Archives for 2007
Series of 2005
TO : All Banks and Non-Bank Financial Institutions Under BSP Supervision
In its Resolution No. 42 dated 29 April 2005, copy attached, the Anti-Money Laundering Council reiterated that all covered institutions, on best effort basis as far as completion deadline is concerned, should:
1. Submit corresponding electronic copy versions, in the required format, of those Suspicious Transaction Reports (STRs) previously submitted in hard copy or the hard copy version of those submitted only in electronic form, as the case may be, retroactive to 05 January 2004; and
2. Re-submit, in required electronic form. those Covered Transactions Reports (CTRs) that have been submitted previously in hard copy or in diskette not in the required format, retroactive to 23 March 2003.
Your outmost cooperation is hereby enjoined.
NESTOR A. ESPENILLA, JR.
16 June 2005
BY THE PRESIDENT OF THE PHILIPPINES
PROCLAMATION NO. 839
DECLARING OCTOBER 31, 2005 (MONDAY) AND DECEMBER 26, 2005 (MONDAY), AS SPECIAL (NON-WORKING) DAYS AND DECLARING NOVEMBER 30, 2005 (WEDNESDAY), AS A WORKING DAY, WHILE AUTHORIZING NOVEMBER 28, 2005 (MONDAY0, AS A NON-WORKING HOLIDAY, THROUGHOUT THE COUNTRY
WHEREAS, December 26, 2005 (Monday), may be declared as an additional day-off pursuant to Section 9, Rule IV of the Omnibus Rules Implementing the Labor Code, which states that “where a regula holiday falls on a Sunday, the following day shall be considered a special holiday for purposes of the Labor Code, unless said day is also a regular holiday;
WHEREAS, October 31, 2005 (Monday) may also be declared as a special day to give our people more time to observe All Saints Day;
WHEREAS, November 28, 2005 (Monday) may also be declared as a non-working holiday while November 30, 2005 (Wednesday) may be declared a workign day, provided that all activities and celebrations in observance of “Bonifacio Day” shall remain to be observed on November 30, 2005 (Wedenesday); and
WHEREAS, a longer weekend also promotes domestic tourism and enables employers to plan their work schedules effectively and efficiently, resulting in improved productivity.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Republic of the Philippines, by virtue of the powers vested in me by law, to hereby declare the following:
SECTION 1. October 31, 2005 (Monday) and December 26, 2005 (Monday) shall be special (non-working) days throughout the country.
SECTION 2. November 30, 2005 (Wednesday) shall be a working day, while November 28, 2005 (Monday) shall be the non-working holiday throughout the country.
All activities and celebrations in observance of “Bonifacio Day” shall, however, remain to be observed on November 30, 2005 (Wednesday).
SECTION 3. The Department of Labor and Employment shall issue the appropriate guidelines to implement this Proclamation.
SECTION 4. this Proclamation shall take effect immediately.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of the Republic of the Philippines to be affised.
Done in the City of Manila, this 10th day of May in the year of Our Lord, Two Thousand and Five.
By the President:
EDUARDO R. ERMITA
CIRCULAR NO. 487
Series of 2005
Pursuant to Monetary Board Resolution No. 695 dated 26 May 2005, the provisions of the Manual of Regulations for Banks (MORB) are hereby amended to read as follows:
Section 1. The last paragraph of Item “c” of Subsec. 1338.2 is hereby amended to read as follows:
“Loans financed under Items “a” and “b” shall be excluded from the computation of the capital to risk assets ratio.”
Section 2. The provisions of Item “c”, Subsec. X338.3 is hereby amended to read as follows:
c. “The aggregate outstanding loans and other credit accommodations granted under the bank’s fringe benefits program, inclusive of those granted to officers in the nature of lease with option to purchase, shall not exceed five percent (5%) of the bank’s total loan portfolio.
All banks providing financial assistance to their officers/employees shall submit a regular report on “availments of financial assistance to officers and employees” to the BSP within fifteen (15) banking days after end of the reference semester.
The appropriate supervising and examining department of the BSP may further require banks to submit such data or information as may be necessary to facilitate verification of such transactions by BSP examiners.”
This Circular shall take effect immediately.
FOR THE MONETARY BOARD:
AMANDO M. TETANGCO, JR.
03 June 2005
BSP Circular No. 494: Guidelines on the Adoption of Philippine FRP and Philippine Accounting Standar
OFFICE OF THE GOVERNOR
Circular No. 494
Series of 2005
Subject: Guidelines on the Adoption of Philippine Financial Reporting Standards and Philippine Accounting Standards
The Monetary Board in its Resolution Nos. 1110 and 1194 dated 18 August 2005 and 8 September 2005, respectively, approved the following guidelines in adopting the provisions of the Philippine Financial Reporting Standards (PFRS) and Philippine Accounting Standards (PAS) effective the annual financial reporting period beginning 1 January 2005, both for purposes of prudential reporting and audited financial statements.
Section 1. Statement of Policy. It is the policy of the Bangko Sentral ng Pilipinas to promote fairness, transparency and accuracy in financial reporting. It is in this light that the BSP aims to adopt all Philippine Financial Reporting Standards (PFRS) and Philippine Accounting Standards (PAS) issued by the Accounting Standards Council (ASC) to the greatest extent possible.
Section 2. Accounting Treatment for Prudential Reporting. For prudential reporting, financial institutions shall adopt in all respect the PFRS and PAS except as follows:
(a) In preparing consolidated financial statements, only investments in financial allied subsidiaries except insurance subsidiaries shall be consolidated on a line-by-line basis; while insurance and non-financial allied subsidiaries shall be accounted for using the equity method. Financial/non-financial allied/non-allied associates shall be accounted for using the equity method in accordance with the provisions of PAS 28 “Investments in Associates”. For purposes of preparing separate financial statements, financial/non-financial allied/non-allied subsidiaries/associates, including insurance subsidiaries/associates, shall also be accounted for using the equity method; and
(b) Financial institutions shall be required to meet the BSP recommended valuation reserves.
Notwithstanding these exceptions, the audited annual financial statements required to be submitted to the BSP in accordance with the provisions of Subsection X164.1 of the Manual of Regulations for Banks (MORB) and Section 4172Q of the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) shall in all respect be PFRS/PAS compliant: Provided, That financial institutions shall submit to the BSP adjusting entries reconciling the balances in the financial statements for prudential reporting with that in the audited annual financial statements.
Section 3. Accounting Treatment of Specific Items. The following rules and regulations shall govern the accounting treatment of specific items for purposes of prudential reporting and audited financial statements:
(a) Derivatives. Derivatives shall be accounted in accordance with the provisions of PAS 39 “Financial Instruments: Recognition and Measurement” which states that derivatives shall be reported on balance sheet with any gain or loss from fair value changes reported in profit or loss. Derivatives and non-derivatives financial assets and liabilities qualifying for hedge accounting shall likewise conform with the guidelines of PAS 39.
Accordingly, Appendix 27 of the MORB and Appendix Q-17 of the MORNBFI on the accounting guidelines for derivatives are hereby superseded.
(b) Bank/Other Financial Institution Premises, Furniture, Fixture and Equipment. Bank/ Other financial institution premises, furniture, fixture and equipment shall be accounted for using the cost model under PAS 16 “Property, Plant and Equipment.”
Outstanding appraisal increment as of the effectivity of this Circular arising from mergers and consolidation shall be deemed part of the cost of the assets. However, appraisal increment booked in accordance with Subsection X606.1 of the MORB and Subsection 4651Q.1 of the MORNBFI shall be reversed.
Accordingly, Subsection X606.1 of the MORB and Subsection 4651Q.1 of the MORNBFI, which allow the booking of appreciation or increase in the book value of bank/NBQB premises and other fixed assets in cases where the market value of the property has greatly increased since the original purchase subject, among others, to the prior notification to the appropriate supervision and examination departments of the BSP are hereby deleted.
(c) Real and Other Properties Acquired (ROPA)
1. Real and other properties acquired (ROPA) in settlement of loans through foreclosure or dation in payment shall be booked initially at the carrying amount of the loan (i.e., outstanding loan balance adjusted for any unamortized premium or discount less allowance for probable losses computed based on PAS 39 provisioning requirements) plus booked accrued interest less allowance for probable losses plus transaction costs incurred upon acquisition (such as non-refundable capital gains tax and documentary stamp tax paid in connection with the foreclosure/purchase of the acquired real estate property): Provided, That where the booked amount of ROPA exceeds the appraised value of the acquired property, an allowance for probable losses equivalent to the excess of the amount booked over the appraised value shall be set up: Provided, further, That if the carrying amount of ROPA exceeds P5 million, the appraisal of the foreclosed/purchased asset shall be conducted by an independent appraiser acceptable to the BSP.
2. The carrying amount of ROPA shall be allocated to land, building, other non-financial assets and financial assets (e.g., receivables from third party or equity interest in an entity) based on their fair values, which allocated carrying amounts shall become their initial costs.
3. Subsequently, ROPA shall be accounted for as follows:
(a) Land and buildings shall be accounted for using the cost model under PAS 40 “Investment Property”;
(b) Other non-financial assets shall be accounted for using the cost model under PAS 16 “Property Plant and Equipment”;
(c) Buildings and other non-financial assets shall be depreciated over a period not exceeding ten years and three years, respectively.
(d) Land, buildings and other non-financial assets shall be subject to the impairment provisions of PAS 36 “Impairment”;
(e) Financial assets shall be initially booked and classified according to intention (i.e., HFT, DFVPL, AFS, HTM, INMES, Unquoted Debt Securities Classified as Loans or Loans and Receivable) and accounted for in accordance with the provisions of PAS 39;
(f) ROPAs that comply with the provisions of PFRS 5 “Non-Current Assets Held for Sale” shall be reclassified and accounted for as such.
4. Claims arising from deficiency judgments rendered in connection with the foreclosure of mortgaged properties shall be lodged under the real account “Deficiency Judgment Receivable”; while probable claims against the borrower arising from the foreclosure of mortgaged properties shall be lodged under the contingent account “Deficiency Claims Receivable”.
5. Appraisal of Properties. Before foreclosing or acquiring any property in settlement of loans, it must be properly appraised to determine its true economic value. If the amount of ROPA to be booked exceeds P5 million, the appraisal must be conducted by an independent appraiser acceptable to the BSP. An in-house appraisal of all ROPAs shall be made at least every other year: Provided, That immediate re-appraisal shall be conducted on ROPAs which materially decline in value.
6. Non-Cash Payment for Interest. Financial institutions that accept non-cash payments for interest on their borrowers’ loans shall book the acquired assets as ROPA. The amount to be booked as ROPA shall be the booked accrued interest less allowance for probable losses: Provided, That where the booked amount of ROPA exceeds the appraised value of the acquired property, an allowance for probable losses equivalent to the excess of the amount booked over the appraised value shall be set up: Provided, further, That if the carrying amount of ROPA exceeds P5 million, the appraisal of the foreclosed/purchased asset shall be conducted by an independent appraiser acceptable to the BSP. The carrying amount of ROPA shall be allocated in accordance with Item (c)2 and shall be subsequently accounted for in accordance with Item (c)3 of this Section.
7. Sales Contract Receivable (SCR) shall be recorded based on the present value of the installments receivables discounted at the imputed rate of interest. Discount shall be accreted over the life of the SCR by crediting interest income using the effective interest method. Any difference between the present value of the SCR and the derecognized assets shall be recognized in profit or loss at the date of sale in accordance with the provisions of PAS 18 “Revenue” Provided, furthermore, That SCR shall be subject to impairment provision of PAS 39.
Accordingly, Section X611 and Subsections X611.1, X611.2 and X611.3 of the MORB and Section 4109Q and Subsections 4109Q.1, 4109Q.2 and 4109Q.3 of the MORNBFI on the accounting treatment of ROPA are hereby superseded.
8. Transitional Provisions. The provisions of Section 3(c) shall be applied to real and other properties acquired on 1 January 2005 and thereafter. Provided: That (a) Section 3(c)3(e) of this Circular shall be immediately adopted for all outstanding financial assets acquired before 1 January 2005; and (b) Section 3(c)7 of this Circular shall be immediately adopted for all outstanding Sales Contract Receivables entered into before 1 January 2005. Provided, further, That all land, buildings and other non-financial assets acquired before 1 January 2005 shall continue to be provided with valuation reserves in accordance with the schedule in Appendix 18 of the MORB and Appendix Q-10 of the MORNBFI.
(d) Goodwill. Goodwill shall be accounted for in accordance with the provisions of PFRS 3 “Business Combination”, and shall be subject to impairment provisions of PAS 36 “Impairment”. In this regard, financial institutions with outstanding goodwill arising from mergers and consolidation approved by the Monetary Board shall apply PFRS 3 prospectively. Therefore the financial institution shall:
1. beginning the annual period beginning on 1 January 2005 shall discontinue amortizing such goodwill;
2. at the beginning of the annual period beginning on 1 January 2005, eliminate the carrying amount of the related accumulated amortization with a corresponding decrease in goodwill; and
3. from the beginning of the first annual period beginning on 1 January 2005 test the goodwill for impairment in accordance with PAS 36.
Accordingly Subsection X112.e of the MORB and Appendix 4112Q.e of the MORNBFI are hereby deleted.
(e) Foreign Exchange Transactions. Foreign exchange transactions shall be accounted for in accordance with the provisions of PAS 21 “Effects of Changes in Foreign Exchange Rates”. In this regard, revaluation of foreign currency monetary items shall be done at least monthly, using the Philippine Dealing System (PDS) Peso/US Dollar closing rate and the New York US Dollar/Third currencies closing rates. Foreign borrowings booked under bills payable, the foreign exchange risk of which is shouldered by the National Government and past due accounts shall be revalued in accordance with the provisions of PAS 21.
(f) Redeemable Preferred Shares. Redeemable preferred shares and preferred shares of similar nature shall be accounted for as a liability or equity instrument in accordance with the provisions of PAS 32 “Financial Instruments: Disclosure and Presentation.” For this purpose, mandatorily redeemable preferred shares and preferred shares of similar nature accounted for as a financial liability shall be booked as a debt instrument in the books of both the issuer and the investor.
(g) Interest Accrual on Past Due Loans. Interest income on past due loans arising from discount amortization (and not from the contractual interest of the accounts) shall be accrued as provided in PAS 39.
Accordingly, Subsections X305.4 and X320.5 of the MORB and Subsections 4307Q.7, 4311Q.2 and 4301N.5 are hereby amended.
(h) Fair Value Option. The use of the fair value option in accordance with the criteria set forth in the amendments to PAS 39 shall be allowed subject to the following conditions:
1. Financial institutions shall have in place appropriate risk management systems (including related risk management policies, procedures and controls) prior to initial application of the fair value option for a particular activity or purpose and on an ongoing basis;
2. Financial institutions shall apply the fair value option only to instruments for which fair values can be reliably estimated; and
3. Financial institutions shall provide BSP with supplemental information as may be necessary, to enable BSP to assess the impact of the financial institution’s utilization of the fair value option.
(i) Other Clarifications on Circular No. 476 dated 16 February 2005
1. Only quoted debt securities can be classified under HTM. Unquoted debt securities that are not classified as HFT nor DFVPL nor AFS or other than those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration, which shall be classified as AFS, may be booked under the account Unquoted Debt Securities Classified as Loans.
Accordingly, securities held in compliance with BSP regulations may likewise be classified under the said account.
2. Credit Linked Notes (CLNs) may be booked under HFT or DFVPL or if the embedded derivative is separated from the host instrument, under AFS, but not under HTM nor Unquoted Debt Securities Classified as Loans.
3. A puttable bond (i.e., a debt security with an embedded put option giving the holder of the note the right to require the issuer to repay or redeem the security before maturity) cannot be classified under HTM.
4. A debt security that is callable by the issuer can generally be classified as HTM as long as the holder intends and is able to hold the security until it is called or until maturity. However, the holder is precluded from classifying the said callable bond under HTM, if the holder would not be able to recover substantially all of the carrying amount of its investment.
5. Quoted loans and receivables shall be classified as debt securities which may be booked under HFT, DFVPL. AFS or HTM.
Section 4. The following sections of the MORB/MORNBFI are likewise hereby amended:
(a) Subsections X161.2 of the MORB and Subsections 4161Q.2/4161S.2/ 4161P.2 of the MORNBFI. Philippine Financial Reporting Standards/Philippine Accounting Standards
“Banks/Financial institutions shall adopt the Philippine Financial Reporting Standards (PFRS) and Philippine Accounting Standards (PAS) which are in accordance with generally accepted accounting principles in recording transactions and in the preparation of financial statements and reports to BSP. However, in cases where there are differences between BSP regulations and PFRS/PAS as when more than one (1) option are allowed or certain maximum or minimum limits are prescribed by the PFRS/PAS, the option or limit prescribed by BSP regulations shall be adopted by all banks/financial institutions.
“For purposes hereof, the PFRS/PAS shall refer to issuances of the Accounting Standards Council and approved by the Professional Regulation Commission.”
(b) 1. Subsection X162.9 of the MORB. Publication, Posting of Statement of Condition.
“x x x.
“a(1)(a) The CSOC of the banks and its subsidiaries and associates shall conform with the guidelines of PAS 27 “Consolidated and Separate Financial Statements”, except that for purposes of consolidated financial statements, only investments in financial allied subsidiaries except insurance subsidiaries shall be consolidated on a line-by-line basis; while insurance and non-financial allied subsidiaries shall be accounted for using the equity method. Financial/non-financial allied/non-allied associates shall be accounted for using the equity method in accordance with the provisions of PAS 28 “Investments in Associates”. For purposes of separate financial statements, investments in financial/non-financial allied/non-allied subsidiaries/associates, including insurance subsidiaries/associates, shall be accounted for using the equity method. x x x”
2. Section 4181Q of the MORNBFI. Publication Requirements.
“The quarterly consolidated statement of condition of an NBQB/trust entity and its subsidiaries and associates shall be published side-by-side with the statement of condition of its head office and its branches/other offices as of such dates as the BSP may require, within twenty (20) working days from receipt of call letter, in any newspaper of general circulation in the country in the prescribed format.
“The consolidated statement of condition of an NBQB/trust entity and its subsidiaries and associates shall conform with the guidelines of PAS 27 “Consolidated and Separate Financial Statements”, except that for purposes of consolidated financial statements, only investments in financial allied subsidiaries except insurance subsidiaries shall be consolidated on a line-by-line basis; while insurance and non-financial allied subsidiaries shall be accounted for using the equity method. Financial/non-financial allied/non-allied associates shall be accounted for using the equity method in accordance with the provisions of PAS 28 “Investments in Associates”. For purposes of separate financial statements, investments in financial/non-financial allied /non-allied subsidiaries/associates, including insurance subsidiaries/associates, shall be accounted for using the equity method.
“a. The following information shall be disclosed in the Statements of Condition : x x x.”
Appendix Q-3-b of the MORNBFI is hereby deleted.
(c) Subsection X162.10 of the MORB. Consolidated financial statements of banks and their subsidiaries engaged in financial allied undertakings.
“ x x x For purposes of this Subsection, the consolidated financial statements shall conform to the guidelines of PAS 27 “Consolidated and Separate Financial Statements” except that for purposes of consolidated financial statements, only investments in financial allied subsidiaries except insurance subsidiaries shall be consolidated on a line-by-line basis; while insurance and non-financial allied subsidiaries shall be accounted for using the equity method. Financial/non-financial allied/ non-allied associates shall be accounted for using the equity method in accordance with the provisions of PAS 28 “Investments in Associates”. x x x”
Appendix 9 of the MORB is hereby deleted.
(d) Subsections X164.2 of the MORB and 4172Q.1 of the MORNBFI. Posting of Audited Financial Statements.
“ x x x shall post in a conspicuous place in all their branches and other banking offices, their latest audited financial statements consisting of the following:
(a) Balance Sheet;
(b) Income Statement;
(c) Statement of Changes in Equity;
(d) Cash Flow Statement;
(e) Notes to Financial Statements, which shall include, among other things, disclosure of the volume of past due loans as well as loan-loss provisions; and
(f) Auditor’s Opinion.”
This Circular shall take effect within fifteen (15) days following its publication in the Official Gazette or in a newspaper of general circulation.
FOR THE MONETARY BOARD:
AMANDO M. TETANGCO, JR.
20 September 2005
Series of 2005
TO : All Banks and Non-Bank Financial Intermediaries (NBFIs)
Subject : BSP Adoption of the General Information Sheet (GIS) of the Securities and Exchange Commission (SEC)
Please be informed that the Bangko Sentral ng Pilipinas (BSP) has adopted the General Information Sheet (GIS) of the Securities and Exchange Commission (SEC) as among the reports for periodic submission. Attached as Annex A is the GIS.
The guidelines prescribed below shall apply in the submission of the GIS, as follows:
1. All banks and NBFIs shall prepare a duplicate copy for BSP of the attached GIS submitted to the SEC in accordance with the General Instructions stipulated on the first page of the GIS.
2. BSP’s duplicate copy of the GIS shall be submitted to the Central Receiving Section (CRS) of SEC. Said duplicate copy stamped received by the SEC shall be placed in a designated drop box located in the CRS of SEC.
This memorandum shall take effect immediately.
For strict compliance.
NESTOR A. ESPENILLA, JR.
02 September 2005
CIRCULAR NO. 483
Series of 2005
Pursuant to Monetary Board Resolution No. 461 dated 7 April 2005, the second paragraph of Section X238 of the Manual of Regulations for Banks is hereby amended to read as follows:
“Unregistered commercial papers may be sold, discounted, assigned, or negotiated by banks to THE FOLLOWING:
a. other banks
c. INVESTMENT HOUSES
d. INSURANCE COMPANIES
e. FINANCE COMPANIES
f. INVESTMENT COMPANIES
g. PENSION OR RETIREMENT PLAN MAINTAINED BY THE GOVERNMENT OF THE PHILIPPINES OR ANY POLITICAL SUBDIVISION THEREOF OR MANAGED BY A BANK OR OTHER PERSONS AUTHORIZED BY THE BANGKO SENTRAL TO ENGAGE IN TRUST FUNCTIONS
h. FUNDS MANAGED BY ANOTHER BANK OR OTHER ENTITIES DULY AUTHORIZED TO ENGAGE IN TRUST OR OTHER FIDUCIARY BUSINESS
i. SUCH OTHER PERSON AS THE COMMISSION MAY BY RULE DETERMINE AS QUALIFIED BUYERS, ON THE BASIS OF SUCH FACTORS AS FINANCIAL SOPHISTICATION, NET WORTH, KNOWLEDGE, AND
j. EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS, OR AMOUNT OF ASSETS UNDER MANAGEMENT”
This Circular shall take effect fifteen (15) days following its publication either in the Official Gazette or in a newspaper of general circulation.
FOR THE MONETARY BOARD:
AMANDO M. TETANGCO, JR.
10 May 2005
CIRCULAR NO. 490
Series of 2005
Pursuant to Monetary Board Resolution No. 831 dated 23 June 2005, the Manual of Regulations for Banks (MORB) and the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) are hereby amended to read as follows:
Section 1. Subsection X136.2 and Section 4126Q.2 of the MORB and MORNBFI, respectively, are hereby amended to read as follows:
Requirements on the declaration of dividends. At the time of declaration, banks and quasi-banks shall have complied with the following:
a Clearing account with the Bangko Sentral ng Pilipinas is not overdrawn;
b Liquidity floor requirement for government funds (for banks only);
c Minimum capitalization requirement and risk-based capital ratio;
d Prescribed EFCDU/FCDU cover consisting of (for banks only);
1. 30% liquidity cover; and
2. 100% asset cover.
e Statutory and liquidity reserves requirement;
f NO PAST DUE LOANS OR ACCOMMODATIONS WITH THE BANGKO SENTRAL NG PILIPINAS (for banks only) OR WITH ANY INSTITUTION (for banks and quasi-banks);
g NO NET LOSSES FROM OPERATIONS IN ANY ONE OF THE TWO FISCAL YEARS IMMEDIATELY PRECEDING THE DATE OF DIVIDEND DECLARATION;
h HAS NOT COMMITTED ANY OF THE FOLLOWING MAJOR VIOLATIONS:
1. LOANS AND OTHER CREDIT ACCOMMODATIONS AND GUARANTEES GRANTED IN EXCESS OF THE SINGLE BORROWER’S LIMIT;
2. LOANS AND OTHER CREDIT ACCOMMODATIONS GRANTED/EXTENDED IN EXCESS OF THE CEILINGS ON ACCOMMODATIONS TO DIRECTORS, OFFICERS, STOCKHOLDERS AND RELATED INTERESTS;
3. UNSAFE AND UNSOUND BANKING PRACTICE AS DEFINED UNDER EXISTING BSP REGULATIONS;
4. EQUITY INVESTMENTS IN EXCESS OF THE PRESCRIBED CEILINGS;
5. INVESTMENTS IN REAL ESTATE, BANK PREMISES AND EQUIPMENT IN EXCESS OF PRESCRIBED CEILINGS;
6. MAJOR VIOLATIONS / EXCEPTIONS CITED IN THE PREVIOUS EXAMINATION NOT DULY ACTED UPON OR NOT YET CORRECTED;
7. TRANSACTIONS OR ACTIVITIES WITHOUT PRIOR APPROVAL OR NECESSARY LICENSE FROM THE BSP SUCH AS, BUT NOT LIMITED TO DERIVATIVES, TRUST AND E-BANKING;
8. REFUSAL TO PERMIT EXAMINATION INTO THE AFFAIRS OF THE INSTITUTION OR ANY WILLFUL MAKING OF A FALSE OR MISLEADING STATEMENT TO THE MONETARY BOARD OR TO THE APPROPRIATE SUPERVISING AND EXAMINING DEPARTMENT;
9. FAILURE TO COMPLY WITH THE CAPITAL BUILD-UP PROGRAM APPROVED BY THE MONETARY BOARD.
The prescribed duration of compliance with items a. to e. above shall be reckoned from the last eight (8) weeks immediately preceding the date of the dividend declaration up to the record date of said dividends.
On the other hand, banks and quasi-banks which have committed any of the major violations under item h. above may only be allowed to declare dividends by the Monetary Board upon recommendation of the appropriate BSP supervising and examining department of the Supervision and Examination Sector that the bank/quasi-bank has corrected the major violation/s that it has committed.
Section 2. Effectivity. This circular shall take effect fifteen (15) days following its publication in the Official Gazette or in a national newspaper of general circulation.
FOR THE MONETARY BOARD:
AMANDO M. TETANGCO, JR.
8 July 2005
CIRCULAR NO. 482
Series of 2005
Pursuant to Monetary Board Resolution No. 537, dated 21 April 2005, the Manual of Regulations for Banks (MORB) is hereby amended, as follows:
Section 1. Item c. is hereby added to Subsec. X281.1 of the MORB on Exemption from reserve requirement to read as follows:
” x x x
c. Borrowings by accredited financial institutions under the Wholesale Lending Program for small and medium enterprises (SMEs) of the Small Business Guarantee and Finance Corporation (SBGFC) of the Small Business Guarantee and Finance Corporation (SBGFC).
This Circular shall take effect fifteen (15) days following its publication in the Official Gazette or in a newspaper of general circulation.
FOR THE MONETARY BOARD:
AMANDO M. TETANGCO, JR.
05 May 2005
December 17, 2007
Dear FELLOW RURAL BANKERS,
With the festive decorations that surround us exuding joy and gaiety, Christmas has truly arrived. And I would like to be among those who will convey to you the eternal meaning of this blessed season of love, peace, and joy. The travails and challenges that has assailed us, both as individual bankers and as member-banks of our Association, should not deter us from our goals but instead it should be our beacon that will illuminate our way to greater achievement.
The Nativity of our Lord Jesus Christ is both a celebration of hope and salvation. His Birth signifies the nurturing of man through trials and tribulations to emerge victorious by His Grace. His Coming into the world embodies His Love and Salvation for mankind. And by His Divine Light, He has strengthened man to rise above his frailties and seek the goodness of his fellowmen through His Guidance and Inspiration.
As we end another challenging year in the rural banking sector, we manifest our thanksgiving to the Lord who has kept us together in His Care despite the tremendous difficulties and burdens we have encountered. By His Mercy, we continue our journey towards banking excellence and prominence that we may share these benefits with the greater number of our people. And by His Grace, we shall always seek the providence for the welfare of our sector and our member-banks despite the obstacles that aim to impair these intentions for our collective good.
On behalf of the 2007-08 RBAP Board of Directors and Officers, we convey our heartfelt greeting of A Blessed Christmas and a Meaningful New Year to you, your family, and your loved ones.
Very truly yours,
PAZ C. RADAZA
Series of 2005
TO : All Banks
Please be informed that the submission and parallel testing of Subsidiary Ledgers (SL) under the SL Reporting System for all banks is hereby temporarily suspended.
The SL Reporting System was previously implemented through the issuance of the Memorandum to All Commercial Banks dated 26 January 2004, Memorandum to All Thrift Banks dated 20 February 2004 and Memorandum to All Rural/Cooperative and Microfinance-Oriented Rural Banks dated 21 May 2004.
The temporary suspension of the SL Reporting System is due to the foreseen changes in the existing financial report structure arising from ongoing initiatives to align such with the approved Philippine Accounting Standards (PAS) and Philippine Financial Reporting Standards (PFRS) which are based on the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Banks have been accordingly notified of such initiatives to align with international standards through the issuance of the Memorandum to All Banks and Other BSP Supervised Financial Institutions dated 11 January 2005.
In the meantime that the SL Reporting System is temporarily suspended, all banks are expected to continue regularly submitting their General Ledger and presently prescribed schedules of the Consolidated Statement of Condition (CSOC) to the Bangko Sentral ng Pilipinas through the following addresses and acceptable modes of submission:
For queries on the matter, you may contact the Supervisory Data Center at 524-7011 locals 2836 / 2516 / 2551 / 2895 or via Email at firstname.lastname@example.org.
For information and guidance
NESTOR A. ESPENILLA, JR.Deputy Governor
08 June 200
To : ALL BANKING INSTITUTIONS
Pursuant to Memorandum Order No. 173 dated 24 May 2005 issued by the Office of the President, enjoining all branches of government to participate actively in the celebration of the 107th Anniversary of Philippine Independence and to enlist the participation of private sector groups and non-government organizations, all banking institutions and their branches are enjoined to undertake activities in support to the national observance of Philippine Independence Day on 12 June 2005, primarily through the display of the Philippine flag and hanging of relevant streamers in their offices during th eentire month of June.
We hope that through your participation in this celebration, we will be able to help generate greater awareness of our history and strengthen our unity as a people.
To unify our observance of this significant event, banks are also requested to incorporate the theme of the celebration, Kalayaan, Bayan Ko, Mahal ko, in their stremers and promotional material.
AMANDO M. TETANGCO, JR.
31 May 2005
1. Acceptance Speech of Atty. Francis S. Ganzon
2. Dep. Gov. Nestor A. Espenilla, Jr. (BSP)
3. Dir. Marcelinda Omila-Yap (BIR)
An Act Amending the National Internal Revenue Code as Amended and for other Purposes
VALUE- ADDED TAX
CHAPTER I – IMPOSITION OF TAX
Section 105. Persons Liable. – Any person who, in the course of trade or business, sells barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code.
The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of Republic Act No. 7716.
The phrase ‘in the course of trade or business’ means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity.
The rule of regularity, to the contrary notwithstanding, services as defined in this Code rendered in the Philippines by nonresident foreign persons shall be considered as being course of trade or business.
Section 106. Value-Added Tax on Sale of Goods or Properties. –
(A) Rate and Base of Tax. – There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor.
(1) The term ‘goods’ or ‘properties’ shall mean all tangible and intangible objects which are capable of pecuniary estimation and shall include:
(a) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business;
(b) The right or the privilege to use patent, copyright, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right;
(c) The right or the privilege to use in the Philippines of any industrial, commercial or scientific equipment;
(d) The right or the privilege to use motion picture films, tapes and discs; and
(e) Radio, television, satellite transmission and cable television time.
The term ‘gross selling price’ means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value-added tax. The excise tax, if any, on such goods or properties shall form part of the gross selling price.
(2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:
(a) Export Sales. – The term ‘export sales’ means:
(1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
(2) Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer’s goods and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
(3) Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production;
(4) Sale of gold to the Bangko Sentral ng Pilipinas (BSP); and
(5) Those considered export sales under Executive Order NO. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws.
(b) Foreign Currency Denominated Sale. – The phrase ‘foreign currency denominated sale’ means sale to a nonresident of goods, except those mentioned in Sections 149 and 150, assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
(c) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate.
(B) Transactions Deemed Sale. – The following transactions shall be deemed sale:
(1) Transfer, use or consumption not in the course of business of goods or properties originally intended for sale or for use in the course of business;
(2) Distribution or transfer to:
(a) Shareholders or investors as share in the profits of the VAT-registered persons; or
(b) Creditors in payment of debt;
(3) Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned; and
(4) Retirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation.
(C) Changes in or Cessation of Status of a VAT-registered Person. – The tax imposed in Subsection (A) of this Section shall also apply to goods disposed of or existing as of a certain date if under circumstances to be prescribed in rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner, the status of a person as a VAT-registered person changes or is terminated.
(D) Determination of the Tax. –
(1) The tax shall be computed by multiplying the total amount indicated in the invoice by one-eleventh (1/11).
(2) Sales Returns, Allowances and Sales Discounts. – The value of goods or properties sold and subsequently returned or for which allowances were granted by a VAT-registered person may be deducted from the gross sales or receipts for the quarter in which a refund is made or a credit memorandum or refund is issued. Sales discount granted and indicated in the invoice at the time of sale and the grant of which does not depend upon the happening of a future event may be excluded from the gross sales within the same quarter it was given.
(3) Authority of the Commissioner to Determine the Appropriate Tax Base. – The Commissioner shall, by rules and regulations prescribed by the Secretary of Finance, determine the appropriate tax base in cases where a transaction is deemed a sale, barter or exchange of goods or properties under Subsection (B) hereof, or where the gross selling price is unreasonably lower than the actual market value.
Section 107. Value-Added Tax on Importation of Goods. –
(A) In General. – There shall be levied, assessed and collected on every importation of goods a value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of Customs in determining tariff and customs duties plus customs duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody: Provided, That where the customs duties are determined on the basis of the quantity or volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, If any.
(B) Transfer of Goods by Tax-exempt Persons. – In the case of tax-free importation of goods into the Philippines by persons, entities or agencies exempt from tax where such goods are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers, transferees or recipients shall be considered the importers thereof, who shall be liable for any internal revenue tax on such importation. The tax due on such importation shall constitute a lien on the goods superior to all charges or liens on the goods, irrespective of the possessor thereof.
Section 108. Value-added Tax on Sale of Services and Use or Lease of Properties. –
(A) Rate and Base of Tax. – There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services, including the use or lease of properties.
The phrase ‘sale or exchange of services’ means the performance of all kinds or services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing services; lessors or distributors of cinematographic films; persons engaged in milling processing, manufacturing or repacking goods for others; proprietors, operators or keepers of hotels, motels, resthouses, pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in securities; lending investors; transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire another domestic common carriers by land, air and water relative to their transport of goods or cargoes; services of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 119 of this Code; services of banks, non-bank financial intermediaries and finance companies; and non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties. The phrase ‘sale or exchange of services’ shall likewise include:
(1) The lease or the use of or the right or privilege to use any copyright, patent, design or model, plan secret formula or process, goodwill, trademark, trade brand or other like property or right;
(2) The lease of the use of, or the right to use of any industrial, commercial or scientific equipment;
(3) The supply of scientific, technical, industrial or commercial knowledge or information;
(4) The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such property, or right as is mentioned in subparagraph (2) or any such knowledge or information as is mentioned in subparagraph (3);
(5) The supply of services by a nonresident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery or other apparatus purchased from such nonresident person.
(6) The supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme;
(7) The lease of motion picture films, films, tapes and discs; and
(8) The lease or the use of or the right to use radio, television, satellite transmission and cable television time.
Lease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of lease or licensing agreement was executed if the property is leased or used in the Philippines.
The term ‘gross receipts’ means the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax.
(B) Transactions Subject to Zero Percent (0%) Rate – The following services performed in the Philippines by VAT- registered persons shall be subject to zero percent (0%) rate.
(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
(2) Services other than those mentioned in the preceding paragraph, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate;
(4) Services rendered to vessels engaged exclusively in international shipping; and
(5) Services performed by subcontractors and/or contractors in processing, converting, of manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production.
(C) Determination of the Tax. – The tax shall be computed by multiplying the total amount indicated in the official receipt by one-eleventh (1/11).
Section 109. Exempt Transactions. – The following shall be exempt from the value-added tax:
(a) Sale of nonfood agricultural products; marine and forest products in their original state by the primary producer or the owner of the land where the same are produced;
(b) Sale of cotton seeds in their original state; and copra;
(c) Sale or importation of agricultural and marine food products in their original state, livestock and poultry of or king generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor.
Products classified under this paragraph and paragraph (a) shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping.
Polished and/or husked rice, corn grits, raw cane sugar and molasses, and ordinary salt shall be considered in their original state;
(d) Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets);
(e) Sale or importation of coal and natural gas, in whatever form or state, and petroleum products (except lubricating oil, processed gas, grease, wax and petrolatum) subject to excise tax imposed under Title VI;
(f) Sale or importation of raw materials to be used by the buyer or importer himself in the manufacture of petroleum products subject to excise tax, except lubricating oil, processed gas, grease, wax and petrolatum;
(g) Importation of passenger and/or cargo vessels of more than five thousand tons (5,000) whether coastwise or ocean-going, including engine and spare parts of said vessel to be used by the importer himself as operator thereof;
(h) Importation of personal and household effects belonging to the residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines: Provided, That such goods are exempt from customs duties under the Tariff and Customs Code of the Philippines;
(i) Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessel, aircraft, machinery other goods for use in the manufacture and merchandise of any kind in commercial quantity) belonging to persons coming to settle in the Philippines, for their own use and not for sale, barter or exchange, accompanying such persons, or arriving within ninety (90) days before or after their arrival, upon the production of evidence satisfactory to the Commissioner, that such persons are actually coming to settle in the Philippines and that the change of residence is bona fide;
(j) Services subject to percentage tax under Title V;
(k) Services by agricultural contract growers and milling for others of palay into rice, corn into grits and sugar cane into raw sugar;
(l) Medical, dental, hospital and veterinary services subject to the provisions of Section 17 of Republic Act No. 7716, as amended:
(m) Educational services rendered by private educational institutions, duly accredited by the Department of Education, Culture and Sports (DECS) and the Commission on Higher Education (CHED), and those rendered by government educational institutions;
(n) Sale by the artist himself of his works of art, literary works, musical compositions and similar creations, or his services performed for the production of such works;
(o) Services rendered by individuals pursuant to an employer-employee relationship;
(p) Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines;
(q) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree Nos. 66, 529 and 1590;
(r) Sales by agricultural cooperatives duly registered with the Cooperative Development Authority to their members as well as sale of their produce, whether in its original state or processed form, to non-members; their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce;
(s) Sales by electric cooperatives duly registered with the Cooperative Development authority or National Electrification Administration, relative to the generation and distribution of electricity as well as their importation of machineries and equipment, including spare parts, which shall be directly used in the generation and distribution of electricity;
(t) Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered with the Cooperative Development Authority whose lending operation is limited to their members;
(u) Sales by non-agricultural, non- electric and non-credit cooperatives duly registered with the Cooperative Development Authority: Provided, That the share capital contribution of each member does not exceed Fifteen thousand pesos (P15,000) and regardless of the aggregate capital and net surplus ratably distributed among the members;
(v) Export sales by persons who are not VAT-registered;
(w) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992, and other related laws, house and lot and other residential dwellings valued at One million pesos (P1,000,000) and below: Provided, That not later than January 31st of the calendar year subsequent to the effectivity of this Act and each calendar year thereafter, the amount of One million pesos (P1,000,000) shall be adjusted to its present value using the Consumer Price Index, as published by the national Statistics Office (NSO);
(x) Lease of a residential unit with a monthly rental not exceeding Eight thousand pesos(P8,000); Provided, That not later than January 31st of the calendar year subsequent to the effectivity of Republic Act No. 8241 and each calendar year thereafter, the amount of Eight thousand pesos (P8,000) shall be adjusted to its present value using the Consumer Price Index as published by the National Statistics Office (NS0);
(y) Sale, importation, printing or publication of books and any newspaper, magazine review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements; and
(z) Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of Five hundred fifty thousand pesos (P550,000): Provided, That not later than January 31st of the calendar year subsequent to the effectivity of Republic Act No. 8241 and each calendar year thereafter, the amount of Five hundred fifty thousand pesos (550,000) shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO).
The foregoing exemptions to the contrary notwithstanding, any person whose sale of goods or properties or services which are otherwise not subject to VAT, but who issues a VAT invoice or receipt therefor shall, in addition to his liability to other applicable percentage tax, if any, be liable to the tax imposed in Section 106 or 108 without the benefit of input tax credit, and such tax shall also be recognized as input tax credit to the purchaser under Section 110, all of this Code.
Section 110. Tax Credits. –
A. Creditable Input Tax. –
(1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax:
(a) Purchase or importation of goods:
(i) For sale; or
(ii) For conversion into or intended to form part of a finished product for sale including packaging materials; or
(iii) For use as supplies in the course of business; or
(iv) For use as materials supplied in the sale of service; or
(v) For use in trade or business for which deduction for depreciation or amortization is allowed under this Code, except automobiles, aircraft and yachts.
(b) Purchase of services on which a value-added tax has been actually paid.
(2) The input tax on domestic purchase of goods or properties shall be creditable:
(a) To the purchaser upon consummation of sale and on importation of goods or properties; and
(b) To the importer upon payment of the value-added tax prior to the release of the goods from the custody of the Bureau of Customs.
However, in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee.
(3) A VAT-registered person who is also engaged in transactions not subject to the value-added tax shall be allowed tax credit as follows:
(a) Total input tax which can be directly attributed to transactions subject to value-added tax; and
(b) A ratable portion of any input tax which cannot be directly attributed to either activity.
The term ‘input tax’ means the value-added tax due from or paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services, including lease or use of property, from a VAT-registered person. It shall also include the transitional input tax determined in accordance with Section 111 of this Code.
The term ‘output tax’ means the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or required to register under Section 236 of this Code.
(B) Excess Output or Input Tax. – If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the Vat-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters. any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112.
(C) Determination of Creditable Input Tax. – The sum of the excess input tax carried over from the preceding month or quarter and the input tax creditable to a VAT-registered person during the taxable month or quarter shall be reduced by the amount of claim for refund or tax credit for value-added tax and other adjustments, such as purchase returns or allowances and input tax attributable to exempt sale.
The claim for tax credit referred to in the foregoing paragraph shall include not only those filed with the Bureau of Internal Revenue but also those filed with other government agencies, such as the Board of Investments the Bureau of Customs.
Section 111. Transitional/Presumptive Input Tax Credits. –
(A) Transitional Input Tax Credits. – A person who becomes liable to value-added tax or any person who elects to be a VAT-registered person shall, subject to the filing of an inventory according to rules and regulations prescribed by the Secretary of finance, upon recommendation of the Commissioner, be allowed input tax on his beginning inventory of goods, materials and supplies equivalent for eight percent (8%) of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax.
(B) Presumptive Input Tax Credits. –
(1) Persons or firms engaged in the processing of sardines, mackerel and milk, and in manufacturing refined sugar and cooking oil, shall be allowed a presumptive input tax, creditable against the output tax, equivalent to one and one-half percent (1 1/2%) of the gross value in money of their purchases of primary agricultural products which are used as inputs to their production.
As used in this Subsection, the term ‘processing’ shall mean pasteurization, canning and activities which through physical or chemical process alter the exterior texture or form or inner substance of a product in such manner as to prepare it for special use to which it could not have been put in its original form or condition.
(2) Public works contractors shall be allowed a presumptive input tax equivalent to one and one-half percent (1 1/2%) of the contract price with respect to government contracts only in lieu of actual input taxes therefrom.
Section 112. Refunds or Tax Credits of Input Tax. –
(A) Zero-rated or Effectively Zero-rated Sales. – any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales.
(B) Capital Goods. – A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made.
(C) Cancellation of VAT Registration. – A person whose registration has been cancelled due to retirement from or cessation of business, or due to changes in or cessation of status under Section 106(C) of this Code may, within two (2) years from the date of cancellation, apply for the issuance of a tax credit certificate for any unused input tax which may be used in payment of his other internal revenue taxes.
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. – In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of compete documents in support of the application filed in accordance with Subsections (A) and (B) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.-
(E) Manner of Giving Refund. – Refunds shall be made upon warrants drawn by the Commissioner or by his duly authorized representative without the necessity of being countersigned by the Chairman, Commission on audit, the provisions of the Administrative Code of 1987 to the contrary notwithstanding: Provided, That refunds under this paragraph shall be subject to post audit by the Commission on Audit.
CHAPTER II – COMPLIANCE REQUIREMENTS
Section 113. Invoicing and Accounting Requirements for VAT-Registered Persons. –
(A) Invoicing Requirements. – A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following information shall be indicated in the invoice or receipt:
(1) A statement that the seller is a VAT-registered person, followed by his taxpayer’s identification number (TIN); and
(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax.
(B) Accounting Requirements. – Notwithstanding the provisions of Section 233, all persons subject to the value-added tax under Sections 106 and 108 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance.
Section 114. Return and Payment of Value-Added Tax. –
(A) In General. – Every person liable to pay the value-added tax imposed under this Title shall file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons shall pay the value-added tax on a monthly basis.
Any person, whose registration has been cancelled in accordance with Section 236, shall file a return and pay the tax due thereon within twenty-five (25) days from the date of cancellation of registration: Provided, That only one consolidated return shall be filed by the taxpayer for his principal place of business or head office and all branches.
(B) Where to File the Return and Pay the Tax. – Except as the Commissioner otherwise permits, the return shall be filed with and the tax paid to an authorized agent bank, Revenue Collection Officer or duly authorized city or municipal Treasurer in the Philippines located within the revenue district where the taxpayer is registered or required to register.
(C) Withholding of Creditable Value-added Tax. – The Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or -controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods from sellers and services rendered by contractors which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the value-added tax due at the rate of three percent (3%) of the gross payment for the purchase of goods and six percent (6%) on gross receipts for services rendered by contractors on every sale or installment payment which shall be creditable against the value-added tax liability of the seller or contractor: Provided, however, That in the case of government public works contractors, the withholding rate shall be eight and one-half percent (8.5%): Provided, further, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For this purpose, the payor or person in control of the payment shall be considered as the withholding agent.
The value-added tax withheld under this Section shall be remitted within ten (10) days following the end of the month the withholding was made.
Section 115. Power of the Commissioner to Suspend the Business Operations of a Taxpayer. – The Commissioner or his authorized representative is hereby empowered to suspend the business operations and temporarily close the business establishment of any person for any of the following violations:
(a) In the case of a VAT-registered Person. –
(1) Failure to issue receipts or invoices;
(2) Failure to file a value-added tax return as required under Section 114; or
(3) Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct taxable sales or receipts for the taxable quarter.
(b) Failure of any Person to Register as Required under Section 236. –
The temporary closure of the establishment shall be for the duration of not less than five (5) days and shall be lifted only upon compliance with whatever requirements prescribed by the Commissioner in the closure order.