1. September 14, 2011 Hotel Stotsenberg, Clark Pampanga

2. INTERNAL REVENUE ALLOTMENT FOR LOCAL GOVERNMENT UNITS (LGU’s) (Forty percent of the National Internal Revenue Taxes collected by the government) Annual Budget – Php XXXX (100%) Province 23% Cities 23% Municipalities 34% Barangays 20% Source: LOCAL GOVERNMENT CODE OF 1991

3. REVENUE MEMORANDUM ORDER NO. 8-2003 (March 3,2003) I. OBJECTIVES This Order is issued to: 1.Ensure the efficient compliance of government withholding agents to existing withholding tax laws, rules and regulations and other related issuances. 2.Identify government officials designated as withholding agents personally responsible for the correct withholding of tax and its timely remittance. x

4. 3.Reiterate Item II(1) of Revenue Memorandum Order No. 14-98 and amend Revenue Memorandum Order No. 70-98 and implement the provisions of RA 1051, EO 651 and RR 1-87. 4.To effect and monitor collection of delinquent accounts/final assessments from LGUs.

5. WITHHOLDING TAX A MANNER OF COLLECTING A KIND OF TAX WHICH IS AN ADVANCE PAYMENT OF THE TAX DUE.

6. WITHHOLDING ON GOVERNMENT MONEY PAYMENTS WITHHOLDING ON GOVERNMENT MONEY PAYMENTS

7. ----is a tax withheld by government bureaus, offices & instrumentalities, including government- owned or controlled corporations and local government units, before making any payments to private individuals, corporations, partnerships and/or associations. ----is a tax withheld by government bureaus, offices & instrumentalities, including government- owned or controlled corporations and local government units, before making any payments to private individuals, corporations, partnerships and/or associations.

8. WHO ?

9. Who is a withholding agent? A withholding agent is any person or entity who is required to deduct and remit the taxes withheld to the government.

10. WHO ARE REQUIRED TO WITHHOLD? » IN GENERAL, ANY JURIDICAL PERSON, WHETHER OR NOT ENGAGED IN BUSINESS » AN INDIVIDUAL WITH RESPECT TO PAYMENTS MADE IN CONNECTION WITH HIS TRADE OR BUSINESS » ALL GOVERNMENT OFFICES, INCLUDING GOVERNMENT OWNED AND CONTROLLED CORPORATIONS, PROVINCIAL, CITY, MUNICIPAL GOVERNMENTS AND BARANGAYS.

11. WHO ARE EXEMPTED FROM WITHHOLDING? » NATIONAL GOVERNMENT AND ITS INSTRUMENTALITIES, INCLUDING PROVINCIAL, CITY OR MUNICIPAL GOVERNMENTS » PERSONS ENJOYING EXEMPTION FROM PAYMENT OF INCOME TAXES PURSUANT TO THE PROVISIONS OF ANY LAW, GENERAL OR SPECIAL

12. WHEN ARE PRIVATE ENTITIES CONSIDERED AS WITHHOLDING AGENTS FOR VAT PURPOSES? ----AS AN EXCEPTION TO THE GENERAL RULE, ----AS AN EXCEPTION TO THE GENERAL RULE, GROSS PAYMENTS MADE TO NON-RESIDENTS SHALL BE SUBJECTED TO THE FINAL WITHHOLDING VAT OF 12% BY PRIVATE ENTITIES MAKING THE INCOME PAYMENT (RMC 5-2006 & 7-2006) (RMC 5-2006 & 7-2006)

13. REVENUE MEMORANDUM ORDER NO. 8- 2003 dated March 3, 2003 Identified the Government officials designated as withholding agents personally responsible for the correct withholding of tax and its timely remittances. RESPONSIBILITY OF GOVERNMENT OFFICIALS They are charged with the DUTY to correctly withhold taxes on compensation, expanded and final withholding taxes as well as government money payments to persons registered as NVAT and VAT taxpayers and the timely remittance of taxes withheld.

14. MEMORANDUM – ACIR COLLECTION SERVICE July 22,2004 In order to implement strictly the withholding tax requirements specifically compliance of govt offices, in relation to E.O. 651 as implemented by RR 1-87 as amended, we are directed to require all govt offices and agencies including GOCC’s as well as provincial, city, municipal and barangay, to identify and submit an updated name of personnel charged with the duty to deduct, withhold and remit taxes withheld on Compensation, Expanded, Final and Govt Money Payments (GMP) on Percentage and Value added Tax including Franchise Tax.

15. The names of the incumbents of such positions shall be submitted by the head of office concerned to the Commissioner of Internal Revenue thru the Revenue District Office within thirty (30) days from receipt of such notification. Any change of such incumbents shall be reported, and names of the replacement submitted within ten (10) days from such change or replacement. The names of the incumbents of such positions shall be submitted by the head of office concerned to the Commissioner of Internal Revenue thru the Revenue District Office within thirty (30) days from receipt of such notification. Any change of such incumbents shall be reported, and names of the replacement submitted within ten (10) days from such change or replacement.

16. The designated official shall be personally liable for the additions to the tax prescribed in Chapter 1, Title X of the National Internal Revenue Code, as amended, for violations of withholding tax laws and regulations. The designated official shall be personally liable for the additions to the tax prescribed in Chapter 1, Title X of the National Internal Revenue Code, as amended, for violations of withholding tax laws and regulations.

17. RESPONSIBILITY OF GOVERNMENT OFFICIALS The following government officials are personally charged with the duty to correctly withhold taxes on compensation, expanded and final withholding tax as well as government money payments to persons registered as Non-VAT (percentage, franchise, etc.) and VAT taxpayers and the timely remittance of taxes withheld:

18. Local Government Units: 1. Provinces - Governor, Provincial Treasurer and Provincial Accountant 2. Cities - Mayor, City Treasurer and City Accountant 3. Municipalities - Mayor, Municipal Treasurer and Municipal Accountant 4. Barangays - Barangay Captain and Barangay Treasurer

19. Duties and obligations of the withholding agent. a) To Register –within ten (10) days (BIR Form 1903) a) To Register –within ten (10) days (BIR Form 1903) b) To Deduct & Withhold - from all money payments subject to withholding tax b) To Deduct & Withhold - from all money payments subject to withholding tax

20. c) To Remit/File the Tax Withheld/ Return - at the time prescribed by law and regulations (BIR Form No. 1600 & 1601 + MAP) c) To Remit/File the Tax Withheld/ Return - at the time prescribed by law and regulations (BIR Form No. 1600 & 1601 + MAP) d) To File Annual Return – BIR Form No. 1604 with Alphalist of Payees d) To File Annual Return – BIR Form No. 1604 with Alphalist of Payees e) To Issue Withholding Tax Certificates – within 10 days after end of the month/upon request of payee (BIR Form No. 2306 & 2307) e) To Issue Withholding Tax Certificates – within 10 days after end of the month/upon request of payee (BIR Form No. 2306 & 2307)

21. WHAT? WHEN? HOW?

22. Types of Withholding Taxes on Government Money Payments(GMP) Creditable Withholding Tax Creditable Withholding Tax Final Withholding Tax on VAT Final Withholding Tax on VAT Withholding on Percentage Tax Withholding on Percentage Tax

23. CREDITABLE WITHHOLDING TAX SYSTEM THE TAX WITHHELD IS INTENDED TO EQUAL OR AT LEAST APPROXIMATE THE TAX DUE OF THE PAYEE ON THE SAID INCOME. THE TAX WITHHELD IS INTENDED TO EQUAL OR AT LEAST APPROXIMATE THE TAX DUE OF THE PAYEE ON THE SAID INCOME. THE INCOME RECIPIENT IS STILL REQUIRED TO FILE AN INCOME TAX RETURN TO REPORT THE INCOME AND PAY THE DIFFERENCE ON THE TAX DUE AND THE TAX WITHHELD. THE INCOME RECIPIENT IS STILL REQUIRED TO FILE AN INCOME TAX RETURN TO REPORT THE INCOME AND PAY THE DIFFERENCE ON THE TAX DUE AND THE TAX WITHHELD.

24. WITHHOLDING TAX ON GOVERNMENT TRANSACTIONS 1. EXPANDED WITHHOLDING TAX (WE) TAX RATE purchases of: ----goods, materials, ----goods, materials, & supplies & supplies ----services ----services 1 % 2%

25. Casual or single purchase of GOODS and SERVICES worth Php 10,000 and below– not subject to EWT If regular purchases – subject to EWT for Php 1,000 & above (6 times & more)

26. MONTHLY ALPHALIST OF PAYEES (MAP) IS A CONSOLIDATED ALPHALIST OF INCOME EARNERS FROM WHOM TAXES HAVE BEEN WITHHELD FOR A GIVEN PERIOD. THIS IS REQUIRED TO BE SUBMITTED AS AN ATTACHMENT TO THE MONTHLY WITHHOLDING TAX RETURNS (1601E, 1601F, 1600) IS A CONSOLIDATED ALPHALIST OF INCOME EARNERS FROM WHOM TAXES HAVE BEEN WITHHELD FOR A GIVEN PERIOD. THIS IS REQUIRED TO BE SUBMITTED AS AN ATTACHMENT TO THE MONTHLY WITHHOLDING TAX RETURNS (1601E, 1601F, 1600)

27. WHEN TO WITHHOLD? THE OBLIGATION OF THE PAYOR TO DEDUCT AND WITHHOLD THE TAX ARISES AT THE TIME AN INCOME PAYMENT IS ACCRUED OR RECORDED AS AN EXPENSE OR ASSET, WHICHEVER IS APPLICABLE, IN THE PAYOR’S BOOKS, WHICHEVER COMES FIRST. PAYABLE MEANS THE DATE THE OBLIGATION BECOMES DUE, DEMANDABLE OR LEGALLY ENFORCEABLE. THE OBLIGATION OF THE PAYOR TO DEDUCT AND WITHHOLD THE TAX ARISES AT THE TIME AN INCOME PAYMENT IS ACCRUED OR RECORDED AS AN EXPENSE OR ASSET, WHICHEVER IS APPLICABLE, IN THE PAYOR’S BOOKS, WHICHEVER COMES FIRST. PAYABLE MEANS THE DATE THE OBLIGATION BECOMES DUE, DEMANDABLE OR LEGALLY ENFORCEABLE.

28. FINAL WITHHOLDING TAX THIS IS CONSIDERED AS THE FULL AND FINAL PAYMENT OF THE TAX DUE FROM THE PAYEE ON THE SUBJECT TRANSACTION. THIS IS CONSIDERED AS THE FULL AND FINAL PAYMENT OF THE TAX DUE FROM THE PAYEE ON THE SUBJECT TRANSACTION. FAILURE TO WITHHOLD THE TAX SHALL BE COLLECTED FROM THE PAYOR/WITHHOLDING AGENT. FAILURE TO WITHHOLD THE TAX SHALL BE COLLECTED FROM THE PAYOR/WITHHOLDING AGENT. THE INCOME RECEPIENT IS NOT REQUIRED TO FILE AN INCOME TAX RETURN IN SO FAR AS INCOME SUBJECTED TO FINAL WITHHOLDING TAX. THE INCOME RECEPIENT IS NOT REQUIRED TO FILE AN INCOME TAX RETURN IN SO FAR AS INCOME SUBJECTED TO FINAL WITHHOLDING TAX.

29. WITHHOLDING OF VALUE- ADDED TAX REVENUE REGULATIONS 14-02 REVENUE REGULATIONS 14-02 THE GROSS PAYMENTS MADE BY THE GOVERNMENT TO SELLERS OF GOODS & SERVICES SHALL BE SUBJECTED TO THE FOLLOWING TAX RATES: THE GROSS PAYMENTS MADE BY THE GOVERNMENT TO SELLERS OF GOODS & SERVICES SHALL BE SUBJECTED TO THE FOLLOWING TAX RATES: IN GENERAL, PAYMENT BY THE GOVERNMENT OR ANY OF ITS POLITICAL SUBDIVISIONS, INSTRUMENTALITIES OR AGENCIES INCLUDING GOCCS ON ACCOUNT OF ITS PURCHASE OF GOODS FROM SELLERS AND SERVICES RENDERED BY SERVICE CONTRACTORS WHO ARE SUBJECT TO VAT (FINAL WITHHOLDING TAX – RR16-2005) 5% IN GENERAL, PAYMENT BY THE GOVERNMENT OR ANY OF ITS POLITICAL SUBDIVISIONS, INSTRUMENTALITIES OR AGENCIES INCLUDING GOCCS ON ACCOUNT OF ITS PURCHASE OF GOODS FROM SELLERS AND SERVICES RENDERED BY SERVICE CONTRACTORS WHO ARE SUBJECT TO VAT (FINAL WITHHOLDING TAX – RR16-2005) 5% PAYMENTS FOR SERVICES RENDERED IN THEPHILIPPINES BY NON-RESIDENTS – FOR LEASE OF PROPERTY RIGHTS FOR SERVICES RENDERED TO LOCAL INSURANCE COMPANIES FOR PREMIUMS PAYABLE TO NONRESIDENT INSURANCE PAYMENTS FOR SERVICES RENDERED IN THEPHILIPPINES BY NON-RESIDENTS – FOR LEASE OF PROPERTY RIGHTS FOR SERVICES RENDERED TO LOCAL INSURANCE COMPANIES FOR PREMIUMS PAYABLE TO NONRESIDENT INSURANCE OTHER SERVICES RENDERED IN THE PHILIPPINES BY NONRESIDENTS OTHER SERVICES RENDERED IN THE PHILIPPINES BY NONRESIDENTS VAT WITHHOLDING 12% VAT WITHHOLDING 12%

30. WHERE THE GOVERNMENT HAS REGIONAL OFFICES, BRANCHES OR UNITS, THE WITHHOLDING AND REMITTANCE OF THE VAT WITHHELD MAY BE DONE ON A DECENTRALIZED BASIS. DECENTRALIZED REMITTANCE IS NOT APPLICABLE IF THE TAXPAYER WITHHOLDING AGENT IS CLASSIFIED AS LARGE TAXPAYER BY THE COMMISSIONER OF INTERNAL REVENUE WHERE THE GOVERNMENT HAS REGIONAL OFFICES, BRANCHES OR UNITS, THE WITHHOLDING AND REMITTANCE OF THE VAT WITHHELD MAY BE DONE ON A DECENTRALIZED BASIS. DECENTRALIZED REMITTANCE IS NOT APPLICABLE IF THE TAXPAYER WITHHOLDING AGENT IS CLASSIFIED AS LARGE TAXPAYER BY THE COMMISSIONER OF INTERNAL REVENUE

31. WITHHOLDING TAX ON GOVERNMENT TRANSACTIONS Under RA 9337 (Eff. Nov. 1, 2005) 2. VALUE ADDED TAX (VT) TAX RATE on purchases of: goods, materials, supplies & goods, materials, supplies &services 5% Standard W/H Tax (Final)

32. WITHHOLDING TAX ON GOVERNMENT TRANSACTIONS 3. PERCENTAGE (WV) TAX RATE Creditable W/H of percentage tax on Goods/supplies, Services or combined, for seller having several payors (RR 14-2003) 3%

33. Revenue Memorandum Circular No. 23-2007 Dated March 20, 2007 Clarifications on the computation of Withholding Taxes and other requirements on Government Money Payments due or payable to supplier of goods and/or services. EXEMPTED FROM WITHHOLDING: 1.Purchase of goods and/or services by any government official and employee recorded as reimbursable allowance, benefit or incentive to government official and employee by the concerned government office (e.g. RATA) 2.Casual government purchases amounting to not more than P 10,000.00 “Casual Purchases” means the number of transactions with the supplier is less than six (6) in a year regardless of amount per transaction either on the previous or current year.

34. ISSUANCES: Revenue Memorandum Circular No. 13-2007 Dated February 05, 2007 Reimbursable expenses made by government officials are treated as Representation and Transportation Allowance (RATA) or allowances given to public officers and employees incurred in the performance of their official duties. The expenses are made in their personal capacity even if reimbursed by the government agency. As such, these are not subject to the 5% withholding tax on Final VAT.

35. Revenue Memorandum Circular No. 45-2007 Dated July 06, 2007 Reiteration for the Top 10,000 private corporations and government agencies related to the withholding of 2% EWT on purchases of services such as those incurred on interest on loans, services fees and other charges extended by banks, quasi-banks and other financial institutions, insurance premiums, (life and non-life), telecommunications, electricity, and other utilities, and other income payment on services. Revenue Memorandum Circular No. 71-2007 Dated October 9, 2007 Accessibility of implementation on taxpayers between the BIR and local government units for tax collection purposes. The BIR can request from the LGU details of the costs, volume of production, receipts or sales, and gross income of taxpayers among others

36. The LGU can request from the BIR information in order to guide them in collecting the correct local taxes, fees and charges from the list of taxpayers. Revenue Memorandum Circular No. 05-2006 Dated November 02, 2005 Government Money Payment chart is prescribed for the computation of taxes withheld at source on the sale of goods and services to the government or any of its political subdivisions. The withholding includes creditable withholding tax, Final VAT and Percentage tax. The new government money payment chart takes into consideration the new rates provided in RR 12-2001, RR 14-2002, RR 30-2003 and RR 16-2005.

37. EXPENSE COD E INCOME EXPENSE PAYMENT G/S EWT160 1E FINAL VA TNVATFINAL TAX TOTAL WHT MAINTENANCE AND OPERATING EXPENSES FORM1 600 FORM1601F 3COMM. SVCS.SERVICE2%5%3% 7%or5% 4REPAIRS & MAINT. SERVICE2%5%3% 7%or5% GOVT.FACILITIES GOODS1%5%3% 6%or4% 5REPAIRS & MAINT. SERVICE2%5%3% 7%OR5% GOVT.VEHICLES GOODS1%5%3% 6%OR4% 6TRANSP. SVCS. DOMESTICAIR,SEA,LAN D SERVICE2%5%3% 7%OR5% INTL.AIR&SEA 2%NONE3% 2%OR3% 6TRANSP.PASSNGRS DOMESTIC AIR &SEA SERVICE2%5%3% 7%OR5% INTL. AIR&SEA SERVICE2%NONE3% 2%OR3% TRANSP. CARGOES AIR,LAND %SEA GOODS1%5%NONE 6% 7SUPP.&MAT. GOODS1%5%3% 6%or4% 8RENTAL 1.REAL PROP. SERVICE5% 3% 10%OR8% 2.CIN. FILMS SERVICE5% 3% 10%OR8%

38. 3.PERS.PROP. SERVICE5% 3% 10%OR8% 8PYMNT.LEASE OR USE 1.PRP.RTS.NONRES. SERVICENONE10%NONE 10% 2.SRVCE.LOCAL INS.NON RES. SERVICENONE10%NONE 10% 3.OTHER SVCS.NON-RES. SERVICENONE10%NONE 10% 11AWARDS NONE 20% 14MLA.WATER CO. INCOME TAX HOLIDAY UP TO JULY31,2006 SERVICENONE5%NONE 5% 1-Aug-06SERVICE2%5%NONE 7% MNLAD WTR.SVCS. SERVICENONE5%NONE 5% INCOME TAX HOLIDAY UP TO AUG.2007 POWER- MERALCO SERVICE2%5%NONE 7% OTHER WATER UTILITIES SERVICE2%5%2% 7%OR4% PAYMENT TO COOPS 1.WT BIR EXMP.CERT. SERVICENONE 2.WTOUT BIR EXEMP. CERT. SERVICE2%5%NONE 7% 1.WT BIR EXMP. CERT. GOODSNONE 2.WTOUT BIR EXMP.CERT. GOODS1%5%NONE 6% 17TRAININGS & SEMINARS SERVICE2%5%3% 7%OR5% 23PURCHASE OF GASOLINE GOODS1%5%3% 6%OR4% OTHER PETRLM. PRDS. GOODS1%5%3% 6%OR4% SVCS. GSLINE STATIONS SERVICE2%5%3% 7%OR5%

39. 24INSURANCE PREMIUMS NON-LIFE SERVICE2%5%3% 7%OR5% LIFE SERVICE2%NONE5% 2%OR7% 27LIBRARY BKS. & MATERIALS GOODS1%5%3% 6%0R4% 29OTHER SERVICES SECRTY.,JANTRIAL,MAINT.AIRCON,E TC. SERVICES2%5%3% 7%OR5% PROF. SVCS. GPP SERVICESNO NE 5%3% 5%OR3% PROF.FEES PD.TO JURIDICAL PRSNS. SERVICE10%5%3% 15%OR13 % SVCS. BY PRSONS IN PRCTCE. OF PROF. SERVICE10%5%3% 15%OR13 % <720,0 00 PYMT. TO PARTNERS GPP SERVICE15%5%3% 20%OR18 % >720,0 00 SERVCE. RENDERED BY ACTORS, ETC. SERVICE10%5%3% 15%OR13 % <720,0 00 SERVICE15%5%3% 20%OR18 % >720,0 00

40. SERVICE BY DCTRS.LWYERS SERVICE10%5%3% 15%OR1 3% <720, 000 SERVICE15%5%3% 20%OR1 8% >720, 000 SERVICE BY GPP OF DCTRS. &LWYERS SERVICENONE5%3% 5%OR3 % PURCHASE OF OTHER GOODS GOODS1%5%3% 6%OR4 % PURCHASE OF AGRI PRODS. GOODS1% NONE ORIG 3% 1%OR3 % SVCS. BY CUSTOMS,REAL EST BROKERS, ETC. SERVICE10%5%3% 15%OR1 3%

41. CAPITAL OUTLAY 34PURCHASE OF LAND 1.5,3,5, 6%5%3% 6.5,8,10,11OR4.5,6,8,9% LAND IMPVMTS. OUTLAY GOODS1%5%3% 6%OR4% SERVICES2%5%3% 7%OR5% 35 BLDG. &IMPVMTS. OUTLAY STRAIGHT CONTRCT.(LABOR &MAT.) SERVICE2%5%3% 7%OR5% SEPARATE INV/BLLNG FOR MAT. GOODS1%5%3% 6%OR4% SEPARATE INV/BLLNG FOR LABOR SERVICE2%5%3% 7%OR5% 36 FURN. FIXT. EQP.&BOOK OUTLAY GOODS1%5%3% 6%OR4% 38% INFO TECH (IT)EQPT.OUTLAY GOODS1%5%3% 6%OR4% SERVICE2%5%3% 7%OR5% 39 LUMP SUM CAPITAL OUTLAY 2%5%3% 7%OR5% BASED ON RATES AS PROVIDED UNDER RMC 5-2006 DATED NOVEMBER 2,2005.

43. BIR Form No. OCN1RC0000164805 Revised July 1997 CERTIFICATE OF REGISTRATION TINNAMEREGISTRATION DATE 999-999-999ARAÑEZ, PAULO REBWEL A.9/9/1999 REGISTERED ADDRESS P. PATERNO ST., SAN PABLO CITY LAGUNA 4000 REGISTERED ACTIVITY(IES) TAX TYPE INCOME TAXREGISTRATION FEE VALUE - ADDED TAXWITHHOLDING TAX - COMPENSATION TRADE NAMELINE OF BUSINESS / INDUSTRY ANN SUCCESS STUFFED TOYS1729 MANUFACTURE OF OTHER TEXTILES, NEC I HEREBY CERTIFY THAT THE ABOVE NAMED PERSON IS REGISTERED AS INDICATED ABOVE, UNDER THE PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED. RDO DRY SEAL THIS CERTIFICATE MUST BE EXHIBITED CONSPICUOUSLY IN THE PLACE OF BUSINESS REVENUE DISTRICT OFFICER (signatureover printed name) RUSTICO M. BAYANI ASST. REVENUE DISTRICT OFFICER REPUBLIKA NG PILIPINAS KAGAWARAN NG PANANALAPI KAWANIHAN NG RENTAS INTERNAS REVENUE REGION NO. 9 REVENUE DISTRICT NO 055

45. PUNISHABLE ACTS OR OMISSIONS EVERY OFFICER OR EMPLOYEE OF THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES OR ANY OF ITS AGENCIES AND INSTRUMENTALITIES, ITS POLITICAL SUBDIVISIONS, AS WELL AS GOCCS CHARGED WITH THE DUTY TO DEDUCT AND WITHHOLD ANY INTERNAL REVENUE TAX AND TO REMIT THE SAME IN ACCORDANCE WITH THESE EGULATIONS SHALL, UPON CONVICTION FOR EACH ACT OR OMISSION, HEREIN SPECIFIED, BE FINED IN A SUM OF NOT LESS THAN P5000.00 BUT NOT MORE THAN P50,000.00 OR IMPRISONED FOR A TERM OF NOT LESS THAN 6 MONTHS AND ONE DAY BUT NOT MORE THAN TWO YEARS, OR BOTH. EVERY OFFICER OR EMPLOYEE OF THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES OR ANY OF ITS AGENCIES AND INSTRUMENTALITIES, ITS POLITICAL SUBDIVISIONS, AS WELL AS GOCCS CHARGED WITH THE DUTY TO DEDUCT AND WITHHOLD ANY INTERNAL REVENUE TAX AND TO REMIT THE SAME IN ACCORDANCE WITH THESE EGULATIONS SHALL, UPON CONVICTION FOR EACH ACT OR OMISSION, HEREIN SPECIFIED, BE FINED IN A SUM OF NOT LESS THAN P5000.00 BUT NOT MORE THAN P50,000.00 OR IMPRISONED FOR A TERM OF NOT LESS THAN 6 MONTHS AND ONE DAY BUT NOT MORE THAN TWO YEARS, OR BOTH.

46. A. FAILS OR CAUSES THE FAILURE TO DEDUCT AND WITHHOLD ANY INTERNAL REVENUE TAX COVERED BY THESE REGULATIONS. B. FAILS OR CAUSES THE FAILURE TO REMIT THE TAXES DEDUCTED AND WITHHELD WITHIN THE TIME PRESCRIBED THEREIN. C. FAILS OR CAUSES THE FAILURE TO FILE THE RETURN OR ISSUE THE CERTIFICATE REQUIRED.

47. SUMMARY

48. Income Payment Expanded Withholding Tax Remittance Form Certificate due to Supplier Final VAT Remittance Form Certificate due to Supplier Due Date GOODS 1%1601-E23075%16002306 10th of the ff mo. except December return SERVICES 2%1601-E23075%16002306 10th of the ff mo. except December return TRANSACTIONS WITH VAT REGISTERED SUPPLIERS BIR Form 2307 - Distribution of certificates is on the 20 th of the following month BIR Form 2306 - Distribution of certificates is on the 10 th of the following month

50. Income Payment Expanded Withholding Tax Remittanc e Form Certificate due to Supplier Withholding Percentage Tax Remittance Form Certificate due to SupplierDue Date GOODS 1%1601E2307*3%1600 2307** 10th of the ff mo. except December return SERVICES 2%1601E2307*3%1600 2307** 10th of the ff mo. except December return TRANSACTIONS WITH NVAT REGISTERED SUPPLIERS *BIR Form 2307-Distribution of certificates is on the 20 th of the following month **BIR Form 2307-Distribution of certificates is on the 10 th of the following month

51. SAMPLE COMPUTATIONS

52. MERALCO - VAT REG. current charges (services) 11,200.00 11,200.00 / 1.12 X 2% = 200.00 EWT 11,200.00 / 1.12 X 5% = 600.00 VAT 800.00 NET MERALCO CHECK10,400.00 XYZ CORP. NON VAT REG. (services)20,000.00 20,000.00 x 2% = 400.00 EWT 20,000.00 x 3% = 600.00 PERCENTAGE TAX 1,000.00 NET XYZ CORP. CHECK19,000.00

53. PURCHASE OF SERVICES (VAT TP per COR) Per invoice: Sales120,000 Vat 12% (120,000 x 12%) 14,400 TOTAL 134,400 ALOBS134,400 VAT 120,000 x 5% 6,000 EWT 120,000 x 2% 2,400 8,400 PAYABLE TO SUPPLIER 126,000 BIR Form 1600 + 2306 + MAP 6,000 BIR Form 1601E +2307 + MAP 2,400

54. Invoice – VAT not separately billed GROSS AMOUNT 134,400 134,400 / 1.12 = 120,000 VAT 120,000 X 5% = 6,000 EWT 120,000 X 2% = 2,400 8,400 Payable to supplier 126,000 BIR Form 1600 + 2306 + MAP 6,000 BIR Form 1601 E + 2307 + MAP 2,400

55. PURCHASE OF SERVICES (percentage TP) Per Official Receipt SALES 120,000 ALOBS 120,000 PT 120,000 x 3%3,600 EWT 120,000 x 2% 2,4006,000 Payable to supplier 114,000 BIR Form 1600 + 2307 + MAP3,600 BIR Form 1601E + 2307 + MAP 2,400

56. REVENUE MEMORANDUM CIRCULAR NO. 72-2004 November 16, 2004

57. Clarification of Issues on the Additional Transactions Subject to CWT under RR 17- 2003, as amended by RR 30-2003, RR 1-2004 and RR 3-2004

58. I - BASIS OF WH TAX

59. Question 1 What shall be the basis of EWT or CWT on payments made to a Non-VAT registered supplier of goods or services?

60. The basis shall be the gross billing. Example of income payment to NON-VAT registered contractor: Answer 1

61. Gross Billing on Services P100,000.00 Less: 2% EWT x P100,000.00 2,000.00 Net amount due the payeeP 98,000.00

62. What shall be the basis of CWT to a VAT registered supplier of goods and services? Question 2

63. The basis shall be the gross amount paid exclusive or net of VAT. Example of income payment to VAT registered contractor: Answer 2

64. Gross amount paid P 112,000.00 Less: 2% EWT (P112,000.00/1.12x2%) 2,000.00 Amount due the payee P 110,000.00

65. What shall be the basis of EWT in case goods and services are not billed separately on purchases made by the TTC, GO and LT? Question 3

66. In cases where purchase of goods are separately billed from purchase of service, the applicable rate of 1% on goods and 2% on services shall be applied respectively. Answer 3

67. However, in case of failure to separately bill goods and services, the higher rate of 2% shall apply.

68. II. ON INCOME PAYMENTS TO MERALCO, COMMUNICATIONS AND OTHER UTILITY COS.

69. Are payments to Meralco and telecommunications companies like PLDT, SMART, etc. considered payment for services and as such, subject to the 2% EWT if the payor is TTC/GO/LT? Question 4

70. Yes, they are considered payments for services, subject to the 2% EWT if the payor is TTC/GO/LT pursuant to Sections 2.57.2 (M) and (N) of RR 2-98, as amended. Answer 4

71. For payments made to Meralco by TTC/GO/LT, what will be the tax base in the computation of the 2% EWT? Question 5

72. It shall be the current amount due appearing in the billing statement. Answer 5

73. Is the TTC/GO/LT- lessee required to withhold the 2% EWT on its payments to Meralco, PLDT and other utility companies Question 6

74. which are coursed through the lessor, the electric meter being in the name of the lessor?

75. Yes, the TTC/GO/LT- lessee shall withhold the 2% EWT whether or not the electric meter is in its name provided that Answer 6

76. valid proof that payment of a particular expense is being shouldered by the payor claiming the expense.

77. The lessee shall present the lease contract and the photocopy of the notice from the BIR designating the corporation as one of the TTC’s to the MERALCO

78. PLDT and other utility companies through the lessor and issue the corresponding BIR Form No. 2307 in the name of the utility companies.

79. If TTC, GO, LT failed to withhold tax on payments to Meralco, telecom companies, service providers, purchase of supplies or goods etc. Question 7

80. as enumerated under RR 17-2003 from June, 2003 to present, may the TTC/GO/LT deduct the tax from the current billing of the said companies?

81. Will the TTC/GO/LT be penalized for its failure to withhold for the months of June and July, 2003?

82. No, withholding of the EWT shall be in the current month and may only be deducted in the billings for the current month. Answer 7

83. Penalties for failure to withhold the 2% EWT from prior periods shall be imposed on the payor- withholding agent but it may request for abatement of penalties under RR 13-2001 dated September 27, 2001

84. IV. OTHER CLARIFICATION

85. Is the payment by the TTC, GO, LT to their regular suppliers through employees, agents or any persons purchasing for or in its behalf representing reimbursable expenses by the payee subject to the EWT? Question 8

86. Yes, the reimbursable expenses are subject to the EWT of 1% on goods or 2% on services provided that the sales invoice/official receipt shall be in the name of the persons whom the former represents and the corresponding certificate of taxes withheld at source (BIR Form No. 2307) is issued. Answer 8

87. It is reiterated that BIR Form No. 2307 shall only be issued by duly authorized representative of the employer–WH agent.

88. Is the payment for membership dues of the TTC/GO/LT to country clubs and/or sports club and the like considered service subject to the 2% EWT under RR 17- 2003? Question 9

89. Yes, membership fees are considered services subjected to the 2% EWT. However, when the payee -club or organization is a non-stock, non-profit organization not subject to INCOME TAX. Answer 9

90. The payment is not subject to EWT upon presentation of BIR Certificate of Tax Exemption

91. What will be the basis of the 2% EWT if the charges of hotel, motel, resort and similar establishments to TTC/GO/LT include room accommodation, food and beverage, laundry, business center charges, etc. including service charges? Question 10

92. The basis shall be the gross billing exclusive or net of the VAT for VAT registered payees and gross billing for NON-VAT registered payees. Answer 10

93. Are services rendered by private hospitals and entities considered GOCC subject to the 2% EWT if the payor is a TTC/GO/LT? Question 11

94. Yes, since they are also engaged in the supply of services. Only GSIS, SSS, PHILHEALTH & PCSO are exempted from IT and from EWT. Answer 11

95. Is payment by TTC/GO/LT for magazine/newspaper subscription subject to 1% EWT? Question 12

96. Yes, it shall be considered purchase of goods subject to 1% EWT. Answer 12

97. Is the amount paid to TV or radio stations by the TTC/GO/LT for airing commercials and payment made directly to newspaper publishers for print advertisements subject to the 2% EWT? Question 13

98. Yes, they are considered suppliers of service and therefore subject to 2% EWT. Answer 13

99. Is the payment made by an advertising agency for the print advertisement of TTC/GO/LT to newspaper publishers (Manila Bulletin, Manila Times, etc.) subject to EWT? Question 14

100. The payment made by the advertising agency for the print advertisement of TTC/GO/LT to the newspaper publisher is subject to the 2% EWT provided that the advertising agency is a TTC/LT. Answer 14

101. Is the payment made to Health Maintenance Organizations (HMOs) by TTC/GO/LT subject to EWT? Question 15

102. Yes, the payment is subject to 2% EWT. Answer 15

103. Are payments made by TTC/GO/LT to cooperatives for the purchase of goods and/or services subject to EWT? Question 16

104. Yes, except when they can show proof of exemption from income tax issued by the BIR. Answer 16

105. Are payments made to companies registered with PEZA/BOI for the purchase of goods or services subject to EWT? Question 17

106. Yes. However, payments to PEZA/BOI registered companies which are exempt from income tax shall not be subjected to EWT pursuant to Section 2.57.5 of RR 2-98, as amended, upon presentation of proof of exemption issued by the concerned agency Answer 17

107. Is the amount paid by a TTC/GO/LT to the automotive dealer representing the entire amount of a car availed of by an employee through a company car plan subject to EWT if the car will be registered with Land Transportation Office (LTO) under the name of the employee? Question 18

108. Yes, the amount paid by the TTC/GO/LT to the automotive dealer is subject to 1% EWT. Answer 18

109. RMO 13-2008 (dated March 13, 2004) Prescribing the policies, guidelines and procedures in the collection, affixture, remittance and reporting of DST through “Constructive Stamping or Receipt System” on certificates issued by government agencies and its instrumentalities including LGU’s. Prescribing the policies, guidelines and procedures in the collection, affixture, remittance and reporting of DST through “Constructive Stamping or Receipt System” on certificates issued by government agencies and its instrumentalities including LGU’s.

110. CONSTRUCTIVE STAMPING OR RECEIPT SYSTEM Constructive affixture is done by affixing to the taxable document the duplicate copy or certified true copy of the DST return (BIR Form 2000). The corresponding DST shall be collected by the Government Agency and indicated as an item on the Government Official Receipt. This will be attached to the certificate as proof of payment of DST. Constructive affixture is done by affixing to the taxable document the duplicate copy or certified true copy of the DST return (BIR Form 2000). The corresponding DST shall be collected by the Government Agency and indicated as an item on the Government Official Receipt. This will be attached to the certificate as proof of payment of DST.

111. POLICIES & PROCEDURES 1. All GAs that are issuing certifications shall be mandated to use “ConstructiveStamping or Receipt System (CS/RS)” in the collection and affixture of DST. 2. The GAs that will be mandated to use the system shall register at the concerned Revenue District Office (RDO). Likewise, the logbook to be used

112. POLICIES & PROCEDURES by the GAs in recording the details of DST collection and remittance shall also be registered. 3. The GAs shall be constituted as agent of the Commissioner of Internal Revenue for the collection of tax, in which case, shall remit the DST collected to the Bureau.

113. POLICIES & PROCEDURES 4. The cost of printing the GOR shall be shouldered by the GA issuing thereof. 5. In case of failure to collect and remit the DST on time, the GA shall be liable for the payment of said tax, in addition to the penalties prescribed under the National Internal Revenue Code, as amended.

114. POLICIES & PROCEDURES 6. There shall be no separate GOR to be issued by the GA for the DST collected. The amount of DST collected shall be indicated as an item in the GOR just like other information that have to be reflected in the GOR such as name of the recipient of the Certificate /document, kind of certification, “Certification Fee” and amount, among others.

115. POLICIES & PROCEDURES 7. The GA shall maintain a logbook of all the GORs issued indicating therein Date of Issuance of the GOR, inclusive Serial Numbers of the GOR issued, number and kind of certifications issued, amount of DST collected, date of remittance, Authorized Agent Bank (AAB) where the remittance was made, amount of remittance.

116. POLICIES & PROCEDURES 8. Summarize all transactions on a daily and monthly basis; 9.The filing of DST Return (BIR Form No. 2000) and payment of the tax shall be made to an Authorized Agent Bank (AAB) within five (5) days after the close of the month when the taxable documents were made, signed, issued, accepted or transferred.

117. POLICIES & PROCEDURES 10. Prepare a Monthly Report of DST Collected and Remitted, indicating therein the following details: the inclusive serial number of GORs issued, date issued, number and kind of certification issued and amount of DST collected, including details of remittance (amount remitted, date of remittance and AAB

118. POLICIES & PROCEDURES 11. A Report on DST Collection and Remittance shall be made every 10 th day of the ff month (annex A) a daily and monthly basis;

119. POLICIES & PROCEDURES 12. Allow the field auditors of the Commission on Audit and the BIR to verify all documents or record relative to the collection and remittance of DST.

122. GARY I. FLORESTA Revenue Officer III NORMA PEREZ-DIME Revenue Officer JOSEPHINE GONZALES Revenue Officer LIZA LOZADA Revenue Officer  REVENUE DISTRICT OFFICE No. 054-A South Cavite,Trece Martires City