RR No. 17-2024 — Prescribing the presentation of tax clearance prior to final settlement of government contracts (Date Posted: September 17, 2024)

@ BUREAU OF INTERNAL REVENUE RECORDS MANAGEMENT DIVISION REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE National Office Building DEPARTMENT OF FINANCE Quezon City BY: ADMIN UNTM& 3$ SE 17 22

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REVENUE REGULATIONS NO. 0 1 7 - 2 0 2 4

SUBJECT: Prescribing the Presentation of Tax Clearance Prior to Final Settlement of Government Contracts

TO All Internal Revenue Officials, Employees and Others Concerned

BACKGROUND

that: bureaus, offices and agencies, including state universities and colleges. to enter into or participate in any contract with the government, its departments. government-owned and/or controlled corporations, government financial Section 1 of Executive Order (E.O.) No. 398, s. of 2005 dated July 12, 2005, directs institutions and local government units, shall, as a pre-condition, submit, along with their proposal and/or bid, a copy of their latest income and business tax returns duly stamped and received by the Bureau of Internal Revenue, and duly validated with the tax payment made thereon. "SECTION 1. All persons, natural or juridical, local or foreign, desiring

They shall also submit a tax clearance from the Bureau of Internal Revenue to prove full and timely payment of taxes."

Revised Implementing Rules and Regulations (IRR) of Republic Act (R.A.) No. 9184 otherwise known as the "The Government Procurement Reform Act", provides that: Pursuant thereto, Section 23 of Rule VIII-Receipt and Opening of Bid of the 2016

"Section 23. Eligibility Requirements for the Procurement of Goods and

Infrastructure Projects

23.1. For purposes of determining the eligibility of bidders using the criteria Documents: be required by the BAC, using the forms prescribed in the Bidding stated in section 23.4 of this IRR, only the following documents shall

a) Class "A" Documents

Legal Documents

i i t) XXX XXX approved by the Bureau of Internal Revenue (BIR). Tax clearance per E.0. 398, s. of 2005, as finally reviewed and

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Moreover, Section 3 of the same E.O. mandates that: HSE

"Sec. 3. To ensure continuing compliance with tax laws,"aff government ADMiN uNIt TIME: 3:A

contracts shall include a stipulation that the private contracting party shall pay taxes in full and on time and that failure to do so will entitle the government to suspend payment for any goods or service delivered by the private contracting party. (Underlining ours)

All government contracts shall likewise include a stipulation requiring the private contracting party to regularly present, within the duration of the contract, a tax clearance from the Bureau of Internal Revenue as well as a copy of its income and business tax returns duly stamped and received by the Bureau of Internal Revenue and duly validated with the tax payments made thereon. (Underlining ours)

The above provisions clearly show that the BIR tax clearance is not only required to be submitted by the contractor during the procurement process as an eligibility requirement.

to be presented by the contractor on a regular basis as proof of payment of taxes during the In order to ensure payment of taxes in full and on time, the BIR tax clearance is also required

duration of the contract it entered into with the government. Non-submission of such tax

infrastructure projects, delivered by the contractor. clearance entitles the government to suspend the payment for any goods or service, including

of 2005, these Regulations are hereby issued. Accordingly, in order to fully achieve the requirements and objectives of E.O. 398, s.

objectives of E.0. No. 398, s. of 2005, these Regulations are hereby promulgated to prescribe Revenue Code (NIRC) of 1997, as amended, and taking into account the thrusts and the presentation of BIR tax clearance prior to the final settlement of all government contracts. SECTION 1. SCOPE. - Pursuant to Sections 244 and 245 of the National Internal

TO FINAL SETTLEMENT OF GOVERNMENT CONTRACTS. - All persons, natural or juridical, local or foreign, who have existing contracts with the government, its departments, bureaus, offices and agencies, including state universities and colleges! SECTION 2. PRESENTATION OF UPDATED TAX CLEARANCE PRIOR

local government units for the supply of goods and services, including infrastructure projects government-owned and/or controlled corporations, government financial institutions and

shall secure from the BIR an updated tax clearance certifying that they have no outstanding tax liabilities and that they have duly filed the latest income and business tax returns and paic the corresponding taxes due thereon. Such tax clearance shall be presented by the contractor

colleges, government-owned and/or controlled corporations, to the concerned departments, bureaus, offices and agencies, including state universities and institutions and local government units prior to the final settlement of the contract it entered into with them. government financial

Failure to secure and present the prescribed BIR tax clearance shall entitle the

colleges, government-owned and/or controlled corporations, government financial institutions and local government units to suspend the final settlement for any goods or services, including infrastructure projects, delivered by the contractor. government, its departments, bureaus, offices and agencies, including state universities and

MONEY AS TAX LIEN. -- The amount of final settlement on the contract for any goods and services, including infrastructure projects, delivered by the contractor which was suspended by the government, its departments, bureaus, offices and agencies, including state the provisions of R.A. No. 9184 and its implementing regulations, shall be subject to tax lien as may be warranted in favor of the government to satisfy the contractor's outstanding tax universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units due to the failure to present the BIR tax clearance prescribed by these Regulations, including the retention money required pursuant to SECTION 3. SUSPENDED FINAL SETTLEMENT AND RETENTION

be applied accordingly. liabilities. The existing guidelines and procedures governing distraint and garnishment shall

SECTION 4. PENALTIES. - Any violation of these Regulations shall be subject to

and applicable regulations issued by the BIR. the corresponding penalties under the pertinent provisions of the NIRC of 1997, as amended.

SECTION 5. REPEALING CLAUSE. -- All other issuances and rules and

these Regulations are hereby repealed, amended, or modified accordingly. regulations or parts thereof which are contrary to and inconsistent with any provisions of

days following its publication in the Official Gazette or the BIR official website, whichever SECTION 6. EFFECTIVITY. - These Regulations shall take effect fifteen (15)

comes first.

PH S.REeTO Secretary of Finance MUG 2 7 202L

Recommending Approval:

Aissioner of Internal Revenue UMaguI, JR. @O BUREAU OE INTeRNAL rEVeNUE RECORDS MANAGEMENT DVISION ...*.

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