Tax incentives for food providers

During one of my yearly home visits, I asked my father why there were no more cornfields visible along the roads. He replied “Alkanse na ang pang uma karon dong uy” (Farming is no longer profitable nowadays, son). I sensed his frustration as he was once a farmer. He then added that the cost of farming inputs, as well as the effects of climate change, prompted him to quit farming.

The agriculture sector plays a vital role in our economy; thus, the government regularly enacts laws and provides tax incentives geared towards supporting and increasing agricultural production and activity. Republic Act No.

11321 or the Sagip Saka Act of 2018 instituted the Farmers and Fisherfolk Enterprise Development Program to achieve sustainable modern agriculture and food security by helping farmers and fisherfolk increase their production and income. Section 12 of the Sagip Saka Act enumerates the available tax exemptions and incentives as follows:

a. Gifts and donation of real and personal properties shall be exempt from donor’s tax.

b. Local government unit shall exempt structures, buildings, and warehouses utilized for the storage of farm inputs and outputs from real property tax, provided that the assessed value of the property does not exceed P3,000,000.00.

c. Land Bank of the Philippines shall provide preferential rates and a special window to accredited farmers and fisherfolk.

d. Exemptions from income tax may be provided for income arising from the operation of the enterprise, provided that the farmer and the fisherfolk cooperatives and enterprise shall register as barangay micro business enterprise pursuant to Republic Act No. 9178 (Barangay Micro-Business Enterprise Act of 2002).

On Oct. 29, the Bureau of Internal Revenue (BIR) issued Revenue Regulations 19-2021, which implements the tax incentive and exemption provision of the Sagip Saka Act. The regulations cover the exemption from donor’s tax of donations made to and the exemption from income tax of accredited farmers and fisherfolk enterprises engaged in agriculture and fishery-related economic activities. Registration with the Farmers and Fisherfolk Enterprise Development program can be done through the City or Municipal Agriculture Office, Provincial Agriculture Office, DA Regional Field Offices, and Agribusiness and Marketing Assistance Service. Online registration is also possible through http://ffedis.da.gov.ph/. Department of Agriculture Memorandum Circular No. 8 Series of 2020 sets out the procedural guidance and documentary requirements for registration.

Exemption from Income Tax — All accredited farmers and fisherfolk enterprises may be exempt from income tax on income derived from the enterprise provided they are registered as Barangay Micro-Business Enterprises (BMBEs). The income tax exemption applies only if, and during the period when, the accredited farmers and fisherfolk enterprises are registered as BMBEs issued with Certificate of Authority by the Department of Trade and Industry, through the Negosyo Center in the city or municipality where the business is located. Additional requirements for the exemption are as follows:

a. The accredited business or enterprise must be among the intended beneficiaries as enumerated under Section 5 of the implementing rules and regulations of RA 11321.

b. Total assets, including those arising from loans but excluding land where the business is situated, must not be more than P3,000.000.00.

DONATIONS TO ACCREDITED FARMERS AND FISHERFOLK

Donation of real and personal property to an accredited farmer and fisherfolk enterprise is exempt from donor’s tax under the following conditions:

a. The donee is an accredited farmer and fisherfolk enterprise as certified by the Department of Agriculture.

b. The donee is among the proponent groups or beneficiaries of the Farmers and Fisherfolk Enterprise Development program.

c. The donation was made for the accomplishment of the Farmers and Fisherfolk Enterprise Development program’s objectives to develop enterprise for farmers and fisherfolk towards sustainable and modern agriculture and food security.

d. The application of exemption from donor’s tax complies with the guidelines of requests for rulings set forth in Revenue Memorandum Order 9-2014 and must be filed with the Law and Legislative Division Room 709, 7th floor BIR National Office, Diliman, Quezon City together with the applicable requirements.

At the onset of this pandemic when border controls were implemented, the vital role played by our farmers and fisherfolk was once again highlighted. In fact, many have started to grow their own gardens at home. Providing tax incentives, such as those discussed, is a great way of showing support to a sector that feeds this nation and will encourage every farmer not to quit farming. Moreover, the success of this program will depend on the effective implementation of the law so that the target industry benefits and thrives.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.