QuestionsQuestions (EXECUTIVE ORDER NO. 164)
EO No. 398 was issued by President Gloria Macapagal-Arroyo under the powers vested in her by law. Its purpose is to direct the timely and complete payment of taxes as a pre-condition to entering into government contracts and as a continuing obligation during contract implementation.
EO No. 398 covers all persons, natural or juridical, local or foreign, who desire to enter into or participate in any contract with the government and its various entities, including national government departments, agencies, state universities and colleges, GOCCs, government financial institutions, and local government units.
Private parties must submit (1) a copy of their latest income and business tax returns duly stamped and received by the Bureau of Internal Revenue (BIR), and duly validated with tax payments made thereon; and (2) a tax clearance from the BIR proving full and timely payment of taxes.
It is intended to ensure that tax obligations are current and actually paid, not merely declared. The stamping/receipt and validation with tax payments provide verification that taxes were paid timely and in full.
A private party must have fully complied with tax requirements—evidenced by the required tax returns and BIR tax clearance—before it can enter into or participate in a government contract.
Government agencies must exert all efforts to determine that the private contracting party is free and clear of all tax liabilities to the government.
The private contracting party, through its responsible officer(s), must certify under oath that it is free and clear of all tax liabilities to the government before entering into the contract.
Contracts must include a stipulation that the private contracting party shall pay taxes in full and on time, and that failure to do so will entitle the government to suspend payment for goods or services delivered.
Contracts must require the private contractor to regularly present, within the duration of the contract, a BIR tax clearance and copies of income and business tax returns duly stamped/received and validated with the tax payments made thereon.
Failure to pay taxes in full and on time entitles the government to suspend payment for any goods or services delivered by the private contracting party.
Agencies must regularly furnish the BIR the names of private contracting parties they have contracted with, as well as the amount of payments made to those parties, to enable BIR scrutiny of full and timely payment of taxes.
It revokes, amends, or modifies all executive issuances, rules, regulations, or parts thereof that are inconsistent with EO No. 398.
It took effect fifteen (15) days after its publication in a newspaper of general circulation.
It requires ongoing compliance by mandating contract stipulations for timely and complete tax payments, regular submission/presentation of tax clearances and validated tax returns, and provides the government a right to suspend payments if taxes are not properly paid.