RMO No. 2-2025 — Policies, guidelines and procedures in the processing and issuance of Tax Clearance Certificate for Final Settlement of Government Contracts (TCFG) Digest | Full Text | Annexes

@ Rureads pranaternen rovezong BUREAU OF INTERNAL REVENUE REPUBLIE OF THE PHILIPPINES DEPARTMENT OF FINANCE .+1-5 City BAGOnG Brinaina in Reu for Nafion-builotng AS PILIPINAS

JAN 0 6 2025 December 02, 2024

REVENUE MEMORANDUMORDERNO. 0 0 2 - 2 0 2 5 DANFLKAHNUGAH -AD EF4S

SUBJECT Policies, Guidelines and Procedures in the Processing and Issuance of Tax Clearance Certificate for Final Settlement of Government Contracts (TCFG)

TO All Revenue Officials, Employees and Other Concerned

I BACKGROUND

Executive Order (E.O.) No. 398 was issued on January 12, 2005 directing the timely and complete payment of taxes as a precondition for entering into, and as a continuing obligation in contracts with the government, its departments, agencies and instrumentalities.

amending RMO No. 39-92 updating the procedures in the implementation of the Revenue Memorandum Order (RMO) No. 12-2015 was then issued on April 20, 2015 Memorandum of Agreement between Department of Public Works and Highways for Contractor's Final Payment Release Certificate (BIR Form No. 0217) across all BIR offices. RMO No. 12-2015 was then revoked by RMO NO. 57-2019 dated November 28, 2019 addressing the issues and concerns regarding the duplication of requirements being submitted by contractors to the Bureau of Internal Revenue (BIR) and DPWH and to align the process for the release of the final payment for contractors with Republic Act (RA) No. 1 1032 also known as the "Ease of Doing Business and Efficient Government Service Delivery Act of 2018". (DPWH) and Department of Finance and decentralizing the processing of Application

Bidding Purposes as required under RA No. 9184 and E.O. No. 398 was provided by RMO No. 46-2018. The procedures in the decentralized processing and issuance of Tax Clearance for

Provisions of Section 3 of E.O. No. 398 show that the BIR tax clearance is not only required to be submitted by the contractor during the procurement process as an of Government Contracts (TCFG) is to be secured from the BIR and to be presented prior to final settlement of government contracts. No. 17-2024 prescribed the presentation of the updated tax clearance by the contractor to the concerned departments, therefore Tax Clearance Certificate for Final Settlement eligibility requirement but on a regular basis within the duration of the contract. RR

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H OBJECTIVES

This Order is issued to:

1. Ensure that taxes withheld from payee private contractors are paid and remitted on time by the government agencies;

2. Ensure that only tax compliant contractors are entitled for the final settlement of any goods, consulting services and infrastructure projects delivered;

3. Provide policies, guidelines and procedures in the application and issuance of TCFG; and

4. Define the duties and responsibilities of BIR officials and offices in the issuance of the TCFG.

I COVERAGE

1. Government contracts for any procurement done through public bidding process pursuant to RA No. 9184 otherwise known as the "Government Procurement Reform Act", as amended by RA No. 12009 shall be covered by the TCFG;

2 Government contracts for the procurement of goods, consulting services, and infrastructure projects pursuant to the scope and application as defined under RA No. 9184; and

3. The tax types covered shall be value-added tax (VAT), percentage and creditable withholding income tax.

V DEFINITION OF TERMS

For the purpose of this Order, the following words and/or phrases shall be defined as follows:

1."Tax Clearance Certificate for Final Settlement of Government Contracts including state universities and colleges, government-owned and/or controlled wili be presented prior to the final settlement of the government contracts to ensure complete and timely payment and remittance of taxes. (TCFG) -- refers to the certificate to be secured by the contactor who have existing contracts with the government, its departments, bureaus, offices and agencies. corporations, government financial institutions and local government units which

2. "Tax Compliance Verification Clearance for Final Settlement of Government associations, whether taxable or non-taxable, etc.) classified as non-large taxpayers. contractors (individuals, partnerships, corporations, joint ventures, cooperatives. This is a pre-requisite requirement for TCFG applications which will be secured by non-large taxpayers from concerned Revenue District Office. Contracts (TCVC-FG) -- refers to the certificate that is issued to all government

RECORDS MANAGEME 8UREAU OF INTERNA SIVISION

JAN O 6 2025

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V. GENERAL POLICIES

1. All persons, natural or juridical, local or foreign, who have any existing contracts updated TCFG (Annex "A " and "A. I ") certifying that they have no outstanding tax liabilities and that they have duly filed the latest income and business tax returns and paid the corresponding taxes due thereon. universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units for the supply of with the government, its departments, bureaus, offices and agencies, including state goods and services, including infrastructure projects, shall secure from the BIR an

2. All government contractors (individuals, partnerships, corporations, joint ventures, cooperatives, associations, whether taxable or non-taxable, etc.) classified as non- large taxpavers who have existing contracts with the government are required to Secure TCVC-FG (Annex "B").

3.- The issuance of TCFG shall be on a per contract basis.

4.The processing offices authorized to receive applications for TCVC-FG and TCFG are as follows:

Tax Clearance Certificate Taxpayer Classification Processing Office

BY G bUreau oF InterITaL ReVeNue RECORDS MANAGEMENT DIVIS!ON JAN 0 6 2025 admin unit BE JME B 1!sbw TCVC-FG TCFG Corporation (NRFC), Non. Business (NRA-NETB), Non-Resident Foreign authorized by the CIR Non-large taxpayers Non-large taxpayers Engaged in Trade or Resident Alien Not and other entities Large taxpayers Large Taxpayers Division (LTD)-Cebu, LTD-Davao Collection Section of the Collection Enforcement Tax Clearance Section (TCS) of the Regional Monitoring Division Accounts Receivable Collection Division Division (LTCED) or Large Taxpayers concerned RDO (ARMD)

5. All contractors, except for NRA-NETB, NRFC are required to submit one (1) part of the documentary requirements to be submitted to the concerned Large the concerned LT Office/RDO. original copy of Certification of Collectible Final Payment (Annex "C") issued by the concerned government agency, duly approved by the Chief, disclosing the collectible final payment due to the contractor and one (1) photocopy of government agency's issued ID of the signatory reflecting the signature or specimen signature for ID without reflected signature. The certification shall form Taxpayers Audit Division/Large Taxpayers District Office (LT Office) or RDO whose principal place of business or branch office falls within the jurisdiction of Accounting/Finance Division or Treasurer of the said government agency

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6. Only applications with complete documentary requirements, as enumerated in the processing office. whichever is applicable), shall be received and processed by the authorized Checklist of Documentary Requirements (CDR) (Annexes "D", "D.I" and "D.2"

7. Only duly accomplished Application Form for TCVC-FG (Annexes "E" and Resolution for corporations, cooperatives, associations and other non-individuals' office. The said form shall"be accomplished and signed by the applicant with complete documentary requirements shall be accepted by the BIR-processing himself/herself for individuals, or by any one of the partners, or by any authorized officer/individual whose authority to act as such is contained in a Board Resolution. as shown by a Secretary's Certificate of the minutes/contents of said Board taxpayer-applicants. "E.I") and Sworn Application Form for TCFG (Annexes "E.2", "E.3" and "E.4")

8. The following criteria must be satisfied by the taxpayer-applicant before the TCVC- FG and TCFG is issued:

For the issuance of TCVC-FG/TCFG:

8.1 No open valid "stop-filer" cases;

8.2 A regular user of the BIR's Electronic Filing and.Payment System (eFPS) from the time of enrollment up to the time of filing of the renewal of TCFG for those with previously issued TCFG. The regular usage of eFPS shall not apply to new applicants. The submission of the new applicant's latest income tax and business tax returns not filed and paid through the Bureau's eFPS shall suffice; 8.3 Not tagged as "Cannot Be Located (CBL)" taxpayer;

8.4 No Accounts Receivable/Delinquent Account (ARDA). However, applicants the amount offered for payment upon filing of the application for compromise settlement or abatement of penalties; the tax liabilities involved were the subject of a pending application/s for compromise settlement and/or abatement of penalties pursuant to Section 204 with delinquent accounts may still be issued TCVC-FG and TCFG, provided of the Tax Code, as amended. Provided, further, that the applicant has fully paid

Additional Condition for the Issuance of TCFG:

8.5 No pending criminal information filed in any court of competent jurisdiction arising from any tax or tax-related cases.

9. The following processing time shall be observed by the concerned processing offices for received TCVC-FG and TCFG applications:

Tax Clearance Certificate TCVC-FG TCFG Two (2) working days Two (2) working days Processing Time

@ BUreAu oFInterNaL reVent RECORDS MANAGEMENT DIVISION OT H

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10. The TCVC-FG and TCFG shall have a validity period as illustrated below unless sooner revoked for valid reasons and shall be signed / approved by the following BIR officials:

Tax Clearance Certificate Classification Taxpayer Revenue Official Approving Validity Period

TCVC-FG TCFG Non-Resident Foreign Non-large taxpayers Non-large taxpayers Not Engaged in Trade Corporation (NRFC), entities authorized by Non-Resident Alien or Business (NRA- NETB), and other Large taxpayers the CIR Cebu/Chief, LTD - Revenue Regional Chief, Collection Revenue District Davao/Chief - Chief, ARMD Division of the Chief, LTD LTCED Officer Office One (1) Year Ninety (90) Days

11. In the absence of the aforesaid officials, the next in rank shall sign / approve the Chief, Tax Clearance Section may sign the TCVC-FG and TCFG, respectively provided that there is a memorandum or approved Continuity Plan for Alternate Signatories issued. Tax Clearance. For instances that the abovementioned signatories are not available due to official business or leave of absence, the Chief, Assessment Section and

12. The TCVC-FG/TCFG shall be prepared in duplicate to be distributed as follows:

Duplicate Copy - to be retained to TCVC-FG/TCFG issuing office for record Original Copy -- to the applicant/taxpayer/prospective bidder; and purposes.

monitoring and record purposes. Clearances with corresponding registered Tax Clearance Control Number for The TCVC-FG/TCFG-issuing office shall maintain a database of all its issued Tax

13. TCFG shali only be valid after the same have been posted in the BIR Website. The name, TIN, the RDO where the taxpayer is registered, the Tax Clearance's Control Number and the Date of Issuance. information that shall be posted in the BIR website shall only include the taxpayer's

14. TCFG shall be verified for authenticity from the List of Tax Clearances Issued through the Bureau's website https://www.bir.gov.ph/Tax-Clearance-List- Issued-TCC.

)BureaUoF RECORDS MANAGEMENT DIVISION NWFU INTERNALREVENU!

JAN 06 2025

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V. PROCEDURES

1. Collection Section of the Revenue District Office shall:

1.1 Receive application for TCVC-FG from taxpayer-applicant; 1.2 Verify and validate if the taxpayer-applicant submitted the complete documentary requirements:

1.3 The concerned Revenue Officer shall issue a claim stub (Annex "F") to the taxpayer-applicant if he/she/it submitted the complete documentary requirements as listed on the Checklist of Documentary Requirements (CDR) (Annex "D") for all TCVC-FG applications;

1.4 In case the taxpayer-applicant fails to complete and satisfy the documentary using the duly acknowledged taxpayer 's copy of the CDR and require taxpayer application and inform the concerned taxpayer of the lacking requirements applicant to submit compliance thereof before the same may be accepted and requirements set forth on the CDR, the Revenue Officer shall not accept the processed;

1.5 An Evaluation Sheet for application of TCVC-FG (Annex "G") shall be routed by the concerned Revenue Officer from Collection Section to the Client Support taxpayer applicant has satisfied all the criteria set forth per Section V.8 of this Section, Compliance Section and Collection Section to verify and validate if the Order;

1.6 Issue a "Compliance Notice" (Annex "H") for TCVC-FG applications indicating the lacking documentary requirements and/or the prescribed criteria of the concerned official, the next in rank shall initial/sign/approve the not satisfied for final approval of the Revenue District Officer. In the absence Compliance Notice for TCVC-FG;

1.7 For compliant applications, issue the corresponding TCVC-FG (Annex "B") Delegation Order issued by the said Revenue District Officer in which a copy for monitoring purposes; Revenue District Officer or any of his authorized representative as shown by a shall be forwarded to the concerned Collection Division of the Revenue Region within two (2) working days from receipt of the application signed by the

1.8 Advise taxpayer-applicant to proceed to the Regional Office's Tax Clearance Section (TCS) of the Collection Division for the issuance of TCFG; and 1.9 Record all issued TCVC-FG and submit the Daily List of Issued TCVC-FG to the concerned Collection Division of Revenue Regional Offices and copy furnished ARMD using the prescribed format (Annex "I") to armd_tes@bir.gov.ph, the official e-mail-address, the following working day. 32a XA SES RDS MANAGEMENTSIVISION J OF INTERNAL REVEN!

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2. Tax Clearance Section (TCS) of the Collection Division of the Regional Office/LTD-Cebu/LTD-Davao/LTCED of LTS shaIl:

2.1 Receive application for TCFG from taxpayer-applicant; 2.2 Verify and validate if the taxpayer-applicant submitted the complete documentary requirements;:

2.3 The concerned Revenue Officer shall issue a claim stub (Annex "F") to the taxpayer-applicant if he/she/it submitted the complete documentary requirements as listed on the Checklist of Documentary Requirements (CDR) (Annex "D. I ") for all TCFG applications;

2.4 In case the taxpayer-applicant fails to complete and satisfy the documentary applicant to submit compliance thereof before the same may be accepted and requirements set forth on the CDR, the Revenue Officer shall not accept the application and inform the concerned taxpayer of the lacking requirements using the duly acknowledged taxpayer's copy of the CDR and require taxpayer processed;

2.5 Revenue Officer from the Tax Clearance Section (TCS) of the Collection court of competent jurisdiction arising from any tax or tax-related cases; to Legal Division for the existence of pending criminal information files' in any Division of the Regional Office shall route the TCFG application using an verification of the existence of Accounts Receivable/Delinquent Accounts and Evaluation Sheet (Annex "G.I ") to the Collection Division for validation and

2.6 In case the taxpayer-applicant fails to complete and satisfy the requirements and and require the taxpayer-applicant to submit compliance thereof before the same criteria set forth herein, inform the taxpayer-applicant of the lacking documentary requirements and criteria using the prescribed format (Annex " J") may be accepted and processed;

H SZOZ 9 0 NVf ETNON 2.7 For compliant applications, issue the TCFG within two (2) working days from the date of receipt of the application using the prescribed format hereto attached (Annex "A " and Annex "A. I") with control number following the sequence numbers as follows: TCFG NO. RR/LT-RDO-MM-DD-Series-YYYY

Y 2.8 The Daily List of Issued TCFG (Annex "K"), including those with ground for mail at e-mail address: armd_tes@bir.gov.ph the following working day for posting to the BIR Portal/Website; and revocation (Annex "K.I"), as the case may be, shall be submitted by the Davao/LTCED of LTS to ARMD, Attention: Tax Clearance Section through e- Collection Division of the Revenue Regional Office/LTD-Cebu/LTD.

2.9 Validate the authenticity of the TCFG, and in case of official request of any If found spurious, the name of the taxpayer (bidder/contractor) using (Annex government procuring agency, prepare the letter reply using the (Annex "L"). Page 7 of 8

LTS, for the filing of appropriate criminal charges, copy furnish the ARMD. under the Regional Office and Prosecution Division for taxpayers under the "M") shall be forwarded to the Regional Investigation Division for taxpayers

3. Tax Clearance Section of the Accounts Receivable Monitoring Division shall:

3.1 Receive and process application for Tax Clearance with complete documentary requirements from NRFC and NRA-NETB and other entities authorized by the CIR;

3.2Receive the Daily List of Issued TCFG (Annex "K") sent by e-mail to Regional Offices, LTD-Cebu, LTD-Davao and LTCED of LTS; armd_tes@bir.gov.ph from the concerned Collection Division of Revenue

3.3 Maintain a Master List of Issued TCFG, for records and monitoring purposes; 3.4 Update BIR Portal on the List of Tax Clearances Issued; and 3.5 Transmit to concerned RID/NID the copies of alleged spurious/fake Tax Clearance submitted by any government procuring agency or spurious documents submitted by the taxpayer-applicant, for preliminary investigation. VI. REPEALING CLAUSE

repealed accordingly. All issuances which are inconsistent herewith are hereby amended, modified or

VHI. EFFECTIVITY

This order shall take effect immediately.

Com ner-of Internal Revenue MAGUI,JR

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REAU OF INTERNA.REVEN ORDS MANAGEMEN S DivSIOr

JAN 06 2025

EY admin unit TIME:

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