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March 1, 2007

BOARD OF INVESTMENTS

REVISED RULES AND REGULATIONS IN THE AVAILMENT OF INCOME TAX


HOLIDAY

The following Rules and Regulations are hereby promulgated to govern the
availment of Income Tax Holiday (ITH) incentive.
RULE I
General Principles
SECTION 1.
Legal Basis for the Grant of ITH. Article 39 (a) of E.O.
226, as amended by R.A. 7918, provides that for six (6) years from commercial
operation for pioneer firms and four (4) years for non-pioneer firms, new registered
firms shall be fully exempt from income taxes levied by the National Government. It
also provides that for a period of three (3) years from commercial operation,
registered expanding and modernizing firms shall be entitled to an exemption from
income taxes levied by the National Government proportionate to their expansion
under such terms and conditions as the Board of Investments (BOI) may determine.
Provided, however, that during the period within which this incentive is availed of by
the registered firm, it shall not be entitled to additional deduction for incremental
labor expense.
SECTION 2.
Legal Basis for the Forfeiture of ITH. Article 7 of E.O.
226 states that the Board of Investments (BOI) shall be responsible for the regulation
and promotion of investments in the Philippines. As such, the BOI is empowered to
process and approve applications for registration with the Board, imposing such terms
and conditions as it may deem necessary to promote the objectives of this Code, and
to cancel the registration or suspend the enjoyment of incentives benefits of any
registered enterprise and/or require refund of incentives including interests and
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monetary penalties for violation of any provision of the Code, of the rules and
regulations issued pursuant thereto, of the terms and conditions of registration, or of
laws for the protection of labor or of the consuming public.
aITECD

RULE II
Definition of Terms
SECTION 1.
Definitions. As used in these rules and regulations, the
following terms shall be construed to mean:

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a.

Registered Enterprise shall mean any individual, partnership,


cooperative, corporation or other entity incorporated and/or organized
and existing under Philippines laws and registered with the Board in
accordance with Book I of E.O. 226; Provided, however, That the term
"registered enterprise" shall not include commercial banks, savings and
mortgage banks, rural banks, savings and loan associations, building and
loan associations, development banks, trust companies, investment
banks, finance companies, brokers and dealers in securities, consumer's
cooperatives and credit unions, and other business organizations whose
principal purpose or principal source of income is to receive deposits,
lend or borrow money, buy and sell or otherwise deal, trade or invest in
common or preferred shares of stocks, debentures, bonds or other
marketable instruments generally recognized as securities; or discharge
of fiduciary functions.

b.

Pioneer Enterprise shall mean a registered enterprise whose status of


registration is reflected as such in its BOI Certificate of Registration and
(1) engaged in the manufacture, processing or production, and not
merely in the assembly or packaging of goods, products, commodities or
raw materials that have not been or are not being produced in the
Philippines on a commercial scale or (2) which uses a design, formula,
scheme, method, process or system of production or transformation of
any element, substance or raw materials into another raw material or
finished goods which is new and untried in the Philippines or (3)
engaged in the pursuit of agricultural, forestry and mining activities
and/or services including the industrial aspects of food processing
whenever appropriate, pre-determined by the Board, in consultation
with the appropriate Department, to be feasible and highly essential to
the attainments of the national goal in relation to the declared specific

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national food and agricultural program for self sufficiency and other
social benefits of the project or (4) which produces non-conventional
fuels or manufactures equipment which utilize non-conventional fuels
or sources of energy or uses or converts to coal or other
non-conventional fuels or sources of energy in its production,
manufacturing or processing operations: Provided, That the foregoing
definitions shall not in any way limit the rights and incentives granted to
less-developed-area enterprises provided under Title V, Book I of E.O.
226.
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c.

Non-pioneer Enterprise shall include all registered producer


enterprises other than pioneer enterprises whose status of registration
are classified as such in their BOI Certificate of Registration.

d.

New Firm shall mean a BOI registered newly formed/incorporated


enterprise or any firm classified as such in its BOI Certificate of
Registration.

e.

Expanding firm shall mean a BOI-registered firm involved in an


activity that results in an increase of its existing volume or value of
production and classified as such in its BOI Certificate of Registration.

f.

Modernizing Firm shall mean a BOI-registered firm involved in


retrofitting or upgrading of existing facilities to attain optimum
capacities, better product quality and improved operating efficiencies
and classified as such in its BOI Certificate of Registration.

g.

Income refers to income earned by enterprises engaged in activities


duly registered with the BOI.

h.

Taxable Income refers to taxable income derived from the activities


of firms duly registered with the BOI.

i.

Date of Commercial Operation shall mean the date of scheduled start


of commercial operation which is indicated in the firm's specific
registration terms and conditions.

j.

Date of Official Filing shall mean the date stamped on the


application by the BOI's Record Section as recorded in its Record/Log
Book for applications for incentives.

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RULE III
Rules in the Availment of Income Tax Holiday
SECTION 1.
Period of Availment. In accordance with Rule VI of the
Rules and Regulations to Implement E.O. 226, new, expanding modernizing projects
duly registered with BOI may avail of the ITH incentive. Period of availment shall be
as follows:
IDTHcA

1.

New registered pioneer firms 6 years from commercial operations.

2.

Registered projects locating in Less Developed Areas (LDA) 6 years


from commercial operation regardless of status (pioneer or non-pioneer)
or type of project (new or expansion).

3.

New registered non-pioneer firms 4 years from commercial


operations.

4.

Expanding firms 3 years from commercial operations of the


expansion.

5.

Modernizing firms 3 years from commercial operations of the


modernization.

SECTION 2.
Criteria for Additional Period for Availment. For new
registered enterprises, the ITH incentive may be extended for an extra year for each of
the following cases, but in no case to exceed the total period of eight (8) years for
pioneer registered enterprises:

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1.

If the ratio of the total imported and domestic capital equipment to the
number of workers for the project does not exceed US$10,000 to one (1)
worker.

2.

If the average cost of indigenous raw materials used in the manufacture


of the registered product is at least fifty (50%) percent of the total cost
of raw materials for the preceding years prior to the extension unless the
Board (BOI) prescribes a higher percentage.

3.

If the net foreign exchange savings or earnings amount to at least


US$500,000.00 annually during the first three (3) years of operation to
be determined by the Board (BOI) at the end of such three-year period:

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Provided, That the foreign exchange savings criterion shall apply as a


general rule, to registered firms whose products are totally imported into
the country at the time of registration and duly indicated as imports
substituting in the firm's certificate of registration.
SCEDaT

For purposes of availment of the bonus year/s, the registered firm shall file a
letter-request to the Board (BOI) applying for the additional period and shall submit
proof/s of compliance of the criterion/a above-indicated.
SECTION 3.
Who are Required to File Application. All new and
expanding enterprises registered under E.O. 226, as amended by R.A. 7918, that were
issued Certificates of Entitlement by the BOI and claimed income tax exemptions in
their Income Tax Returns (ITR) are required to file their applications for ITH
incentive with the Board.
SECTION 4.
When Application should be Filed. Applications for ITH
shall be filed in the prescribed form within thirty (30) days from the date of filing of
the annual ITR with the BIR or from the last day prescribed by law for the filing of
the ITR, whichever comes later.
For enterprises which filed tentative ITRs, the application shall filed within
thirty (30) days from the filing of the final ITR or within thirty (30) days after the
lapse of the three (3) year period within which to file the final ITR.
SECTION 5.

Conditions for the Availment of Income Tax Holiday.

1.

In general, new, expanding and modernizing enterprises registered


under E.O. 226, as amended by R.A. 7918, are entitled to ITH
incentives unless expressly withheld from the firm under the terms and
conditions of its registration with the BOI.

2.

In accordance with the locational restriction policy of the Board, only


firms located outside the National Capital Region (NCR) are entitled to
ITH.
Exemption from the locational restriction however may be given to the
following:
a.

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Projects locating in the following government industrial estates


declared as such by national law or by presidential proclamation

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prior to 1 January 1989:

Dagat-Dagatan (P.D. 569 dated 30 Oct. 1974)

Vitas Industrial Estate, Tondo (E.O. 1086 dated 31


January 1986, as amended/expanded through Presidential
Proclamation No. 39 dated 9 September 1992 and
Proclamation No. 465 dated 1 August 1994) (Vitas
Industrial Estate/Smokey Mountain)

Bagong Silang Industrial Estate, Caloocan


(Presidential Proc. No. 843 dated 26 July 1971)

FTI, Taguig (LOI 900 dated 25 July 1979)

Navotas Fishing Port Complex (E.O. 772 dated 8 Feb.


1982)

City

b.

Projects that will engage in service-type activities.

c.

Export-oriented projects; and

d.

Other projects listed in the IPP as exempt from locational


restriction.

SECTION 6.
Rate of Exemption. New enterprises shall be entitled to
100% income tax exemption on their income derived from their registered operation.
acIASE

a. New firms shall be entitled to 100% income tax exemption on their


income derived from their registered operation.
b. Expanding firms shall be entitled to the income tax holiday incentive only
to the extent of their actual increase in production. The rate of exemption from income
tax shall be computed as follows:
Rate of Exemption

Incremental Sales of the Registered Product/Activity


=
Total Sales of the Registered Product/Activity

The term "sales" as indicated in the above formula shall be expressed in


volume in cases of homogeneous products and value in case of heterogeneous
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products.
1.

Homogeneous products shall refer to products of the same kind or


category using a common unit of measurement.

2.

Heterogeneous products shall refer to products of different kinds and


characteristics as well as those of the same kind but with various
categories using different units of measurement.
aETDIc

c. For projects without increase in capacity, the ITH rate of exemption shall
be computed as follows:
1.

for single product/activity


New Investment (in US$)
Rate of Exemption (ROE) =
x 100
Total Investments (existing + new)
relative to the concerned plant (in
US$)

2.

for multiple products/activities or when ITH entitlement of other


products/activities has lapsed

% Share to Total Sales

Sales of the Product subject of


retooling
x 100
Total Sales

New Investment (in US$)


Rate of Exemption (ROE) = x 100
Total Investments (existing + new)
relative to the concerned plant (in
US$)
Where:

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The ROE shall be fixed for the ITH entitlement period.

The exchange rate shall be the existing rate at the time of actual
investment.

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For purposes of determining existing investments, the Total


Fixed Assets relative to the concerned plant including the land on
which the project is situated shall be based on the latest audited
financial statements at the time of application for registration.
IHCacT

The % share in Total Sales shall be based on actual sales value


for the year of availment.

d. The rate of exemption of those with less than a year availment including
for those with multiple registrations with the same product/activity where the period
of entitlement to ITH of one registration expires within the availment year and for
those whose operation ceased during the last year of availment shall be based on
audited segregated income statement subject to the condition that registered
enterprises availing of ITH for less-than-a-year shall be required to submit certified
true copies of the quarterly corporate income tax returns preceding the period covered
by ITH.
SECTION 7.
Penalty Provision. All applications for ITH covering the
taxable year 2006 onwards, which are filed beyond the prescribed period provided in
Section 4, Rule III hereof shall be meted a penalty to be computed as follows:
a.

Within the 31st and 180th day from the date of filing of the annual ITR
with the BIR or from the last day prescribed by law for the filing of the
ITR, whichever comes later
Penalty = Amount of ITH x 1% but not less than P500.00 nor more than
P2Million

b.

After 6 months (180 days) from the date of filing of the annual ITR with
the BIR or from the last day prescribed by law for the filing of the ITR,
whichever comes later
Penalty = Forfeiture of ITH for the taxable year
RULE IV
Procedural Steps in the Availment of ITH

SECTION 1.
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Documentary Requirements. Enterprises availing of the

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ITH incentive shall file the following documents with the Incentives Department of
the BOI:
ATcaID

1.

Two (2) sets of duly accomplished and notarized BOI application form.

2.

Supporting documents:
a.

Certificate of Entitlement.

b.

Secretary's Certificate stating the authorized signatory of the


application for ITH incentive.

c.

BOI Certificate of Registration showing ITH entitlement per


terms and conditions thereof.

d.

Income Tax Return with the following:

e.

f.

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Computation of taxable income per ITR/application in


case there is no detail of the reconciling items to arrive at
taxable income.

Gross interest income subjected to final tax for purposes


of computing non-deductible interest expense.

Breakdown of miscellaneous income, if any.

Audited Financial Statements supported by the following


schedules:

Audited Segregated Income Statement of registered and


non-registered activity certified by external auditor

In case of multi-registered activities, Audited Segregated


Income Statement for each of the registered activity

Breakdown of Miscellaneous/Other/Various Income, if


different in amount per ITR

Details of scrap sales, if any

Duly accomplished Cost Benefit Analysis Data form

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g.

Summary of sales, in volume and value, made during the taxable


year. Export sales should include values in US$ and in Pesos and
the exchange rates used
aIcTCS

h.

List of stockholders

i.

Statement of Management Responsibility

j.

SSS Certificate of Good Standing (if required)

k.

Compliance with other conditions for entitlement to ITH under


general/specific terms and conditions of registration

l.

For Less Than A Year Availment in addition to requirements


(a) to (g)

m.

Audited Segregated Income Statement segregating period


still entitled to ITH from period no longer entitled to ITH

Certified true copies of Quarterly Corporate Income Tax


Returns for Period Covered by ITH

For First Time Availors In addition to requirements (a) to (k)

BOI Certificate of Registration with terms and conditions

Certificate of Registration with BIR

Sworn Statement as to actual start of commercial


operation of registered activity to be signed by the
President/Owner.

SECTION 2.
Procedural Steps. Enterprises availing of the ITH
incentive shall observe the following procedural steps:
1.

The applicant enterprise shall secure a Certificate of ITH Entitlement


(CE) from the BOI before filing the ITR with the BIR.
HIEASa

2.

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The applicant enterprise shall file the ITR with BOI-issued CE and ITH
claim to the BIR. For large taxpayers filing on-line, submission of CE
shall be done manually. Date of filing of ITR if done on-line shall be the

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date of e-filing.
3.

Within thirty (30) days from the date of filing of the annual ITR with the
BIR or from the last day prescribed by law for the filing of the ITR,
whichever comes later, applicant enterprise shall file with the BOI
duly-accomplished application form together with all the supporting
documents enumerated under the preceding Section.

4.

The staff of the Incentives Department of the BOI checklists and/or


pre-evaluates the application as to the applicant's eligibility and
completeness of documents. Application being filed after six (6) months
(180 days) from the date of filing of the annual ITR with the BIR or
from the last day prescribed by law for the filing of the ITR, whichever
comes later, or without the Certificate of Entitlement shall not be
accepted and the BIR shall be informed of the forfeiture of the ITH
incentive for the taxable year.
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5.

Stamping shall be done by the Incentives Department (ID) of the BOI


with "OK FOR ACCEPTANCE" for applications with complete
documents or with "FOR PROVISIONAL ACCEPTANCE" for
applications with incomplete documents that have submitted at least a
basic application with ITR, CE and AFS and a notarized undertaking to
submit deficiencies within fifteen (15) working days from date of
provisional acceptance. Deficiencies not submitted within six (6)
months (180 days) from the date of filing of the annual ITR with the
BIR or from the last day prescribed by law for the filing of the ITR,
whichever comes later, shall mean the forfeiture of the ITH incentive
for the taxable year.

6.

The staff of the Incentives Department's Director shall issue the Order
of Payment for the filing fee. The official filing of the application shall
be done at the Records Section of the BOI after paying the
corresponding filing fee. BOI's Record Section stamps the Date of
Official Filing and the Application Number on the application and
transmits it to the BOI's Incentives Department.

7.

Within one year from receipt of the application/s, the BOI shall process,
review and endorse to the Assessment Service of the BIR National
Office, copy furnished the concerned Revenue District Office, all
applications for ITH incentive, including dockets bearing on the

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evaluation thereof, financial statements, schedules and supporting


documents attached thereto.
8.

The staff of the Incentives Department of the BOI shall evaluate the
application and notify applicant of any problems/issues encountered
during evaluation process. The applicant shall be given a deadline to
comply with the additional requirements, if any. In the event an ITH
application cannot be processed and evaluated within the prescribed
one-year period due to policy and/or legal issues, the BOI shall
immediately inform the BIR within one (1) month after the end of the
said one-year period so as not to prejudice the duty of the latter to make
an assessment within the three (3)-year period prescribed under Section
203 of the Tax Reform Act of 1997.
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9.

The staff shall prepare an evaluation report showing the firm's eligibility
to avail of the ITH incentive, its rate of exemption and the actual
amount of income tax exemption for approval and signature of the
Incentives Department Director.

10.

The evaluation report shall be presented to the TSG Executive Director


for approval and then to the Board of Governors for confirmation.

11.

The Incentives Department shall prepare an endorsement to the


Assessment Service (Main Office) of the BIR signed by the BOI
Executive Director and a letter of advice to the registered enterprise
signed by the BOI Incentives Department Director informing them of
the BOI's action on the firm's ITH application.

12.

The letter of advice to the registered enterprises shall be released to the


Records Section for mailing or for pick-up by the proponent while the
endorsement to the BIR including a complete set of application and
evaluation report shall only be released to the Records Section of the
BOI for delivery/mailing to the BIR Office after compliance with prior
release requirements such as submission of reports, proof of payment of
issuance fee, etc. The firm shall be furnished a copy of such
endorsement.

13.

Prior to the end of the prescriptive period provided under Section 203 of
R.A. No. 8424, the BIR, through the Assessment Service in the BIR
National Office, shall post-audit/review the dockets bearing the ITH

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incentive availment endorsed by the BOI.


14.

If any deficiency tax assessment arises from the post-audit/review, the


Assessment Service shall transmit its findings and the corresponding
dockets to the concerned RDOs who shall enforce the immediate
collection thereof, including increments accruing thereon.

15.

The BIR shall defer issuance of Letter of Authority (LOA)/Letter Notice


(LN)/Tax Verification Notice (TVN) to applicant enterprises whose
operations are 100% registered with the BOI/BOI-ARMM, until after
the completion of BOI evaluation of ITH application but not to exceed
one and a half (1 1/2) years from the last day prescribed by law for the
filing of the annual ITR.
SCcHIE

However, for applicant enterprises, with mixed operations (i.e.,


registered and unregistered activities), the above deferment shall only be
for one (1) year from the last day prescribed by law for the filing of the
annual ITR.
Applicant enterprises described above may be entitled to the above
deferment, except those falling under any of the following instances:
a.

Cases handled by the BIR under the Run After Tax Evader
(RATE) Program;

b.

Persons under investigation as a result of verified information


filed by a Tax Informer under Section 282 of the NIRC, duly
processed and recorded in the BIR Official Registry Book;

c.

Cases involving claims for tax refund; and

d.

Cases in which Letter Notices (LNs) were issued, where the


discrepancy in sales exceeds 30% of sales of base year or the
discrepancy in purchases exceeds 30% of the purchases of the
base year.
RULE V
Repeal/Effectivity Clause

SECTION 1.
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Amendment, Modification and/or Repeal. The BOI has

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the power and authority to amend, modify and/or repeal any of the provisions of the
Rules and Regulations on the Availment of Income Tax Holiday Incentive.
SECTION 2.
Effectivity. The foregoing Rules and Regulations shall
take effect immediately.
ScCIaA

MEMORANDUM OF AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement is made and entered into by and between:
The BOARD OF INVESTMENTS, with principal office at the
Industry and Investments Building, 385 Sen. Gil J. Puyat Avenue, Makati City
represented herein by Undersecretary Elmer C. Hernandez, hereinafter
referred to as the BOI;
The BOARD OF INVESTMENTS AUTONOMOUS REGION OF
MUSLIM MINDANAO, with principal office at ORC Compound, Cotabato
City, Maguindanao, represented herein by Chairman & Managing Head Sheryl
B. Siao, hereinafter referred to as the BOI-ARMM;
and
The BUREAU OF INTERNAL REVENUE, with principal office at
the BIR National Office Building, Agham Road, Diliman, Quezon City,
represented herein by Commissioner Jose Mario C. Buag, hereinafter
referred to as the BIR;
TCASIH

WITNESSETH THAT:
WHEREAS, the National Internal Revenue Code of 1997 (Tax Code), as
amended, mandates the BIR to administer and execute all internal revenue tax laws;
WHEREAS, Section 5 (B) thereof authorizes the BIR Commissioner to obtain,
on a regular basis, from any person, government agencies and instrumentalities, any
information to ascertain the liability of any person for any internal revenue tax;
WHEREAS, Section 203 thereof provides for a three (3)-year statute of
limitations or prescriptive period for the BIR to make a deficiency tax assessment to
be reckoned from the last day prescribed by law for the filing of tax return, or from
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the date of filing of the said return, whichever comes later;


WHEREAS, Article 7, Chapter II of Executive Order (E.O.) No. 226, as
amended, also known as the Omnibus Investments Code of 1987, provides that the
BOI/BOI-ARMM shall be responsible for the regulation and promotion of
investments in the Philippines. As such, it is empowered to process and approve
applications for registration with the Board, imposing such terms and conditions as it
may deem necessary to promote the objectives of the Code, and to cancel the
registration or suspend the enjoyment of incentives benefits of any registered
enterprise and/or require refund of incentives including interests and monetary
penalties for violation of any provision of the Code, its implementing rules and
regulations, or of the terms and conditions of the registration agreement;
WHEREAS, there is a need to provide for an effective mechanism to monitor
registered enterprises enjoying Income Tax Holiday (ITH) incentives under Art. 39 (a)
of E.O. No. 226, as amended;
WHEREAS, the parties mutually agree to assist one another in the
implementation of strategies to enhance tax enforcement and collection efforts
towards an efficient tax incentives system;
NOW, THEREFORE, for and in consideration of the foregoing premises, the
parties, through their respective representatives, and subject to the confidentiality and
disclosure provisions of E.O. No. 226, as amended, and the Tax Code, as amended, do
hereby agree to undertake the following:
I.

The BOI/BOI-ARMM shall:


1.

Coordinate and work closely with the BIR to ensure effective


monitoring of ITH availments by BOI/BOI-ARMM-registered
enterprises, and provide documents, records and such other valuable
information relevant to the ITH claims;
CASTDI

2.

Furnish the BIR the following:


a.

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Within a month following the close of each semester (i.e., on or


before July 31 and on or before January 31), an updated
alphabetical master list of BOI/BOI-ARMM registered
enterprises entitled to ITH incentives with the following column
headings:

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Name of Registered Enterprise

TIN of Registered Enterprise

Registered Address

BOI/BOI-ARMM Registration Number

Date of Registration

Validity Period of ITH entitlement plus extension, if any

Start of ITH

Registered Activity (including registered capacity, if


applicable)

Date of Filing of Application for ITH Availment and the


Period Covered (Indicate if no application was filed)
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Performance Data for the Taxable Year

Amount of ITH Applied

Amount of ITH Approved and Date of Approval

% of Income Tax Exemption Approved

Other relevant information

b.

Within
thirty
(30)
days
after
issuance
to
the
BOI/BOI-ARMM-registered enterprise, the second copy of the
Certificate of ITH Entitlement (CE) stating that the said
enterprise is a bonafide BOI/BOI-ARMM-registered entitled to
ITH incentive;

c.

Not later than November 30 of each year, an alphabetical list of


BOI/BOI-ARMM -registered enterprises that have filed
applications for ITH incentives with the BOI/BOI-ARMM within
six (6) months from the date of filing of the annual Income Tax
Returns (ITRs) with the BIR or from the last day prescribed by
law for the filing of the annual ITR, whichever comes later,

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indicating therein the amount of the ITH incentives applied for;


and
d.

3.

Within thirty (30) days after the end of every month, an


alphabetical list of BOI/BOI-ARMM-registered enterprises
whose ITH incentives entitlements have expired during the
preceding month;

Consider any of the following as grounds for forfeiture of the


BOI/BOI-ARMM-registered enterprise's ITH incentives for the taxable
year:
a.

Failure by the BOI/BOI-ARMM-registered enterprise to secure


CE from the BOI/BOI-ARMM and to attach the same in the
annual ITR upon its filing with the BIR;

b.

Failure by the BOI/BOI-ARMM-registered enterprise with issued


CE to apply for ITH incentive with the BOI/BOI-ARMM within
six (6) months from the date of filing of the annual ITR with the
BIR or from the last day prescribed by law for the filing of the
annual ITR, whichever comes later; or
EHSIcT

c.

4.

Failure by the BOI/BOI-ARMM-registered enterprise with and


without CE to file the ITH application with the
BOI/BOI-ARMM;

Process, review and endorse to the Assessment Service of the BIR


National Office all applications for ITH incentive, including dockets
bearing on the evaluation thereof, financial statements, schedules and
supporting documents attached thereto, for taxable year 2006 and every
year thereafter within one year from official receipt of the ITH
applications;
In the event an ITH application cannot be processed and
evaluated within the prescribed one-year period due to policy
and/or legal issues, the BOI/BOI-ARMM shall immediately
inform the BIR within one (1) month after the end of the said
one-year period so as not to prejudice the duty of the latter to
make an assessment within the three (3)-year period prescribed

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1(2) under Section 203 of the Tax Code, as amended.


II.

The BIR shall:


1.

Require the BOI/BOI-ARMM-registered enterprise to attach the


BOI/BOI-ARMM-issued CE upon filing of the annual ITR. In the
absence thereof, the BIR shall not allow any claim for ITH incentive
that is reflected in the annual ITR. For large taxpayers filing on-line,
submission of CE shall be done manually until such time that the BIR's
Electronic Integrated Tax System (e-ITS) facility is enhanced for this
purpose;

2.

Defer issuance of Letter of Authority (LOA)/Letter Notice (LN)/Tax


Verification Notice (TVN) to BOI/BOI-ARMM-registered enterprises
whose operations are 100% registered with the BOI/BOI-ARMM, until
after the completion of BOI/BOI-ARMM evaluation of ITH application
but not to exceed one and a half (1 1/2) years from the last day
prescribed by law for the filing of the annual ITR;
IcCEDA

However, for BOI/BOI-ARMM-registered enterprises, with


mixed operations (i.e., registered and unregistered activities), the
above deferment shall only be for one (1) year from the last day
prescribed by law for the filing of the annual ITR;
BOI/BOI-ARMM-registered enterprises described above may be
entitled to the above deferment, except those falling under any of
the following instances:

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a.

Cases handled by the BIR under the Run After Tax Evader
(RATE) Program;

b.

Persons under investigation as a result of verified


information filed by a Tax Informer under Section 282 of
the NIRC, duly processed and recorded in the BIR Official
Registry Book;

c.

Cases involving claims for tax refund; and

d.

Cases in which Letter Notices (LNs) were issued, where


the discrepancy in sales exceeds 30% of sales of base year

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or the discrepancy in purchases exceeds 30% of the


purchases of the base year;
3.

Conduct post-audit/review of the dockets bearing on ITH incentive


availment endorsed by the BOI/BOI-ARMM prior to the end of the
prescriptive period provided under Section 203 of the Tax Code, as
amended, through the Assessment Service in the BIR National Office;
If any deficiency tax assessment arises from the review of
incentive availment, the Assessment Service shall transmit its
findings of discrepancy and the corresponding documents to the
concerned RDOs to enforce the immediate collection thereof,
including increments accruing thereon;
cDCEHa

III.

4.

Conduct immediate investigation of BOI/BOI-ARMM-registered


enterprises that claimed ITH incentives in their annual ITR but failed to
attach the CE, failed to file or filed applications for ITH incentives with
the BOI/BOI-ARMM beyond the six (6)-month period as provided in
Item I (3) (b) above for purposes of enforcing collection of income taxes
pertaining to forfeited ITH claims, including all increments accruing
thereon;

5.

Inform the BOI/BOI-ARMM of its findings on the post audit and/or


review it has conducted within thirty (30) days from the approval by the
concerned BIR official;

6.

Furnish BOI/BOI-ARMM with copies of pertinent BIR regulations,


rulings, other revenue issuances, and other information within thirty (30)
days from issuance thereof, the latter however, is subject to the
provisions of Sec. 270, in conjunction with Sec. 71 of the Tax Code, as
amended; and

7.

Issue a Revenue Memorandum Circular for the effective implementation


of the provisions of this Agreement.

The BOI/BOI-ARMM and BIR shall:


1.

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Within thirty (30) days from signing of this Agreement, create a


Working Group, with the inclusion of one representative each from the
Department of Finance (DOF) and Department of Trade and Industry

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(DTI), that shall oversee and monitor the proper implementation of the
provisions of this Agreement, including the creation of a database on
investment incentives for policy purposes;
ACDIcS

IV.

2.

Within thirty (30) days from the creation of the Working Group,
promulgate and disseminate their respective rules and regulations for the
execution of the provisions of this Agreement;

3.

Undertake to promptly resolve any issue involving discrepancies in


exchanged data/information; and

4.

Carry out information campaign of the contents of this Agreement


through letters and publications in newspapers of general circulation for
the awareness of all concerned.

Transitory Provisions:
a.

All applications covering taxable years 2004 and 2005 received prior to
the effectivity of this Agreement and still pending processing by the
BOI/BOI-ARMM shall be immediately processed/reviewed for
transmittal to the BIR, for post-audit, not later than August 31, 2007;
and

b.

All BOI/BOI-ARMM-registered enterprises entitled to ITH incentives


for taxable years 2004/2005 shall be required by BOI/BOI-ARMM to
file their ITH applications not later than May 31, 2007. Processed
applications for said taxable years shall be transmitted to the BIR, for
post-audit, not later than August 31, 2007.
EHTIDA

V.

Effectivity:

Subject to the provisions of item IV of this Agreement, the rest of the herein
provisions shall apply to ITH incentives availments covering taxable year 2006 and
onwards, unless revoked by the parties.
IN WITNESS WHEREOF, the parties hereto have affixed their signatures this
1st day of March, 2007, in the City of ___________, Philippines.

BOARD OF INVESTMENTS
By:
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(SGD.) ELMER C. HERNANDEZ


Vice Chairman and Managing Head
BOI-AUTONOMOUS REGION OF MUSLIM MINDANAO
By:
(SGD.) SHERYL B. SIAO
Chairman & Managing Head
BUREAU OF INTERNAL REVENUE
By:
(SGD.) JOSE MARIO C. BUAG
Commissioner
SIGNED IN THE PRESENCE OF:

ACKNOWLEDGMENT
Republic of the Philippines )
Quezon City
) S.S.
BEFORE ME, a Notary Public for and in the City of Quezon City, Metro
Manila, this 5th day of March 2007, personally appeared:
IHaECA

NAME

CTC NO.

DATE ISSUED

Elmer C. Hernandez
Jose Mario C. Buag

09467608
00003277

02-04-07
02-27-07

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Philippine Taxation Encyclopedia 2015

PLACE ISSUED
Meycauayan, Bulacan
Quezon City

21

Sheryl B. Siao

25002795

03-01-07

Cotabato City

known to me and to me known to be the persons who executed the foregoing


Memorandum of Agreement consisting of seven (7) pages including the page wherein
this Acknowledgment is written and acknowledged to me that the same is their free
act and voluntary deed and that of the government agencies they represent:
WITNESS MY HAND AND SEAL on the date and place above written.
Doc. No. 211
Page No. 43
Book No. XV
Series of 2007
Footnotes
1.

The 3 year prescriptive period is reckoned after the last day prescribed by law for the
filing of the Annual ITR, or from the day such return was filed, whichever comes
later. For taxpayers adopting an accounting period on a calendar year basis, the last
day for filing shall be on or before the fifteenth (15th) day of April of the succeeding
year. For taxpayers on a fiscal year basis, however, the last day for filing shall be on
or before the fifteenth (15th) day of the fourth month following the close of the fiscal
year.
HTaSEA

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Endnotes
1 (Popup - Popup)
EO 226-1987

2 (Popup - Popup)
1.

The 3 year prescriptive period is reckoned after the last day prescribed by law for the
filing of the Annual ITR, or from the day such return was filed, whichever comes
later. For taxpayers adopting an accounting period on a calendar year basis, the last
day for filing shall be on or before the fifteenth (15th) day of April of the succeeding
year. For taxpayers on a fiscal year basis, however, the last day for filing shall be on
or before the fifteenth (15th) day of the fourth month following the close of the fiscal
year.
HTaSEA

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