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, reported by BusinessWorld, defines the scope of tax exemptions covering activities under the Letter of Agreement on Narcotics Control and Law Enforcement.
The issuance ensures that all payments made by the US government to local contractors and grantees for projects under the agreement are exempt from income tax, value-added tax, and other national internal revenue taxes, provided they meet the conditions outlined in the circular.
The BIR stated that the clarification aims to facilitate the smooth implementation of US-funded programs while ensuring compliance with Philippine tax laws. The circular is effective immediately and applies to all relevant transactions.