BIR: Updated Tax Clearance Required for Contractors

Bureau of Internal Revenue (BIR) Commissioner Romeo D. Lumagui Jr. announced Revenue Regulation No. 17-2024 (RR No. 17-2024), requiring government contractors to secure an updated tax clearance from the BIR before the final settlement of government contracts.

The updated tax clearance certifies that the contractor has no outstanding tax liabilities, has filed the latest income and business tax returns, and has paid the corresponding taxes due.

“Government contractors must show they have no outstanding tax liabilities before the final settlement of a government contract,” Lumagui said.

“The BIR will require an updated tax clearance. Otherwise, the government has the authority to suspend the final settlement of the contract,” he added.

Previously, contractors submitted a tax clearance during the procurement process as an eligibility requirement.

“Part of our commitment to excellent taxpayer service is ensuring that government contractors are cleared of any tax liabilities before they are paid,” Lumagui stated.

“This protects the taxes collected from hardworking taxpayers against contractors who fail to meet their tax obligations,” he added.

Under RR No. 17-2024, any amount due for final settlement that is suspended due to failure to present an updated tax clearance will be subject to a tax lien in favor of the government to satisfy the contractor’s outstanding liabilities.

Additionally, Lumagui issued Revenue Memorandum Order No. 002-2025, outlining policies, guidelines, and procedures for processing and issuing tax clearance certificates for final settlement of government contracts.