BIR tightens tax clearance rules for government contractors

MANILA, Philippines - Government contractors must now meet tighter requirements from the Bureau of Internal Revenue (BIR) to get a tax clearance before they can participate in public biddings.

Under Revenue Regulations 1-2016, the BIR laid out specific qualifications for contractors, originally absent in an earlier order in 2005, to obtain tax clearances.

BIR officials could not be reached for comment, but private tax professionals welcomed the new order.

“I think the objective of this regulation is to make sure all those participating in public biddings are tax compliant,” said Benedict Tugonon, president of the Tax Management Association of the Philippines.

“I think it’s a good idea,” he said in a phone interview yesterday.

Under RR 1-2016, tax clearance applicants must have no unpaid annual registration fee or pending criminal cases before the Department of Justice and the courts.

They must also not have been involved in any BIR assessment cases where the agency won.

Those undergoing compromise settlements will be granted a tax clearance, but are instructed to open an “escrow account” and deposit the amount involved pending abatement decision.

Meanwhile, applications by companies with “delinquent” accounts will be denied.

Additionally, new applicants must be users of the BIR’s electronic filing and payment system (eFPS) for “at least two consecutive months” before the application.

For previous contractors who are yet to be eFPS members, the BIR instructed them to enroll in the system for future applications.

“The only issue that I could see here is with the new eFPS registration. It could discourage new participants because of this two-month requirement,” Tugonon commented.

“Compliance-wise, you are limiting the number of participants (in biddings),” he added.

For the government, the BIR told contracting parties to check with its website if tax clearances submitted them are authenticated.

Anyone that will be found to have fabricated a tax clearance will be persecuted.

“There would be more paperwork and more time needed for the government bidders to comply, but I think these are good rules,” Tugonon said.