Recently, the Bureau of Internal Revenue (BIR) carried out mission orders authorizing revenue officers to conduct tax mapping operations that required them to inspect taxpayers’ premises within a specified area and to evaluate compliance with rules and regulations on registration and bookkeeping, particularly on the issuance of sales invoices or receipts, among others.
Those that were greatly affected by the inspections were project sites or offices of entities registered with the Philippine Economic Zone Authority (PEZA) whose registration and bookkeeping were done either: (1) in consolidation with their head office; or (2) through another project site, located within the same area as the project site being inspected and therefore, under the jurisdiction of the same district office of the BIR.
For PEZA purposes, a project site or office is an additional building or facility which is located separately or independently from an original or existing project location. There may be several PEZA projects in one building or facility but generally, the whole building or facility is considered one project site or office.
A question now arises as to whether these project sites or offices are required to be registered separately even if their head offices are already registered in the same district office of the BIR.
Let’s revisit the rules and regulations issued by the BIR on the matter.
Section 3 of Revenue Regulations (RR) No. 07-2012 defines a “head office” as referring to the declared specific or identifiable principal place or head office of the business as stated in the articles of incorporation or, in its absence, the place where the complete books of accounts are kept. It is the fixed place of business, whether rented or owned, and whether or not the products/services being sold are actually located or displayed there.
A “branch,” on the other hand, is a separate or distinct establishment or place of business where sales transactions are conducted independently from the head office. It may include either: (1) a sales outlet or establishment situated in another location or address other than at the head office; or (2) a “facility” with sales activity.
The RR went further to define a “facility” as one which may include, but is not limited to, a place of production, showroom, warehouse, storage place, garage, bus terminal, or real property for lease with no sales activity. In other words, a facility may or may not have sales activities.
Under the RR, a facility shall be registered as a branch if sales transactions or activities are being conducted there. Otherwise, no BIR registration is required.
Since most of the project sites or offices of PEZA-registered entities have sales activities, it follows that a separate branch registration must be secured for each project site or office even if their head offices are already registered in the same district office of the BIR.
There may be several PEZA projects in one building or facility but for BIR purposes, each additional building or facility apart from the head office, must have a separate branch registration.
At a minimum, the project site or office must secure or comply with the following separate from its head office: (1) Taxpayer Identification Number (TIN) or branch code for each site; (2) Payment of annual registration fee; and (3) BIR Certificate of Registration for each registered site.
Incidentally, one of the standard requirements of the BIR before issuing a separate registration is the submission of a Mayor’s Permit from the local government unit (LGU) concerned. As a general rule, however, all PEZA-registered enterprises entitled to incentives such as the income tax holiday, 5% gross income tax, and tax and duty-free importation are exempted from securing a Mayor’s Permit from the concerned LGU.
Thus, unless there is an existing Memorandum of Agreement (MOA) between PEZA and the respective LGU requiring the application for a Mayor’s Permit and the payment of regulatory fees, submitting the Mayor’s Permit during the application for BIR registration may be dispensed with. Currently, PEZA has existing MOAs with six cities in Metro Manila (Pasay, Pasig, Parañaque, Makati, Taguig and Quezon City).
With the mandatory requirement of securing the BIR registration of PEZA project sites or offices, another question comes to mind — are they also required to maintain separate books of account and to issue separate receipts and invoices?
Apart from the requirement under the PEZA law of having distinct and separate books of account for each registered project, Revenue Memorandum Circular (RMC) No. 29-2019 requires that books of account, whether manual, loose leaf or computerized, shall be used and kept at all times in the place of business of the taxpayer. Place of business, in this case, shall include project sites and offices registered separately as branch offices.
As to receipts and invoices, RR 18-2012 requires that a separate Authority to Print (ATP) for principal and supplementary receipts and invoices be secured for both the head office and its branches. For the head office, all receipts and invoices used in the business premises must reflect the TIN and address of the head office, while those used by the branch must reflect the branch code and its address.
PEZA-registered entities must be cognizant of the requirements and conditions that must be complied with under the law. As the saying goes, “An ounce of prevention is better than a pound of cure” — lest one is caught unaware during a BIR tax mapping exercise and assessed penalties for violating the rules and regulations.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
John Paul M. Vargas is a Senior Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of PricewaterhouseCoopers global network.