Tax Articles

Implementing the tax incentives provisions
of the Sagip Saka Act

By Atty Rodel C. Unciano

Despite rapid urbanization and industrialization, agriculture remains to be the backbone of our economy. In recognition of the significant role of agriculture in our economic system, we have a law called the “Sagip Saka Act” (Republic Act 11321), which aims to strengthen farmers and fisherfolks by extending help to agricultural and fishing communities, including the grant of tax incentives and exemptions to covered activities.

Under the Sagip Saka Act, exemptions from income tax may be provided for income arising from the operations of an accredited enterprise. To qualify for exemption, the enterprise must register as barangay micro-business enterprises pursuant to Republic Act 9178, otherwise known as the "Barangay Micro-Business Enterprises (BMBEs) Act of 2002".

Under Revenue Regulations 19-2021 which recently implemented the tax incentives provisions of the Sagip Saka Act, the exemption from income tax shall apply to accredited farmers and fisherfolk enterprise engaged in agriculture and fishery-related economic activities, including producer groups, fisherfolk organizations/cooperatives, cluster of growers or fishers and other similar enterprises whose products are included in the priority commodity value chains, have potential to increase their marketable surplus, and willing to undergo capacity building on enterprise development and management.

The income tax exemption shall only apply during the period in which the accredited farmer and fisherfolk enterprise is registered as BMBE. It must be 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. In order to avail of the income tax exemption, the accredited business entity or enterprise must have a total assets of not more than Three Million Pesos (P3,000,000.00), subject to revision of the appropriate government agency or council. This is however exclusive of the value of the land on which the particular business entity's office, plant and equipment is situated.

In addition, gifts and donations of real and personal properties to an accredited farmers and fisherfolk enterprises shall also be exempt from donor’s tax. To qualify for the exemption, the donee must be an accredited farmers and fisherfolk enterprise as certified by the Department of Agriculture. Also, the donee should be among the proponent groups or beneficiaries of "The Farmers and Fisherfolk Enterprise Development Program", as certified by the Department of Agriculture - Regional Sagip Saka-Program Management Committee (SS-PMC). The donation must be made for the accomplishment of the Farmers and Fisherfolk Enterprise Development Program, consistent with its objectives to develop enterprises for farmers and fisherfolk towards a sustainable modern agriculture and food security.

The application for exemption from donor's tax shall comply with the guidelines in the processing of requests for rulings set forth in Revenue Memorandum Order 9-2014. The donations made are deductible from the gross income of the donor subject to compliance with the ordinary rules of deductibility under relevant provisions of the Tax Code, as amended.

Finally, under the law, the local government unit shall exempt structures, buildings, and warehouses utilized for the storage of farm inputs and outputs from real property taxes, provided that the assessed value of the property does not exceed Three million pesos (P3,000,000.00).

The grant of tax incentives to covered farmers and fisherfolks enterprises is consistent with the State’s objective of achieving sustainable modern agriculture and food security in the country.