The Bureau of Internal Revenue (BIR) will now require government contractors to secure an updated tax clearance before the final settlement of a government contract to ensure they have no outstanding tax liabilities.

In a statement, BIR Commissioner Romeo D. Lumagui Jr. said this new policy, outlined in Revenue Regulation No. 17-2024 (RR No. 17-2024), aims to strengthen tax compliance among government contractors.

"Government Contractors have to show that they do not have any outstanding tax liabilities before the final settlement of a government contract. The BIR will require an updated tax clearance,” Lumagui said.

“Otherwise, the Government has the power to suspend the final settlement of the government contract,” he added.

Previously, a BIR tax clearance was only required during the procurement process as an eligibility requirement.

"Part of our commitment to Excellent Taxpayer Service is ensuring that before Government Contractors are paid, they are cleared of any tax liabilities," Lumagui said.

"In this way, the BIR will be able to protect the taxes collected from our hardworking taxpayers against Government Contractors who do not even pay their taxes,” he added.

The BIR said the new regulation ensures that government contractors fulfill their tax obligations before receiving final payment for their services.

RR No. 17-2024 also stipulated that any final settlement on a government contract suspended due to the contractor's failure to present an updated BIR tax clearance will be subject to a tax lien in favor of the government to settle the contractor's outstanding tax liabilities.

To facilitate the implementation of this new policy, Lumagui also issued Revenue Memorandum Order No. 002-2025, which prescribed the policies, guidelines, and procedures for processing and issuing tax clearance certificates for the final settlement of government contracts.