Bureau of Internal Revenue(BIR)

April 5, 2022 Dear Joan Angelica Endencia, Greetings! Thank you for your request dated Apr 04, 2022 07:49:11 AM under Executive Order No. 2 (s. 2016) on Freedom of Information in the Executive Branch. You are inquring on the process of availing tax incentives under RA 6971. PLease be informed that the Implementing Rules and Regulations (IRR) of RA No. 6971 provide, to wit: "RULE VI Tax Incentives SECTION 1. Rate of Deductions. (a) Subject to the provisions of Section 7 of the Act and Rule IV hereof, a business enterprise which adopts a productivity program, duly agreed upon by the labor-management committee, shall be granted a special deduction from the gross income equivalent to fifty percent (50%) of the total productivity bonuses given to employees under the program in addition to the total allowable ordinary and necessary business deductions for said bonuses as provided for under the National Internal Revenue Code, as amended. (b) A business enterprise providing manpower training and special studies to rank-and-file employees as accredited by the RMDO may avail of the special deduction from gross income equivalent to fifty (50%) percent of the total grants for local trainings and special studies given to employees under the program in addition to the allowable ordinary and necessary business deductions for said grants as provided for under the National Internal Revenue Code, as amended. (c) For business enterprises deriving income other than from within the Philippines, which grant manpower training abroad to rank-and-file employees, the related expenses incurred in relation thereto, shall not be deducted in full but shall be determined on a ratable basis in accordance with Revenue Regulations No. 16-86 implementing the National Internal Revenue Code, as amended; provided that such qualifies as ordinary and necessary expenses. SECTION 2. Period Considered for Tax Deduction. — The deductions provided for in the Act shall be taken for the taxable year in which the productivity bonus has been "paid or accrued" or "paid or incurred" dependent upon the method of accounting upon the basis of which the income is computed, unless in order to clearly reflect the income, the deductions should be taken as of a different period as provided for under Section 39 of the National Internal Revenue Code, as amended. SECTION 3. Eligibility of Tax Incentives on Training Grants. — Within fifteen (15) calendar days after completion of the training program and/or special studies, the business enterprise shall submit to the appropriate RMDO a post-training report stating whether the objectives of the training program have been adequately met, plus the official receipts of training expenses. Upon submission of the post-training report by the business enterprise, the RMDO, within thirty (30) calendar days, shall conduct a post-training evaluation to determine the acquisition of appropriate skills, knowledge and behavior and shall issue to the business enterprise the necessary Certificate of Tax Eligibility. SECTION 4. Requirements for Granting Tax Incentives. — The tax deductions stipulated in the Act may be availed of by the business enterprise upon filing the quarterly/final income tax return accompanied with the pertinent supporting documents." Based on the foregoing, you must first request for a certificate of tax eligiblity from the concerned Regional Manpower Development Office under the National Manpower and Youth Council, stating that you are qualified to avail of the incentives under RA No. 6971, as required under the IRR of the said law. Once the said certification is secured, the tax deductions may already be availed of by the business enterprise upon filing the quarterly/final income tax return. In other words, you just deduct it from your gross income as part of deductible expenses under Section 34(H) of the Tax Code. Keep the supporting documents as proof just in case the company will be audited by the BIR. Respectfully, BIR Chief, Law & Legislative Division Decision Maker FOI Officer