The Bureau of Internal Revenue (BIR) has clarified the tax treatment of contractors, grantees, and recipients funded by the US government in support of the Philippine criminal justice system.
The circular was issued to define the scope of tax exemptions covering activities undertaken under the Letter of Agreement (LoA) on Narcotics Control and Law Enforcement between the Philippine and US governments.
Under the circular, local sale of goods and services by value-added tax (VAT)-registered sellers to the USG shall be subject to a zero-percent VAT rate, while services rendered by non-resident sellers to the USG are VAT exempt.
The importation of goods and properties for programs covered by the LoA is likewise exempt from VAT.
Income earned by foreign contractors from services performed in the Philippines in connection with the LoA is also exempt from income tax.
USG personnel assigned to perform duties in the Philippines under the LoA, as well as their accompanying family members, are likewise exempt from taxes on income and purchases of goods and services.
