RMC No. 74-2008 — Publishes the full text of DOF-DBM Joint Circular No. 2008-1 entitled “Guidelines and Procedures for the Release of the LGU Shares from the Value-Added Tax in Lieu of Franchise Tax Collected from Racetrack Operations of the Manila Jockey Club, Inc. and the Philippine Racing Club, Inc.”

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE Quezon City BUREAU OF INTERNAL REVENUE RECORDS MGT DIYISION RECEIVED NOV 0 7 2008 3 3"3Z UNJaA Aa

October 2, 2008

REVENUE MEMORANDUM CIRCULAR NO. 1- 3108

SUBJECT: Publishing the Full Text of Joint Circular No. 2008-1, Jockey Club, Inc. (MJCl) and the Philippine Racing Club Inc. (PRCI) Tax Collected from Racetrack Operations of the Manila Guidelines and Procedure for the Release of the LGu Shares from the Value Added Tax (VAT) in Lieu of Franchise

TO : All Internal Concerned Revenue Officials, Employees and Others

full text: of Joint Circular No. 2008-1 issued by the Secretaries of the Department of Finance and the Department of Budget and Management on June 16, 2008 For the information and guidance of all concerned, quoted hereunder is the

OF BUDGET

Department of Budget and Management . Department of Finance " Repubtic of the Philippines CENTRAL RECORD RELEASE OFFICIAL

Joint Circular No..2003 -- 1 jine 16, 2008

FOR Management (DBM), Local Government Units (LGUs), and All Others Department of Finance (DOF) - Bureau of Internat Revenue (BIR) and Bureau of the ..Treasury (BTr), Department of Budget and Concerned

SUBJECT the Value Added Tax (VAT) in lieu of Franchise Tax Collected from Philippine Racing Club, Inic (PRCI) Guidelines and Procedure for the Release of the LGU Shares from Racetrack Operations of the Manila Jockey Club, Inc. (MJCI) and the

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1.0 BACKGROUND

11 franchise to.operate racetracks, where: Republic Act (RA) Nos. 8407 and 7953 granted to the Manila Jockey Club, Inc. (MJCI) and to the Philippine Racing Club, Inc. (PRCI) respectively, the

or' gross receipts on the sale of betting tickets during the racing day, MJCI and PRCI shall remit to the National Treasury a franchise tax equai to twenty five percent (25%) of their individual gross earnings.from the horse races authorized to be held under their respective franchise which is equrivalent. to eight.and one half-percent-(8 .1/2-%) of-the total-wager fund allotted as follows:

White Cross (WC)] National Government Provinceor city/municipality where "racetrack "is Phitippine Anti - Tuberculosis Society (PTS) Phifippine Charity Sweepstakes Office "(PCSO) PRCi/ Municipal hospital where the racetrack is tocated Iocated for MJCI Particulars for % Shares 2 625 525 725 225

1.2 percentages shall be based on the VAT payable, as follows: The enactment of RA No. 7716 (Expanded VAT Law) and RA No. 8Z41 computed based on gross receipts as defined under Section 108 (A) of RA No. 8424, the Tax "Code of 1997. (Amending RA No. 7716) replaced the rate of franchise tax to VAT to be Accordingly, the allocation of the

For PRCI

National Government Local Government WC PCSO PTS 525 S25 725 625 225

For MJCH:

National Government Local Government WC Municipal Hospital PTS 525 512 T25 612 225

BUREAU OF INTERNAL REVENUE RECORDS MGT: DIVISION RECEIVED NOV 0'7 2008/+ 3i 2f M. Mr Mt

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2.o PURPOSE

2.1 PRCI, pursuant to R.A. Nos. 8407 and 7953, respectively. Iocal government units (LGUs) from the Value Added Tax (VAT) in lieu of franchise tax collected from race track operations of the MJCI and the To prescribe the quidelines and procedure for the reiease of the shares of

2.2 To delineate the responsibilities of agencies concerned in the allocation and release of the shares of LGUs.

3.0 COVERAGE

Nos. 8407 and 7953, respectively. This Joint Circular covers the shares of the LGU beneficiaries concerned from the VAT collected from'racetrack operations of the MJCI and the PRCI, pursuant to RA

4.0 DEFINITION OF TERMS

4.1 Franchise Tax a tax on a special privilege or right conferred by the does not belong to the citizens of the country generally as a matter of common right. State through the legislature and which, therefore,

4.2 Gross Receipts the total amount of money or its equivalent or to be performed for another' person, excluding representing the contract price, compensation, VAT. service fee, rental or royalty, including the amount charged for materiais supplied with the services and deposits and advance payments actually received during the taxable guarter for the services performed

4.3 Input Tax the value added tax due from or paid by a VAT- registered person in the course: of his trade or business on importation of goods or local purchase of from a VAT-registered person. goods or services, including lease or use of property.

4.4 LGU Beneficiary refers to the province or city/municipality where the

province and by the city/municipality, the share shall be proportionately allocated. racetrack is located and where partly owned by the

4.5 Municipal Hospital - refers to a government hospital located in, and operated and funded by the municipality.

4.6 Output Tax of taxable goods or properties or services by any Nationa! Internal Revenue Code. means the value added tax due on the sale or lease person liable to pay tax under Section 105 of the

BUREAU OF INTERNAL REVENUE RECORDS MGT. DIVISION NOV 0 7"208 " 3: 24. P.M WMW

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4.7 Value Added Tax - a tax on consumption levied on the sale, barter, exchange or lease of goods" or properties and services at the time of the effectivity of RA No. 9337. goods into the Philippines.The seller is the one statutorily liable for the payment of the tax but the amount of the tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties services in the Philippines and on importation of

5.0 PROCEDURAL GUIDELINES

5.1 LGU's Share Computation

VAT Output Gross Receipts (8.5% Club's Commission) *1 VAT Rate *2 10% or 12% whichever is applicable P 8 10% or 12% XXXXXXX XXXXXXX .Less: Input Tax VAT Due and Payable LGU's Percentage Share (5/25) LGU's Share 8 XXXXXXX XXXXXXX XXXXXXX* 20%

Note: *1 LGU's share is computed from the 8.5% Club's Commission only

*2 10% VAT rate up to January 31, 2006 12% VAT rate effective February 1, 2006

5.2 Illustrative Computation

A LGU's share from VAT collections when VAT rate was 10% i.e., up to January 31, 2006 only:

VAT due and payable LGU's share VAT rate LGU's percentage share (5/25) Gross Receipts (8.5% Club's commission) VAT output Less: Input Tax 0 8 P Q 23,000,000 2,300,000 1,300.000 1,000,000 20000 2% 10%

B LGU's Shares of 12% VAT collected for the taxable period effective

February 1, 2006:

VAT rate Gross Receipts (8.5% Club's commission)P VAT output Less: Input Tax P 23.000.000 2,760,000 1,760,000 1%

LGU's share VAT due and payable LGU's percentage share (5/25) P P 1,000,000 200.000 20

BUREAU OF INTERNAL REVENUE RECORDS MGT DIVISION NOV 0 7 2008 3 y M

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6.0 RESPONSIBILITIES

6.1 Department of Finance (DOF) -- Bureau of Internat Revenue (BIR

General Appropriations Act (GAA). For the Release of LGU Shares Chargeable to CY 2007 and the CY 2008

6.1.1 Prepares the 2007 annual summary of VAT payments for income of payment and the Authorized Government Depository made; derived by the MJCI and PRCI from horse racing indicating the date Bank/Authorized Agent Bank (AGDB/AAB) where payment was

6.1.2 Within thirty (30) days after the issuance of this circular, transmits to BTr for validation the 2007 annual summary of VAT payments referred to in 6.1.1;

6.1.3 Submits to DBM not later than April 30, 2008, the computations of the shares of LGU from VAT payments supported by the BIR-BTr Joint Certification as basis for the programming of funds and release of LGU shares in CY 2008 in accordance with the annual General Appropriations Act.

For the Release of LGU Shares for Remittances in CY 2008 Chargeable Against CY 2009 GAA and Thereafter

6.1.4 For CY 2008 and every year thereafter, prepares the monthly after the end of the month of filing of returns; summary of VAT payments of MJCI and PRCI paid/filed with the BIR and forwards copy of the summary to the BTr "within ten (10) days

6.1.5 Submits to DBM the duly signed BTr-BIR Joint Certification of reconciled VAT payments received by BIR from MJCI and PRCI and LGUs thereon on or before April 30, 2009 and ensuing year deposited to BTr, together with the computation of the shares of thereafter.

For the Annual Budget Preparation (BP) for CY 2009 and for Every BP Year Thereafter

6.1.6 Prepares and submits to DBM not later than March 15, 2008 and of each ensuing year, the projected amount representing the VAT payments for the current year for inclusion in the National Expenditure Program (NEP) starting in CY 2009,and for every BP year thereafter.

BUREAU OF INTERNAL REVENUE RECORDS MGT DIVISION NOV 0 7 2008 3: Z OM

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6.2 Department of Finance - Bureau of the Treasury (BTr)

6.2.1 Receives from the BIR the summary of VAT payments of MICI and PRCI, validates the same from the credit advices received from AGDBs "and prepares the summary .of deposits - with the corresponding Journal Entry Voucher (JEV) issued;

6.2.2 Consolidates the monthly summary of VAT payments, validates the to the BTr-BIR Joint Certification; same from BTr recorded VAT deposits, prepares the whole year summary with the corresponding JEV issued, and attach the same

6.2.3 Prepares and signs the yearly BTr-BIR Joint Certification showing and deposited to the BTr; the reconciled VAT payments received by BIR from MJCI and PRCI

6.2.4 Submits to BIR the duly signed BTr-BIR Joint Certification of VAT payments together with the summary of recorded VAT deposits of MJCI and PRCI with the corresponding JEV issued within fifteen (15) days from receipt of the summary of VAT payments from the BIR

5.3 Department of Budget and Management (DBM)

6.3.1 Includes in the NEP the projections/estimates of VAT payments for income derived by MJCI and PRCI for the current year submitted by the BIR as per 6.1.6.

6.3.2 Releases the shares directly to the LGUs, based on the BIR each year, starting in CY 2008, subject to cash prograrhming, computation of LGU shares supported by the BIR-BTr Joint deposited to the BTr, as submitted to DBM not later than April 30 of budgeting, accounting and auditing rules and regulations. Certification on the actual collections made by the BIR and actuaily

7.0 SEPARASILITY CLAUSE

RA 8407 and RA 7953 shall be made in a separate issuance. If any section or provision of this Joint Circular is held invalid, all other provisions not affected thereby shall remain valid. Share of other beneficiaries mentioned in

BUREAU OF INTERNAL REVENUE RECORDS MGT. DIVISION NOV 0 7 2008 3 : 2l P.M W

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80 GOVERNING CLAUSE

Cases not covered by the provisions of this Joint Circular shall be referred to the DBM Central Office or through the Regional Office concerned, which shall resoive the matter in coordination with MJCI, PRCI, BIR and BTr.

9.0 EFFECTIVITY CLAUSE

This Joint Circular shall take effect immediately.

Department of Finance MARGARITO B.ITEVES 003994 Secretary ROLANDO G. ANDAYA, JR. Department of Budget and Management" Secretary

All concerned are hereby enjoined to be guided accordingly and give this Circular a wide publicity as possible.

SIXTO SESQUIVIAS IV Commissiopfer of Internal Revenue

BUREAU OF INTERNAL REVENUE RECORDS MGT DIVISION RECEIVED NOV 0 7 2008 334 yaM7 MNA

OF BUDGE

Department of Finance Republic of the Phillppines CENTRAL RECORDS DIV RELEASE OFFICIAL E AGEN

Department of Budget and Management

Joint Circular No. June 16, 2008 2008 - 1

FOR and Bureau of the ..Treasury (BTr), Department of Budget and Department of Finance (DOF) - Bureau of Internal Revenue (BIR)

Management (DBM), Local Government Units (LGUs), and All Others Concerned

SUBJECT the Value Added Tax (VAT) in lieu of Franchise Tax Collected from Racetrack Operations of the Manila Jockey Club, Inc.. (MJCI) and the Guidelines and Procedure for the Reiease of the LGU Shares from

Philippine Racing Club, Inc. (PRCI)

1.0 BACKGROUND

1.1 Inc. (MJCI) and to the Philippine Racing Club, Inc. (PRCI) respectively, the Republic Act (RA) Nos. 8407 and 7953 qranted to the Manila Jockey Club)

franchise to.operate racetracks, where:

MJCI and PRCI shall remit to the Nationai Treasury a franchise tax equal to twenty five percent (25%) of their individual gross earnings from the horse races authorized to be held under 'their respective franchise which is equivalent.to eight.and one half percent (8 1/2 %) of the total wager fund or' gross receipts. on the sale of betting tickets during the racing day. allotted as follows:

National Government located Province Philippine Charity Sweepstakes Office "(PCSO) PRCI/ Municipal hospital where the racetrack or city/municipality where racetrackis Particulars for s % Shares 525 525 725

White Cross (WC)] located for MiCI Phitippine Anti -- Tuberculosis Society (PTS) 625 225

1.2 The enactment of RA No. 7716 (Expanded VAT Law) and RA No. 8241 (Amending RA No. 7716) reptaced the rate of franchise tax to VAT to be

No. 8424, the Tax Code of 1997. computed based on gross receipts as defined under Section 108 (A) of RA percentages shail be based on the VAT payable, as follows: 'Accordingly, the allocation of the

For PRCI:

PCSO National Government Local Government PTS WC 525 525 6 8E4 2 WoT JUN 2 0 2008 1 Ft ENY 50

For MJCI:

Local Government Municipal Hospital Nationai Government PTS WC 525 525 625 725 225

2.0 PURPOSE

2.1 To prescribe the guidelines and procedure for the release of the shares of Iocal government units (LGUs) from the Va!ue Added Tax (VAT) in lieu of

franchise tax collected from race track operations of the MJCI and the PRCI, pursuant to R.A. Nos. 8407 and 7953, respectively.

2.2 To delineate the responsibilities of agencies concerned in the allocation and release of the shares of LGUs.

3.0 COVERAGE

This Joint Circular covers the shares of the LGU beneficiaries concerned from the VAT collected from racetrack operations of the MJCI and the PRCI, pursuant to RA Nos. 8407 and 7953, respectively.

4.0 DEFINITION OF TERMS

4.1 Franchise Tax a tax on a special privilege or right conferred by the State through the legislature and which, therefore,

does not -belong to the citizens of the country generaily as a matter of comimon right.

4.2 Gross Receipts the total amount of money or its equivalent representing the contract price, compensation,

service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advance payments actuaily received during the taxable quarter for the services performed or to be performed for another person, exciuding VAT.

4.3 Input Tax the value added tax due from or paid by a VAT- registered person: in the course of his trade or

business on importation of goods or local purchase of goods or services, including lease or use of property, from a VAT-registered person.

4.4 LGU Beneficiary refers to the province or city/municipality where the racetrack is located and where partly owned by the

province and by the city/municipality, the share shall be proportionately allocated.

4.5 Municipal Hospital - refers to a government hospital iocated in, and operated and funded by the municipality.

4.6 Output Tax means the value added tax due on the sale or lease of taxable goods or properties or services by any person liable to pay tax under Section 105 of-the

National Internal Revenue Code.

47 Value Added Tax - a tax on consumption levied on the sale, barter exchange or lease of goods or properties and

services in the Philippines and on importation of goods into the Philippines. The seller is the one statutorily liable for the payment of the tax but the amount of the tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties services at the time of the effectivity of RA No. 9337.

5.0 PROCEDURAL GUIDELINES

5.1 LGU's Share Computation

Gross Receipts (8.5% Club's Commission) *1 VAT Rate *2 10% or 12% whichever is applicable VAT Output Less: Input Tax VAT Due and Payable P 8 8 10% or 12% XXXXXXX XXXXXXX XXXXXXX XXXXXXX

LGU's Share LGU's Percentage Share (5/25) D .xxxxxxx! 20%

Note: *1 LGU's share is computed from the 8.5% Club's Commission only

*2 10% VAT rate up to January 31, 2006 12% VAT rate effective February 1, 2006

5.2 Illustrative Computation

A LGU's share from VAT collections when VAT rate was 10% i.e., up to January 31, 2006 only:

Gross Receipts (8.5% Club's commission) LGU's percentage share (5/25) VAT rate Less: Input Tax VAT due and payable LGU's share VAT output P P P 23,000,000 1,000,000 2,300,000 1,300,000 200,000 20% 10%

W

B LGU's Shares of 12% VAT collected for the taxable period effective February 1, 2006:

Gross Receipts (8.5% Club's commission) VAT output Less: Input Tax VAT due and payable LGU's percentage share (5/25) VAT rate LGU's share P 8 D 23,000,000 2,760,000 1.760.000 200,000 1,000,000 20% 12%

6.0 RESPONSIBILITIES

6.1 Department of Finance (DOF) -- Bureau of Internal Revenue (BIR)

For the Release of LGU Shares Chargeable to CY 2007 and the CY 2008 General Appropriations Act (GAA).

6.1.1 Prepares the 2007 annual summary of VAT payments for income

of payment and . the Authorized derived by the MJCI and PRCI from horse racing indicating the-date Bank/Authorized Agent Bank (AGDB/AAB) where payment was Government Depository

made;

6.1.2 Within thirty (30) days after the issuance of this circular, transmits

to BTr for validation the 2007 annual summary of VAT payments referred to in 6.1.1;

6.1.3 Submits to DBM not iater than April 30, 2008, the computations of

the shares of LGU from VAT payments supported by the BIR-BTr Joint Certification as basis for the programming of funds and release of LGU shares in CY 2008 in accordance with the annual General Appropriations Act.

For the Release of LGU Shares`for Remittances in CY 2008 Chargeable Against CY 2009 GAA and Thereafter

6.1.4 For CY 2008 and every year thereafter, prepares the monthly

summary of VAT payments of MJCI and PRCI paid/filed with the BIR and forwards copy of the summary to the BTr within ten (10) days after the end of the month of filing of returns;

6.1.5 Submits to DBM the duly signed BTr-BIR Joint Certification of

reconciled VAT payments received by BIR from MJCI and PRCI and deposited to BTr, together with the computation of the shares of LGUs thereon on or before April 30, 2009 and ensuing year thereafter.

For the Annual Budget Preparation (BP) for CY 2009 and for Every BP Year Thereafter

6.1.6 Prepares and submits to DBM not later than March 15, 2008 and of each ensuing year, the projected amount representing the VAT Expenditure Program (NEP) starting in CY 2009; and for every BP year thereafter. payments for the current year for inclusion in the National

6.2 Department of Finance - Bureau of the Treasury (BTr)

6.2.1Receives from the BIR the summary of VAT payments of MJCI and PRCI, validates the same from the credit advices received from AGDBs and prepares the summary of deposits with the corresponding Journal Entry Voucher (JEV) issued;

6.2.2 Consolidates the monthly summary of VAT payments, validates the same from BTr recorded VAT deposits, prepares the _whole year summary with the corresponding JEV issued, and attach the same to the BTr-BIR Joint.Certification;

6.2.3 Prepares and sign's the yearly BTr-BIR Joint Certification showing the reconciled VAT payments received by BIR from MJCI and PRCI

and deposited to the BTr;

6.2.4 Submits to BIR the duly signed BTr-BIR Joint Certification of VAT days from receipt of the summary of VAT payments from the BIR. payments together with the summary of recorded VAT deposits of MJCI and PRCI.with the corresponding JEV issued within fifteen (15)

6.3 Department of Budget and Management (DBM)

6.3.1 Includes in the NEP the projections/estimates of VAT payments for income derived`by MJCI and PRCI for the current year submitted by the BIR as per 6.1.6.

6.3.2 Releases the shares directly to the LGUs, based on the BIR computation of LGU shares supported by the BIR-BTr Joint Certification on the actual collections made by the BIR and actually deposited to the BTr, as submitted to DBM not later than April 30 of each year, starting in CY 2008, subject to cash programming,l budgeting, accounting and auditing rules and regulations.

7.0 SEPARABILITY CLAUSE

If any section or provision of this Joint Circular is held invalid, all other. provisions not affected thereby shall remain valid. Share of other beneficiaries mentioned in RA 8407 and RA 7953 shall be made in a separate issuance.

tJUN 2 0 2008

8.0 GOVERNING CLAUSE

the matter in coordination with MJCI, PRCI, BIR and BTr. Cases not covered by the provisions of this Joint Circular shall be referred to the DBM Central Office or through the Regional Office concerned, which shall resolve

9.0 EFFECTIVITY CLAUSE

This Joint Circular shall take effect immediately

MARGARITO B.(TEVES Department of Finance 005994 Secretary Department of Budget and ROLANDO G. ANDAYA, JR. Management Secretary