REVENUE MEMORANDUM CIRCULAR NO. 17-2013 issued on February 15, 2013 clarifies the taxes from Financial or Technical Assistance Agreement (FTAA) contractors during “Recovery Periods.”

The National Internal Revenue Code (NIRC) of 1997 and other related laws provide for the taxes and fees that are applicable to a mining company operating in the Philippines. On the other hand, the non-collection of the “government share” during the “recovery period” of FTAA contractors referred to in Republic Act (RA) No. 7942 or the Philippine Mining Act of 1995 is not tantamount to an express grant of tax exemption. Even the pertinent provisions of the RA No. 7942 do not mention any such type of exemption, thus:

“CHAPTER XV
TAXES AND FEES

SECTION 83. Income Taxes. — After the lapse of the Income Tax holiday as provided for in the Omnibus Investments Code, the contractor shall be liable to pay Income Tax as provided in the National Internal Revenue Code, as amended.

SECTION 84. Excise Tax on Mineral Products. — The contractor shall be liable to pay the Excise Tax on mineral products as provided for under Section 151 of the National Internal Revenue Code: Provided, however, That with respect to a mineral production sharing agreement, the Excise Tax on mineral products shall be the government share under said agreement.” (Emphasis supplied)

It is a governing principle in taxation that tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority; and he who claims an exemption must be able to justify his claim by the clearest grant of organic or statute law.

Accordingly, FTAA contractors are liable to pay the taxes due under the NIRC and existing rules and regulations during and after their “recovery period.” This payment is in the nature of compliance with tax obligations and not in the nature of settling the “government share” under the FTAA.

In this regard, BIR Ruling Nos. 010-07 dated May 4, 2007 and 008-07 dated April 3, 2007 are revoked and invalidated and all revenue issuance inconsistent with the Circular are repealed, amended or modified accordingly.