Section 3 of the Executive Order (E.O.) No. 398, s. of 2005 provides that: “Section 3. To ensure continuing compliance with tax laws, all government contracts shall include a stipulation that the private contracting party shall pay taxes in full and on time and that failure to do so will entitle the government to suspend payment for any goods or service delivered by the contracting party.” To fully achieve the objectives of E.O. No. 398, s. of 2005, Revenue Regulations No. 17-2024 was issued.
All persons, natural or juridical, local or foreign, who have existing contracts with the government, its departments, bureaus, offices and agencies, including state universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units for the supply of goods and services, including infrastructure projects, shall secure from the BIR an updated tax clearance certifying that they have no outstanding tax liabilities and that they have duly filed the latest income and business tax returns and paid the corresponding taxes due thereon.
Rules
The amount of final settlement on the contract for any goods and services delivered by the contractor which was suspended due to the failure to present the BIR tax clearance prescribed by these Regulations, including the retention money required pursuant to the provisions of R.A. No. 9184 and its implementing regulations, shall be subject to tax lien as may be warranted in favor of the government to satisfy the contractor’s outstanding tax liabilities. The existing guidelines and procedures governing distraint and garnishment shall be applied accordingly.
Penalty
Any violation of these Regulations shall be subject to the corresponding penalties under the pertinent provisions of the NIRC of 1997, as amended, and applicable regulations issued by the BIR.
Effectivity
These regulations shall take effect fifteen (15) days following its publication in the Official Gazette or the BIR official website, whichever comes first.
