Let's Talk Tax

Tax clearance for government bidding: What’s new?

Of the P3.002-trillion national budget, P702.9 billion is intended for infrastructure in 2016. The P702.9-billion capital outlay budget represents 23.4% of the 2016 total budget, and represents a 29.8% rise from 2015.

According to the government, the programmed increase of infrastructure spending will bring the Philippines almost at par with the global benchmark of 5% infrastructure spending. Robust spending is good for the economy as it aims to link lagging communities to growth centers and people to opportunities. A significant increase in infra spending is also expected during this election year. Thus we see ongoing government projects all over the Philippines in various stages of completion.

The infra budget is a good opportunity for the private sector to participate in government projects. The government contractors or prospective bidders should be familiar with the procurement rules and procedures pursuant to Republic Act No. 9184, also known as the Government Procurement Reform Act and Executive Order No. 398.

One of the major requirements for a contractor or bidder in participating government projects is a tax clearance certificate duly issued by the Bureau of Internal Revenue (BIR). The rationale of this requirement is very reasonable. The government wants to award projects to those companies which are complying with the tax regulations and paying the right taxes.

The process of issuing a tax clearance usually takes some time when the BIR ascertains that the prospective bidder has a pending tax assessment case with the Court of Tax Appeals (CTA) or Supreme Court (SC). With the intent to prevent undue disruptions in the business operations of the bidder and wholly, in the bidding process, a provisional tax clearance is be issued, solely for tax assessment cases pending in courts as clarified under Revenue Memorandum Circular No. 58-2013.

Recently, the BIR issued Revenue Regulations (RR) No. 1-2016, effective Feb. 26, 2016, to further refine some provisions of the existing rules and regulations, particularly on the manner of filing tax returns and the criteria for granting tax clearance.

RR 1-2016 promulgates that only tax returns filed thru Electronic Filing and Payment System (eFPS) will be accepted as attachments to government bids/proposals as required under EO 398.

All Tax clearance applications for bidding taxpayers shall be manually filed with the office of the Accounts Receivable Monitoring Division (ARMD) until such time that an online application for this purpose has been made available for use of prospective bidders. Tax Clearances with validity period of six months shall be issued by the ARMD to attest that taxpayer has no delinquent account and has satisfied all other criteria for the issuance of tax clearance, as follows:

a. No unpaid registration fee;

b. No open valid stop-filer cases;

c. Regular user of eFPS for two consecutive months (for new applicants);

d. No pending criminal case with the Department of Justice or the courts; and,

e. No delinquent account and/or judicially protested tax assessments with decision favorable to the BIR.

The Government Procuring Entity shall validate the authenticity of the tax returns from the list of Tax Clearances published on the BIR Web site. The attached audited financial statements, on the other hand, must be validated with the Revenue District Office/Large Taxpayer Service where the bidder is registered. Criminal charges shall be filed against bidders found to have submitted spurious tax clearances. No tax clearance shall be issued to them until the criminal case is resolved.

With these guidelines in place, the prospective government bidders should regularly evaluate their tax compliance and resolve any pending tax cases as soon as possible to avoid losing the chance to participate in government projects. Likewise, the BIR will also need to speed up the release of the tax clearance if the taxpayer has no pending tax cases with the agency or with the courts. This guarantees competitive bidding for every project since more bidders would have a chance to participate. Competitive bidding will result in savings and cost-efficient infra projects for the benefit of the Filipino people, thereby achieving the administration’s goal of good governance.

Sheena Marie D. Daño is a tax and outsourcing manager at the Cebu Branch of Punongbayan & Araullo.