REVENUE MEMORANDUM CIRCULAR NO

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1 2014 JUNE ISSUE ALBA ROMEO & CO., CPAS Audit Tax Consulting JUNE 2014 REVENUE MEMORANDUM CIRCULAR NO SUBJECT: Clarification on Electronic Certificate Authorizing Registration (ecar) Forms Prescribed Under Revenue Memorandum Circular No DATE: May 19, For the information and guidance of all concerned, BIR Form Nos R Certificate Authorizing Registration (For Transaction Involving Transfer of Real Properties) and 2313-P (For Transaction Involving Transfer of Property Properties) previously attached as Annexes A and B, respectively, in Revenue Memorandum Circular No are sample ecar forms for transactions subject to Capital Gains Tax, Documentary Stamp Tax, and Donor s Tax. The body/ contents of the electronically generated CAR may vary depending on the nature and circumstances surrounding the transactions and the applicable taxes. REVENUE MEMORANDUM CIRCULAR NO SUBJECT: Prescribing the Use of the Enhanced and Integrated Electronic Accreditation and Registration (eaccreg) and Electronic Sales Reporting (esales) Systems DATE: May 22, A priority area of tax administration reform and modernization is the effective supervision and control of the issuance of receipts/invoices by a business establishment, whether through manual process or through the use of Cash Register Machine (CRM), Point-of-Sale (POS) machines and other similar machines. - The eaccreg System is an enhanced electronic accreditation and registration for the issuance of permits to use Cash Register Machines (CRM), Point of Sale Machines (POS) and other business machines generating receipts or invoices. The enhancement is to streamline the procedures and simplify necessary requirements for the issuance of permits to use business machines. The printing of Certificate of Accreditation and Final Permit to Use is now available via the enhanced eaccreg. Revenue Memorandum Circular No Revenue Memorandum Circular No Revenue Memorandum Circular No Revenue Memorandum Circular No Revenue Memorandum Circular No Revenue Memorandum Circular No Revenue Memorandum Circular No

2 2 TAX DIGEST o ***Account enrollment is a web facility allowing users of eaccreg to create an account including those with manually-issued Machine Identification Number (MIN). It requires information to be provided to identify the taxpayer plus the desired username and password. REVENUE MEMORANDUM CIRCULAR NO SUBJECT: Clarifying the Taxability of Financial Lease for Purposes of Documentary Stamp Tax DATE: April 25, Corollary to this, the esales System automates the monitoring and reporting of the gross monthly sales per registered CRM/POS or any other similar business machines generating receipts or invoices. Through esales, taxpayer monthly sales shall be monitored by the BIR. Submission of monthly sales reports by taxpayers shall be available via , web, and SMS. - This Circular is issued to prescribe the use of the Enhanced and Integrated eaccreg and esales Systems by all taxpayers with CRM/ POS and/or any other similar business machines. In line with this, all Authorized Users* and/or Authorized Representatives** shall be required to submit a duly notarized letter (Annex A ) to enroll in the Account Enrollment*** facility. The said letter shall be submitted to the concerned Revenue District Office (RDO)/ Large Taxpayer District Office (LTDO)/Large Taxpayers Assistance Division (LTAD)/ Excise Large Taxpayers Regulatory Division (ELTRD). o *An Authorized User is a duly designated responsible officer/ employee of the Taxpayer in charge of accessing/utilizing the BIR s Enhanced and Integratedd eaccreg and esales Systems. o **An Authorized Representative is a duly designated responsible officer/employee with a written authorization duly signed by the taxpayer-applicant or in the case of eaccreg only, a responsible officer/employee of the supplier as indicated in the sworn statement. - All taxpayers/suppliers are required to enroll their respective authorized users/representatives prior to the use of the enhanced and integrated eaccreg and esales systems. Account enrollment application shall be on one (1) authorized user per Taxpayer Identification Number (TIN) basis, or one authorized user in behalf of multiple Branches, whichever is applicable/convenient to the taxpayer. - All taxpayers using CRM/POS and/ or other similar business machines with system-generated MINs are required to report their monthly sales every 8th (for taxpayers whose last digit of the 9-digit TIN is an even number) or 10th (for taxpayers whose last digit of the 9-digit TIN is an odd number) day of the month following the month of sales. For example, the deadline for submission of the monthly sales report of such sales machines for the month of May shall be on June 8, 2014 (for taxpayers whose last digit of the 9-digit TIN is an even number) and on June 10, 2014 (for taxpayers whose last digit of the 9-digit TIN is an odd number), via the enhanced esales. - This Circular is issued to clarify the taxability of Financial Lease for purposes of Documentary Stamp Tax (DST). - BACKGROUND - Revenue Regulations No defines Financial Leasing as a mode of extending credit through a non-cancellable lease contract under which the lessor purchases or acquires, at the instance of the lessee, machinery, equipment, motor vehicles, appliances, business and office machines, and other movable or immovable property in consideration of the periodic payment by the lessee of a fixed amount of money sufficient to amortize at least seventy percent (70%) of the purchase price or acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of not less than two (2) years during which the lessee has the right to hold and use the leased property with the right to expense the lease rentals paid to the lessor and bears the cost of repairs, maintenance, insurance, and preservation thereof, but with no obligation or option on his part to purchase the leased property from the owner-lessor at the end of the lease contract. A finance lease is a lease that transfers substantially all the risks and rewards incident to ownership of an asset. Title may or may not eventually be transferred.

3 3 - The said definition was copied from Republic Act No as amended by Republic Act No otherwise known as the Financing Company Act of Section 3(c) of Republic Act No as amended by R.A also defined the term Credit to mean any loan, mortgage, financial lease, deed of trust, advance or discount, conditional sales contract, contract to sell or sale or contract of sale of property or service, either for present or future delivery, under which, part of all or the price is payable subsequent to the making of such sale or contract; any contract, any option, demand, lien or pledge, or to the other claims against, or for the delivery of, property or money, any purchase, or other acquisition of or any credit upon the security of, any obligation or claim arising out of the foregoing, and any transaction or series of transactions having similar purpose or effect. - Likewise, Section 179 of the National Internal Revenue Code (NIRC), as amended provides o SEC Stamp Tax on All Debt Instruments. On every original issue of debt instruments, there shall be collected a documentary stamp tax of One peso (P1.00) on each Two hundred pesos (P200), or fractional part thereof, of the issue price of any such debt instrument: Provided, That for such debt instruments with terms of less than one (1) year, the documentary stamp tax to be collected shall be of a proportional amount in accordance with the ratio its term in number of days to three hundred sixty-five (365) days: Provided, further, That only one documentary stamp tax shall be imposed on either loan agreement, or promissory notes issued to secure such loan. For purposes of this section, the term debt instrument shall mean instruments representing borrowing and lending transactions including but not limited to debentures, certificates of indebtedness, due bills, bonds, loan agreements, including those signed abroad wherein the object of the contract is located or used in the Philippines, instruments and securities issued by the government or any of its instrumentalities, deposit substitute debt instruments, certificates or other evidences of deposits that are either drawing interest significantly higher than the regular savings deposit taking into consideration the size of the deposit and the risks involved or drawing interest and having a specific maturity date, orders for payment of any sum of money otherwise than at sight or on demand, promissory notes, whether negotiable or non-negotiable, except bank notes issued for circulation. (Emphasis supplied) TAX DIGEST - CLARIFICATION - Based on the aforementioned definition of a Financial Lease, the same is akin to a debt rather than a lease. A nature of an obligation than a lease of personal property. The mere act of extending credit is already a means of facilitating an obligation or advancing in behalf of the lessee certain property in lieu of cash in exchange for a definitive amortization to be paid to the lessor with profit margin included. - Financial Lease is not only akin to an obligation by definition by also by treatment. In fact, the International Accounting Standard (IAS) on Leases (IAS 17) is in agreement with how finance lease should be treated and recognized. It even requires that a liability be set up in the lessee s books of accounts. Paragraph Nos. 21 and 22 of IAS 17 Leases provides:

4 4 TAX DIGEST o 21 Transactions and other events are accounted of and presented in accordance with their substance and financial reality and not merely with legal form. Although the legal form of a lease agreement is that a lessee may acquire no legal title to the leased asset, in the case of finance leases the substance and financial reality are that the lessee acquires the economic benefits of the use of the leased asset for the major part of its economic life in return for entering into an obligation to pay for that right an amount approximating, at the inception of the lease, the fair value of the asset and the related finance charge. o 22 If such lease transactions are not reflected in the lessee s balance sheet, the economic resources and the level of obligation of an entity are understate, thereby distorting financial ratio. Therefore, it is appropriate for a finance lease to be recognized in the lessee s balance sheet both as an asset and as an obligation to pay future lease payments. At the commencement of the lease term, the asset and the liability for the future lease payments are recognized in the balance sheet at the same amount except for any initial direct costs of the lessee that are added to the amount recognized as anasset. (Emphasis supplied) - Although documents, transactions or arrangement under financial lease are not specifically mentioned under Section 179 of the NIRC, as amended, it should be remembered that the imposition of the DST under such Section of the NIRC, as amended covers all debt instruments. Therefore, being a nature of an obligation, financial lease is covered under such Section of the NIRC, as amended. - Accordingly, any document, transaction or arrangement entered into under financial lease is subject to the Documentary Stamp Tax (DST) under Section 179 of the National Internal Revenue Code, as amended. REVENUE MEMORANDUM CIRCULAR NO SUBJECT: Publishing the Full Text of the Memorandum of Understanding (MOU) between the Bureau of Internal Revenue (BIR) and Home Development Mutual Fund (HDMF) DATE: - For the information and guidance of all concerned, quoted hereunder is the full text of the Memorandum of Understanding (MOU) between the Bureau of Internal Revenue (BIR) and the Home Development Mutual Fund (HDMF) signed on May 12, 2014 in Mandaluyong, Metro Manila, Philippines.

5 5 TAX DIGEST MEMORANDUM OF UNDERSTANDING o KNOW ALL MEN BY THESE PRESENTS: o This Memorandum of Understanding is entered into this day of May 12, 2014 in Metro Manila, Philippines, by and among: o The BUREAU OF INTERNAL REVENUE, a government agency organized and existing in the Republic of the Philippines, with principal address at the BIR National Office Building, BIR Road, Diliman, Quezon City, and represented in this act by its Commissioner, Atty. Kim S. Jacinto-Henares (hereinafter referred to as the BIR); and o The HOME DEVELOPMENT MUTUAL FUND, a government financial institution organized and existing by virtue of Republic Act No with principal address at Petron Mega Plaza Building, 358 Sen. Gil Puyat Avenue, Makati City, and represented in this act by its Chief Executive Officer, Atty. Darlene Marie B. Berberabe (hereinafter referred to as PAG-IBIG Fund). o WITNESSETH THAT: o WHEREAS, PAG-IBIG Fund is the principal government agency mandated to provide housing loan financing and mutual provident saving system to Filipino workers; o WHEREAS, Sec. 3 of RA 9679 states that the State s objectives are to improve the quality of life of its citizens by providing them with sufficient shelter, to provide for an integrated nationwide provident savings system, and to provide housing through mobilization of funds for shelter finance through Pag-IBIG Fund; o WHEREAS, the BIR is committed to collect taxes for nation-building through excellent, efficient and transparent service, just and fair enforcement of tax laws, uplifting the life of every Filipino; o WHEREAS, the BIR has implemented the Electronic Bureau of Internal Revenue Forms (ebirforms) primarily to provide taxpayers with an alternative mode of preparing and filing tax through the use of the downloadable ebirforms Software Package; o WHEREAS, Pag-IBIG Fund, in fulfillment of its mandate, processes on a daily basis voluminous transactions with its members and developers, that usually involve the payment of expanded withholding tax, capital gains tax, documentary stamp tax, among others; o WHEREAS, Pag-IBIG Fund is dedicated to improve and accelerate the processing of its transactions, including the remittance of taxes on behalf of its members, borrowers and developers; o WHEREAS, both parties have expressed their willingness to cooperate and assist each other and provide the necessary support for the use of ebirforms in the Pag-IBIG Fund s provident and housing loan programs; o NOW THEREFORE, for and in consideration of the foregoing premises, the Parties hereto have agreed to undertake the following: I. OBLIGATIONS OF THE PARTIES 1. BIR a. Allow the Pag-IBIG Fund, with proper written authorization from the members/borrowers/ developers concerned, to file and remit the taxes payable by its members/borrowers/ developers arising from their transactions with the Fund using ebirforms or other modes of payment (e.g. mobile payment, debit system, etc.); b. Provide assistance for the computation of related taxes, submission of documents and verification of status of Pag-IBIG accounts through a special lane, for the issuance of the Certificate Authorizing Registration (CAR); c. Allow the Pag-IBIG Fund to secure, on behalf of its members/borrowers/developers, the CAR from BIR, if duly authorized for the purpose. 2. Pag-IBIG Fund a. Secure the proper authority from its members/borrowers/ developers to file and remit the taxes on their behalf using ebirforms or other modes of payment (e.g. mobile payment, debit system, etc.); b. Responsible for the submission of complete documents and remittance of correct taxes based on the evaluation of the transactions/ documents filed on behalf of members/borrowers/developers. 3. Formation of a Technical Working Group The parties shall work together on this endeavor in the spirit of mutual trust, cooperation and coordination. Towards this end, they shall immediately form a Technical Working Group to study, identify and define the administrative, technical and other requirements to achieve the objective of this MOU.

6 6 TAX DIGEST II. AMENDMENTS The Memorandum of Understanding may be amended only in writing duly signed by authorized representatives of all parties hereto. III. EXECUTION OF AGREEMENT The parties shall issue and promulgate such guidelines and execute an agreement or contract as may be necessary and proper for the full implementation of the provisions of this Memorandum of Understanding. IV. EFFECTIVITY This Memorandum of Understanding shall take effect upon the signing of the Parties hereof and shall remain in force until terminated at any time by service of notice by either party. REVENUE MEMORANDUM CIRCULAR NO SUBJECT: Extending Deadline of Electronic Sales (esales) Reports as Transitory Procedure Using the Enhanced and Integrated Electronic Accreditation and Registration (eaccreg) and esales Systems DATE: June 9, Pursuant to Revenue Memorandum Circular , all taxpayers using CRM/POS and/or other similar business machines with system-generated Machine Identification Numbers (MINs) are required to report their monthly sales every 8th or 10th day of the month following the sales using the Enhanced and Integrated eaccreg and esales Systems. -To give ample time for all parties to comply with the requirements due to the change in the technical specifications from simply reporting the Gross Monthly Sales to reporting the breakdown of Vatable Sales, Zero-Rated Sales, Exempt Sales and Sales Subject to Other Percentage Taxes in the rolled-out Enhanced and Integrated eaccreg and esales Systems, the deadline for the submission of monthly sales report for the month of May 2014 are now extended until 30 June 2014 (for both taxpayers whose last digit of the 9-digit TIN is even and odd number). Thereafter, reporting of monthly sales will remain on or before the 8th (for the taxpayers whose last digit of the 9-digit TIN is even number) or 10th (for the taxpayers whose last digit of the 9-digit TIN is odd number) day of the month following the sales period. -No penalties shall be imposed for reporting May 2014 monthly sales based on the said extension. -Likewise, all taxpayers with CRM/POS machines with manually issued MIN are hereby required to use and are mandated to be re-enrolled in the eaccreg and esales Systems on or before 01 July 2014.

7 7 TAX DIGEST REVENUE MEMORANDUM CIRCULAR NO SUBJECT: Publishing the New Minimum Wage and Providing Advisory Guidelines on Productivity Based Pay for Private Establishments in Region - IVA DATE: June 6, 2014 Date: April 25, For the information and guidelines of all internal revenue officers, employees and others concerned, we are publishing Wage Order No. IVA-16 which was issued on April 8, 2014 and published at Philippine Daily Inquirer on May 1, 2014: WAGE ORDER No. IVA-16 SETTING THE NEW MINIMUM WAGE AND PROVIDING ADVISORY GUIDELINES ON PRODUCTIVITY BASED PAY FOR PRIVATE ESTABLISHMENTS IN REGION IVA -WHEREAS, the Regional Tripartite Wages and Productivity Board IVA (RTWPB IVA) under R.A The Wage Rationalization Act, is mandated to set the applicable minimum wage of workers in private establishments in the Region following a standard minimum wage fixing process and set of criteria, and to promote productivity improvement and garnishing programs; Section 1. Section 12 of DOF Department Order No is hereby amended to read as follows: -WHEREAS, the Trade Union Congress of the Philippines (TUCP) and Confederation of Labor and Allied Social Services-Trade Union Congress of the Philippines (CLASS-TUCP) filed petitions for wage increase on June 20, 2013 and July 31, 2013 submitting daily across the board increase of P75 and P79.50, respectively; -WHEREAS, the Regional Board declared the conduct of a series of sectoral, provincial and industry level wage consultations from August 15, 2013 to October 29, 2013, specifically: 15 August 2013 with Labor Groups, series of consultations from 18 August to 23 October 2013 with Employers Sector, Provincial multi-sectoral consultations on 12 September 2013 in Quezon; 19 September 2013 inlaguna, 23 September 2013 in Cavite, 08 October 2013 in Batangas, 24 October 2013 in Rizal and Region-wide public hearing on 29 October 2013, respectively, in consideration of petitions filed with the Board and assessment of wage related indicators; -WHEREAS, the Regional Board issues this Wage Order providing an increase in the minimum wage rates of private sector workers/employees in the region attributable to the changes in its socio-economic conditions such as: regional domestic output, net employment, and poverty incidence, among others, and in support for the promotion and generation of long term investments and quality employment as the region s economy continue to pick up; -WHEREAS, this Wage Order No. IVA-16 sets the new minimum wage for covered workers and employees in private establishments in the Region, prescribing an increase in the form of Basic Pay (BP) or Socio-Economic Allowance (SEA), where the applicability depends on the specific industry category and area configuration where the establishments are situated; -WHEREAS, consistent with the government s policy of enabling establishments achieve higher levels of productivity and competitiveness, promote investments that will create more employment, improve the standards of living of workers and their families, an Advisory Guideline on Productivity/Performance Based Pay is issued together with this Order; -WHEREAS, this Wage Order becomes effective fifteen (15) days upon publication in a newspaper of general circulation, applicable to minimum wage workers and employees in private establishments in Region IVA-CALABARZON (as defined under Executive Order 103 Series of 2002) which covers the provinces of Cavite, Laguna, Batangas, Rizal and Quezon. -NOW, THEREFORE, by virtue of the power and authority vested under Republic Act No. 6727, known as the Wage Rationalization Act, the Regional Tripartite Wages and Productivity Board of Region IV-A hereby issued this wage order: -SECTION 1. MINIMUM WAGE. The minimum wage ranges from Two Hundred Sixty-Seven Pesos (P267.00) to Three Hundred Sixty-Two Pesos and Fifty Centavos (P362.50) per day. The Two Hundred Sixty-Seven Pesos (P267.00) per day is the floor wage. It is set by taking into consideration the region s poverty threshold, median wage and region specific indicators. For those receiving over and above the Two Hundred Sixty-Seven Pesos (P267.00) per day shall be entitled to Thirteen Pesos (P13.00) Socio-Economic Allowance (SEA) per day. - SECTION 2. AMOUNT AND FORM OF INCREASE IN THE MINIMUM WAGE. Upon effectivity of this Order, minimum wage workers and employees in private establishments in Region IVA shall receive a daily increase in the form of Basic Pay (BP) or Socio-Economic Allowance (SEA), whichever is applicable.

8 8 TAX DIGEST For those receiving minimum wage rate of less than Two -SECTION 4. IMPLEMENTATION SCHEDULE OF THE Hundred Sixty-Seven Pesos (P267.00) per day, a Twelve P12.00 BASIC PAY INCREASE. The staggered Pesos (P12.00) basic pay increase per day shall be implementation schedule of the Twelve Pesos (P12.00) effected in staggered basis, starting from the effectivity Basic Pay Increase and the effective minimum wage of the Order, and thereafter, until 01 December rates of workers/employees receiving a minimum Such increase shall be implemented in two tranches wage of less than Two Hundred Sixty-Seven Pesos yearly (01 May 2014 and 01 December 2014) and (P267.00) per day, in covered industry and area thereafter, until 01 December 2016, in addition to the classification shall be as follows: wage adjustments prescribed under Wage Order No. IVA-15. For those receiving minimum wage rate of more than Two Hundred Sixty-Seven Pesos (P267.00) to Three Hundred Forty-Nine Pesos and Fifty Centavos (P349.50) per day, the Conditional Temporary Productivity Allowance (CTPA) of Twelve Pesos and Fifty Centavos (P12.50) under Wage Order No. IVA-15 included, shall receive a Thirteen Pesos (P13.00) per day Socio-Economic Allowance (SEA) in full amount upon effectivity of the Order. -SECTION 3. BASIS IN THE DETERMINATION OF THE INCREASES. The Twelve Pesos (P12.00) Basic Pay Increase is arrived at taking into consideration the region s poverty threshold, median wage and region-specific indicators. The Thirteen Pesos (P13.00) Socio-Economic Allowance is derived at taking into account the growth rate in the Gross Regional Domestic Product, Net Employment and Poverty Incidence. Retail & Service Establishment Employing Not More Than 10 Workers WO 15 refers to Wage Order No. IVA 15, tranches of increase in minimum wage with effectivity dates 15 May 2012, 15 May 2013, 15 May 2014, 15 May 2015, and 15 May W) 16 refers to Wage Order No. IVA 16 tranches of increase in minimum wage with effectivity dates 01 May 2014, 01 December 2014, 01 May 2015, 01 December 2015, 01 December 2016.

9 9 TAX DIGEST GCA refers to Growth Corridor Area; EGA refers to Emerging Growth Area; and RBA refers to Resource Based Area. -SECTION 5. NEW MINIMUM WAGE RATES. The new daily minimum wage rate for workers/employees receiving minimum wage rate of more than Two Hundred Sixty-Seven Pesos (P267.00) to Three Hundred Forty-Nine Pesos and Fifty Centavos (P349.50) per day, is composed of the basic pay under Wage Order No. IVA-15 plus Twelve Pesos and Fifty Centavos (P12.50) per day Conditional Temporary Productivity Allowance (CTPA) prescribed under WO IVA-15, plus Thirteen Pesos (P13.00) Socio-Economic Allowance (SEA) granted under WO IVA-16. o For workers/employees receiving less than Two Hundred Sixty-Seven Pesos (P267.00) per day, the daily minimum wage is composed of the Basic Pay increases under Wage Order No. IVA-15 made effective 15 May 2012 and 15 May 2013 respectively, plus Basic Pay Increase of Twelve Pesos (P12.00), give in tranches starting upon the effectivity of Wage Order No. IVA-16. o The daily minimum wage rates of workers and employees in private establishments in the Region shall be as follows:

10 10 TAX DIGEST 1/ Applicable Minimum Wage under Wage Order No. IVA 15, composed of (Basic Pay Plus Conditional Temporary Productivity Allowance) 2/ Applicable increase in the Minimum Wage in the form of Socio Economic Allowance (SEA) under Wage Order No. IVA 16 effective 01 May 2014.

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14 14 TAX DIGEST oall workers covered by this Wage Order receiving wage rates less than the prescribed minimum wage shall be adjusted at least to the new minimum wage rates prescribed herein. -SECTION 6. APPLICATION OF THE SOCIO-ECONOMIC ALLOWANCE (SEA). The SEA is a daily allowance, an increase in the daily minimum wage of workers/employees receiving more than Two Hundred Sixty-Seven (P267.00) to Three Hundred Forty-Nine Pesos and Fifty Centavos (P349.50) per day. othe payment of SEA under this Order shall follow the No Work, No SEA policy for daily paid workers and employees. The SEA shall be integrated in the payment of holiday pay, government mandated benefits and separation pay. It shall not be considered in the computation of overtime pay, premium pay, night shift differential, 13th month pay and retirement pay. othe SEA shall not be credited as part of Productivity Based Pay. -SECTION 7. BASIS OF MINIMUM WAGE. The minimum wage prescribed under this Order shall be for the normal working hours, which shall not exceed eight (8) hours work a day. -SECTION 8. COVERED WORKERS AND EMPLOYEES. The minimum wage rates prescribed under this Order shall apply to all minimum wage workers and employees in private establishments in Region IV-A regardless of their position, designation or status of employment and payment method by which their wages are paid. othis Wage Order shall not cover household workers, persons employed in the personal service of another, including family drivers and workers of Barangay Micro Business Enterprises (BMBEs) with Certificates of Authority, pursuant to R.A SECTION 9. APPLICATION TO WORKERS PAID BY RESULTS. All workers paid by results, including those who are paid on piece work, takay, pakyaw or task basis, shall receive the minimum wage for the normal working hours which shall not exceed eight (8) hours work a day, or a proportion thereof for working less than the normal working hours. -SECTION 10. APPLICATION TO WORKERS OF CONTRACTORS OR SUBCONTRACTORS. All workers of legitimate contractor or subcontractor in the construction and other industries are entitled to the prescribed minimum wage, provided for under Sections 1, 2, and 3 of this Wage Order. The prescribed wage rates of covered workers shall be borne by the principal or user enterprise and the service agreement or contract shall be deemed amended accordingly. In the event, however, that the principal fails to pay the prescribed wages, the contractor or sub-contractor shall be jointly and severally liable with the principal or user enterprise. -SECTION 11. APPLICATION TO TRANSFER, BRANCH AND MOBILE EMPLOYEES. In cases where the establishment may have branches in different parts of the region or where its headquarters is outside the region, the applicable minimum wage is the rate of the particular city/municipality where the worker/ employee is based. In the case of mobile worker/ employee, the home base rate shall apply. In cases of transfer from a high rate city/municipality to a lower rate city/municipality, the higher rate shall continue to be applied.

15 15 TAX DIGEST -SECTION 12. APPLICATION TO SEASONAL OR TEMPORARY WORKERS. Seasonal, reliever, week-ender, temporary or promo jobber workers directly hired by the principal or engaged by a contractor or subcontractor shall receive the prescribed minimum wage. -SECTION 13. APPLICATION TO SPECIAL GROUPS OF WORKERS. Wages of apprentices and learners shall in no case be less than seventy-five percent (75%) of the minimum wage prescribed in this Order. oall recognized learnership and apprenticeship agreements entered into before the effectivity of thie Order shall be considered automatically modified insofar as their wage clauses are concerned to reflect the provisions of this Wage Order. oall qualified handicapped workers shall receive the full amount of the minimum wage prescribed in this Order, pursuant to R.A. 7277, otherwise known as the Magna Carta for Disabled Persons. -SECTION 14. EXEMPTION. No exemption from compliance with this Wage Order shall be allowed. -SECTION 15. PRODUCTIVITY BASED PAY (PBP). Productivity Based Pay (PBP) is an incentive given to workers and employees, on top of the minimum wage increase, in the form of productivity bonus or incentive in recognition to worker s productivity and/or performance, value of the job, contribution to business competitiveness and profitability, among others. All workers and employees in private establishments in the region may be entitled to PBP, as may be determined and agreed upon by the PIIC or equivalent management system in the establishment. othe PBP is voluntary and flexible in character, its implementation will be discussed through the PIIC or equivalent structure that allows labor-management decision making, guided by the Advisory Guidelines on Productivity Based Pay that is included in this Wage Order. onothing however, will preclude establishments from providing higher productivity-based pay than what is suggested in the said Advisory Guidelines on Productivity Based Pay. -SECTION 16. MECHANISM FOR THE IMPLEMENTATION OF PRODUCTIVITY BASED PAY. Private establishments in the region are encouraged to organize a PIIC that will effectively implement the Advisory Guidelines on Productivity Based Pay at the establishment level. othe PIIC is a structure composed of equal representation from both labor and management with the core function of managing the implementation of the Advisory Guidelines on Productivity Based Pay at the establishment level. othe PIIC will determine and recommend the terms and conditions of providing PBP such as: amount of PBP, performance standards, criteria, coverage, frequency and manner of payment, and monitoring of impact in both labor and management. oit is recommended that the PIIC will have an equal representation from labor and management. For the organized establishments the recognized Union officers and members shall be the labor representatives in the PIIC. For the unorganized establishments, the workers representatives shall be selected among the workers and the same will have to be properly communicated to the management.

16 16 TAX DIGEST the same will have to be properly communicated to the management. -SECTION 17. TECHNICAL ASSISTANCE ON PRO- DUCTIVITY BASED PAY. Upon request, the Regional Tripartite Wages and Productivity Board-IVA and/or the DOLE RO-IVA will provide the technical assistance to private establishments in the development of productivity improvement programs and/or productivity based pay formula for purposes of implementing the Advisory Guidelines on Productivity Based Pay of this Order. -SECTION 18. EFFECTS ON EXISTING WAGE STRUC- TURE. Where the application of the wage increase prescribed under this Wage Order results in distortion in the wage structure within the establishments, it shall be left to the parties concerned to address the issue in accordance with the procedure under Article 124 of the Labor Code, as amended. oadvisory formulae to correct distortions will be contained in the implementing Rules of this Wage Order. -SECTION 19. MONITORING. Compliance monitoring with the mandatory provisions of this Wage Order shall be the function of the Department of Labor and Employment Regional Office-IVA and/or its Principal Field Offices. -SECTION 21. DISPUTES AND GRIEVANCES. In cases of disputes, grievances, or other matters arising from the interpretation or implementation of the Order, labor and management shall meet to resolve the dispute, or may seek the assistance of the Regional Tripartite Wages and Productivity Board-IVA with regard to the implementation of the Guidelines on Productivity Based Pay. -SECTION 22. FREEDOM TO BARGAIN. This Order shall not be construed to prevent workers in particular enterprises from bargaining for higher wages with their respective employers. -SECTION 23. NON-DIMINUTION OF BENEFITS. Nothing in this Order shall be construed to reduce any existing wage rates, allowances and benefits of any form under existing laws, decrees, issuances, executive orders and/or under any contract of agreement between the workers and employers. -SECTION 24. PENAL PROVISIONS. Any employer who refuses or fails to pay the corresponding minimum wage rates provided under this Order shall be subject to the penalties under R.A. 6727, as amended by R.A SECTION 25. PROHIBITION AGAINST INJUNCTION. No preliminary injunction or temporary restraining order may be issued by any court, tribunal or any entity against the Board, this Wage Order or any proceedings before the Regional Board. -SECTION 20. COMPLAINTS FOR NON-COMPLIANCE. Complaints for non-compliance with this Order shall be filed with the Department of Labor and Employment Regional Office-IVA (DOLE-RO IVA) or to any DOLE-Provincial Field Office in the Region, and shall be the subject of Single Entry Approach (SENA) or enforcement proceedings under Article 128 and 129 of the Labor Code, as amended without prejudice to criminal prosecution which may be undertaken against those who fail to comply.

17 LOCATIONS Makati 7/F Multinational Bancorporation Centre 6805 Ayala Avenue, Makati City 1226 Philippines Telephone (+63 2) Fax (+63 2) Bacolod 3/F Capitol Subdivision Building 15th Lacson Street, Bacolod City 6100 Philippines Telephone (+63 34) (+63 34) (+63 34) Fax (+63 34) address: Cebu 2/F Block A, Mactan Marina Mall MEPZ 1, Ibo Lapu-Lapu City, Metro Cebu 6015 Philippines Telephone (+63 32) (+63 32) Fax (+63 32) address: Cagayan de Oro 2/F Leonila Neri Building Don Apolinar Velez & C. Pacana Streets, Cagayan de Oro City 9000 Philipppines Telephone (+63 88) (+63 88) ( ) Fax ( ) address: This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations, and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Alba Romeo & Co. to discuss these matters in the context of your particular circumstances. Alba Romeo & Co., its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or any decision based on it. Alba Romeo & Co., a Philippine professional partnership, is a member of BDO International Limited, a UK company Limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO member firms.