taxable
under Title II of the Tax Code, as amended, beginning on the 4th taxable year immediately following the taxable
year in which such corporation commenced its business operations when the MCIT is greater than the regular
income tax.

GROUP 5 TAX II

Ross, Yballe, Ruaya, Seballos,

Tidoso, Sios-e, Tumulak

B. SALE OF PRODUCTION REJECTS AND SECONDS, SCRAP, RAW MATERIALS, PACKAGING MATERIALS
and OTHER PRODUCTION SUPPLIES
Rejects/Seconds finished or semi-finished products which are defective or inferior in quality, ushc that any
further processing or manipulation thereof is not technically or economically feasible for the purpose for which
they are originally intended
Transactions Covered by applicable Income Tax Incentive:
(Income Tax Holiday or 5% Gross Income Tax)
1. Sale of production rejects and seconds from the registered activity of the Export Enterprise

considered covered by the registered activity of said Enterprise; Income derived therefrom shall be covered

by the applicable tax incentive

2. Sale of recovered waste/scrap generated from processing of raw materials, including used
packaging materials and other direct/indirect materials/supplies that have undergone processing or

which have been used in production/processing activity registered with PEZA considered covered

by the registered activity of an Export Enterprise; Income derived therefrom shall be covered by the
applicable tax incentive

Transactions NOT Covered by applicable Income Tax Incentive:

1. Sale of unprocessed, unused, obsolete or off-specs production inputs (direct/indirect materials

or supplies) not covered by the registered activity of an Eco-zone Enterprise; Income derived therefrom

shall be subject to NORMAL CORPORATE INCOME TAX, provided that the related cost shall be
deducted only once for the purposes of computing income

For purposes of proper reckoning of incentives, Eco-zone Export Enterprises with multiple activities are required to
maintain separate books of accounts for each activity.
REVENUE REGULATION 7-2012
Issued: April 2, 2012
PRIMARY REGISTRATION, UPDATES AND CANCELLATION PROCEDURES
Primary Registration - the process by which a person, whether an individual, including estates and trusts, or a
corporation and other juridical entities, upon application and full compliance with the registration requirements
prescribed in these Regulations, is registered with and consequently included in the registration database of the
Bureau of Internal Revenue (BIR)

Ross, Yballe, Ruaya, Seballos,

Tidoso, Sios-e, Tumulak

GROUP 5 TAX II

Primary Registration may involve two scenarios depending on the purpose of the taxpayer applying for
registration as follows:
i. TIN ISSUANCE AND REGISTRATION refers to issuance of TIN to all persons who will engage in
business, practice of profession or employment and who may or may not be subject to any national internal
revenue tax but may be required to file the corresponding tax return, statement or other documents as
required by the Code such as: income tax, estate and donors tax, value added tax, percentage tax,
withholding tax, excise tax and documentary stamp tax (DST), including registration of its branch/es (for
purposes of securing a branch code);
ii. PURELY TIN ISSUANCE refers to issuance of TIN to applicants under Executive Order (EO) 98, series
of 1998 e.g. in the case of individuals required to incorporate the TIN in all forms, permits, licenses,

clearances, official papers and documents which they secure from other government agencies e.g. Local
Government Unit (LGU), Department of Trade and Industry (DTI), Land Transportation Office (LTO),
Department of Foreign Affairs (DFA), etc. It also includes issuance of TIN to Overseas Filipino Workers
(OFWs)/Overseas Contract Workers (OCWs) as defined under these Regulations as well as to NonResident Foreign Corporations (NRFC)/ Non-Resident Alien not engaged in Trade or Business (NRANETB)
subject to final withholding tax on income derived from sources within the Philippines.
Secondary Registration - shall pertain to subsequent registration activities after the issuance of BIR Certificate of

Registration (COR) relative to the printing and issuance of official receipts/sales invoices; keeping/registering of
books of accounts and other accounting records; applying for certain accreditation requirements and securing other
applicable registration-related permits
SECTION

5.

REGISTRATION

OF

BUSINESS,

EMPLOYMENT

AND

OTHER

UNDERTAKINGS. Individuals engaged in business or practice of profession and juridical entities, unless otherwise
exempted, shall:

1. Pay ARF (Annual Registration Fee), if applicable;

2. Secure COR (Certificate of Registration);
3. Proceed to Secondary Registration;
4. Get Ask for Receipt notice, if applicable; and
5. Attend the taxpayers initial briefing to be conducted by the BIR district office for new registrants in order
to apprise them of their rights and duties/responsibilities. In lieu of the briefing, the BIR district office may
distribute information materials on registration to its new applicants in CD format to be developed by the
Taxpayer Assistance Service (TAS).

To complete the registration requirement pursuant to Section 236(A) of the NIRC of 1997, as amended, the following
persons shall comply with the procedures and requirements in Annex "A" and Section 6 hereof:

Ross, Yballe, Ruaya, Seballos,

Tidoso, Sios-e, Tumulak

GROUP 5 TAX II

i.

Self-employed individuals, estates and trusts, and their branches or facilities, if any;

ii.

Corporations, partnerships, cooperatives, associations (whether taxable or non- taxable) and their branches
and facilities, if any;

iii.
iv.

Government Agencies and/or Instrumentalities (GAIs), GOCCs, LGUs, and their branches and facilities, if
any; and

Employees.

SECTION

6.

PRESCRIBED

PERIODS

TO

COMPLETE

PRIMARY

REGISTRATION

Every person subject to any internal revenue tax to be filed/paid periodically shall complete its registration with the
BIR as follows:

1. On or before the commencement of business - Self-employed individuals, estates and trusts,

corporations and their branches, if any:

Commencement of business shall be reckoned as defined in Section 3(6) hereof. A person shall be
considered to have violated this provision when he/it proceeded to this stage after the lapse of thirty (30)
calendar days from the issuance of Mayors Permit/PTR by the concerned LGU, or COR issued by the
SEC or the date of its first sales transaction prior to its registration.

2. Before payment of any tax due - Corporations (Taxable or Non-taxable)/ ONETT:

Subject to the requirements of Section 4(B)(i) hereof, parties to ONETT transactions who, at the time of
their transaction, have not yet been issued a TIN shall apply for issuance thereof at the time of payment of
the tax due. Such TIN issued to the individual shall be permanent and may be updated for future
transactions of such person with the BIR, e.g. subsequent employment, establishing a business, etc.
3. Before or upon filing of any applicable tax return, statement or declaration as required by the
Code, as amended Partnerships, Associations, Cooperatives, Government Agencies and
Instrumentalities (GAIs): -

Example 1: A General Professional Partnership (GPP) was issued TIN on May 2, 2008, with only Income
Tax and ARF as registered tax types. Subsequently, it paid its advance office rental amounting to
P20,000.00 where an amount of P1,000.00 was withheld and must be remitted to the BIR on or before
June 10, 2008. Under this scenario, the GPP must update its records and register the applicable tax type
e.g. withholding on rental, with its BIR district office on or before the due date for the remittance of the tax
that was withheld.

4. Within ten (10) days from date of employment Employees

This applies to individuals who are registering with the BIR for the first time by reason of employment.

GROUP 5 TAX II

Ross, Yballe, Ruaya, Seballos,

Tidoso, Sios-e, Tumulak

The submission of the fully accomplished registration forms to the BIR may either be done by the employer
or the employee. However, employees of identified Large Taxpayers (LT) or entities under the Taxpayer
Account Management Program (TAMP), whose TINs were secured by the employer thru the eREG System,
shall submit the prescribed registration form for employment shall be submitted through the employer.
5. Applications under EO 98, series of 1998 Subject to the provisions of Section 4(B)(iv) hereof, individuals required to secure TIN for their transactions
with government agencies shall apply for their TIN from any BIR district office (thru the eREG system) at
any time before they complete their transaction with such government agency. TINs issued under EO 98,
series of 1998 shall be permanent and may be updated for future transactions of such person with the BIR
(e.g., subsequent employment, establishing a business, etc.).

In any case, the CIR may, for administrative and meritorious reasons, deny or revoke any application for
registration.

SECTION 7. CERTIFICATE OF REGISTRATION (COR)

1. Persons Entitled to the Issuance of COR. The COR shall only be issued to individuals engaged in business
or practice of profession and to juridical persons (whether taxable or exempt) by the BIR district office concerned
(i.e., BIR district office of HO/Branch/Facility) upon compliance with the requirements for registration subject to the
provisions of Section 4(4) hereof. Issuance of COR, whether upon registration or upon update of taxpayers
information, is not subject to payment of Certification Fee unless the taxpayer requested for a certified copy of said
COR, in which case, the same shall be subject to the payment of Certification Fee, to be prescribed by the CIR,
imposed under Section 13 hereof.

2. Persons Not Covered by the Issuance of COR. Employees, ONETT taxpayers, and/or persons who have
secured a TIN under EO 98, series of 1998 with the BIR shall not be issued a COR.

5. Posting of COR. Persons mentioned in Subsection (1) above shall post or exhibit his/its original COR and
duly validated ARF Return at his/its principal place of business and at each branch and/or facility in a way that is
clearly and easily visible to the public.

SECTION 8. ANNUAL REGISTRATION FEE (ARF). An ARF in the amount of Five Hundred Pesos (P500.00)
for every HO and/or branch shall be paid upon registration and every year thereafter on or before January 31.
However, the following shall be exempt from the imposition of ARF:
1. Cooperatives duly registered with the CDA;
2. Individual residents earning purely compensation income
3. OCWs/OFWs;

GROUP 5 TAX II

Ross, Yballe, Ruaya, Seballos,

Tidoso, Sios-e, Tumulak

4. Marginal Income Earners;

5. GAIs, in the discharge of their governmental functions;
6. LGUs, in the discharge of their governmental functions;
7. Tax exempt corporations such as those enumerated under Section 30 of the Code, as amended, in
pursuance of tax-exempt activities;
8. Non-stock/non-profit organizations not engaged in business;
9. Persons subject to tax under one-time transactions;
10. Persons registered under EO 98, series of 1998; and
11. Facility/ies where no sales transactions occur.

SECTION 9. REQUIREMENT FOR THE REGISTRATION OF EACH TYPE OF INTERNAL REVENUE TAX. Every
person, who is required to register with the BIR under Section 4 of these Regulations, shall register each type of
internal revenue tax for which he/it is obligated to file a return or pay taxes due thereon. Such person shall update
the BIR for any changes in his / its registration information in accordance with Section 11 hereof.

Generally, registration of tax types by a business entity consists of but not limited to the following internal revenue
taxes/fees:

1. Income tax;
2. VAT and/or percentage tax;
3. Withholding tax on compensation;
4. Creditable withholding tax at source on certain income payments;
5. Final withholding tax on certain income payments;
6. Documentary Stamp Tax;
7. Excise tax; and
8. Annual Registration Fee
In order to avoid the generation of invalid stop-filer cases in the BIRs database, only those tax types which the
taxpayer is expected to regularly/periodically file the return and/or pay the tax shall be registered. In case a taxpayer
fails to update his tax types prior to filing/ payment of a tax return, the duly authorized BIR personnel must register
the corresponding tax type for the Tax Return to be filed/paid except for VAT and/or percentage taxes which must
be applied for by the taxpayer. The BIR personnel initiating the update in behalf of the taxpayer must inform him of
such update, in writing, to give due notice on his obligation to subsequently file the return on a regular basis on or
before the prescribed deadline for filing.

The registration of income tax as a tax type does not automatically carry with it the registration of VAT and/or
percentage tax as a covered/registered tax type. An example of this is the seller of agricultural food products. Such
seller, although subject to income tax, is exempt from the imposition of either VAT or percentage tax, pursuant to

GROUP 5 TAX II

Ross, Yballe, Ruaya, Seballos,

Tidoso, Sios-e, Tumulak

the provisions of Section 109 of the Code, as amended. In which case, VAT or Percentage need not be registered
as a tax type.

For marginal income earners, the activities of such individuals are considered principally for subsistence or livelihood.
Moreover, they are not required to pay any ARF although they are required to register as taxpayers for being
potential income and withholding tax filers. For purposes of registration, they will be registered for the tax type
Income Tax and Form Type 1701. Notwithstanding their exemption from business taxes and ARF, they are liable to
pay Income Taxes similar to any other individual engaged in business or practice of profession, after applying the
allowable deductions against their Gross Income/Sales/Receipts and personal/additional exemptions granted under
the Tax Code.

For those enjoying income tax holidays, or exemption from other taxes for a limited time, as granted pursuant to
special laws, the type of taxes the taxpayer is exempt from paying on the account thereof, the effectivity and expiry
date shall be indicated. However, upon expiration thereof, it shall be the duty of the taxpayer to update his/its
registration and/or the BIR district office must be duly informed in writing.

For purposes of determining the proper tax type (i.e., whether VAT or other percentage taxes) based on the nature
of the business activity of the taxpayer, the following rules shall apply:
i.

VAT REGISTRATION, in General. Any person who, in the course of trade or business, sells, barters,
exchanges goods or properties, or engages in the sale of services subject to VAT imposed in Sections.

106 and 108 of the Code, as amended, shall register the VAT tax type with the BIR district office
having jurisdiction over the HO.
ii.

MANDATORY VAT REGISTRATION. - Any person who, in the course of trade or business, sells, barters

or exchanges goods or properties or engages in the sale or exchange of services shall be liable to register
the VAT tax type if:

1) His gross sales or receipts for the past twelve (12) months, other than those that are
exempt under Section 109 (1) (A) to (U) of the Code, as amended, have exceeded One Million
Nine Hundred Nineteen Thousand Five Hundred Pesos (P1,919,500.00); or

2) There are reasonable grounds to believe that his gross sales or receipts for the next
twelve (12) months, other than those that are exempt under Section 109 (1) (A) to (U) of the
Code, as amended, will exceed One Million Nine Hundred Nineteen Thousand Five Hundred
Pesos (P1,919,500.00).

Every person who becomes liable to VAT under paragraph (ii) of this Section shall register with the BIR
district office which has jurisdiction over his HO. IF HE FAILS TO REGISTER, he shall be liable to pay the
output tax under Sections. 106 and/or 108 of the Code, as amended, as if he were a VAT-registered

10

GROUP 5 TAX II

Ross, Yballe, Ruaya, Seballos,

Tidoso, Sios-e, Tumulak

person, but without the benefit of input tax credits for the period in which he was not properly
registered.
Moreover, FRANCHISE GRANTEES OF RADIO AND TELEVISION BROADCASTING, whose gross annual
receipt for the preceding calendar year exceeded P10,000,000.00, shall register as VAT taxpayer within
thirty (30) days from the end of the taxable year.
iii.

Non-VAT Registration. The following are not required to register VAT as a tax type:
1) Those persons subject to other percentage taxes under Title V of the Code, as amended;
2) Those whose transactions are VAT-exempt as enumerated under Section 109 of the Code,
as amended.

3) Marginal Income earners as herein defined.

iv.

Optional Registration of Value-Added Tax for VAT- EXEMPT PERSONS. 1.

1) Any person who is VAT-exempt under Section 109 (1) (V) of the Code, as amended, i.e.,
sale or lease of goods or properties or the performance of services other than the transactions
mentioned in Section 109 (1) (A) to (U) of the Code, as amended, the gross annual sales and/or
receipts do not exceed the amount of One Million Nine Hundred Nineteen Thousand Five Hundred
Pesos (P1,919,500.00) not otherwise required to register for VAT may elect to be VAT- registered
by registering with the BIR district office that has jurisdiction over the HO of that person.

2) Any person who is VAT-registered BUT ENTERS INTO TRANSACTIONS WHICH ARE
EXEMPT FROM VAT (mixed transactions) may opt that the VAT apply to his transactions which
would have been exempt under Section 109 (1) of the Code, as amended.

3) Franchise grantees of radio and/or television broadcasting whose annual gross receipts
of the preceding year do not exceed Ten Million Pesos (P10,000,000.00) derived from the
business covered by the law granting the franchise may opt for VAT registration.
THIS OPTION, ONCE EXERCISED, SHALL BE IRREVOCABLE.
Any person who ELECTS TO REGISTER UNDER SUBSECTIONS (IV.1) AND (IV.2) above shall
not be allowed to cancel his VAT registration for the next three (3) years.
The above-stated taxpayers may apply for VAT registration not later than ten (10) days before the
beginning of the taxable quarter and shall pay the ARF prescribed under Section 8 hereof, unless they
have already paid at the beginning of the year. In any case, the CIR may, for administrative reason, deny
any application for registration. Once registered as a VAT person, the taxpayer shall be liable to output
tax and be entitled to input tax credit beginning on the first day of the month following registration.

11