Title
Tax rules on jewelry and metallic minerals sales
Law
Bir Revenue Regulations No. 5-2013
Decision Date
Mar 21, 2013
BIR Revenue Regulations No. 5-2013 mandates advance payment of excise, value-added, and income taxes on the sale of jewelry, gold, and other metallic minerals to nonresident aliens and foreign corporations not engaged in business in the Philippines, aiming to curb tax evasion and enhance revenue collection.
tax treatment
nonresident alien
foreign corporation

Legal basis, framework, and relationship

  • The Regulations are promulgated under the authority of the Bureau of Internal Revenue and the Department of Finance to prescribe rules on the manner internal revenue taxes are paid through collection officers and deputized banks.
  • The Regulations invoke Section 245(j) of the Tax Code as authority for prescribing the manner of payment of internal revenue taxes and the submission of tax returns and papers through collection officers or authorized agent banks.
  • The Regulations invoke coverage under Sections 244 and 245 in relation to Sections 24, 25, 27, 28, 51, 52, 106, 108, 114, 116, 128, 129, 130, and 151 of the National Internal Revenue Code of 1997 (Tax Code).
  • The Regulations are issued to prescribe advance payment rules for business and income taxes and actual payment rules for excise tax for specified sellers involved in specified sales.
  • The Regulations build upon the excise tax framework under RR No. 6-2012 dated April 2, 2012.
  • The VAT/percentage tax threshold reference is tied to Revenue Regulations No. 3-2012 dated February 20, 2012, which currently sets the threshold at Php1,919,500.

Policy and enforcement purpose

  • The Regulations address revenue leakages arising from difficulty in tracking sellers of jewelry and gold/metallic minerals sold to nonresident aliens and foreign entities for short-term cash purchases.
  • The Regulations require an advance payment of probable taxes to plug revenue leakage and tap additional revenue sources.
  • The Regulations establish a collection and monitoring system using RDO-assigned Revenue Collection Officers (RCOs) and enforcement through Special Investigation Division (SID) surveillance.

Scope: covered sellers and covered buyers

  • The Regulations cover sellers of jewelry, gold, and other metallic minerals who sell to:
    • Nonresident alien individuals not engaged in trade or business within the Philippines, and/or
    • Nonresident foreign corporations.
  • The Regulations apply to sales transactions occurring within the Philippines where the nonresident buyer comes for a limited time to purchase in cash jewelry and metallic minerals.
  • The Regulations require advance payment even where sellers are not duly registered with the Bureau and even where sellers are paying through the jurisdiction of the RDO where the transaction occurs.
  • The Regulations require that excise-tax-related compliance be established through proof of payment for possessors of gold and metallic minerals (including imported and locally bought).

Taxes imposed and key tax rates

  • The Regulations impose excise tax under the scheme prescribed for gold and other metallic minerals under RR 6-2012.
  • For gold and other metallic minerals, the excise tax is Two percent (2%), computed based on:
    • the actual market value of the gross output at the time of removal for locally extracted/produced minerals, or
    • the value used by the Bureau of Customs (BOC) in computing tariff and duties for importations.
  • Possessors of gold and other metallic minerals must show proof excise tax was paid; otherwise they are assessed and held liable for excise tax.
  • Gold and other metallic minerals discovered in a possessor’s inventory without proof of excise tax payment are presumed removed on the day of discovery.
  • For purposes of these Regulations, “possession” includes not only actual physical possession but also inclusion in the inventory at any point in time.
  • Proof for excise tax payment includes:
    • For imported goods: certified true copies of Authority to Release Imported Goods (ATRIG) and Import Entry and Internal Revenue Declaration and Official Receipt issued by the BOC.
    • For locally bought minerals: certified true copies of Excise Tax Return (BIR Form No. 2200M) and machine validated deposit slip of the bank where payment and filing were made.
  • For gold and other metallic minerals, VAT/percentage tax treatment is:
    • 12% VAT on sales to persons and entities except sale of gold to the BSP, if the gross selling price exceeds the threshold of Php1,919,500 (set under Revenue Regulations No. 3-2012 dated February 20, 2012),
    • otherwise 3% percentage tax.
  • For jewelry, VAT/percentage tax treatment is:
    • 12% VAT if gross selling price exceeds Php1,919,500,
    • otherwise 3% percentage tax.
  • Sellers of jewelry, gold, and other metallic minerals are subject to income tax at the rates prescribed under:
    • Sections 24 and 25 for individual taxpayers, and Sections 27 and 28 for corporations.
  • Sellers must pay income tax in advance (creditable) to the Government.
  • For VAT-registered sellers, advance VAT is creditable against VAT liability under the Tax Code credit system as allowed by law.

Advance payment requirement and amounts

  • Sellers of jewelry, gold, and other metallic minerals must pay, in advance, business tax (VAT or percentage tax), income tax, and excise tax if applicable.
  • Advance payments must be made through the assigned Revenue Collection Officers (RCOs) of the RDO having jurisdiction over the place where the subject transaction occurs, regardless of whether the sellers are duly registered with the Bureau.
  • Advance payment of business tax is required as follows:
    • advance VAT at 12% on gross selling price, or
    • advance percentage tax at 3% on gross sales.
  • Advance payment of income tax is required at 5% on gross payment.
  • Actual payment of excise tax is required at 2%, computed on the same basis as the excise tax rules:
    • actual market value of gross output at the time of removal for locally extracted/produced minerals, or
    • value used by the BOC in computing tariff and duties for importations.
  • For these Regulations, “actual market value” refers to the actual consideration paid by the buyer to the seller.
  • The Regulations authorize RCOs to receive advance payments of business (VAT or percentage tax) and income taxes and to receive actual payment of excise tax, notwithstanding other issuances, and to issue the corresponding Revenue Official Receipt (ROR).
  • Advance payment applies whether sellers are registered or not with their respective RDOs.

Credit mechanism and documentation rules

  • Advance payments are credited against the actual taxes due for the taxable period for which the advance payments were remitted.
  • Credit for advance business tax applies as follows:
    • If the seller is a non-VAT taxpayer whose gross sales/receipts do not exceed Php1,919,500 in any 12-month period and is therefore liable to 3% percentage tax under Section 116 of the Tax Code, advance business tax is credited against the percentage tax due for the month when the advance payment was collected.
    • If the seller is a VAT registered taxpayer, the advance VAT paid is allowed as a credit against VAT liability or payable VAT, together with input tax credits allowed under the Tax Code.
  • Credit for advance income tax is allowed:
    • the advance income tax paid is credited against the seller’s income tax due when the seller files quarterly and annual income tax returns.
  • Advance payment proof for business tax and income tax is required and consists of a duly validated copy of BIR Form No. 0605 and the ROR issued by the RCOs.
  • Without the proof attached to the tax returns, claims for credit on account of advance payments are disallowed, and the corresponding taxes are assessed.

Implementing duties, seller documentation, and BIR enforcement

  • A Nonresident Alien Individual Not Engaged in Trade or Business within the Philippines or a Nonresident Foreign Corporation must maintain a record of transactions containing:
    • date of transaction,
    • name of the seller,
    • seller’s Tax Identification Number (if available),
    • amount received by the seller.
  • The nonresident buyer must require the seller to sign an order slip or similar document evidencing the amount received by the seller, which becomes the basis for revenue officers in recording the transaction and assessing correct taxes due.
  • Owners and operators of hotels, inns, or establishments where the nonresident buyers conduct the transaction must advise in writing the Revenue District Office having jurisdiction over the place of the transaction immediately after acquiring knowledge of the buying event.
  • The written advice to the RDO must include:
    • name of the alien individual and/or entity,
    • nationality,
    • passport number,
    • intended number of days of staying in the hotel/inn/establishment,
    • place, date and time of the buying event,
    • Tax Identification Number of the nonresident alien or nonresident foreign corporation if already registered.
  • Hotel/inn owners/operators who fail to inform or notify the BIR are subject to appropriate penalties imposed under Section 275 and other pertinent provisions of the Tax Code.
  • Tax enforcement operates through information gathering and mission orders:
    • the RDO recommends issuance by the Regional Director of Mission Orders to the Special Investigation Division (SID) and RCOs for the whole duration of the subject transaction.
  • RCOs must physically check compliance of sellers and confirm that advance payment of business and income taxes and actual payment of excise tax have been made.
  • RCOs must, on the spot, collect taxes on every sale transaction made on site.
  • RCOs evidence receipts as follows:
    • advance business and income taxes: duly validated BIR Form No. 0605,
    • excise tax: Excise Tax Return (BIR Form No. 2200M),
    • in all cases: the corresponding RORs are issued.
  • RCOs must prepare a report on the advance payment for every tax type per taxpayer and excise tax returns filed, and must submit it to the RDO with a copy furnished to the Regional Director immediately after the buying event.
  • SID officers must ascertain whether the alien individual or foreign corporation is engaged in trade or business in the Philippines, and if determined not engaged, the nonresident is covered by these Regulations.
  • SID officers must prepare reports containing:
    • name of the nonresident individual and/or nonresident foreign corporation,
    • transactions made in the Philippines,
    • period of stay in the Philippines,
    • profile of the nonresident,
    • compliance with the Regulations.
  • SID officers must maintain an Official Registry Book (ORB) to ensure transactions are properly recorded.
  • The Regional Director reconciles SID and RCO reports and reconciles/tallies them within five (5) days from the buying event.
  • A final report by the Regional Director is submitted to the Commissioner of Internal Revenue within five (5) days from receipt of the aforementioned reports.
  • RCOs and SID officers must establish profiles of sellers not registered with the Bureau, obtain their registrable business addresses, and endorse the identity to the appropriate RDO so the RDO can ensure registration and collect the appropriate fees and taxes due.

Repeal and modification clause

  • Any existing rules, regulations, and other issuances, or portions thereof, inconsistent with these Regulations are modified, repealed, or revoked accordingly.

Immediate implementation

  • The Regulations take effect immediately upon issuance under the Effectivity Clause.

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