BIR Bookkeeping Regulations RR V-1 (Emelino T Maestro)

0998 9793922 0917 8610550

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Statement of Facts

More than twenty four thousand eight hundred days or sixty eight years from the time that the Bureau of Internal Revenue’s Revenue Regulations V-1 was developed and implemented, it remained so relevant and a valuable source of knowledge and information for tax accounting bookkeepers and taxpayers of the Republic of the Philippines.

It reminds and requires the taxpayers to make entries in their books of accounts, keep them and the source documents used in making entries therein in their principal place of office and finally, present all of them at the time requested or required by the revenue officers assigned and authorised to see, hold and examine them.

Because this find is as precious as the the diamond, it must be given attention and importance in conducting a business.

Keep.

Information.

Short.

Simple.

Uniform.

Equitable.

Progressive.

REVENUE REGULATIONS NO. V-1
THE BOOKKEEPING REGULATIONS

TO All Internal Revenue Officers and others Concerned

CHAPTER I
Scope and Definition of Terms
SECTION 1.  Scope. — Pursuant to the authority granted in section 338, in relation to section 4 (j) of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, the following regulations relative to the keeping of books of accounts, records, registers, and the issuance of invoices, receipts, tickets, and other supporting papers and documents by persons subject to internal revenue taxes, and the manner of recording business transactions are hereby promulgated and shall be known as Revenue Regulations No. V-1 or "The Bookkeeping Regulations." 

 
SECTION 2.  Definition of Terms. — As used in these regulations, the following words and phrases shall be taken to mean as follows:
"Persons" include natural persons and partnerships, associations, companies or corporations, no matter how created or organized.
"Books of accounts" shall include the journal and the ledger and their subsidiaries, or their equivalents.
"Journal" is a book of original entry in which the happenings or transactions affecting the business of a taxpayer are recorded consecutively day by day as they occur.
"Ledger" is a book of final entry to which are posted the classified accounts or items of all transactions entered in the journal or its equivalents.
"Simplified set of Bookkeeping Records" consists of the record of daily sales and cash receipts, the record of daily purchases, expenses and cash disbursements, record of the summary of transactions, and the yearly statements of net worth and operations, which may be in combined form or in separate booklets. Said records should be specially designed for each class or kind of trade or business and prepared by a certified public accountant, should conform substantially with the forms illustrated in Revenue Regulations No. V-13, should be regularly bound, and may be printed, mimeographed or typewritten. 
An "independent certified public accountant" is one who is in fact independent. In other words, an accountant will not be considered independent with respect to any person in whose business the accountant has any financial interest, direct or indirect, or in which he is, or was during the period of the report, connected as a promoter, underwriter, voting trustee, director, officer, or employee. 

A certified public accountant whose work is subject to the supervision and control of the taxpayer, or who is employed to keep the books of accounts or to supervise the keeping of the said, accounts, cannot audit the latter's books of accounts. He must, therefore, be employed exclusively to audit the books of accounts of the taxpayer and not for any other purpose, nor bear to him any business or professional relationship which may in any way affect the independence of his professional actuations.

A firm of certified public accountants, one of the members of which is actually keeping or supervising the keeping of the books of accounts of a certain taxpayer, cannot audit or examine the said books of account of the latter. 

CHAPTER II
Books of Accounts and Audit by Independent Certified Public Accountants. "All corporations, companies, partnerships, or persons required by law to pay internal revenue taxes shall keep a journal and a ledger, or their equivalents: Provided, however, That those whose gross quarterly sales, earnings, receipts, or output do not exceed five thousand pesos shall keep and use a simplified set of Bookkeeping Records duly authorized by the Secretary of Finance wherein all transactions and results of operations are shown and from which all taxes due the Government may readily and accurately be ascertained and determined any time of the year. And provided, further, That in the case of corporations, companies, partnerships or persons whose gross quarterly sales, earnings, receipts or output exceed twenty-five thousand pesos, shall have their Books of Accounts audited and examined yearly by Independent Certified Public Accountants and their income tax returns accompanied with certified balance sheets, profits and loss statements, schedules, listing income-producing properties and the corresponding incomes therefrom and other relevant statements." 

SECTION 3. Persons Required to Keep Books of Accounts: — Persons required by law to pay internal revenue taxes whose gross quarterly sales, earnings, receipt, or output, whether subject to percentage tax or not, exceed five thousand pesos (P5,000), are required to keep books of accounts in accordance with the standard accounting system. The said books of accounts shall consist of journal and a ledger, or their equivalents, and shall contain all information necessary for the accurate determination of the internal revenue taxes due on their businesses.

SECTION 4. Journals, Ledgers, and Their Equivalents: — The journal may consist of only one book, the general journal. Its equivalents may consist of several books such as sales book, purchase book, cash book and such other books as the taxpayer may find convenient for his business. Such books are also books of original entries where all the daily transactions, whether cash or otherwise, are recorded in their chronological order. A journal, in order to comply with the provisions of these regulations, must contain all the transactions affecting the business. Every entry in the general journal shall carry a brief but complete explanation of the nature of the business transaction and be supported by proper vouchers. The general journal shall be in bound form. Where subsidiary journals are used, the same may be either bound or in loose-leaf form provided that the entries in loose-leaf sheet shall be summarized at the end of every month in the general journal which shall then be posted to the ledger.   
The ledger, like the journal, may consist of one book, the general ledger. Its equivalents, may consist of several ledgers such as customers' ledger, creditors' ledger, stock ledger, and such other books as the taxpayer may find convenient for his business. All entries in the journal must be posted to the ledger not later than seven days from the date of the transaction and shall be classified in the ledger so as to show the assets, liabilities, capital, and the operating accounts from which a balance sheet, and a profit and loss statement covering the operation of the business can be prepared. No entry shall be made in the ledger or its equivalents unless said entry originates from the journal or its equivalents. The general ledger shall be in bound form. Where subsidiary ledgers are used, the same may be either in book form or in loose-leaf form, provided that the entries in the loose-leaf subsidiary ledger are reflected in the general ledger by a controlling account. In meritorious case and upon written authority of the Commissioner of Internal Revenue the use of the general journal and the general ledger in loose-leaf may be allowed.

SECTION 5. Persons Required to Keep Simplified Set of Bookkeeping Records: — Persons required by law to pay internal revenue taxes on business whose gross quarterly sales, earnings, receipts or output do not exceed five thousand pesos (P5,000) shall keep and use the simplified set of bookkeeping records recommended by the Commissioner of Internal Revenue and approved by the Secretary of Finance as defined in section 1 of these regulations, unless they elect to keep the regular books of accounts. Simplified sets of bookkeeping records previously authorized under Revenue Regulations No. V-13  which are not specifically assigned and designated for use of a definite class of trade or business and for which specific sets of bookkeeping records have been prepared in accordance with and authorized under Revenue Regulations No. V-43 shall no longer be used. All persons commencing business after the publication of these regulations shall use the simplified sets provided for in these regulations. However, persons already engaged in business at the time of the publication of these regulations may continue using their simplified sets of bookkeeping records authorized under Revenue Regulations No. V-13 until December 31, 1962. Thereafter, beginning January 1, 1963, only such forms of simplified sets of bookkeeping records approved and authorized for use in particular line of business or trade under Revenue Regulations No. V-43 are allowed to be used. 

A trade or business for which no specific form has as yet been approved pursuant to Revenue Regulations No. V-43 may use a simplified set of bookkeeping records approved under Revenue Regulations No. V-13 until such time when a specific set therefor has been approved under the latter regulations.

The simplified sets of bookkeeping records enumerated in Annex "A" hereof are the only ones so far approved by the Secretary of Finance in accordance with Revenue Regulations No. V-43.

SECTION 6. Transactions to be Recorded in the Simplified Set of Bookkeeping Records. — The amount of sales of goods, wares, or merchandise or the value of services rendered for the day, whether in cash or on credit, shall be entered in the record of daily sales and cash receipts not later than five o'clock in the afternoon of the day following the date of transaction. The manner of entering the transactions for the day in the record of daily sales and cash receipts are explained in Appendix I (Form No. 1). If there is no sale or receipt during the day, that fact shall be noted in the said record within the same period.
All purchases and expenditures whether in cash or on credit and other sundry disbursements shall be recorded likewise every day in the record of daily purchases, expenses and cash disbursements not later than five o'clock in the afternoon of the day following the date the particular transaction was effected. The manner of entering the transactions for the day in the said record of daily purchases, expenses and cash disbursements are explained in Appendix II (Form No. 2).
Within twenty-four hours after the close of each calendar month, the money columns of the record of daily sales and cash receipts and record of purchases, expenses and cash disbursements shall be totalled and posted or transferred to the corresponding columns in the record of the summary of transaction as shown in Appendix III (Form No. 3). After the end of the accounting year, the money columns of the summary of transactions shall be totalled and the computations indicated therein properly accomplished.
The yearly statements of net worth and operations shall be prepared within one hundred and five days after the end of the accounting year by using the totals for the year in the summary of transactions and the inventory sheet required by Section 13 of Revenue Regulations No. V-1. The said yearly statements shall be attached to the income tax return to be filed by the taxpayer.

SECTION 7. Records of Receipts and Disbursement: — All persons subject to any internal revenue tax on their occupation, pursuit or calling of whatever nature, or on their income, such as professionals, farmers, property owners, etc., shall, unless they provide themselves with the journal and the ledger or their equivalents, keep a record of their receipts and disbursements. All entries therein shall be made not later than five o'clock in the afternoon of the day following the date the transaction was effected. However, a person whose only source of income is his salary shall be exempt from keeping the records prescribed in these regulations.

SECTION 8. Entries to be Kept up to Date in Ink or Indelible Pencil. — All entries in the books of accounts and other records must be kept up to date in ink or indelible pencil in a neat and legible manner, and the figures entered in all columns shall be totalled within twenty-four hours from and after the close of each calendar month and the totals posted at the foot of the respective columns. All transactions, the time of posting or entry of which is not specifically provided for in these regulations, shall be recorded within seven days from the date of transactions were effected.

SECTION 8-A. Audit to be Performed by Independent Certified Public Accountant: — (1) Corporations, companies, partnerships or persons whose gross quarterly sales, earnings, receipts or output exceed twenty-five thousand pesos, shall have their books of accounts audited and examined yearly by independent certified public accountants. The audit to be performed by an independent certified public accountant shall embrace an examination of the accounting for assets, liabilities and capital together with a review of the income and expense accounts of the taxpayers in accordance with generally accepted auditing standards and procedures.

SECTION 8-B. Schedule of Income-Producing Properties and the Corresponding Incomes Therefrom and Other Relevant Statements to Accompany Income Tax Return: — Corporations, companies, partnership or persons whose gross quarterly sales, earnings, receipts or output exceed twenty-five thousand pesos shall have their income tax returns accompanied with schedules listing income-producing properties and the corresponding incomes therefrom and other relevant statements. Said schedules shall conform substantially with the form prescribed in Annex "A" hereof.
PROFIT AND LOSS STATEMENT TO ACCOMPANY INCOME TAX RETURN FORM THEREOF: — Corporations, companies, partnership and persons whose gross quarterly sales, earnings, receipts or output exceed twenty-five thousand pesos shall accompany their income tax returns with comparative profit and loss statements. Said statement shall conform substantially with the form prescribed in Annex "B" hereof. 
 
CHAPTER III
Other Books and Records
"All corporations, companies, partnerships, or persons keeping the books of accounts mentioned in the preceding section may at their option keep such subsidiary books as the needs of their business may require: Provided, That where such subsidiaries are kept, they shall form part of the accounting system of the taxpayer and shall be subject to the same rules and regulations as to their keeping, translation, production, and inspection as are applicable to the journal and the ledger."

SECTION 9. Subsidiary Books. — Persons required to keep the books and records mentioned in Section 334 of the National Internal Revenue Code may, at their option, keep such subsidiary books as the needs of their business may require and such other books as may be required by these regulations. Such books shall be subject to the same rules and regulations as are applicable to the journal and ledger prescribed in Chapter II hereof. 

 
SECTION 10.  Records to be Kept by Proprietors or Operators of Rope Factories, Sugar Centrals, and Disiccated Coconut Factories: — Aside from the books and other records required in Chapter II of these regulations, proprietors or operators of rope factories, sugar centrals, desiccated coconut factories and other factories subject to the percentage tax on the gross value of their output or gross sales of their products shall keep true and correct records of their purchases of raw materials, the finished products and by products. The records of purchases of raw materials shall indicate the kind and quantity of raw materials received, the unit price, and the total value of the said raw materials, the date of receipt, the number of receipt issued therefor, and the name, address and residence certificate of the persons from whom the raw materials were purchased. The record of finished products and by-products shall state the date of production, and the kind and quantity of the finished products and by-products, and the record of removals shall show the date of removal, the number of the invoice issued therefor, the kind and quantity of the finished products or by-products, the unit price and the total selling price or market value thereof, and the name, address and residence certificate of the purchaser or the person to whom delivery is made.
The proprietor or operator of a factory or mill may adopt such system of keeping his records as may be convenient for his business, provided that the system adopted truly reflects all his transactions and his books contain all the desired information. All his purchases shall be covered by the corresponding receipts, except when the person from whom the same are made has issued invoices therefor in which case, the proprietor or operator may keep the said invoices in lieu of issuing receipts therefor, provided, that said invoices show the information herein required. Every removal of the finished products or by-products shall be covered by an invoice showing the date of removal, the kind and quantity of the finished product or by-product removed, the unit price and the total selling price or market value thereof, and the name, address and residence certificate of the purchaser or the person to whom delivery is made.
Proprietors or owners of rice mills and corn mills shall keep the records and issue the receipts and invoices prescribed in Revenue Regulations No. 1 (Rice and Corn Mills Regulations.).

SECTION 11. Record of Jobs Received by Contractors. — Road, building, waterworks, and other construction work contractors, and other persons subject to tax under Section 191 of the National Internal Revenue Code shall, in addition to the books and other records required in Chapter II of these regulations, keep a register book for job orders received in which they shall enter immediately upon making a contract the date, name and address of the customer, a description of the articles to be constructed or the services desired, the consideration therefor, and the amount of deposit or partial payment, if any; and upon completion and delivery of the subject matter of the contract, the date of completion or delivery and the amount paid therefor.

Keepers of hotels and lodging houses may, in lieu of the records of jobs received, keep a guest register book in which shall be entered immediately upon accepting a guest the date and time of his arrival, the name and address of the guest, and the number of the room to be occupied; and, upon checking out, the date and time of his departure; and the amount paid by him. The entries shall be numbered consecutively for purposes of reference. The books prescribed herein shall conform substantially with Form "C" of the Appendix.

In case any of the taxpayers enumerated in Section 191 of the National Internal Revenue Code finds the use of the register book for jobs received impracticable for his business he may devise such system of keeping his books and other records as may be appropriate for his particular business and submit said books and records for approval to the Commissioner of Internal Revenue, if his place of business is in Manila, or to the provincial revenue agent, if in the province. No such books and records may be used until they are duly approved in accordance with Section 19 of these regulations.

SECTION 12.  Records to be Kept by Brokers. — Aside from the books and other records required in Chapter II of these regulations, stockbrokers, dealers in securities, real estate brokers, real estate dealers, commercial, customs and immigration brokers shall use serially numbered contract forms, which shall be issued in chronological order, for each agreement had with their customers, showing the date and other facts concerning the services rendered or to be rendered and the signature of the parties thereto. The contracts shall be recorded everyday in a register book showing the date and number of the contract, the name of the customer, the services desired, the subject matter and the value thereof (in case of properties), the compensation agreed upon and the duration of the contract; and upon termination of the contract, a remark as to the date and number of the receipt issued for the compensation received. The contracts shall be filed in the office of the broker in numerical order together with copies of all papers concerning the transactions.
In case of commercial brokers representing foreign companies, copies of the orders such as cablegrams, telegrams, radiograms, etc. shall be filed with the corresponding file copies of the contracts. These pertinent papers need not be filed with the file copies of the contracts where a filing system is employed such that said papers are readily available by reference appearing on the file copies of the contracts.

SECTION 13.  Records of Inventories: — Persons required by law to pay internal revenue taxes on business shall keep, in addition to the other books and records prescribed in these regulations, a book of inventories, in which they shall record in detail the quantity, description, unit and total cost of every item of their stocks-in-trade, materials, supplies and other goods found in the premises of their establishments at the time they start business and at the close of the calendar year or accounting period. The inventory at the beginning shall be made and submitted to the Commissioner of Internal Revenue, if the place of business is in Manila, or to the deputy provincial or city treasurer, if in a municipality or city, within ten days after securing the privilege tax-receipts or starting the business, and the subsequent inventories not later than thirty days after the close of the calendar year or accounting period. This period may, in meritorious cases, be extended by the Commissioner of Internal Revenue.
Deputy provincial and city treasurers shall, upon receipt of such inventories, immediately send the same to the corresponding provincial revenue agent who shall keep and preserve them for purposes of reference.

CHAPTER IV
Invoices or Receipts
"All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at two pesos or more, prepare and issue sales or commercial invoices or receipts serially numbered in duplicate, showing among other things, their names, or styles, if any, and business addresses; PROVIDED, That in case of sales, receipts or transfers in the amount of fifty pesos or more, the invoices or receipts shall further show the name, or style, if any, and business address of the purchaser, customer or client. The original of each sales invoice or receipts shall be issued to the purchaser, customer, or client who, if engaged in any taxable business, shall be kept and preserve the same in his place of business for a period of five years from the date of the invoice or receipt, the duplicate to be kept and preserved by the persons subject to tax, also in his place of business for a like period: PROVIDED, That persons subject to tax, whose gross sales, earnings, or receipts during the last preceding year exceed twenty thousand pesos shall, for each sale or transaction, issue an invoice or receipt irrespective of the value of the articles sold or service rendered.
"The Commissioner of Internal Revenue may, in meritorious cases, exempt any person subject to an internal revenue tax, from compliance with the provisions of this section. In any event, public market vendors selling exclusively domestic meat, fruits, vegetables, game, poultry, fish and other domestic food products are hereby exempted from the provisions of this section."
SECTION 14. Vouchers for Transaction: — Persons paying internal revenue taxes who are required to keep the books of accounts mentioned in Section 334 of the National Internal Revenue Code shall have a voucher for each entry in their books. The voucher may be an invoice, receipt, check or other document, which shall show the details of each transaction.
"Persons subject to tax shall issue a sales or commercial invoice for each sale or transfer of merchandise or for services rendered valued at P2 or more. In case the transaction is valued at less than P2, the taxpayer need not issue any invoice, but unless it is issued, the transaction must be recorded immediately after it is effected in a record of petty sales or transactions the entries in which shall be summarized at the end of the day and the total transferred to the journal or internal revenue sales book or book of receipts. If the gross sales or receipts of a person during the preceding year exceed P20,000, every sale or transaction effected by him shall be covered by an invoice, irrespective of the amount of the sale or transaction.
"The record of petty sales or receipts may be dispensed with if a cash register machine with roll sheets is used to record all petty transactions. The entries in the roll sheets shall be summarized at the end of the day and the total transferred to the journal or to the internal revenue sales or receipts book. The said roll sheets shall be identified by the signature or initials of the taxpayer or his bookkeeper or manager and shall show the dates of the transaction therein recorded. 
"Every purchase or expenditure by a taxpayer subject to these regulations shall also be supported by an invoice or a receipt issued by the vendor or the person rendering the service. In case an invoice or a receipt is not issued, the taxpayer concerned shall require the vendor to sign a purchase or expense voucher showing the date, the quantity and description of the articles purchased or the services rendered, THE RATE OF TAX TO WHICH THE ARTICLES WERE SUBJECTED, IF SUBJECTED TO THE ADVANCE SALES TAX IN THE CASE OF IMPORTATION OR TO THE SALES TAX IN THE CASE OF LOCALLY MANUFACTURED OR PRODUCED ARTICLES, the consideration paid therefor, and the name and address of the vendor or PERSON RENDERING THE SERVICE together with the number, date and place of issue of his residence certificate.
"The COMMISSIONER of Internal Revenue may, in meritorious cases, exempt a person from compliance with these regulations.
SECTION 15.  Form and Manner of Issuance of Invoices and Receipts. — An invoice or a receipt, in order to comply with the requirement of these regulations, must be serially numbered and made at least in duplicate. They shall be bound in the form of booklets or pads of 50 or 100 each, and shall show, among other things, the name and address and the business style, if any, of the person issuing the same, and shall contain such columns as may be necessary and appropriate for the business of the taxpayer concerned. The invoices or receipts may have as many duplicate copies as may be necessary for the purposes of the taxpayer, but the duplicate copies shall bear the same serial number as the original.
"Where the transaction is required to be covered by an invoice or receipt, the same shall be issued at the time the transaction is effected and the original thereof delivered to the purchaser or to the person from whom payment is received. In the case of sales invoices, THE INVOICE MUST show the date of the transaction, the quantity and description of the merchandise, the unit cost, THE RATE OF SALES TAX TO WHICH THE PRODUCTS OR ARTICLES ARE SUBJECT OR WERE SUBJECTED IF ISSUED BY PRODUCERS, MANUFACTURERS, IMPORTERS, OR WHOLESALERS, and the total price. IN CASE OF SALES, REGARDLESS OF AMOUNT, BY PRODUCERS, MANUFACTURERS, IMPORTERS, OR WHOLESALERS TO RETAILERS OR ANY BUSINESS ESTABLISHMENT, THE INVOICE MUST FURTHER SHOW THE NAME, OR STYLE, IF ANY, THE BUSINESS ADDRESS AND THE NUMBER, DATE, AND KIND OF PRIVILEGE TAX OF THE PURCHASER. RETAIL DEALERS IN LOCALLY PURCHASED ARTICLES, UNLESS REQUESTED BY THE PURCHASERS, NEED NOT INDICATE IN THE SALES INVOICES THE RATE OF TAX TO WHICH THE ARTICLES SOLD HAD BEEN SUBJECTED. In case of a sale or transfer in the amount of P50 or more, the invoice shall also show the name, or style, if any, the business address of the purchaser, and the number, date, and place of issue of his residence certificate. In the case of other invoices, THE INVOICE MUST show the date, the description of the articles or the nature of the service, the consideration paid therefor, and the name, address, and residence certificate of the person furnishing the articles or rendering the service. The residence certificate need not appear in the invoice when the other party to the transaction is a corporation or a registered partnership or association."
SECTION 16.    Freight Stub Receipts and Passage Tickets Required of Common Carriers. — Common carriers, transportation contractors, and other persons subject to tax under Section 192 of the National Internal Revenue Code shall use freight stub receipts and passage tickets in duplicate to be printed in accordance with such form as the Public Service Commission may, from time to time prescribe. In issuing the freight stub receipt, the carrier or his agent shall enter in both the original and the duplicate the name and address of the carrier, the date of issue, the name and address of the consignee, a description of the goods shipped with a statement of their weight or quantity, the place of delivery to the carrier and the destination of the goods, the route to be followed, the date of shipment, and the amount of freightage. Every receipt issued must be signed by the carrier or his authorized agent. Passage tickets shall also be in duplicate and must show the points of embarkation and destination and the amount of charges. The original must be delivered to the passenger or the shipper, and the duplicate retained by the carrier for record purposes and preserve for a period of five years from the date of issue. However, passage tickets may not be issued in duplicate if common carriers employ the services of inspectors or car auditors, etc. to check and supervise the issuance of the passage tickets by their conductors and if they keep in their office daily record of the number of tickets issued to every conductor as well as the number of tickets returned by each conductor after each trip or day's work.
SECTION 17.   Admission Tickets and Other Records to be Issued or Kept by Persons Subject to Amusement Tax. — In the case of amusement or business places where fees or cover charges are required to be paid for admission, the proprietor, lessee or operator shall provide himself with tickets which shall evidence payment of fees or cover charges. The tickets shall be serially numbered and shall indicate the name of the place of amusement or business and the fees or cover charges. The serial number of each ticket and the admission fee or cover charge shall be printed on the ticket twice that when the ticket is divided into two upon being presented for admission both the serial number and the price shall appear on both parts.
Before the proprietor, lessee or operator of the place of amusement or business orders tickets for printing he shall first send to the Commissioner of Internal Revenue, if the business is located in Manila, or to the provincial revenue agent or deputy provincial or city treasurer, if in the province, a written notice stating the name and address of the printer with whom he intends to place the order, the classes of tickets, the inclusive serial numbers, the admission fee or cover charge, and the total number of each class of tickets. The proprietor, lessee, or operator shall keep for record purposes the invoice or receipt issued by the printer covering the order.
Before being used, the tickets shall first be presented to the Commissioner of Internal Revenue, if the place of amusement or business is located in Manila, or to the provincial revenue agent or deputy provincial or city treasurer, if in the province, for approval and registration. The said officers shall keep a register of tickets in the form of a ledger, such that each place of amusement or business shall have a separate account or record for the purpose of entering therein all the tickets presented for approval and registration, indicating the date of registration, the classes of tickets, and the admission prices, the inclusive serial numbers, and the number of tickets of each class. The proprietor, lessee or operator of the place of amusement or business shall likewise keep a true and correct record of his stock of tickets, indicating the total number of registered and unregistered tickets, and of the registered tickets, how much has been sold from day to day.
All such proprietors, lessees, or operators shall prepare monthly statements of the daily box receipts from admission fees or cover charges, showing the total number of each particular class of tickets sold, the unit price of each class and the total amount collected, duly signed by the proprietor, lessee, or operator, or by manager. The said statements shall be submitted to the Commissioner of Internal Revenue, if the place of amusement or business is in Manila, or to the deputy provincial or city treasurer, if in the province, not later than the 10th day of each month as regards the gross receipts for the preceding month. Duplicate copies of the said statements shall be kept by the proprietor or operator at the box office as part of his accounting system and the same shall be preserved in the same manner as the books of accounts and other records.
Other persons subject to tax under Section 260 of the National Revenue Code shall keep true and correct records of their gross receipts. In case any of the records and registers hereinbefore mentioned are not appropriate for their business, they shall devise a system for recording their receipts appropriate for their business and submit the same, before they are used, to the Commissioner of Internal Revenue, if the place of business or amusement is in Manila, or to the provincial revenue agent or city or deputy provincial treasurer, if in the province, for registration and approval.  
CHAPTER V.                                        General Administrative Provisions
“All such corporations, companies, partnerships, or persons shall keep the books or records mentioned in Section 334 hereof, in a native language, English, or Spanish: Provided, however, That if in addition to said books or records the taxpayer keeps other books or records in a language other than a native language, English, or Spanish, he shall make a true and complete translation of all the entries in such other books of accounts into a native language, English, or Spanish, the said translation must be made by the bookkeeper or such taxpayer, or, in his absence, by his manager and must be certified under oath as to its correctness by the said bookkeeper or manager, and shall form an integral part of the books of accounts aforesaid.  The keeping of such books or records in any language other than a native language, English, or Spanish, is hereby prohibited.”
“All the books of accounts, including the subsidiary books, and other accounting records such corporations, companies, partnership, or persons shall be preserved by them for a period of at least five years from the date of the last entry in each book and shall be subject to examination and inspection at any time by internal-revenue officers; Provided, That all corporations, companies, partnerships, or persons who retire from business shall within ten days from the date of such retirement or within such period of time as may be allowed by the Commissioner of Internal Revenue in special cases, submit their books of accounts, including the subsidiary books, and other accounting records, to the Commissioner of Internal Revenue or any of his deputies for examinations, after which they shall be returned.”
SECTION 18.  LANGUAGE TO BE USED IN KEEPING BOOKS OF ACCOUNTS AND SUPPORTING PAPERS; TRANSLATION OF ENTRIES IN OTHER BOOKS AND RECORDS. - The books and records prescribed in Section 334 of the National Internal Revenue Code shall be kept in a native language, English, or Spanish.  The vouchers and other supporting papers and documents, being part of the accounting system shall, likewise be kept in a native language, English, or Spanish.  However, persons who keep other books in addition to the books and records prescribed in this Section 334 of the Tax Code in a language other than a native language, English, or Spanish, shall, within ten days from the date of the transaction make a true and complete translation thereof into a native language, English, or Spanish, the said translation to form an integral part of such books, register and records.
Translation shall be made in a neat and legible manner in ink or indelible pencil, either on  the same page of the books, registers or records, opposite or below such entry or on a separate page opposite the page to be translated.  The taxpayer, or his bookkeeper or manager, shall certify to the correctness of the translation of the entries in the books, register or record by executing, within ten days after each book has been filled or its use completed, a certificate to be sworn to before a notary public r an internal-revenue officer authorized to administer oaths.  The certificate shall be placed immediately following the translation of the last entry on the last page of each book and shall be substantially in the following form:
C E R T I F I C A T E   O F   C O R R E C T N E S S
I hereby certify that the foregoing translation is a true and complete translation of all the entries contained in this ________________________________ covering the period from ___________ to _________________________, 19______
________________________________
(Owner, Bookkeeper, or Manager)
“Subscribed and sworn to before me at __________________ Philippine, on this __________ day of ___________ 19____.  Affiant exhibited to me his Residence Tax Certificate No. ________________, issued at __________ on ___________, 19____
__________________________ (Internal Revenue Agent or Notary Public)SECTION 19.   PRIOR APPROVAL AND REGISTRATION OF BOOKS OF ACCOUNTS, REGISTERS, RECORDS, INVOICES AND RECEIPTS. - Persons required to keep books of accounts, internal revenue books, records of receipts and disbursements, additional registers and other records, invoices and receipts for recording their transactions as prescribed in these regulations, shall before using any of aforesaid books, records, registers, invoices and receipts first present them to the Commissioner of Internal Revenue, if the place of business is in Manila, or to the provincial revenue officer or to the deputy provincial or city treasurer, if in the province, for approval and registration. A register book for every book, register, or record which has been approved shall be kept showing such information as the date of approval; the name and address of the taxpayer; his citizenship; the number of the alien registration certificate or landing certificate, if an alien; the kind of business and the schedule, paragraph and number of privilege tax receipt issued for the business, if any, and the kind, volume, number of pages or sheets of the book, register or record.  Every book, register or record so approved and registered shall be serially numbered for each taxpayer.
A draft copy of invoices and receipts proposed to be used by the persons required to keep books of accounts and records prescribed by these regulations shall first be presented to the Commissioner of Internal Revenue,  if the place of business is in Manila, or to the provincial revenue officer or the deputy provincial or city treasurer.  If in the province, for approval.  All approved draft copies of invoices and receipts shall be recorded in a register showing such data as the date of approval; the name, address, and the kind of business of the taxpayer; the schedule, paragraph, and number of his privilege tax receipt.  No change shall be made in the form or type of invoices or receipts shall be used by said person without prior approval as required herein.  Every invoice or receipt must be serially numbered.
Before ordering invoices or receipts for printing, a taxpayer shall send to the Commissioner of Internal Revenue if his place of business is in Manila, or to the provincial revenue officer or city deputy provincial treasurer, if in the province, a written notice of the name and address of the printer with whom he intends to place the order, and the total number of booklets and the inclusive serial number of the invoices or receipts ordered.
Before any book, register, or record is presented for registration there shall be placed on the front cover by the owner thereof an identification as to the kind of book, register, or record, the name and business address of the owner, citizenship, the number of the alien registration certificate or landing certificate, if an alien, the kind of business engaged in, and the schedule, paragraph, and number of the privilege tax receipt issued for the business, serially numbered in a permanent and legible manner.  If a book, register, or record is approved, the following authentication shall be made by approving officer on the reverse side of the first cover thereof:
“This _______________________, Volume No. ________________________ with _______ pages or sheets, is approved on this __________________ day of _________________ 19_______, for purposes of Revenue Regulation No. ______
______________________________
(Signature)
If the book, register, or record presented for approval is a continuation of provisions books, registers, or records, besides the foregoing authentication, the following notations shall be added to the authentication:
“Volume No. _______ of this ______ was approved on the _____ day of _______ 19 ____.
______________________________
(Signature)
______________________________
(Designation of Officer)
In the case of invoices and receipts, the approval shall be indicated by an appropriate stamp placed in the front cover, on the back of the middle page and on the back page of the last invoice or receipt of the booklet or pad approved, together with the signature of the officer authorized to approve the same.
SECTION 20.  INSPECTION OF BOOKS, REGISTERS AND RECORDS. – All books, registers and other records, and vouchers and other supporting papers required by these regulations shall be kept at all times at the place of business of the taxpayer, subject to inspection of any internal revenue officer, and upon demand, the same must be immediately produced and submitted for inspection. When required by inspecting officers, the owner, bookkeeper, or manager shall give the necessary explanations regarding the items in the entries contained in the said books, registers and records.  In the case of a branch store, or where the controlling books are kept in a place other than the business establishment, such books and records as would clearly reflect all the transactions effected therein. When the books, register, record and other papers are needed by an internal revenue officer for examination outside of the taxpayer’s place of business, the said officer shall issue a receipt therefor on the required internal revenue form.  After making the inspection or examination of the said books, registers, records and other papers, the Internal Revenue Officer shall inform the taxpayer that he will receive a confirmation of the investigation within thirty (30) days upon termination of the investigation from the revenue office who authorized the investigation in accordance with the following form:


A n n e x  C
LETTER OF CONFIRMATION No.  _____
____________________
(Name of Taxpayer)
(Address)
Sir/Madam/Gentlemen:
With reference to our letter of Authority No. __________________- addressed to you ________________________, please be informed that the results of the investigation conducted by Revenue Examiner ______________________ of your tax liability/liabilities for the year(s) period _______________ the findings are:
Discrepancies __________________ Deficiency Tax(es) Due __________________
The above findings are subject to review and final approval by the proper officer of this Bureau.
                                       Very truly yours,
                               _____________________
                                       (Head of Office)
To be signed by CME, CMA, PRO, Asst. PBO (For province of Rizal only), Chief of Regional Investigating Branches, or Chief of National Office Divisions, as the case may be.
IMPORTANT: This letter of confirmation should be pasted on the inside cover of the ledger for the year(s) investigated.
“In this confirmation letter, the taxpayer shall be informed that the corresponding report of investigation of his tax liability has been submitted and that the recommendation of the investigating Internal Revenue Officer is under consideration by the Revenue Office concerned.  The taxpayer upon receipt of the confirmation letter shall paste the said letter on the inside cover of the ledger for the year or years investigated.  The confirmation letter shall be prepared in triplicate and numbered consecutively.  The original shall be sent to the taxpayer, the duplicate shall be attached to the report of the investigating Internal Revenue Officer and the triplicate shall be retained as the file copy.”
SECTION 21. PRESERVATION OF BOOKS OF ACCOUNTS AND OTHER RECORDS. – All the books, registers, records, vouchers, and other supporting paper and documents prescribed in these regulations, and other records kept by taxpayers at their option, shall be preserved intact, unaltered, an unmutilated for at least five years from the date of the last entry in each book or from the date of the last transaction and the same shall be kept at all times in the place of business of the taxpayer who shall produce them for examination or deliver the same or any of them for inspection outside of his place of business upon demand of any internal-revenue officer.
SECTION 22. SUBMISSION OF BOOKS AND RECORDS UPON RETIREMENT. – All taxpayers required by these regulations to keep books of accounts or other records who retire from business or cease to pursue their calling shall, within ten (10) days from the date of such retirement, or within such period of time as may be allowed by the Commissioner of Internal Revenue in special cases upon application therefor in writing, submit their books of accounts and other records pertaining to their business, including the translation thereof, to the city treasurer or the deputy provincial treasurer (now Collection Agents)  for examination.  The city treasurer or the deputy provincial treasurer shall keep all such books and records in a secure place an notify the corresponding provincial revenue agent of the receipt hereof within forty-eight hours after the receipt of such books and other records.  An examination of such books of accounts and records shall be conducted immediately by an internal-revenue officer to ascertain if all the taxes due from the taxpayer have been paid.
SECTION 23.  RETURN OF BOOKS AND RECORDS. – The books of accounts and other records mentioned in the preceding section shall not be returned until after the taxes, charges and penalties found to be due, if any, shall have been paid unless authority to do so shall have been first secured from the Commissioner of Internal Revenue. Furthermore, in case a violation of provision of the internal revenue laws or regulations has been committed by a taxpayer and said books of accounts and records are served the purpose for which they were taken or submitted Commissioner of Internal Revenue shall notify the taxpayer or representative to get the books and other records.  If the books and other records are not taken by the taxpayer or by his representative the same shall be destroyed by the Commissioner of Internal Revenue within six months from the date of such notice.  Books held by internal-revenue officers for examination in the provinces shall be destroyed by the provincial revenue agents only upon previous authority of the Commissioner of Internal Revenue.
CHAPTER VI. – General Penal Provisions
“A person who violates any provisions of this Code or any regulation of the Department of Finance made in conformity with the same, for which delinquency no specific penalty is provided law, shall be punished by a fine of not more than three hundred pesos or by imprisonment for not more than six months, or both.”
“Any person who knowingly shall make a false entry or enter false or fictitious name in the books or records mentioned in Sections 334 and 335 of this Code or who shall abet or aid, if any, manner in the making or writing thereof, shall be fined in the sum of not less than five hundred pesos or more than five thousand pesos or imprisoned for a term of not less than six months and one day nor more than five years, or both.
“Any person who fails to keep the books or records mentioned in Section 334 in a native language, English, or Spanish, or to make a true and complete translation as required in Section 336 of this Code, or whose books or records kept in a native language, English, or Spanish, are found to be at material variance with books or records kept by him in another language, shall be fined in a sum of not less than two thousand pesos nor more than ten thousand pesos or imprisoned for a term of not less than two years or both.”
SECTION 24.  PENALTY FOR MAKING FALSE ENTRIES OR WRITING FALSE OR FICTITIOUS NAMES IN BOOKS OR RECORDS. – Any person who knowingly makes any false entry or writes any false or fictitious name in his books of accounts or other records, or who abets or aids in the making or writing thereof, is punishable under Section 355 of the National Internal Revenue Code by a fine of not less than P500.00 nor more than P5,000.00 or by imprisonment of not less than six months and one day nor more than five years, or both.
In order to obviate the possibility of entering false or fictitious name in their books, taxpayers should require persons to whom they have transactions which should be entered in their books exhibit their residence certificates, if subject thereto, and take note of their number and the date and place of issue.
A person who fails to keep the books or records mentioned in Section 334 of the National Internal Revenue Code in native language, English, or Spanish, or to make a true and complete translation of books kept in other languages into a native language, English, or Spanish, are at material variance with books or records kept by him in another language, is liable to a fine of not less than P2,000.00 nor more than P10,000.00, or imprisonment for not less than two years nor more than six years, or both.
SECTION 25. PENALTY FOR VIOLATION OF OTHER PROVISIONS OF THESE REGULATIONS. - Any person who shall violate any provisions of these regulations for which violation the National Internal Revenue Code or any other law does not provide any specific penalty shall be penalized, under section 352 of the aforesaid Code, by a fine of not less than P300 or by imprisonment of not more than six months, or both.

SECTION 26.  REPEALING PROVISIONS: - Regulations Nos.34, 48, 58 84, 91, 101, 105 and 108 of the Department of Finance and other regulations inconsistent herewith are hereby repealed.
SECTION 27. DATE OF EFFECTIVITY: – These regulations shall take effect upon their promulgation in the OFFICIAL  GAZETTE. 
       “A”- Explanatory note for the RECORD OF DAILY SALES AND CASH RECEIPTS
(Form No. 1, Appendix I)
All transactions concerning SALES and SERVICES RENDERED and MONIES RECEIVED, including those received as investment and other income, shall be entered in this Record.  The amount of every transaction shall be entered under two money columns, first under a column on the left side of “Explanation,” second under a column on the right side.  The total of the columns in the left side must equal the total of the columns on the right side
DATE – corresponds to the date of the transaction.
EXPLANATION – refer to a brief statement of the nature of the transaction, such as total cash sales, credit sale with the name of the customer, other income, payment for previous credit sale with the name of the customer and any other explanation which may be necessary.
INVESTMENT IN CASH shall be entered first under “Cash Received” and second under “Other Credits.”
CASH SALES for the day shall be enter in total only, first under “Cash Received” and the second under “Sales” classified according to privilege tax receipt.
CREDIT SALES shall be entered individually, by invoice if sales invoices are issued therefore, first under “Due from Customers” and second under “Sales” classified according to privilege tax receipt.
SERVICE RENDERED and OTHER INCOME – by total for the day – shall be entered first under “Cash Received” and second under “Other Credits.”
PAYMENTS FOR PREVIOUS CREDIT SALES shall be entered individually first under “Cash Received” and second under “Received for Credit Sales.”
The columns designed on this form may be increased into such number as the needs of each particular business may require. 
 “B”- Explanatory note for the RECORD OF DAILY PURCHASES, EXPENSES AND CASH DISBURSEMENTS SALES AND CASH RECEIPTS
(Form No. 2, Appendix II)
All transactions concerning PURCHASES, EXPENSES and MONIES disbursed, including those for payments for previous purchases on credit and as investment, shall be entered in this Record.  The amount of every transaction shall be entered under two money columns, first under a column on the left side of “Explanation,” second under a column on the right side.  The total of the columns in the left side must equal the total of the columns on the right side
DATE – corresponds to the date of the transaction.
EXPLANATION – refer to a brief statement of the nature of the transaction, such as total purchases, without invoices, purchases on credit sale with the name of the creditor, payment for previous purchases on credit with the name of the creditor, nature of the expenses incurred, withdrawal of investment and any other explanation which may be necessary.
WITHDRAWAL OF CASH INVESTMENT shall be entered first under “Cash Disbursed, second under “Other Debits.”
CASH PURCHASES without invoices or receipts for the days shall be entered by the total first under “Cash Disbursed”, second under “Purchases”, classified according to privilege tax receipt.
PURCHASES ON CREDIT shall be entered individually, first under “Payable to Creditors”, second under  “Purchases”, classified according to privilege tax receipt.
EXPENSES shall be classified and entered by the classification indicated under “Explanation” first under “Cash Disbursed”, second under “Expenses”.
PAYMENTS FOR PREVIOUS PURCHASES ON CREDIT shall be entered first under “Cash Disbursed”, second under “Payment to Creditors.”
OTHER DISBURSEMENTS shall be entered first under “Cash Disbursed,” second under “Other Debits.”
 The columns designed on this form may be increased into such number as the needs of each particular business may require. 


 
            

Micro Finance NGO by Emelino T Maestro

REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Quezon City REVENUE REGULATIONS NO. 3-2017 SUBJECT: IMPLEMENTING THE TAX PROVISIONS OF REPUBLIC ACT (RA) NO. 10693, OTHERWISE KNOWN AS, THE “MICROFINANCE NGOs ACT.” TO: All Internal Revenue Officers, Employees, and Others Concerned by Emelino T Maestro
SECTION 1. Background – Republic Act (RA) No. 10693, otherwise known as the “Microfinance NGOs Act”, was signed into law on 03 November 2015. The Act is pursuant to the declared policy of the State to pursue a program of poverty eradication wherein poor Filipino families shall be encouraged to undertake entrepreneurial activities to meet their minimum basic needs including income security. It aims to encourage non-government microfinance institutions to work with the government to pursue community development and improvement in the socio-economic welfare of the poor and other basic and marginalized sectors through financially inclusive and pro-poor financial and credit policies and mechanisms, such as microfinance and its allied services. On August 16, 2016, the Implementing Rules and Regulations of RA No. 10693 were duly approved by the concerned government agencies. Subsequently, this Bureau issued Revenue Memorandum Circular (RMC) No. 124-2016 dated November 25, 2016, circularizing the said Implementing Rules and Regulations. SECTION 2. Scope – Pursuant to the provisions of Sec. 244 of the National Internal Revenue Code (NIRC) of 1997, as amended, these Regulations are hereby issued to implement the tax provisions of RA No. 10693, particularly Section 20 thereof. SECTION 3. Definition of Terms - For purposes of these Regulations, the following terms and phrases shall be defined as follows: (1) Act – the Microfinance NGOs Act or RA No. 10693; (2) IRR- the Implementing Rules and Regulations of RA No. 10693; (3) Accreditation – the process of giving official recognition to a duly registered Microfinance NGO, after meeting the minimum standards set by the Microfinance NGO Regulatory Council (or “Council”). A Microfinance NGO is deemed accredited when it is duly issued an accreditation certificate by the Council; RA NO. 10693 (MICROFINANCE NGOs ACT) PAGE 2 OF 7 (4) Charges on loans – the agreed upon reasonable and conscionable interest rate, service charge, penalty, and such other charges incidental to microfinance lending activity; (5) Clients – all borrowers and savers of a Microfinance NGO; (6) Compensating balance – the proportion of the total loan of a microfinance client, which is retained with the microfinance institution as capital buildup (CBU) or microsavings which can be used by the microfinance institution to offset the clients’ outstanding balance in case of default; (7) Group Loan – a loan contracted by a member of a group of microfinance clients whose loan is guaranteed by the group of members collectively or by any members/s of the group. The creditor can collect from any of the members of the group that guaranteed the said loan, without prejudice to the right of reimbursement of the member or members of the group that had advanced the payment in favor of the actual debtor; (8) Gross receipts from microfinance operations – the interest income, penalties, surcharges, commissions and discounts, service and general fees, and other charges related to microfinance operations actually or constructively received without any deduction of any kind or nature; (9) Low-income – the income of individuals or families that fall below the low-income threshold, which is defined by the National Economic and Development Authority (NEDA) as twice the official national poverty threshold. This definition shall be subject to periodic review by the NEDA; (10) Microcredit – the extension of microfinance loans by a Microfinance NGO to its poor and low-income clients; (11) Microenterprise development strategy – the social reform program to promote and pursue inclusive growth that includes the poor, and whose implementation shall involve both the public and private sectors among which Microfinance NGOs are key players. Specifically, it refers to programs to empower the poor, manage risks and vulnerabilities and thereby improve their asset base and expand access to microfinance services, such as microcredit, microinsurance, microsavings, health care and microhousing through a broad package of financial, business and human development services and other nonfinancial services, including education to enable them to lead productive lives; (12) Microfinance – the viable and sustainable provision of a broad range of financial services to poor and low-income individuals engaged in livelihood and microenterprise activities. It uses nontraditional and innovative methodologies and approaches, namely: the extension of small loans, simplified loan application procedures, group character loans, collateral-free arrangements, cash flow-based lending, alternative loan repayments, minimum requirements for CBU/minimum balance retention, RA NO. 10693 (MICROFINANCE NGOs ACT) PAGE 3 OF 7 and small denominated savers’ instruments aimed to improve their asset base and expand their access to capital and savings; (13) Microfinance loans – small loans granted to the basic sectors, as defined in RA No. 8425, otherwise known as the “Social Reform and Poverty Alleviation Act”, and other loans; as defined by the government as to their amount, scope, and coverage that are granted to the poor and low-income individuals for their microenterprises and small businesses so as to enable them to raise their income levels and improve their living standards. Microfinance loans are granted on the basis of the borrower’s cash flow and are typically unsecured; (14) Microfinance NGO – a nonstock, nonprofit organization duly registered with the Securities and Exchange Commission (SEC), with the primary purpose of implementing a microenterprise development strategy and providing microfinance programs, products, and services, such as microcredit and microsavings, for the poor and low-income clients; (15) Microfinance Operations – refers to the following programs and services of Microfinance NGOs: (a) Minimum Core Programs and Services. – Microfinance NGOs shall continuously provide at least any of the following programs, products, or services: (i) Microcredit and financial literacy programs; and (ii) Microcredit and CBU or microsavings. (b) Other Programs and Services. – The following are the other programs and services that Microfinance NGOs may undertake, subject to existing laws and regulations: (i) Agricultural microfinance; (ii) Housing microfinance; (iii) Microinsurance, in partnership with authorized microinsurance companies, agents and/or entities; (iv) Electronic payment system such as mobile or any innovative digital platforms or channels; (v) Money transfer and other related remittance services, in partnership with authorized agents and/or entities; (vi) Provide development opportunities such as leadership training and entrepreneurial skills enhancement; and (vii) Other relevant and/or innovative programs, products and services that address social welfare purposes and which are not contrary to existing laws and regulations. This may include, but not limited to, programs involving health, education, Disaster Risk Reduction and Management (DRRM), and Persons with Disabilities (PWD) assistance. RA NO. 10693 (MICROFINANCE NGOs ACT) PAGE 4 OF 7 (16) Microinsurance – as defined under Section 187 of the Insurance Code, as amended, it is a financial product or service that meets the risk protection needs of the poor where: (a) the amount of contributions, premiums, fees or charges, computed on a daily basis, does not exceed seven and half percent (7.5%) of the current daily minimum wage rate for non-agricultural workers in Metro Manila; and (b) the maximum sum of guaranteed benefits is not more than one thousand (1,000) times of the current daily minimum wage rate for non-agricultural workers in Metro Manila. (17) Microsavings – the program of a Microfinance NGO to collect relatively small amounts of money from their clients for purposes of maintaining a compensating balance. It refers also to equity build-up or capital build-up; (18) Nongovernment organization (NGO) – a nonstock, nonprofit organization duly registered with the Securities and Exchange Commission (SEC), focusing on the upliftment of the basic or disadvantaged sectors of society by providing advocacy, training, community organizing, research, access to resources, and other similar activities, as defined in RANo. 8425; (19) Poor – individuals and families whose income fall below the poverty threshold as defined by the NEDA. Generally, the poor are regarded as those who cannot afford, in a sustained manner, to provide their minimum basic needs of food, health care, education, housing and other essential amenities of life as defined by RA No. 8425; (20) Social performance – the effective translation of a Microfinance NGO’s mission into practice; and (21) Social welfare promotion/purposes – the thrusts, objectives, plans, programs, services and activities designed to aid and/or ameliorate the living conditions of the poor, disadvantaged, marginalized, vulnerable and underprivileged individuals and their families in order to attain improved quality of life and well-being. SECTION 4. – Accreditation of Microfinance NGOs Microfinance NGOs must secure a Certificate of Accreditation from the Council as a condition for the availment of the incentives of RA No. 10693. As required under the said Act, a Microfinance NGO must be a non-stock, non-profit corporation with a capital contribution of at least One Million Pesos (P1,000,000.00) and must conform to the following requirements: (1) The word “Microfinance” shall be included in the corporate and trade name of the Microfinance NGO; and (2) Its Articles of Incorporation and By-Laws shall specifically state that: (a) It is “non-stock and non-profit”; RA NO. 10693 (MICROFINANCE NGOs ACT) PAGE 5 OF 7 (b) It has the primary purpose of implementing a microenterprise development strategy and providing microfinance programs, products, and services for the poor; (c) Shall specifically provide that upon dissolution, the net assets shall be distributed to another NGO organized for similar purposes, or the State for public purpose/s or as may be determined by a competent court of justice; (d) No part of the property or income shall inure to the benefit of any member, officer, organizer or any individual person; (e) The trustees shall not receive any compensation or remuneration, except reasonable per diem; (f) The level of administrative expenses shall not exceed thirty percent (30%) of the total expenses for the taxable year; and (g) Other requirements which the Council may deem necessary. Only Microfinance NGOs with duly issued Certificates of Accreditation from the Council shall be eligible to avail of the 2% gross receipts tax on income from microfinance operations as set forth under Section 6 hereof. SECTION 5. Transitional Accreditation Microfinance NGOs which have been certified by the Securities and Exchange Commission (SEC) to have no derogatory information and are deemed accredited, in accordance with Section 2, Rule 11 of the IRR, as Microfinance NGOs for a period of one (1) year from the effectivity of RA No. 10693, unless sooner revoked, shall be entitled to avail of the 2% gross receipts tax on its income from microfinance operations. SECTION 6. - Taxation of Microfinance NGOs (1) A duly registered and accredited Microfinance NGO shall pay a two percent (2%) tax based on its gross receipts from microfinance operations in lieu of all national taxes: Provided, that preferential tax treatment shall be accorded only to NGOs whose primary purpose is microfinance and only on their microfinance operations catering to the poor and low-income individuals in alignment with the main goal of RA No. 10693 to alleviate poverty. Provided, further, that the Certificate of Accreditation issued by the Council or the Certificate of No Derogatory Information issued by the SEC, as the case may be, shall be an essential requirement for granting the 2% preferential tax treatment of Microfinance NGOs. (2) The preferential rate of two percent (2%) tax based on gross receipts from microfinance operations should only refer to lending activities and insurance commission which are bundled and forming integral part of the qualified lending activities of the Microfinance NGOs. (3) All other income by the Microfinance NGOs which are not generated from the lending activities and insurance commissions shall be subject to all applicable taxes, which shall include but not limited to the following: RA NO. 10693 (MICROFINANCE NGOs ACT) PAGE 6 OF 7 (1) Interest income derived from loans other than those extended to qualified borrowers under RA No. 10693; (2) Commission fees and other charges on the provision of electronic payment system such as mobile or any innovative digital platforms or channels; (3) Commission fees and other charges on the provision of money transfer and other related remittance services; (4) Interest income from any currency bank deposit, yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements including a depository bank under the expanded foreign currency deposit system; (5) Royalties; (6) Prizes and other winnings; (7) Cash and/or property dividends; (8) Capital gains from the sale or dispositions of real property; (9) Capital gains tax on the sale, barter, exchange or other disposition of shares of stock in a domestic corporation; (10) Stock transaction tax on the sale, barter, or exchange of shares of stock listed and traded through the local stock exchange; (11) All other forms of income not related to microfinance operations (lending activities and insurance commission) catering to the poor and low-income individuals. (4) The availment of the benefits under RA No. 10693 by Microfinance NGOs for their microfinance operations shall be evaluated in conjunction with their other lines of business in order to determine the appropriate tax treatment of revenues derived from those other activities. (5) The Microfinance NGOs shall be constituted as a withholding agent for the government if they act as employer and any of their employees received compensation income subject to compensation withholding tax, or if they make payments to individuals or corporations subject to the withholding taxes at source as required under Chapter XIII and Section 57 of the Tax Code of 1997, as amended and implemented by Revenue Regulations (RR) No. 2-98, as amended. (6) Finally, the Microfinance NGOs’ books of accounts and other pertinent records shall be subject to periodic examination by revenue enforcement officers of this Bureau for the purpose of ascertaining whether they are complying with the conditions under which they have been granted tax incentives and their tax liability, if any, pursuant to Section 235 of the Tax Code of 1997, as amended. SECTION 7. Update of Registration with the Revenue District Office. Duly registered and accredited Microfinance NGOs, including those deemed accredited as Microfinance NGOs under Section 2, Rule 11 of the IRR, must update their registration with their concerned Revenue District Offices to reflect their accreditation as Microfinance NGOs. Moreover, their clients shall likewise be required to have a Taxpayer Identification Number (TIN). The documentary requirements for the application of TIN are provided under Revenue Memorandum Circular (RMC) No. 93-2016, as amended by RMC No. 137-2016. RA NO. 10693 (MICROFINANCE NGOs ACT) PAGE 7 OF 7 In order to assist their clients in securing TIN, the Microfinance NGO, with proper authorization from the clients, may apply for the issuance of TIN in behalf of their clients, by collating the duly accomplished BIR Form 1904 of the clients and valid identifications in support thereof, which shall be submitted to the concerned RDO for the processing and issuance of the TIN. SECTION 8. Repealing Clause. – The provisions of all existing rules, regulations and other issuance or portions thereof inconsistent with the provisions of these Regulations are hereby modified, repealed or revoked accordingly. SECTION 9. Effectivity. – These Regulations shall take effect fifteen (15) days after publication in the Official Gazette or newspaper of general circulation, whichever comes first. (Original Signed) CARLOS G. DOMINGUEZ Secretary Department of Finance Recommending Approval: (Original Signed) CAESAR R. DULAY Commissioner of Internal Revenue K-1