Month: September 2020

The Bureau of Internal Revenue recently issued Revenue Regulations No. 18-2020 on Voluntary Assessment and Payment Program (VAPP). By availing the benefits under the VAPP, the taxpayer shall not be audited for 2018 for the tax types covered by the availment, and in case of pending audit, the issued Letter of Authority, Tax Verification Notice, Discrepancy Notice, Notice for Informal Conference, Preliminary Assessment Notice, Final Assessment Notice for pending cases shall be withdrawn and canceled. The VAPP is available until December 31, 2020, unless extended by the Secretary of Finance.

We provide below the details of the said regulations. If you are interested in exploring the benefits under the VAPP (i.e. whether your Company is qualified, the computation of voluntary tax payment etc.), we shall be glad to walk you through.

What are the taxes Covered?

• Internal revenue taxes covering:
  • Taxable year ending December 31, 2018 or Fiscal year 2018 ending the last day of months of July 2018 to June 2019 (Subject Period)
• Internal revenue taxes include one tax transactions (ONETT) such as estate tax, donor’s tax, Capital Gains Tax and ONETT-related creditable withholding tax (CWT)/expanded withholding tax and documentary stamp tax (DST)

Who are qualified to avail of the VAPP?

• Those who are liable to pay internal revenue taxes for the Subject Period who, due to inadvertence or otherwise,  erroneously paid his/its internal revenue tax liabilities or failed to file returns/pay taxes

Who are not qualified to avail of VAPP?

• Those taxpayers who have already been issued a Final Assessment Notice (FAN) that have become final and executory, on or before the effectivity of these Regulations;
• Persons under investigation as a result of verified information filed by a Tax Informer under Section 282 of the NIRC of 1997, as amended, with respect to the deficiency taxes that may be due out of such verified information;
• Those with cases involving tax fraud filed and pending in the Department of Justice or in the courts; and 
• Those with pending cases involving tax evasion and other criminal offenses under Chapter II of Title X of the NIRC of 1997, as amended.

Until when can the VAPP be availed of?

• December 31, 2020, unless extended by the Secretary of Finance

How much is tax to be paid as a condition to avail of the benefits under the VAPP?

Increase/Decrease in the Total Taxes Due from 2017 to 2018* (A)	Amount of Voluntary Tax Payment Whichever is the higher of – (B)	Minimum Account (C)
Net increase of not more than 10%	3% of 2018 gross sales** or 7% of 2018 taxable net income	Individuals, estates and trusts – P75,000 Corporations – a.     With subscribed capital of more than P50 Million – P1,000,000.00 b.     With subscribed capital of more than P20 million up to P50 Million – P500,000 c.     With subscribed capital of more than P5 million up to P20 Million – P250,000 d.     With subscribed capital of P5 Million and less – P100,000.00 Other juridical entities, including but not limited to cooperative, foundations, general professional partnerships – P75,000
Net increase of more than 10% up to 30%	2% of 2018 gross sales or  6% of 2018 taxable net income
Net increase of more than 30%	1% of 2018 gross sales or  5% of 2018 taxable net income
Net decrease of not more than 10%	4% of 2018 gross sales or  8% of 2018 taxable net income
Net decrease of ore than 10%	5% of 2018 gross sales or  9% of 2018 taxable net income
*Total taxes due in 2017 and 2018, for purposes of the above schedule refer to the sum of all tax due per tax return (IT, PT, ET, and DST) and net VAT payable (VAT) before deducting any creditable withholding tax, quarterly payment or advance payment.   **Gross sales and taxable net income shall be based on the Annual Income Tax Return for the taxable year ending December 31, 2018, and fiscal year 2018, ending on the last day of July 2018 to June 2019.

How much is the settlement amount for Final withholding taxes (On compensation, fringe benefits etc.) and creditable withholding tax (CWT) other than CWT on ONETT?

• 5% of the basic withholding tax remittance for the taxable year

How much is the settlement amount for taxes on ONETT, such as Estate Tax, Donor’s Tax, CGT, ONETT-related CWT/Expanded Withholding Tax and DST?

• Basic tax due of the unfiled tax return/unpaid tax due plus 5%

What are the requirements to avail of the benefits under VAPP?

• Mandatory Requirements:
  • Duly accomplished BIR Form No. 2119
  • Payment Form (BIR Form No. 0622) with proof of payment
• Additional Requirements:
  • Filed tax returns (proof of payment of taxes paid in 2017 and 2018 and audited financial statements for the covered taxable year for those availing of the program under Section 9.a/non-ONETT (i.e. income tax, VAT, percentage tax, excite tax, and DST other than DST on ONETT)
  • Copy of remittance return and proof of payment of final and creditable withholding taxes for taxpayers availing of the program under Section 9.b (Final Withholding Taxes)
  • Copy of duly paid BIR Form 0605 stamped either by the Authorized Agent Banks or Revenue Collection Officers duly signed by the BIR the taxpayer is registered and proof of payment representing settlement of previous deficiency tax, with or without an assessment notice, if any, covering the taxable period
  • ONETT Tax returns and corresponding documentary requirements for the transaction of taxpayers availing of the program under Section 9.c

What is the mode of submission?

• Personally or through courier service

What is the mode of payment?

• Cash only. Non-cash mode of payment such as tax debit memo, will not qualify as a valid payment.

Where should the taxpayer pay?

• Authorized Agent Banks (AAB) or Revenue Collection Officer (RCO) under the BIR office having jurisdiction over the taxpayer
• For sale of property: AABs/RCO under the BIR office covering the location of the property

Should the application be separately filed in case of multiple availment?

• Yes, separate application must be filed in case the availment is under non-ONETT  and ONETT

What is the BIR’s procedure in handling the VAPP?

• Within thirty (30) working days from receipt, the Revenue Officer will evaluate the Application, Payment Form and other documents submitted, and will endorse the same to the Assistant Chief, LT Office/Assistant Revenue District Officer (ARDO) for review, and to the Chief, LT Office/Revenue District Officer, as the case may be, for approval, who shall affix his signature on the BIR Form No 2119.
• If the review reveals deficiencies or defects in the availment, the approving official shall notify the concerned taxpayer through the email address provided in BIR Form No. 2119 and shall require the taxpayer to rectify the defects and/or comply with/pay the deficiencies within ten (10) working days from receipt of the notification/email. Failure to act and/or pay the required amount on the part of the taxpayer within such period shall result in the denial of the application.
• A Certificate of Availment shall be issued by the concerned LT Office/RDO within three (3) working days from approval of the application. Such Certificate shall serve as proof of the taxpayer’s availment of the VAPP, compliance with the requirements, and entitlement to the privilege granted under these Regulations.
• The LT Office/RDO shall transmit all dockets on approved VAPP applications to the concerned reviewing office not later than the 5th day following the month of issuance of the Certificate of Availment for post review.

What is the consequence if the taxpayer failed to submit the documentary requirements or if the taxpayer submits erroneous/incomplete/falsified information?

• The taxpayer shall not be entitled to avail of the benefits under the VAPP.
• The voluntary payment may be applied against any deficiency tax liability for the taxable year 2018, in case of audit/investigation.

What is the consequence if the availment is found to be invalid, deficient or defective?

• The taxpayer shall not be entitled to the privilege.
• However, the taxpayer may apply the voluntary payments made against any deficiency tax liability for the taxable year 2018 in case of audit/investigation.

What is the effect if the taxpayer is issued Certificate of Availment?

• It/he shall not be audited for 2018 for the tax types covered by the availment.
• In case of audit, the issued Letter of Authority, Tax Verification Notice, Discrepancy Notice, Notice for Informal Conference, Preliminary Assessment Notice, Final Assessment Notice for pending cases shall be withdrawn and canceled.

What is the effect if the taxpayer’s  tax returns for the covered taxable period are currently being audited?

• The conduct of the audit shall be suspended upon the availment of the VAPP while the availment is under evaluation. It shall resume if the availment has been found invalid.

What are the instances where despite the issuance of a Certificate of Availment, the availment is rendered invalid and shall be subject to audit/investigation:

• When there is strong evidence or findings of under-declaration of sales, receipts or income or overstatement of deductions by more than 30% based on a written report of the appropriate revenue official stating the facts with supporting documents; and/or
• When there is verifiable information that the taxpayer has withheld but failed to remit withholding taxes.

Any voluntary payment may be applied against the deficiency tax due, if any, that may be assessed against the taxpayer after the audit/investigation.

Can taxpayers who failed to file tax returns and/or pay their non-ONETT taxes for the taxable year 2018 avail of the VAPP?

• Yes, provided the unfiled tax returns shall first be filed and/or unpaid taxes plus corresponding penalties for late filing and payment shall first be paid by the taxpayer.

Can taxpayer claim for refund or credit for any payment made under this VAPP (i.e erroneous payment)?

• No, the payment is construed as a waiver of the taxpayer’s right to claim for refund or credit, notwithstanding the collection thereof from an erroneous payment, unless the taxpayer excludes in the availment the specific tax type for which it is pushing the claim for tax credit/refund.

Is payment under the VAPP considered an admission of fraud on the part of the taxpayer?

• No, the act of voluntary payment under this program shall not be deemed as an admission on the part of the taxpayer that there was fraud in the declaration of its taxes and/or there was an intention to pay the tax erroneously.

When is the VAPP effective?

• 15 days after publication on September 5, 2020

• Corporations whose fiscal years ended November 30, 2019 or December 31, 2019, regardless of their SEC registration or license numbers shall have until September 30, 2020 to submit the printed/hard copies of their AFS to the SEC Main Office and Extension Offices.
• Corporations whose fiscal years ended between January 31, 2020 and June 30, 2020 shall have the following new deadlines:

 

Fiscal Year End	New Filing Deadline
January 31, 2020	August 28, 2020
February 29, 2020	September 28, 2020
March 31, 2020	October 27, 2020
April 30, 2020	November 11, 2020
May 31, 2020	October 28, 2020
June 30, 2020	November 27, 2020

 

• Corporations, which held their annual stockholders’ or members’ meetings during the previously imposed ECQ and MECQ, shall have until September 30, 2020 to submit the printed or hard copies of their GIS to the SEC Main Office and Extension Offices
• For your easy reference, the Circular may be accessed HERE(SEC Notice, 11 August 2020).

 

SEC EXTENDS THE DEADLINES FOR POSTING OF ADDITIONAL SECURITIES DEPOSIT AND SUBSTITUTION OF SECURITIES DEPOSIT TO ALIGN THE SAME WITH THE DEADLINE OF THE AUDITED FINANCIAL STATEMENTS.

 

• Posting of additional securities deposit for branch offices whose submission of AFS was extended pursuant to MC No. 17and MC No. 18, all series of 2020 shall be extended until October 29, 2020.
• The extension for posting of additional securities deposit and substitution of securities deposit shall automatically be applied without the need for a request from the affected branch offices.
• For corporations incorporated prior to February 23, 2019, the adjustment in the computation of additional securities deposit based on the new figures of Section 143 of the Revised Corporation Code (RCC) and compliance with the increase in initial deposit amounting to P500,000 will commence on August 1, 2020, unless the foreign corporation opts to comply with the minimum amount of P500,000 imposed by the RCC.
• For foreign corporations licensed on February 23, 2019, or onwards, the minimum of P500,000 shall be imposed, as required by Section 143 of the RCC. Any additional securities deposit for these corporations shall adopt the adjustment in the computation based on the figures of Section 143 of the RCC.
• In relation to the change of resident agent, the following applications will not incur penalty if payment of appropriate fees are made on or before September 30, 2020. Hence, penalty shall commence to run on October 1, 2020:
  • Applications on request for change of resident agent filed and reviewed before March 16, 2020 with issued Payment Assessment Form (PAF)
  • Applications on request for change of resident agent filed before the quarantine period (ECQ, MECQ, GCQ, MGCQ) but issued a PAF during the quarantine period
  • Applications on request for change of resident agent filed and reviewed during the quarantine period but without issuance of PAF
• For your easy reference, the Circular may be accessed HERE(SEC Memorandum Circular No. 24, 25 August 2020).

 

Bureau of Internal Revenue

 

BIR DEADLINES from September 6 to 14, 2020 . A gentle reminder on the following deadlines, as may be applicable:

 

DATE	FILING/SUBMISSION
September 8, 2020	· E-Submission of e-Sales Report of all Taxpayers using CRM/POS with TIN ending in even number – Month of August 2020 · Submission of All Transcript Sheets used by Dealers of Automobiles/Manufacturers/Toll Manufacturers/Assemblers/Importers of Alcohol Products, Tobacco Products, Petroleum Products, Non-essential Goods, Sweetened Beverage Products, Mineral Products and Automobiles – Month of August 2020
September 10, 2020	· Filing and payment/remittance of 1601C, 0619-E and 0619-F – Non E-FPS filers for the month of August 2020 · E-submission of E-Sales Report of all taxpayers using CRM/POS with TIN ending in odd number for the month of August 2020 · E-Filing/Filing and e-Payment/payment of BIR Form 1600 with Monthly Alphalist of Payees & 1606 – Month of August 2020 · E-Filing and e-Payment/Remittance of BIR Form 1600 and 1601C withholding tax return for National Government Agencies for the month of August 2020 · Filing and payment/remittance of 2200M Excise Tax Return for the amount of Excise Taxes Collected from payment made to Metallic Minerals for the month of August 2020 · Submission of List of Buyers of Sugar together with a copy of certificate of advance payment of VAT made by each buyer appearing in the List by a Sugar Cooperative- for the month of August · Submission of Information Return on Releases of Refined Sugar by the Proprietor or Operator of a Sugar Refinery or Mill for the month of August · Submission of Monthly Report of DST Collected and Remitted by the Government Agency for the month of August · Submission of Transcript Sheets of 2222ORB – Month of August 2020
September 11, 2020	· E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group E – Month of August 2020
September 12, 2020	· E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group D – Month of August 2020
September 13, 2020	· E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group C – Month of August 2020
September 14, 2020	· E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group B – Month of August 2020

 

BIR FURTHER EXTENDS THE DEADLINE FOR BUSINESS REGISTRATION OF THOSE INTO DIGITAL TRANSACTIONS UNTIL SEPTEMBER 30, 2020 WITHOUT PENALTY FOR LATE REGISTRATION.

 

• For your reference, a copy of the issuance may be accessed (Revenue Memorandum Circular No. 92-2020, September 1, 2020)

 

Court of Tax Appeals Decisions

 

PHP 3 MILLION REFUND ERRONEOUSLY PAID PERCENTAGE TAX; GROSS REVENUE TAX OF 5% IMPOSED ON NON-BANK FINANCIAL INTERMEDIARIES IS BASED ON RECEIPTS.

 

• The BIR partially granted the taxpayer’s refund of erroneously paid tax from P3.9M to P3.4M arising from overpaid percentage taxes.
• The following are the requirements in order to prove a claim for refund of taxes erroneously paid or illegally collected.
  • The taxpayer should file a written claim for refund with the BIR within 2 years from the date of payment of tax or penalty;
  • If denied or not acted upon within the 2-year period, the petition for refund should be filed with the CTA within 30 days from receipt of the denial AND within said 2-year period from the date of payment of tax or penalty regardless of any supervening clause
  • The claim for refund must be a categorical demand for reimbursement; and
  • There must be proof of payment of erroneously or illegally collected taxes.
• In this case, the taxpayer was able to prove the foregoing requirements.The taxpayer is a non-bank financial intermediary subject to 5% percentage tax on its gross receipts (Gross receipt tax or GRT). Under the rules, GRT shall only apply to income actually or constructively received during a taxable period, and the claim of refund is based on error of computation in computation of gross receipts.
  • The Court confirmed that the tax base for GRT purposes should be the income actually or constructively received. Considering that the income subjected to GRT was on accrual basis, the taxpayer erroneously computed its GRT (Aeon Credit Service (Philippines), Inc.  v. CIR, CTA Case No. 9770, July 15, 2020).

 

PHP 2.3 MILLION INCOME TAX REFUND DENIED; SALARIES PAID BY ADB TO FILIPINO CITIZENS ARE SUBJECT TO INCOME TAX.

 

• The CTA En Bancaffirmed the CTA Division’s decision denying the claim of refund of income tax paid by the ADB employees.
• Pursuant to the 1965 ADB Charter Agreement, salaries of ADB employees are not subject to tax. However, when the Philippine government ratified the Agreement, it provided for a reservation that it retains the right to tax salaries and emoluments paid by the bank to the Filipino citizens. The BIR issued RMC No. 31-2013 which implements the foregoing rule, which took effect on May 2, 2013.
  • The rules should operate prospectively. Since the tax payments being sought to be refunded pertain to taxable year 2013 and BIR’s RMC took effect on May 2, 2013, the income earned are subject to income tax.
  • Thus, the taxpayer’s claim for refund was denied (Canzon et. al., v. CIR, CTA EB No 2040, CTA Case No. 9384, July 16, 2020).

 

PHP 2.7 BILLION TAX ASSESSMENT CANCELLED; CHIEF OF LARGE TAXPAYER AUDIT DIVISION CANNOT VALIDLY SIGN A MEMORANDUM OF ASSIGNMENT; PAGCOR’S LICENSEES AND CONTRACTEES ARE EXEMPT FROM INCOME TAX ON GAMING REVENUES.

 

• The CTA En Bancaffirmed the decision of the CTA Division declaring the assessment void, cancelled and withdrawn.
• Under the rules, a Memorandum of Assignment (MOA) may be construed as equivalent to new letter of authority where the authority of a newly designated revenue officer emanates from, provided that it contains all the necessary elements to establish a contract of agency between the CIR or his duly authorized representative and the new revenue officer.
• The Revenue Regional Director (RRD) is authorized to issue an LOA. The position equivalent to a RRD for the Large Taxpayers Division, who is authorized to issue the LOA, is the Assistant Commissioner or Head Revenue Executive Assistants (HREA)
  • In the instant case, only the OIC-Chief signed the MOA. He is neither the CIR, RRD nor HREA. Thus the MOA is void and the resulting assessment is also void.
• Jurisprudence has ruled that PAGCOR’s licensees and contractees, such as the taxpayer in this case,  are exempt from income tax on their gaming revenues.
• Therefore, the assessment was declared void, cancelled and withdrawn(CIR v. Travellers International Hotel Group, Inc., CTA EB No. 2047, CTA Case No. 9168, July 17, 2020).

 

PHP 37 MILLION LOCAL BUSINESS TAX ASSESSMENT CANCELLED; CITY TREASURER MUST BE AUTHORIZED TO FILE A CASE IN THE FORM OF CITY CHARTER OR RESOLUTION; COMMON CARRIERS ARE EXEMPT FROM LOCAL BUSINESS TAX.

 

• A local government unit (LGU) has the power to sue through its officials. However, before a city official can exercise the LGU’s power to sue, a law granting such prerogative must first be passed (e.City Charter). Otherwise, a city official can only exercise such power if a resolution is passed by the Sangguniang Panglungsod authorizing him to sue on behalf of the City.
  • In the instant case, the Charter does not provide an express grant of power to the treasurer to initiate and prosecute suits. Neither was there a resolution passed as proof of the treasurer’s authority.
• Under the Local Government Code, taxes on the gross receipts of transportation contractors and person engaged in the transportation of passengers or freight by hire or common carriers are not subject to local business tax.
  • In this case, the taxpayer is engaged in the business of freight forwarding. It is engaged in international freight and/or cargo consolidation and forwarding by means of air and sea transportation. It is a common carrier not subject to local business tax(City of Paranaque v. Kuehne + Nagel, Inc., CTA EB No. 2130, CTA AC No. 189, Civil Case No. 07-0370, July 17, 2020)

 

PHP 54 MILLION REAL PROPERTY TAX ASSESSMENT UPHELD; REAL PROPERTY TAX EXEMPTION ARISING FROM TAX INCENTIVES IS A QUESTION OF FACT SUBJECT TO PRIOR EXHAUSTION OF ADMINISTRATIVE REMEDIES.

• The CTA En Banc affirmed the decision of the CTA Division dismissing the taxpayer’s appeal for lack of jurisdiction.
• When a taxpayer assails the reasonableness of the amount of the real property tax (RPT) or where the issue involves a question of fact, the proper recourse is to pay the assailed the RPT assessment and protest the same with the local treasurer and/or assessor, as the case may be within 30 days from the date of payment. The treasurer and/or assessor shall have 60 days from receipt within which to decide the protest. If the decision is unfavorable, the taxpayer has 60 days to appeal to the local board of assessment appeals, which if the latter decides unfavorably, the matter may be appealed to CBAA within 30 days. If the CBAA’s decision is unfavorable, the taxpayer may appeal with the CTA En Banc(“Prior exhaustion of administrative remedies”).
• Claiming exemption from RPT raises a question as to the correctness or reasonableness of an assessment, thus, it involves a question of fact which requires exhaustion of administrative remedies.
  • In this case, the taxpayer’s claim of RPT exemption arising from availment of incentives is a question of fact which should be subject to prior exhaustion of administrative remedies. The taxpayer should not have directly resorted to the regular court.
• Therefore, the resulting assessment issued against the taxpayer is upheld (Jetti Petroleum, Inc. v. Tolentino, CTA EB No. 2093, July 14, 2020)

 

PHP 12 MILLION REFUND OF CUSTOMS DUTIES GRANTED; PETROLEUM FUEL PURCHASED AND DELIVED TO AN ECOZONE FOR THE PRODUCTION OF GLASS PRODUCTS IS EXEMPT FROM CUSTOMS DUTIES AND TAXES.

• The CTA En Banc affirmed the decision of the CTA Division granting refund.
• Under the rules, supplies brought into the Ecozone by a duly-registered PEZA enterprise and to be sold, stored, broken up, repacked, assembled, installed, sorted, cleaned, graded, or otherwise processed, manipulated, manufactured, mixed with foreign or domestic merchandise, whether directly or indirectly related in such activity, shall not be subject to customs laws and regulations and thus exempt from customs duties and taxes.
  • In this case, the petroleum fuel purchased by the taxpayer which was delivered to its factory inside the economic zone was to be used for the production of glass products. Accordingly, being a PEZA-registered ecozone export enterprise, the passed-on customs duties on the said purchases may be a proper subject of a claim for refund.

Therefore, the refund was granted (BOC v. Pioneer Float Glass Manufacturing, Inc., CTA EB No. 1973, CTA Case No. 8752, July 14, 2020)

For your reference, a copy of the issuance may be accessed HERE. (Revenue Memorandum Circular No. 92-2020, September 1, 2020) 

A gentle reminder on the following deadlines, as may be applicable:

DATE	FILING/SUBMISSION
September 8, 2020	E-Submission of e-Sales Report of all Taxpayers using CRM/POS with TIN ending in even number – Month of August 2020 Submission of All Transcript Sheets used by Dealers of Automobiles/Manufacturers/Toll Manufacturers/Assemblers/Importers of Alcohol Products, Tobacco Products, Petroleum Products, Non-essential Goods, Sweetened Beverage Products, Mineral Products and Automobiles – Month of August 2020
September 10, 2020	Filing and payment/remittance of 1601C, 0619-E and 0619-F – Non E-FPS filers for the month of August 2020 E-submission of E-Sales Report of all taxpayers using CRM/POS with TIN ending in odd number for the month of August 2020 E-Filing/Filing and e-Payment/payment of BIR Form 1600 with Monthly Alphalist of Payees & 1606 – Month of August 2020 E-Filing and e-Payment/Remittance of BIR Form 1600 and 1601C withholding tax return for National Government Agencies for the month of August 2020 Filing and payment/remittance of 2200M Excise Tax Return for the amount of Excise Taxes Collected from payment made to Metallic Minerals for the month of August 2020 Submission of List of Buyers of Sugar together with a copy of certificate of advance payment of VAT made by each buyer appearing in the List by a Sugar Cooperative- for the month of August Submission of Information Return on Releases of Refined Sugar by the Proprietor or Operator of a Sugar Refinery or Mill for the month of August Submission of Monthly Report of DST Collected and Remitted by the Government Agency for the month of August Submission of Transcript Sheets of 2222ORB – Month of August 2020
September 11, 2020	E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group E – Month of August 2020
September 12, 2020	E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group D – Month of August 2020
September 13, 2020	E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group C – Month of August 2020
September 14, 2020	E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group B – Month of August 2020

Dear CLIENTS, COLLEAGUES and FRIENDS:

For your reference and file, we are pleased to send our regular corporate, tax and other legal digest.

In this Article:

SECURITIES AND EXCHANGE COMMISSION (“SEC”)

• SEC EXTENDS THE DEADLINES AND PROVIDES FOR INTERIM PROCEDURES FOR THE SUBMISSION OF PRINTED/HARD COPIES OF ANNUAL REPORTS.
• SEC EXTENDS THE DEADLINES FOR POSTING OF ADDITIONAL SECURITIES DEPOSIT AND SUBSTITUTION OF SECURITIES DEPOSIT TO ALIGN THE SAME WITH THE DEADLINE OF THE AUDITED FINANCIAL STATEMENTS.

BUREAU OF INTERNAL REVENUE ("BIR") DEADLINES AND ISSUANCES:

• BIR DEADLINES from September 6 to 14, 2020
• BIR FURTHER EXTENDS THE DEADLINE FOR BUSINESS REGISTRATION OF THOSE INTO DIGITAL TRANSACTIONS UNTIL SEPTEMBER 30, 2020 WITHOUT PENALTY FOR LATE REGISTRATION.

COURT OF TAX APPEALS (“CTA”) DECISIONS

• PHP 3 MILLION REFUND ERRONEOUSLY PAID PERCENTAGE TAX; GROSS REVENUE TAX OF 5% IMPOSED ON NON-BANK FINANCIAL INTERMEDIARIES IS BASED ON RECEIPTS.
• PHP 2.3 MILLION INCOME TAX REFUND DENIED; SALARIES PAID BY ADB TO FILIPINO CITIZENS ARE SUBJECT TO INCOME TAX.
• PHP 2.7 BILLION TAX ASSESSMENT CANCELLED; CHIEF OF LARGE TAXPAYER AUDIT DIVISION CANNOT VALIDLY SIGN A MEMORANDUM OF ASSIGNMENT; PAGCOR’S LICENSEES AND CONTRACTEES ARE EXEMPT FROM INCOME TAX ON GAMING REVENUES.
• PHP 37 MILLION LOCAL BUSINESS TAX ASSESSMENT CANCELLED; CITY TREASURER MUST BE AUTHORIZED TO FILE A CASE IN THE FORM OF CITY CHARTER OR RESOLUTION; COMMON CARRIERS ARE EXEMPT FROM LOCAL BUSINESS TAX.
• PHP 54 MILLION REAL PROPERTY TAX ASSESSMENT UPHELD; REAL PROPERTY TAX EXEMPTION ARISING FROM TAX INCENTIVES IS A QUESTION OF FACT SUBJECT TO PRIOR EXHAUSTION OF ADMINISTRATIVE REMEDIES.
• PHP 12 MILLION REFUND OF CUSTOMS DUTIES GRANTED; PETROLEUM FUEL PURCHASED AND DELIVED TO AN ECOZONE FOR THE PRODUCTION OF GLASS PRODUCTS IS EXEMPT FROM CUSTOMS DUTIES AND TAXES.

Posting of additional securities deposit for branch offices whose submission of AFS was extended pursuant to MC No. 17 and MC No. 18, all series of 2020 shall be extended until October 29, 2020.

The extension for posting of additional securities deposit and substitution of securities deposit shall automatically be applied without the need for a request from the affected branch offices.

For corporations incorporated prior to February 23, 2019, the adjustment in the computation of additional securities deposit based on the new figures of Section 143 of the Revised Corporation Code (RCC) and compliance with the increase in initial deposit amounting to P500,000 will commence on August 1, 2020, unless the foreign corporation opts to comply with the minimum amount of P500,000 imposed by the RCC.

For foreign corporations licensed on February 23, 2019, or onwards, the minimum of P500,000 shall be imposed, as required by Section 143 of the RCC. Any additional securities deposit for these corporations shall adopt the adjustment in the computation based on the figures of Section 143 of the RCC.

In relation to the change of resident agent, the following applications will not incur penalty if payment of appropriate fees are made on or before September 30, 2020. Hence, penalty shall commence to run on October 1, 2020:

• Applications on request for change of resident agent filed and reviewed before March 16, 2020 with issued Payment Assessment Form (PAF)
• Applications on request for change of resident agent filed before the quarantine period (ECQ, MECQ, GCQ, MGCQ) but issued a PAF during the quarantine period
• Applications on request for change of resident agent filed and reviewed during the quarantine period but without issuance of PAF

For your easy reference, the Circular may be accessed HERE (SEC Memorandum Circular No. 24, 25 August 2020).

Corporations whose fiscal years ended November 30, 2019 or December 31, 2019, regardless of their SEC registration or license numbers shall have until September 30, 2020 to submit the printed/hard copies of their AFS to the SEC Main Office and Extension Offices.

Corporations whose fiscal years ended between January 31, 2020 and June 30, 2020 shall have the following new deadlines:

Fiscal Year End	New Filing Deadline
January 31, 2020	August 28, 2020
February 29, 2020	September 28, 2020
March 31, 2020	October 27, 2020
April 30, 2020	November 11, 2020
May 31, 2020	October 28, 2020
June 30, 2020	November 27, 2020

Corporations, which held their annual stockholders’ or members’ meetings during the previously imposed ECQ and MECQ, shall have until September 30, 2020 to submit the printed or hard copies of their GIS to the SEC Main Office and Extension Offices
For your easy reference, the Circular may be accessed HERE (SEC Notice, 11 August 2020).

• The CTA En Banc  affirmed the decision of the CTA Division granting refund.
• Under the rules, supplies brought into the Ecozone by a duly-registered PEZA enterprise and to be sold, stored, broken up, repacked, assembled, installed, sorted, cleaned, graded, or otherwise processed, manipulated, manufactured, mixed with foreign or domestic merchandise, whether directly or indirectly related in such activity, shall not be subject to customs laws and regulations and thus exempt from customs duties and taxes.
  • In this case, the petroleum fuel purchased by the taxpayer which was delivered to its factory inside the economic zone was to be used for the production of glass products. Accordingly, being a PEZA-registered ecozone export enterprise, the passed-on customs duties on the said purchases may be a proper subject of a claim for refund.
• Therefore, the refund was granted (BOC v. Pioneer Float Glass Manufacturing, Inc., CTA EB No. 1973, CTA Case No. 8752, July 14, 2020)

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The CTA En Banc  affirmed the decision of the CTA Division dismissing the taxpayer’s appeal for lack of jurisdiction.

When a taxpayer assails the reasonableness of the amount of the real property tax (RPT) or where the issue involves a question of fact, the proper recourse is to pay the assailed the RPT assessment and protest the same with the local treasurer and/or assessor, as the case may be within 30 days from the date of payment. The treasurer and/or assessor shall have 60 days from receipt within which to decide the protest. If the decision is unfavorable, the taxpayer has 60 days to appeal to the local board of assessment appeals, which if the latter decides unfavorably, the matter may be appealed to CBAA within 30 days. If the CBAA’s decision is unfavorable, the taxpayer may appeal with the CTA En Banc (“Prior exhaustion of administrative remedies”).

Claiming exemption from RPT raises a question as to the correctness or reasonableness of an assessment, thus, it involves a question of fact which requires exhaustion of administrative remedies.

• In this case, the taxpayer’s claim of RPT exemption arising from availment of incentives is a question of fact which should be subject to prior exhaustion of administrative remedies. The taxpayer should not have directly resorted to the regular court.

Therefore, the resulting assessment issued against the taxpayer is upheld (Jetti Petroleum, Inc. v. Tolentino, CTA EB No. 2093, July 14, 2020)

A local government unit (LGU) has the power to sue through its officials. However, before a city official can exercise the LGU’s power to sue, a law granting such prerogative must first be passed (i.e. City Charter). Otherwise, a city official can only exercise such power if a resolution is passed by the Sangguniang Panglungsod authorizing him to sue on behalf of the City.

• In the instant case, the Charter does not provide an express grant of power to the treasurer to initiate and prosecute suits. Neither was there a resolution passed as proof of the treasurer’s authority.

Under the Local Government Code, taxes on the gross receipts of transportation contractors and person engaged in the transportation of passengers or freight by hire or common carriers are not subject to local business tax.

• In this case, the taxpayer is engaged in the business of freight forwarding. It is engaged in international freight and/or cargo consolidation and forwarding by means of air and sea transportation. It is a common carrier not subject to local business tax (City of Paranaque v. Kuehne + Nagel, Inc., CTA EB No. 2130, CTA AC No. 189, Civil Case No. 07-0370, July 17, 2020)