By: Domingo Angelo F. Cayosa

On September 11, 2020, the President signed the Bayanihan To Recover As One Act or the “Bayanihan II”. The Bayanihan II took effect on September 15, 2020. It will be effective until December 19, 2020.

Bayanihan II aims to accelerate the recovery and bolster the resilience of the Philippine economy through measures grounded on economic inclusivity, and collective growth through fiscal sustainability. As a result, Bayanihan II provided for the following tax incentives:

1. Repeal of Tax on the lnitial Public Offering (lPO) of Shares of Stocks. [1]

Bayanihan II removed the 1%/ 2% and 4% tax rates under Section 127 (B) of the National Internal Revenue Code (NIRC) [2] on the sale, barter, exchange or other disposition of shares of stock through IPO, in closely held corporations.

Thus, every sale, barter, exchange or other disposition through IPO, of shares of stock in closely held corporations shall no longer be subject to the tax imposed by Section 127(B) of the NIRC upon the effectivity of Bayanihan II on September 15, 2020.

2. Exemption from Documentary Stamp Tax (DST) of Loans Extended or Credits Restructured. [3]

Under the NIRC, a DST shall be imposed on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto. [4]

Bayanihan II provides for an exemption from DST of certain loan agreements. This exemption shall cover all extensions of payments and/or maturity periods of all loans, including, but not limited to, salary, personal, housing, commercial, and motor vehicle loans, amortizations, financial lease payments and premium payments, as well as credit card payments, falling due, or any part thereof, on or before December 31, 2020, including the extension of maturity periods that may result from the grant of grace periods for these payments, whether or not such maturity period will originally fall due on or before December 31, 2020. [5]

Note, however, that the DST exemption does not apply to interbank loans and bank borrowings. Interbank loans shall include, among other things: (a) interbank call loan (IBCL) transactions; (b) borrowings evidenced by deposit substitute instruments; (c) purchases of receivables with recourse.
The DST exemption does not also include funds borrowed by banks from trust departments of banks or investment houses.

3. Five-Year Carry-Over of Net Operating Loss for 2020 and 2021. [6]

Under the NIRC, NOLCO which had not been previously offset as deduction from gross income shall be carried over as a deduction from gross income for the next three (3) consecutive taxable years immediately following the year of such loss. [7]

Under Bayanihan II, a business or enterprise which incurred net operating loss for the taxable years 2020 and 2021 shall be allowed to carry over the same as a deduction from its gross income for the next five (5) consecutive taxable years immediately following the year of such loss. This is assuming that the business or enterprise is not disqualified from claiming the deduction. [8] The taxable years 2020 and 2021 shall include all those corporations with fiscal years ending on or before June 30, 2021, and June 30, 2022, respectively. [9]

The net operating losses for taxable years 2020 and 2021 may be carried over as deductions even after the expiration of Bayanihan II provided the same are claimed within the next five (5) consecutive taxable years immediately following the year of such losses. [10]

4. Tax exemptions on donations of personal computers, laptops, tablets, or similar equipment to public schools. [11]

The importation and donation of personal computers, laptops, tablets, or similar equipment to public schools, including State Universities and Colleges (SUCs) and vocational institutions under TESDA shall be exempt from import duties and taxes, including donor’s tax.

Under Revenue Regulations (RR) No. 26-2020, Donor/s of personal computers, laptops, tablets, or similar equipment for use in teaching and learning in public schools shall be entitled to the following tax incentives: (1) Deduction from gross income of the amount of contribution/donation subject to limitations; (2) Exemption from the payment of donor’s tax; (3) In case of foreign donation, the importation shall be exempt from Value Added Tax (VAT); and (4) In the case of local donation where the equipment is originally intended for sale or for use in the course of business by the donor, the same shall not be treated as transaction deemed sale subject to VAT. [12]

Note that in order to avail of the tax incentives provided by RR No. 26-2020, no prior determination or ruling issued by the BIR shall be required. [13]

5. Extension for filing VAT refund. [14]

To ease the burden of the taxpaying public, Bayanihan II moved the statutory deadlines and timelines for the filing and submission of any document, the payment of taxes, fees, and other charges required by law.

Under RR No. 27-2020, the BIR suspended the deadline for filing of applications for VAT refund, the prescriptive periods of which fall during the effectivity of Bayanihan II. To prevent the influx of numerous filers of VAT refund claims, the following deadlines were extended to the following dates:

Taxable Quarter Deadline
Calendar quarter ending September 30, 2018 December 31, 2020
Fiscal quarter ending October 31, 2018 January 15, 2021
Fiscal quarter ending November 30, 2018 January 31, 2021
Calendar quarter ending December 31, 2018 February 15, 2021

Moreover, under RR No. 27-2020, the 90-day processing of VAT refund claims pursuant to Section 112 (C) of the NIRC has been suspended during the effectivity of Bayanihan II. The same RR also provides for a schedule of filing refund claims after the effectivity of Bayanihan II where the Enhanced Community Quarantine or the Modified ECQ is in force.

6. Liberalization of the grant of incentives for the manufacturing or importation of critical or needed healthcare equipment or supplies or essential goods. [15]

The exemption from import duties, taxes, and other fees shall be determined by the BIR and the Bureau of Customs. The goods to be determined as exempt from taxes and fees shall include critical products, essential goods, equipment or supplies needed to contain and mitigate COVID-19. RR No. 28-2020 provides for a list of goods that are exempt from value-added tax, excise tax and other fees.

7. Income tax exemptions. [16]

Bayanihan II provides for income tax exemptions of retirement benefits, and certain forms of compensation and allowances given to health workers. These income tax exemptions were explained in RR No. 29-2020. According to RR No. 29-2020, the following income payments shall be excluded from gross income and shall not be subject to income tax:

(1) Retirement benefits received by officials and employees of private firms, whether individual or corporate, from June 5, 2020 to December 31, 2020, provided that the amount received is in accordance with a retirement plan duly-registered with the BIR. Note that re-employment of such officials or employees in the same firm and its related parties within the succeeding twelve (12) month period shall be considered as proof of non-retirement.

The abovementioned conditions do not apply to the retirement benefits received by employees under Section 2.78.1(B)(1) of RR 02-1998, as amended.

(2) COVID-19 Special Risk Allowance given to public and private health workers. COVID-19 Special Risk Allowance is the allowance paid to both private and public health workers directly catering to or in contact with COVID-19 patients for every month that they are serving during the state of national emergency as declared by the President.

(3) Actual Hazard Duty Pay given to Human Resources of Health (HRH) or persons temporarily hired to complement or supplement the current health workforce. Actual Hazard Duty Pay given to temporary HRH serving in the front line during the state of emergency due to COVID-19 shall be exempt from income tax.

(4) Compensation paid to private and public health workers who have contracted COVID-19 in the line of duty or dies while fighting COVID-19, amounting to:
a. One Million Pesos (P1,000,000.00) in case of death; or
b. One Hundred Thousand Pesos (P100,000.00) in case of severe or critical sickness; or
c. Fifteen Thousand Pesos (P15,000.00) in case of mild or moderate sickness.
The One Million Peso compensation in case of death shall not be subject to estate tax.
The foregoing tax exemptions are subject to reportorial requirements under RR No. 29-2020 which must be complied with.


[1] Section 6, Bayanihan II

[2] As amended by Republic Act No. 10963

[3] Section 4(uu), Bayanihan II

[4] Section 173, NIRC

[5] Section 2, Revenue Regulations No. 24-2020

[6] Section 4(bbbb), Bayanihan II

[7] Section 34(D)(3), NIRC

[8] Section 4, Revenue Regulations No. 25-2020

[9] Revenue Regulations No. 25-2020

[10] Id.

[11] Section 4(zzz), Bayanihan II

[12] Section 4, Revenue Regulations No. 26-2020

[13] Id.

[14] Revenue Regulations No. 27-2020 in relation to Section 4(tt), Bayanihan II

[15] Section 4(cc), Bayanihan II

[16] Section 5, Bayanihan II




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