8box Solutions Inc.

4_20230710_150500_0001

Contact Number: 09369340340
Email: sales@8box.solutions

REVENUE REGULATIONS NO. 17-2020 issued on August 7, 2020 implements the Tax Neutrality provision of Republic Act No. 11439 (An Act Providing for the Regulation and Organization of Islamic Banks). The Regulations cover transactions of Islamic banks, either domestic or foreign, and Islamic Banking Units in the form of a division, department, office, or branch of a conventional bank that are authorized to conduct business in accordance with the principles of Shari’ah pursuant to the guidelines prescribed by the Bangko Sentral ng Pilipinas (BSP). The tax treatment of Islamic banking arrangements should be based on their economic substance rather than their form.Where an Islamic banking arrangement is economically equivalent to a conventional bank product, the tax treatment of the two should be the same.Any reference to interest shall apply to gains or profits received and expenses incurred in Islamic banking arrangements, in lieu of interest income and/or expenses under the conventional banking transactions. Any reference to a disposal or lease of an asset shall not apply to any disposal or lease of an asset by or to a person that is carried out in accordance with Islamic banking arrangements, as defined by the BSP; Provided that the resulting tax effect on the Islamic banking arrangement would approximate or be similar to that applicable to the corresponding conventional banking transactions. Any reference to an instrument that is carried out in accordance with Islamic banking arrangements, as defined by the BSP, which produces an additional instrument required for the purpose of compliance with Shari’ah principles but which will not be required in any other conventional banking transactions, shall be deemed excluded for taxation purposes. The details on the tax treatment of the following Islamic banking arrangements will be covered in a separate Revenue Memorandum Circular: • Murabahah (Profit disclosed sale); • Tawarruq (Commodity Murabahah); • Salam (Sale with deferred delivery and spot payment); • Ijarah (Lease); • Mudarabah Partnership (Profit Sharing Partnership); • Wakalah Investment (Investment Agency); • Istisna; • Musharaka; • Sukuk; and • Other Islamic banking transactions with economically equivalent conventional finance transactions. For purposes of the Regulations, an Islamic Bank shall ensure that financial statements are prepared in accordance with the Philippine Financial Reporting Standards (PFRS) taking into account the differences between Islamic and conventional banking transactions. Authorized conventional banks with Islamic banking arrangements shall maintain a system segregating the transactions of the Islamic banking unit from its conventional banking business. Authorized Islamic banks shall register with the Bureau of Internal Revenue similar to a conventional bank following the existing guidelines on business registration.Islamic banks, including conventional banks with Islamic banking windows, shall issue receipt on profits/gains/fees derived from its banking operations.