Bayanihan to Recover as One Act - PJS Law

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Bayanihan to Recover

as One Act (RA 11494)

Response & Recovery Provisions

COVID-19 Client Advisory as of 12 September 2020

As of 12 September 2020

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Bayanihan to Recover as One Act (Bayanihan 2)1

Key Response & Recovery Provisions A. Economic Recovery & Financial Assistance (MSMEs)2

1. What credit accommodations, in general, are extended to MSMEs under

Bayanihan 2? Section 4(x) of the law provides that lending institutions shall impose low-interest rates for MSMEs borrowing funds. The loans shall be payable within three (3) years and no collateral shall be required if the loan does not exceed PhP3Million. [Section 4(x)]

2. Which institutions have specific mandates in relation to the lending programs to MSMEs, and what are their roles? Small Business Corporation (SB Corp) Bayanihan 2 directs SBCorp to expand its existing loan programs for MSMEs and to other entities (cooperatives, hospitals, among others) which are affected by the COVID-19 crisis and other socio-economic reversals. For this purpose, the law allocated PhP10Billion for the COVID-19 Assistance to Restart Enterprises of CARES Program of SBCorp, with PhP6Billion thereof for tourism MSMEs. The expanded program may consist in a combination of the following:

(a) Increasing loanable funds; (b) Reducing documentary requirements; (c) Increasing maximum loan amounts per borrower; (d) Reducing interest rates;

1 Republic Act No. 11494,signed into law by the President on 11 September 2020. 2 Magna Carta for Micro, Small and Medium Enterprises (Republic Act No. 6977), MSMEs: any business activity or enterprise engaged in industry, agribusiness and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of land on which the particular business entity’s office, plant and equipment are situated, must have value falling under the following categories:

Micro Not more than PhP3 Million Small PhP3,000,001 to PhP15 Million Medium PhP15,000,001 to PhP100 Million


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(e) Extending loan terms; (f) Using financial technologies to expand reach and increase assets and set fast

turn-around loan processing time; and (g) Allowing the use of the loan proceeds for payroll costs, materials and suppliers,

mortgage payments, rent, utilities, fuel and storage, creation of new supportive businesses, re-purposing of existing business capital, and any other business debt obligations incurred before the covered period or acquisition of new technologies and systems to adjust business processes for resiliency. [Section 4(z)]

Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP) The LBP and DBP are directed to introduce a low interest and/or a “flexible term” loan program for operating expenses which are available to businesses affected by the COVID-19 crisis. The objective of these programs is to assist and encourage the affected businesses and their creditors to continue investing in, lending to, and operating their businesses. The law, however, states that the LBP and DBP must prioritize agri-fishery and non-essential MSMEs, including but not limited to start-ups and cooperatives. [Section 4(aa)] Philippine Guarantee Corporation (PhilGuarantee) The law directs PhilGuarantee to issue an expanded government guarantee program for non-essential businesses to ease the current rules and regulations and to give preference to critically impacted MSMEs, cooperatives, and other activities that support DOH initiatives. The expanded program is geared towards ensuring an adequate and responsive supply of health care services and to guarantee the loan portfolio of partner financial institutions of eligible MSME and cooperative loans. [Section 4(bb)]

3. Aside from loan packages, what other assistance is provided under Bayanihan 2 specifically for MSMEs?

Bayanihan 2 Act directs the Department of Trade and Industry (DTI) together with other implementing agencies, to accelerate and undertake massive promotion of online commerce and offer technical and financial assistance through Government Financial Institutions (GFIs) to those engaged in e-commerce, such as those involved in:


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(a) Internet retail; (b) Digital financial services; (c) Digital media; and (d) Ride-hailing.

These programs would include those that would expedite the digitalization of MSMEs and cooperatives through training subsidies for onboarding or starter kits, wage support for new enterprises, upskilling/reskilling, and other activities as may be defined by relevant government agencies. [Section 4(jj)]

B. Economic Recovery & Financial Assistance (Transport Sector)

1. What types of assistance is the Department of Transportation (DOTr) mandated to extend to the transportation industry under Bayanihan 2?

The law requires the extension of the following:

(a) Direct cash or loan interest rate subsidy; (b) Grants for applicable regulatory fees; (c) Substitution of refund option to travel vouchers; (d) Grants for fuel subsidy and/or digital farer vouchers, as may be necessary; and (e) Grants for training, equipment, facilities, test kits and necessary personnel, on

coping with increased health risks arising from infectious diseases.

The DOTr may grant assistance to critically-impacted business in the transportation industry, including transport cooperatives, subject to eligibility requirements and other terms and conditions prescribed by the Department, including the submission of a reasonable and proper business plan.

2. What may be included in the grants for regulatory fees?

The grants may include reductions in rates through the removal of the applicable local taxes, and fees and charges imposed by any regulatory agency and Local Government Units (LGUs). The grant may be availed of by any critically-impacted business for a period of not more than six (6) months.


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3. Would the availment of other economic relief provided under Bayanihan 2 disqualify the borrower from assistance extended by the DOTr?

No. The availment of any economic relief, such as wage subsidy, loan and loan guarantees under the Act, does not disqualify the eligible business from availing the economic relief from the DOTr. Note, however, that business entities that shall require assistance for any activity that supports the Balik Probinsya, Bagong Pag-asa Program under Executive Order No. 114, s. 2020 shall be prioritized by the DOTr.

C. Economic Recovery & Financial Assistance (Tourism)

1. What reliefs, in general, are required to be extended to the tourism sector under

Bayanihan 2?

The law states that the Department of Tourism (DOT) may render assistance to critically-impacted tourism enterprises upon the Order of the President. Tourism enterprises include tourism-oriented barangay micro business enterprises, cooperatives engaged in tourism related activities or other members of the informal sector in the tourism economy. [Section 4(hh)] The DOT may provide relief through any of the following ways or through any of the following programs:

(a) Loan interest rate subsidies; (b) Tourism Road Infrastructure Program of the Department of Public Works and

Highways (DPWH); (c) Cash-for-work programs and the unemployment and involuntary assistance for

the displaced workers and employees in the tourism sector; (d) Marketing and product development, promotions and programs, including

travel advertising and festival-support strategies; (e) Grants for education, training, and advising of tourism stakeholder for the new

normal alternative livelihood programs; (f) Utilization of information technology for the improvement of tourism services,

development of a tourist tracking system for emergency response, and establishment of spatial database to improve planning capacity;

(g) Establish COVID-19 testing centers in tourist destinations as identified by the DOT;

(h) Any other relevant programs necessary to mitigate the economic effects of COVID-19 on the tourism industry. This would include infrastructure, product-sourcing and subsidized domestic package tours. [Section 4(hh)]


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2. Who may avail of the DOT loan intervention programs? How will this be

implemented?

DOT Loan interventions will be granted exclusively to accredited tourism enterprises, which include small-scale tourism-oriented enterprises accredited by LGUs under the Republic Act No. 9178 or the “Barangay Micro Business Enterprises Act of 2002”. The establishments that (1) Support the Balik Probinsya, Bagong Pag-asa Program, and (2) comply with the guidelines of the DOH will be prioritized. [Section 4(hh)] The loan intervention program is to be administered by SBCorp under the CARES Program (see item A.2 above), subject to guidelines from the DOT.

3. Would the availment of other economic relief provided under Bayanihan 2 disqualify the borrower from assistance extended by the DOT?

No. The availment of any economic relief, such as wage subsidy, loan and loan guarantees under the Act, does not disqualify the tourism enterprise from availing the economic relief from specifically granted to critically-impacted tourism entities. As mentioned earlier, however, that business entities that shall require assistance for any activity that supports the Balik Probinsya, Bagong Pag-asa Program under Executive Order No. 114, s. 2020 shall be prioritized by the DOTr.

D. Tax-Relief Measures

1. Are there concessions on taxes under Bayanihan 2 that meant to ease the burden of individuals in areas under community quarantine?

Yes, aside from the grant of any benefit, the statutory deadlines and timelines for the following shall be moved:

(a) filing and submission of any document with the Bureau of Internal Revenue (BIR), and

(b) payment of taxes, fees, and other charges required by law. [Section 4 (tt)]

2. Are there sector-specific reliefs also granted for tax obligations?

Yes, for the critically-impacted creative sector, the law requires the DTI and DILG to review the imposition of the amusement tax and to recommend any measures to the President on the exercise of his power to suspend, reduce, or waive the imposition of the fees and charges for a period of six (6) months. [Section 4 (hhh)]


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Further, under Section 5 of Bayanihan 2, retirement benefits received by officials and employees of private firms, whether individual or corporate, are to be excluded from gross income and shall be exempt from taxation, without condition. The exemption covers benefits received within the period 05 June 2020 to 31 December 2020. Finally, Section 127(B) of the National Internal Revenue Code (NIRC)3 was repealed in totality by this Act. Thus, there will be no more taxes levied, assessed and collected on sales, barters, exchanges or other dispositions through Initial Public Offerings (IPO) of shares of stock in closely held corporations. [Section 6]

E. Loan Repayment Reprieve

1. What is the scope of the relief for loan repayments under Bayanihan 2?

The law provides for one-time sixty (60)-day grace period for the payment of all existing, current, and outstanding loans or any part thereof, falling due on or before 31 December 2020, including but not limited to salary, personal, housing, commercial, and motor vehicle loans, amortizations, financial lease payments and premium payment as well as credit card payments. Likewise, all loans may be settled on staggered basis without interest on interests, penalties and other charges until 31 December 2020 or as may be agreed upon by the parties.

3 (B) Tax on Shares of Stock Sold or Exchanged Through Initial Public Offering. – There shall be levied, assessed and collected on every sale, barter, exchange or other disposition through initial public offering of shares of stock in closely held corporations, as defined herein, a tax at the rates provided hereunder based on the gross selling price or gross value in money of the shares of stock sold, bartered, exchanged or otherwise disposed in accordance with the proportion of shares of stock sold, bartered, exchanged or otherwise disposed to the total outstanding shares of stock after the listing in the local stock exchange: Up to twenty-five percent (25%) .................................... 4% Over twenty-five percent (25%) but not

- over thirty-three and one third percent (33 1/3%) ..... 2% - over thirty-three and one third percent (33 1/3%) ......... 1%

The tax herein imposed shall be paid by the issuing corporation in primary offering or by the seller in secondary offering.


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The foregoing reliefs are not applicable to interbank loan and bank borrowings. [Section 4(uu)]

2. Will the interest due on the loan be suspended during this 60-day grace period?

No, the law does not provide for the suspension of the running of interest on the loan. What the law provides is that, during the 60-day grace period, there will be no interest due on the interest, penalty, fees or other charges.

3. Who are required to grant this 60-day grace period on loan repayments?

The following are required by law to grant this relief: (a) Banks;

(b) Quasi-banks;

(c) Financing companies;

(d) Lending companies;

(e) Real estate developers;

(f) Insurance companies providing life insurance policies;

(g) Pre-need companies;

(h) Entities providing in-house for goods and properties purchased;

(i) Asset and liabilities management companies;

(j) Government Service Insurance System;

(k) Social Security System;

(l) Home Development Mutual Fund;

(m) Other financial institutions. [Section 4(uu)]


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4. Meanwhile, what reliefs may bank and other non-bank financial institutions (NBFIs) be entitled to?

Banks and NBFIs that agree to loan term extensions or restructuring pursuant Section 4(uu) of the Bayanihan 2 Act shall be exempt from documentary stamp taxes. In addition, banks and NBFIs that agree to loan term extensions or restructuring beyond the 60-day grace period required by law may be entitled to regulatory relief, as may be determined by the Bangko Sentral ng Pilipinas which may include, but is not limited to:

(a) Staggered booking of allowances for credit losses;

(b) Exemption from loan-loss provisioning;

(c) Exemption from the limits on real estate loans, when applicable;

(d) Exemption from related party transaction restrictions; and

(e) Non-inclusion in the bank’s or NBFIs’ reporting on non-performing loans. [Section 4(uu)]

F. Concessions on Utilities Payments

1. What concessions, if any, are mandated under the law on the payment of electric, water, telecommunications, and other similar utilities during community quarantine (ECQ or MECQ)?

All institutions providing for said utilities (electric, water, telecommunications, similar utilities) are directed to provide a minimum thirty (30)-day grace period for the payment of said utilities falling due during the period of ECQ or MECQ only. As an exception, in case of the electric power sector, the 30-day grace period and the staggered payment (without interest, penalties, and other charges) shall apply to all payments due within the period of community quarantine (ECQ, MECQ, GCQ or MGCQ) in the entire electric power value chain, including generation companies, transmission utility, and the distribution utilities. [Section 4(vv)]


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2. Can customers be required to pay penalties, interests and other charges by said

utilities? What if the utility bills were not paid during the 30-day grace period? No, the payment of said utility bills, if due during the period of ECQ or MECQ, may be settled without incurring any penalties, interests and other charges. Unpaid residential, MSME, and cooperatives utility bills may be paid on a staggered basis, in not less than three (3) monthly installments, subject to the procedural requirements of the regulatory agencies affecting the utility institutions, without interests, penalties, and other charges. Note that this concession is granted only to those utility bills affecting residential, MSME, and cooperatives entities. [Section 4(vv)]

3. Are there any other concessions that may be granted by the covered utility companies or institutions?

Covered institutions may also offer less onerous payment terms with the consent of their clients. Such payment terms require the approval of the regulators of each utility entity/institution. [Section 4(vv)]

G. Concessions on Rental Payments

1. What concessions, if any, are mandated under the law on rental payments?

The following are granted a minimum of thirty (30)-day grace period, reckoned from the date of the lifting of the ECQ or MECQ, to pay for their residential and commercial rents falling due within the period of the community quarantine:

(a) lessees not permitted to work, and (b) MSMEs and cooperatives ordered to temporarily cease operations.

[Section 4 (ww)]

The lease payments or rentals falling due within the period of ECQ or MECQ shall be amortized in equal monthly installments until 30 December 2020, without any interests, penalties or other charges.

2. Can lessors increase the rental amounts or leases in the meantime?

No, the law prohibits the imposition of any increases in the rent or lease amounts during the period of community quarantine.


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H. Regulatory Relief on Permits and Clearances

1. What relief, if any, are mandated under the law on the processing of permits,

clearances and other authorizations?

All government agencies and LGUs are required to act on all pending and new applications for permit, license, certificate, clearance, authorization and resolutions within a non-extendible period of seven (7) working days. The applicant/s in respect of the above requirements shall be allowed to provide an undertaking for purposes of any additional requirements imposed by the said government agency or LGU, and such undertaking to submit or complete compliance will not delay the approval of the application. [Section 4(eee)]

2. Is this regulatory relief applicable to administrative investigations or

enforcement activities?

No, the regulatory relief granted will not apply to administrative investigations of enforcement activities by regulatory pursuant to their quasi-judicial functions. [Section 4(eee)]

3. Aside from the expedited timeline for approval, are there any other regulatory

reliefs granted on the processing of permits and clearances?

Permits, licenses, certificates, clearances, authorizations and resolutions imposed by national government agencies may be waived for projects that are: (i) nationally significant, or those with (ii) high economic returns or (iii) high employment potential. The determination of which projects qualify, and which specific permits, licenses, etc. to be waived will be determined by a committee to be chaired by the Secretaries of the Departments of Finance (DOF), Trade and Industry (DTI), and Environment and Natural Resources (DENR). Note, however, that permits, licenses, clearances or authorizations relating to taxes, duties, border control and environmental laws and regulations are not included in the waiver concession.


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The regulatory relief for waiver of the permits, licenses, clearances, authorizations and resolutions will only be valid and effective during the state of national emergency as declared by the President and the economic rehabilitation period, or until the last day of June 2022. Only the Supreme Court has the power to issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the actions or decisions of the committee mentioned above and/or the completion or operation of the identified projects which are granted the regulatory relief. [Section 4(nnn)]

4. What concessions or regulatory reliefs are granted in respect of mergers and acquisitions under Bayanihan 2?

To promote business continuity and capacity building, all mergers and acquisitions with the transaction values below PhP50Billion shall be considered exempt from compulsory notification under Section 17 of the Philippine Competition Act (PCA) if said merger or acquisition was entered into within a period of two (2) years from the effectivity of the Bayanihan 2. Said mergers and acquisitions shall also be exempt from the authority of the Philippine Competition Commission (PCC) to review motu proprio under Section 12 of the PCA for a period of one (1) year from effectivity of Bayanihan 2. [Section 4(eee)]

5. Are there any penalties imposed for violation of filing and/or non-compliance

with reportorial obligations with the Securities and Exchange Commission (SEC) and other regulatory agencies?

None. In respect of business activities and transactions that promote continuity and capacity-building in all sectors of the economy during the period of community quarantine, the SEC and other regulatory agencies are directed to desist from imposing fines and other monetary penalties for:

(a) Non-filing; (b) Late filing; (c) Failure to comply with compulsory notification; and (d) Other reportorial requirements.

[Section 4(www)]


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I. Exemptions from the Government Procurement Reform Act (GPRA)

1. What goods or services may be exempted by the President from the requirement

of public bidding under the GPRA?

As a general rule, the GPRA requires that all procurements made by the government undergo a competitive bidding process, with certain exemptions provided under the law. Any interested party may participate in the bidding. All bidders, as well as their bids, shall be subject to evaluations prior to the award of contract in an aim to achieve transparency, accountability and efficiency in the government’s procurement process. Under Section 4(u) of Bayanihan 2, the procurement of the following may be exempted from this requirement:

(a) Medical goods and such other supplies or equipment as may be determined by the DOH and other relevant government agencies;

(b) Good and services for social amelioration measures in favor of affected communities;

(c) Lease of real property or venue to house health workers or serve as quarantine centers, medical relief/aid distribution locations, or temporary facilities;

(d) Establishment, construction, and operation of temporary medical facilities; (e) Utilities, telecommunications, and other critical services in relation to operation

of quarantine centers, medical relief and aid distribution centers and temporary medical facilities; and

(f) Ancillary services related to the foregoing.

2. What kind of equipment can be included in the category of medical goods exempted under the law?

(a) PPEs such as gloves, gowns masks, goggles, face shields; (b) Surgical equipment and supplies; (c) Laboratory equipment and its reagents; (d) Medical equipment and devices; (e) Support and maintenance for laboratory and medical equipment, surgical

equipment and supplies; (f) Medical supplies, tools and consumables such alcohol, sanitizers, tissue,

thermometers, hand soap, detergent, sodium hypochlorite, cleaning materials, povidone iodine, and common medicines; and

(g) Testing kits.


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3. Which facilities should have priority in the allocation and distribution of medical goods and equipment by the DOH?

(a) Public health facilities in regions, provinces or cities designated as COVID-19

referral hospitals; (b) Private hospitals with existing capacities to provide support care and treatment

to COVID-19 patients; and (c) Public and private laboratories with existing capacities to test suspected

COVID-10 patients. .

4. Is there any preference in the procurement of the exempted products under Bayanihan 2?

Yes. Products, materials and supplies produced, made or manufactured domestically shall be preferred by the government. Nonetheless, these shall still be subject to competitive procurement procedures. This means that, the lowest domestic manufacturer-bidder shall be awarded with the contract despite its bid being fifteen percent (15%) in excess of the lowest foreign bid. However, the bidder must secure a DTI certification that the articles forming part of its bid are substantially composed of materials grown, produced or manufactured in the Philippines. [Section 4(u)]

J. Supporting the Digital Shift – Information and Communications

Technology (ICT) Sector

1. What does Bayanihan 2 provide in terms of measures to facilitate and support ICT infrastructure?

The law statest that the President may partner with internet and communication service providers to accelerate the deployment of critical ICT infrastructure such as cell towers, equipment, software and wireless technologies. This is for the purpose of addressing the country’s increased need for digital connectivity, internet speed and stability, cybersecurity in E-commerce, E-government, online learning and telecommuting. [Section 4(ii)]


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2. What concessions, if any, are provided to ease the requirement for clearances, permits and other authorizations relating to ICT infrastructure?

The requirement to secure permits and clearances for the construction of telecommunication and internet infrastructure may be suspended for three (3) years from the effectivity of Bayanihan 2. With certain exceptions, no national or local permit or clearance will be required for construction, installation, repair, operation and maintenance of telecommunications and internet infrastructure, including the establishment and operation of equipment and facilities, and the use of technologies necessary in order to expand the coverage of broadband internet networks and provide connectivity to unserved or underserved communities. [Section 4(ii)]

3. What is the scope or coverage of the temporary suspension of the permit or clearances requirement?

The following may avail of the temporary suspension of permit or clearance requirements:

(a) Independent tower companies that are registered with the Department of

Information and Communications Technology (DICT); or (b) Holders of certificates of public convenience and necessity; or (c) Holders of provisional authority granted by the National Telecommunications

Commission (NTC) to public telecommunication entities. [Section 4(ii)]

4. How will the temporary suspension of permit or clearance requirement affect pending and new applications for construction or transmission or similar ICT infrastructure?

All pending and new applications for the construction of cell sites, cell towers, roll out of fiber, installation of poles, ground terminals and other transmission or similar telecommunications and internet structure that are not decided within seven (7) days from receipt of application are deemed approved. [Section 4(ii)]


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5. Does the suspension of this requirement extend to homeowners’ associations

and other community clearances?

No, the establishment of ICT infrastructure within the subdivision/village will be subject to consultation and approval of a simple majority of the Homeowner’s Association members. This is pursuant to Section 15 of the Ease of Doing Business and Efficient Government Service Delivery Act in relation to Section 10(k) of the Magna Carta for Homeowners and Homeowners’ Associations. [Section 4(ii)]

6. What other permits and clearances need to be secured or otherwise not covered

by the temporary suspension?

The following permits are not covered in the temporary suspension of requirements to secure permits and clearances for the construction of telecommunications and internet infrastructure:

(a) Building Permit issued by the Office of the Building Official; and (b) Height Clearance Permit from the Civil Aviation Authority of the Philippines

(CAAP). [Section 4(ii)] Note that the CAAP Height Clearance Permit will be required for telecommunications tower infrastructure that meet the following qualifications:

(a) Exceeds fifty (50) meters in height and is in the direct flight plan within a three (3) kilometer radius or an airport; or

(b) Constructed within the ten (10) kilometer radius of communication-navigation surveillance facilities located off-airport.

If the telecommunications tower infrastructure does not meet the above qualifications, it only has to submit a notarized undertaking attesting that the infrastructure will be build outside the CAAP critical areas, as certified by a geodetic engineer. [Section 4(ii)]

7. Aside from the suspension of requirement of certain permits and clearances, are there other reliefs granted under Bayanihan 2 for the ICT sector?

Yes. Under the law, the construction of telecommunications infrastructure cannot generally be hindered by any temporary restraining order (TRO), preliminary injunction or preliminary mandatory injunction. Only the Supreme Court can issue the above-mentioned orders against the construction of telecommunications infrastructure. [Section 4(ii)]


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8. What market support measures, if any, are provided in Bayanihan 2 to facilitate or promote the use of ICT infrastructure?

The DTI may be directed to coordinate with other implementing agencies to accelerate and undertake massive promotion of online commerce. The DTI may also provide technical and financial assistance to those engaged in E-commerce. The programs should expedite the digitalization of MSMEs and cooperatives through activities that may be defined by the DTI, Cooperative Development Authority, DICT, Technical Education and Skills Development Authority, and the Commission on Higher Education. [Section 4(jj)]

9. What goods or services may be exempted by the President from the requirement

of public bidding under the GPRA?

As a general rule, the GPRA requires that all procurements made by the government undergo a competitive bidding process, with certain exemptions provided under the law. Any interested party may participate in the bidding. All bidders, as well as their bids, shall be subject to evaluations prior to the award of contract in an aim to achieve transparency, accountability and efficiency in the government’s procurement process.

Disclaimer and Limitations — This advisory is intended to provide general guidance to clients of PJS Law only, based on laws and issuances as of the date stated above. Please confirm with our lawyers for possible updates or contact [email protected] if you have clarifications or other concerns.

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Bayanihan to Recover as One Act - PJS Law