AN ACT AMENDING SECTIONS 27, 28, 32, 34, 57, 106, 108, 109, 112, 135, 237-A, 269, 292, 293, 294, 295, 296, 297, 300, 301, 308, 309, 310, AND 311, AND ADDING NEW SECTIONS 135-A, 295-A, 296-A, AND 297-A OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES

[ REPUBLIC ACT NO. 12066, November 08, 2024 ]

AN ACT AMENDING SECTIONS 27, 28, 32, 34, 57, 106, 108, 109, 112, 135, 237-A, 269, 292, 293, 294, 295, 296, 297, 300, 301, 308, 309, 310, AND 311, AND ADDING NEW SECTIONS 135-A, 295-A, 296-A, AND 297-A OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Section 27(A) of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 27. Rates of Income Tax on Domestic Corporations. -

(A) In General. - Except as otherwise provided in this Code, an income tax rate of twenty-five percent (25%) effective July1, 2020 is hereby imposed upon the taxable income derived during each taxable year from all sources within and without the Philippines by every corporation, as defined in Section 22(B) of this Code and taxable under this Title as a corporation, organized in, or existing under the laws of the Philippines: Provided, That corporations with net taxable income not exceeding Five million pesos (P5,000,000) and with total assets not exceeding One hundred million pesos (P1,000,000,000), excluding land on which the particular business entity's office, plant, and equipment are situated during the taxable year for which the tax is imposed, shall be taxed at twenty percent (20%): Provided, further, That registered business enterprises under the enhanced deductions regime as provided in Section 294(C) of this Code shall be taxed at a rate equivalent to twenty percent (20%) on their taxable income derived from registered projects or activities during each taxable year.

x x x."

Section 2. Section 28(A)(1) of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 3. Section 32 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 4. Section 34 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 5. Section 57 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 6. Section 106 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 7. Section 108 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 8. Section 109 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 9. Section 112 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 10. Section 135 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 11. A new Section 135-A shall be introduced in the National Internal Revenue Code of 1997, as amended. The new Section 135-A shall read as follows:

Section 12. Section 237 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 13. Section 237-A of the National Internal Revenue Code of 1997, as amended, is hereby further amended, to read as follows:

Section 14. Section 269(j) of the National Internal Revenue Code of 1997, as amended, is further amended to read as follows:

Section 15. Section 292 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 292. Extent of Authority to Grant Tax Incentives. - The Fiscal Incentives Review Board or the Investment Promotion Agency, shall grant the appropriate tax incentives provided in this Title to RBEs only to the extent of their approved registered project or activity under the Strategic Investment Priority Plan (SIPP), taking into consideration the infusion of investment capital, generation of direct local employment which takes into account Republic Act No. 11962, otherwise known as the 'Trabaho Para sa Bayan Act', and other standard and project-specific performance metrics of the registered project or activity that may be imposed by the Fiscal Incentives Review Board or the concerned Investment Promotion Agency."

Section 16. Section 293 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 17. Section 294 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 18. Section 295 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 19. A new Section 295-A shall be introduced in the National Internal Revenue Code of 1997, as amended. This new Section 205-A shall read as follows:

"Section 295-A. Registered Business Enterprises Taxpayer Service. - A separate service within the BIR is hereby created to support the end-to-end tax compliance of RBEs. The Commissioner shall prescribe the manner and place of filing returns and payment of taxes by RBEs through the said service. For ease of compliance with tax rules and regulations, simplified filing and payment processes shall be implemented for RBEs."

Section 20. Section 296 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 21. A new Section 296-A shall be introduced in the National Internal Revenue Code of 1997, as amended. The new Sections 296-A shall read as follows:

Section 22. Section 297 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 23. A new Section 297-A shall be introduced in the National Internal Revenue Code of 1997, as amended. The new Section 197-A shall read as follows:

"Section 297-A. Processing of Tax Incentives Applications. - The Fiscal Incentives Review Board and Investment Promotion Agencies shall issue a decision on applications for tax incentives within twenty (20) working days from the receipt of all required documents, in accordance with Section 9 of Republic Act No. 11032, otherwise known as 'Ease of Doing Business and Efficient Government Service Delivery Act of 2018'. An extension of the processing period may be permitted only once, and shall in no case exceed an additional twenty (20) working days."

Section 24. Section 300 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 25. Section 301 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 26. Section 308 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 27. Section 309 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 309. Prohibition on Registered Activities. - Except as allowed under this provision, a qualified registered project or activity under an Investment Promotion Agency administering an economic zone or freeport shall be exclusively conducted or operated within the geographical boundaries of the zone or freeport being administered by the Investment Promotion Agency in which the project or activity is registered: Provided, That an RBE may conduct or operate more than one qualified registered project or activity within the same zone or freeport under the same Investment Promotion Agency: Provided, further, That any project or activity conducted or performed outside the geographical boundaries of the zone or freeport shall not be entitled to the incentives provided in this Act: Provided, furthermore, That RBEs may institute a 'telecommuting' program as defined under Republic Act No. 11165, otherwise known as the 'Telecommuting Act', including work-from-home arrangements, which shall not cover more than fifty percent (50%) of the total workforce, and shall be subject to the rules and regulations formulated by the Investment Promotion Agency. The RBEs shall continue to avail of all the incentives provided under this Act and under their registration with any applicable Investment Promotion Agency: Provided, finally, That double registration for purposes of availing of other incentives under special laws shall not be allowed."

Section 28. Section 310 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 29. Section 311 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 30. Appropriations. - The Secretary of Finance shall immediately include in the Department's program the operationalization of the electronic processing of the VAT refund system, the funding of which shall be included in the annual General Appropriations Act.

Section 31. Transitory Provisions. - The following provisions shall apply prospectively to projects or activities granted with the tax incentives under Republic Act No. 11534 upon the effectivity of this Act:

No tax refund or credit shall be granted to RBEs covered by Section 19 of this Act.

Section 32. Implementing Rules and Regulations. - Within ninety (90) days from the effectivity of this Act, the Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue, shall promulgate the necessary rules and regulations for the effective implementation: Provided, That for the provisions under Title XIII of the National Internal Revenue Code of 1997, as amended, the Secretary of Finance and the Secretary of Trade and Industry shall jointly promulgate the necessary rules and regulations thereof within the same period, after due consultation with the BIR, the BOC, the BOI, and other Investment Promotion Agencies, for its effective implementation. Failure to promulgate the rules and regulations shall not prevent the implementation of this Act upon its effectivity.

Section 33. Separability Clause. - If any provision of this Act is declared unconstitutional, the remaining parts or provisions thereof not affected thereby shall remain in full force and effect.

Section 34. Repealing Clause. - All laws, decrees, executive orders, implementing rules and regulations, issuances, or any part thereof inconsistent with the provisions of this Act are deemed repealed, amended, or modified accordingly.

Section 35. Effectivity. - This Act shall take effect after fifteen (15) days following its publication in the Official Gazette or in a newspaper of general circulation.

Approved,

This Act which is a consolidation of Senate Bill No. 2762 and House Bill No. 9794, was passed by the Senate of the Philippines and the House of Representatives on September 10, 2024.

Approved: NOV 08 2024

(SGD.) FERDINAND ROMUALDEZ MARCOS JR.
President of the Philippines

"Section 28. Rates of Income Tax on Foreign Corporations. -

"Section 32. Gross Income. -

"Section 34. Deductions from Gross Income. -

x x x

(B) Interest. - x x x

(C) Taxes. - x x x

x x x."

"Section 57. Withholding of Tax at Source. -

x x x."

"Section 106. Value-Added Tax on Sale of Goods or Properties. -

"Section 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -

"Section 109. Exempt Transactions. -

"Section 112. Refunds or Tax Credits of Input Tax. -

"Section 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax:

"Section 135-A. Refund of Excise Tax on Petroleum Products. - No refund or credit of excise tax paid by suppliers on otherwise exempt sales under Section 135 shall be allowed, unless the taxpayer files a written claim for refund with the Commissioner, within two (2) years after the payment of excise tax: Provided, however, That a return filed showing an overpayment shall be considered a written claim for refund.

The Commissioner shall process and decide the refund under this provision within ninety (90) days from the submission of complete documents supporting the application filed. Should the Commissioner deny the claim for refund in full or in part, the Commissioner shall communicate in writing to the taxpayer, the legal and/or factual basis for the denial.

The taxpayer shall have fifteen (15) days from receipt of the denial to file a request for reconsideration, which shall be resolved by the Commissioner within fifteen (15) days from the receipt thereof. Failure to file a request for reconsideration within fifteen (15)-day period shall render the decision final. In case of full or partial denial of the request for reconsideration, or failure on the part of the Commissioner to act on the application for refund or request for reconsideration within the periods prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the request for reconsideration, or after the lapse of the period to decide on the application for refund or request for reconsideration, in cases where no action is made by the Commissioner, appeal the decision with the Court of Tax Appeals.

Failure on the part of any official agent or employee of the BIR to process and decide on the application within the ninety (90)-day period and on the request for reconsideration within fifteen (15)-day period shall be punishable under Section 269 of this Code."

"Section 237. Issuance of Invoices. -

"Section 237-A. Electronic Sales Reporting System. - Upon the establishment of a system capable of storing and processing the required data, the Bureau shall require taxpayers engaged in the export of goods and services, and taxpayers under the jurisdiction of the Large Taxpayers Service to electronically report their sales data to the Bureau through the use of electronic point of sale systems, subject to rules and regulations to be issued by the Secretary of Finance as recommended by the Commissioner of Internal Revenue: Provided, That the machines, fiscal devices, and fiscal memory devices shall be at the expense of the taxpayer: Provided, further, That the Secretary of Finance, upon the recommendation of the Commissioner, may require taxpayers to electronically report their sales data to the Bureau.

All taxpayers required to issue and those who voluntarily choose to issue the electronic invoices and electronically report their sales data to the Bureau shall be granted, in addition to the allowable deduction provided under Section 34(A)(1), the following allowable deductions:

The foregoing allowable deduction shall be availed of only once. The importation of such electronic sales reporting system shall also be exempt from taxes.

x x x."

"Section 269. Violations Committed by Government Enforcement Officers. - Every official, agent, or employee of the BIR or any other agency of the Government charged with the enforcement of the provisions of this Code, who is guilty of any of the offenses herein below specified shall, upon conviction for each act or omission, be punished by a fine of not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000) and suffer imprisonment of not less than ten (10) years but not more than fifteen (15) years and shall likewise suffer an additional penalty of perpetual disqualification to hold public office, to vote, and to participate in any public election:

"Section 293. Definitions. - When used in this Title:

"Section 294. Incentive. - Subject to the conditions and period of availment in Sections 295, 296, and 296-A, respectively, the following types of tax incentives may be granted to registered projects or activities:

"Section 295. Conditions of Availment. - The availment of tax incentives in the preceding section shall be governed by the following rules:

"Section 296. Period of Availment of Incentives for Projects or Activities Approved by the Investment Promotion Agencies. - The period of availment of incentives granted by the Investment Promotion Agencies to RBEs shall be as follows:

The period of availment of the foregoing income tax-based incentives shall commence from the actual start of commercial operations with the RBE availing of the tax incentives within three (3) years from the date of registration, unless otherwise provided in the SIPP and its corresponding guidelines.

x x x

(3) Tier III activities shall include (i) research and development resulting in demonstrably significant value-added, higher productivity, improved efficiency, breakthroughs in science and health, and high-paying jobs; (ii) generation of new knowledge and intellectual property registered and/or licensed in the Philippines; (iii) commercialization of patents, industrial designs, copyrights and utility models owned or co-owned by an RBE; (iv) highly technical manufacturing; or (v) are critical to the structural transformation of the economy and require substantial catch-up efforts, including but not limited to cyber-security, artificial intelligence, and data-center facilities.

The period of availment of incentives based on the combination of both location and industry priorities, as determined in the SIPP, shall be as follows:

For exporters:

For domestic market activities:

In addition to the incentives provided in the tiers above, projects or activities of registered business enterprises located in areas covering from armed conflict or a major disaster, as determined by the Office of the President, shall be entitled to two (2) additional years of income tax-based incentives.

Projects or activities registered prior to the effectivity of this Act, or under the incentive system provided herein that shall, in the duration of their incentives, completely relocate from the National Capital Region, shall be entitled to three (3) additional years of income tax-based incentives: Provided, That the additional incentive shall commence at the completion of the relocation of operations.

RBEs may continue to avail of the VAT zero-rating on local purchases and VAT exemption on importation under Section 294(E), and duty exemption on importation under Section 294(D), for the entire registration period as an RBE, reckoned from the date of registration, if the RBEs continue to meet the terms and conditions of registration by their respective Investment Promotion Agencies ad if the RBEs maintain at least seventy percent (70%) of total annual production or output as export, sales for the immediately preceding year.

Registered domestic market enterprises may avail of duty exemption on importation from the date of registration until the expiration of the income tax-based incentives granted in this section.

After the expiration of the entitlement to VAT zero-rating on local purchases and VAT exemption on importation under this Title, registered export enterprises may avail of the VAT zero-rating on local purchases and VAT exemption on importation under Sections 106, 108, and 109 of this Code: Provided, That they comply with the requirements set forth therein."

"Section 296-A. Period of Availment of Incentives for Projects or Activities Approved by the Fiscal Incentives Review Board. - The period of availment of incentives granted by the Fiscal Incentives Review Board to RBEs shall be as follows:

"Section 297. Expanded Functions of the Fiscal Incentives Review Board. - The functions and powers of the Fiscal Incentives Review Board created under Presidential Decree No. 776, as amended, shall be further expanded as follows:

"Section 300. Strategic Investment Priority Plan. - The BOI, in consultation with the Fiscal Incentives Review Board, and the Investment Promotion Agencies, other government agencies administering tax incentives, and the private sector, shall formulate the SIPP to be submitted to the President for approval, which may contain recommendations for types of non-fiscal support needed to create high-skilled jobs to grow a local pool of enterprises, particularly micro, small and medium enterprises (MMEs), that can supply to domestic and global value chains, to increase the sophistication of products and services that are produced and/or sourced domestically, to expand domestic supply and reduce dependence on imports, and to attract significant foreign capital or investment. The SIPP may include areas of investment that are specific to an area or region, taking into consideration the project or activity that the Investment Promotion Agencies in those areas or regions deem fit to promote, in order to foster regional growth and attract investments: Provided, That the project or activity identified by the Investment Promotion Agencies shall be consistent with the Philippine Development Plan and Republic Act No. 11962, otherwise known as the 'Trabaho Para sa Bayan Act'. The SIPP shall be valid for a period of three (3) years, subject to review and amendment every three (3) years thereafter unless there would be a supervening event that would necessitate its review: Provided, That the BOI shall cause the publication of the rules and regulations implementing the SIPP including any amendments thereof, in the Official Gazette or newspaper of general circulation, and on its official website, to be effective.

The SIPP shall contain the following:

All sectors or industries that may be included in the SIPP shall undergo an evaluation to determine the suitability and potential of the industry or the sector in promoting long-term growth and sustainable development, and the national interest. In no case shall a sector or industry be included in the SIPP unless it is supported by a formal evaluation process or report.

x x x

In no case shall the Investment Promotion Agencies accept applications unless the project or activity is listed in the SIPP. Projects or activities not listed in the SIPP shall be automatically disapproved."

"Section 301. Power of the President to Grant Incentives. - Notwithstanding the provisions of Section 295, 296, and 296-A, the President may, in the interest of national economic development, or upon the recommendation of the Fiscal Incentives Review Board, modify the mix, period or manner of availment of incentives provided under this Code or craft the appropriate fiscal and non-fiscal support package for a highly desirable project or a specific industrial activity based on defined development strategies for creating high-value jobs, building new industries to diversify economic activities, and attracting significant foreign and domestic capital or investment, and the fiscal requirements of the activity or project, subject to maximum incentive levels recommended by the Fiscal Incentives Review Board: Provided, That the grant of ITH shall not exceed ten (10) years followed by SCIT of five percent (5%) or EDR; or SCIT or EDR, which may be immediately granted at the start of commercial operations: Provided, further, That the total period of income tax-based incentive availment shall not exceed forty (40) years.

The Fiscal Incentives Review Board shall determine whether the benefits that the government may derive from such investment are clear and convincing and far outweigh the cost of incentives that will be granted in determining whether a project or activity is highly desirable.

The determination by the Fiscal Incentives Review Board shall guide the President in calibrating either or both the magnitude of the incentives to be granted and the agreed performance target corresponding to the grant.

The President may exercise the powers under this section: Provided, That the following conditions are satisfied:

Provided, That the threshold shall be subject to the periodic review by the Fiscal Incentives Review Board every three (3) years, taking into consideration international standards or other economic indicators: Provided, further, That if the project fails to substantially meet the projected impact on the economy and agreed performance targets, the Fiscal Incentives Review Board shall recommend to the President the cancellation of the tax incentives or fiscal or nonfiscal support package or the modified period or manner of availment of incentives, after due hearing and an adequate opportunity to substantially comply with the agree performance targets and outputs.

For this purpose, the President may grant non-fiscal support package limited to the utilization of government resources such as use of land and budgetary support provision under the annual General Appropriations Act.

This power of the President, in as far as it commands additional public sector expenditures in support of investors, is suspended during fiscal years when, an unmanageable fiscal deficit is declared by the President on the advice of the Development Budget Coordination Committee with a consequence that even core budgetary obligations, such as, but not limited to, mandatory revenue allotments for local government units and budget for the National Economic and Development Authority's core public investments program, cannot be fully financed.

Notwithstanding the provisions in the preceding paragraphs, tax and duty incentives granted through legislative franchises shall be exempted from the foregoing powers of the President to review, withdraw, suspend, or cancel tax incentives and subsidies."

"Section 308. Penalties for Noncompliance with Filing and Reportorial Requirements. - Any RBE or other registered enterprise, which fails to comply with filing and reportorial requirements with the appropriate Investment Promotion Agencies or other government agencies administering tax incentives and/or, which fails to show proof of filing of tax returns using the electronic system of filing and payment of taxes of the BIR under Section 305 hereof, shall be imposed the following penalties by the appropriate Investment Promotion Agency or other government agency administering tax incentives:

Provided, That if the failure to show such proof is not due to the fault of the RBEs or other registered enterprises, the same shall not be a ground for the suspension of the ITH and/or other tax incentives availment: Provided, further, That collections from the penalties shall accrue to the general fund.

After due process, the concerned Investment Promotion Agency may cancel the registration, suspend the enjoyment of incentive benefits of any registered enterprise, and/or require refund or incentives enjoyed by such enterprise, including interests and monetary penalties, for any willful and material misrepresentation of information or submission of falsified or misleading information or documents for the purpose of availing of more incentives than what it is entitled to under this Code: Provided, further, That in case of cancellation of the certificate of registration, the project or activity of the RBE shall cease to be registered and the RBE shall be required to pay all appropriate taxes and duties from the date of cancellation order becomes final and executory.

Provided, That the Investment Promotion Agency, with the recommendation of the Commissioner, may revoke or suspend incentives granted by the Investment Promotion Agency, and/or order business closure of the RBE that violates Title VI (Excise Taxes on Certain Goods) and Title X (Statutory Offenses and Penalties) of this Code and other related revenue regulations, orders, or issuances of the government: Provided, further, That such authority shall cover the acts of RBE committed even in the first year of availment of incentives. Notwithstanding the provisions of this section, the DOF, the BIR, and the BOC shall retain their respective mandates, powers and functions as provided for under this Act and related laws.

Any government official or employee who fails without justifiable reason to provide or furnish the required tax incentives report or other data or information as required under Section 306 and 307 of this Act shall penalized, after due process, by a fine equivalent to the official's or employee's basic salary for a period of one (1) month to six (6) months or by suspension from government service for not more than one (1) year, or both, in addition to any criminal and administrative penalties imposable under existing laws."

"Section 310. Establishment of One-Stop Action Center and Initial Point of Contact for Foreign Investment Leads. - All Investment Promotion Agencies shall establish a one-stop shop or one-stop action center that will facilitate and expedite, to the extent possible, the setting up and conduct of registered projects or activities, including assistance in coordinating with the local government units and other government agencies to comply with Republic Act No. 11032, otherwise known as the "Ease of Doing Business and Efficient Government Service Delivery Act of 2018': Provided, however, That the enterprises shall continue to avail of the one-stop shop facility notwithstanding the expiration of their incentives under this Code.

Unless, otherwise provided under special laws, local government units may delegate to the concerned Investment Promotion Agency, through appropriate memoranda of agreement, the functions of accepting, processing, and granting business permits and licenses.

The Investment Promotion Agency may also assist RBEs in obtaining licenses and permits from national government agencies by accepting and submitting documentary requirements for such licenses and permits, on behalf of the RBEs to the appropriate national government agencies.

The Investment Promotion Agency may undertake activities necessary to perform the function as the initial point of contact for foreign investment leads. Such activities shall include assisting potential foreign investors in establishing their business enterprises in the concerned Investment Promotion Agency or in the economic zone best suited to their specific needs."

"Section 311. Investments Prior to the Effectivity of Republic Act No. 11534. - RBEs with incentives granted prior to the effectivity of Republic Act No. 11534 shall be subject to incentives granted in their certificate of registration or certificate of registration and tax exemption, and to the following rules: