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New Requirement for Government Contractors: Tax Clearance from BIR Needed for Full Payment
Government contractors are now facing stricter requirements when it comes to receiving payment for their projects. The Bureau of Internal Revenue (BIR) has issued a new regulation, Revenue Regulation No. 017-2024, which mandates that contractors working with the government must obtain a tax clearance before they can receive full payment.
This new regulation applies to contractors working with various government entities, including national government agencies, local government units, government-owned and -controlled corporations, and state universities and colleges. The BIR emphasized that this requirement is not new, as the Government Procurement Reform Act (RA No. 9184) already mandates that bidders for government contracts must submit a tax clearance as part of the eligibility requirements.
In addition, Executive Order No. 398 (2005) requires government contractors to demonstrate full and timely payment of taxes. This means that contractors must regularly present a tax clearance from the BIR, along with copies of their income and business tax returns, to ensure compliance with tax obligations.
“The BIR clearance is not only required during the procurement process as an eligibility requirement, but it must also be presented on a regular basis during the duration of the contract with the government to prove tax compliance,” the BIR stated.
Contractors who fail to provide a tax clearance risk not being paid for their work. The BIR warned that without a tax clearance, the final settlement of the contract will be subject to a lien to ensure that any outstanding tax liabilities are settled.
This new regulation aims to promote transparency and accountability in government contracts, ensuring that contractors fulfill their tax obligations and contribute to the country’s revenue. Contractors are urged to comply with the new requirements to avoid any delays or issues in receiving payment for their projects.
