Month: October 2020

Update:

 

• In general, all persons, natural and juridical, including estates and trusts, are qualified to avail of the VAPP.
• The VAPP covers calendar year 2018 and fiscal year 2018 ending in July, August, September, October, and November 2018, as well as those ending in January, February, March, April, May and June 2019.
  • For one-time transactions (ONETT) of individuals and taxpayers on a calendar year basis, the VAPP covers all transactions from January to December 2018.
  • For taxpayer on a fiscal year basis, the covered ONETT are those within their fiscal year 2018.
    • For example, if the fiscal year of the taxpayer is from May l, 2018 to April 30,2019, the ONETT covered is within this inclusive period.
  • The taxpayer cannot avail for only or two tax types and leave out the other tax types to which the taxpayer is registered.
    • Availment should cover all the tax types to which the taxpayer is registered, including withholding taxes, except when the taxpayer is pursuing a claim for tax credit/refund, in which case, he can leave out the tax type for such claim.
  • The taxpayer can avail of the program for the tax type(s) only on ONETT.
  • Taxpayers shall use BIR Form No. 2l I 9 for the application and BIR Form No. 0622 for payment of the corresponding voluntary tax.
  • In case of shares of stock not traded through the local stock exchange, the application shall be filed with the BIR Office where the taxpayer-seller is registered.
    • The additional requirements that must be submitted are Capital Gains Tax Return Documentary Stamp Tax Declaration/Return Payment Forms and proofs of tax payments.
  • For the availment re. creditable/expanded withholding tax for onerous transfer of real property other than capital asset, BIR Form No. 1606 - Withholding Tax Remittance Return shall be submitted as additional document.
  • In case the tax returns data are different from those in the BIR's information system, the BlR-Integrated Tax System (ITS)-generated data will prevail unless there is proof of error in encoding of the tax returns data.
  • If a taxpayer is registered in one district, wants to avail of the VAPP for all his registered internal revenue taxes and he also wants to avail for his donor's tax on his donation and capital gains tax on a sale of his real property, he should he file the VAPP applications as follows:
    • For availment of the registered internal revenue taxes, the filing of the application should be in the BIR office where the taxpayer is registered.
    • For availment of donor's tax, the application should be filed at the RDO where the donor-taxpayer is domiciled at the time of donation; and
    • For the transaction involving sale of real property, the application should be filed with the RDO having jurisdiction over the location of the property.
  • Payment by check is acceptable, provided that check payments conform to the payment requirements of the BIR.
    • Payment through Tax Remittance Advice (TRA) is not considered as "cash" under the regulations. The purpose of the regulations is to raise additional revenues to augment government funds due to rising expenditures from the outset of the COVID-l9 pandemic. Hence, cash or all its forms are required for payment.
  • Gross sales as basis for computing the amount of voluntary tax payment shall mean the sales/receipts/revenues/fees net of sales returns, allowances and discounts per Annual Income Tax Return.
  • If there is no increase or decrease in the total taxes due for all tax types in 2018 compared to all taxes due in 2017, as in the case of enterprises enjoying tax exemptions and incentives, the voluntary tax payment shall be computed based on the "net increase of not more than 10% per table under Section 9.a. of the regulations.
  • If the taxpayer is only in its first year of operation for 2018 and there are taxes due for this year per tax returns filed, the taxpayer can avail of the VAPP. The voluntary tax payment shall be computed based on the "net increase of more than 30%" since there is no tax payment to be considered for 2017.
  • If the taxpayer paid improperly accumulated earnings tax, the payment will be included in the total taxes due for the purpose of computing the increase/decrease as it can be considered as income tax.
  • If the taxpayer's assessment on ONETT pertains to the penalties, the voluntary payment shall be 5% of the basic tax paid.
  • In case the taxpayer paid minimum corporate income tax (MCIT) in 2017 and paid the normal income tax in 2018 the basis for his/its income tax due per return for 2017 and 2018 shall be as follows:
    • The MCIT shall be the income tax due for 2017 while the annual corporate income tax due computed under the normal income before deducting any tax credits/payments shall be considered the income tax due for 2018.
  • We consider excess tax credits from prior period/taxable year in determining the Net VAT due.
    • The reference to determine the VAT due for taxable years 2017 and 2018 is Line 25 - 'Net VAT payable" in the quarterly VAT return. If the net VAT due is a negative amount, then the total taxes due for the year will not be reduced by the negative VAT amount.
  • If the taxpayer paid percentage tax or availed of the eight percent (8%) income tax rate despite having exceeded the threshold of three million pesos (P3,000,000),  he can apply for the VAPP provided that the VAT return will be filed and the VAT will be paid with the corresponding penalties after deducting the total percentage tax payments.
  • If the basic deficiency tax for 2018 is added to all the tax due per returns to determine the increase/decrease from 2017 to 2018, any deficiency tax payment for 2017 will not be added to all the tax due of the returns in 2017.
  • The waiver for refund is applicable only to claims for refund on erroneous payment. In Section 9.a of the same RR, it is stated that for taxpayers with claims for tax credit/refund, this shall constitute as a waiver of such claims under Section 12 unless they exclude from their availment the specific tax type for which they are pursuing the claim for tax credit/refund.
    • If the taxpayer would like to apply of the VAPP but he declines to waive his right to claim for refund, he can leave out from the availment the tax type for said refund. Thus, the specific tax type pertaining to the refund on erroneous payment shall not be covered by the availment.
  • A taxpayer with a pending claim for tax credit/refund can avail of the VAPP, provided that the claim is not on erroneous payment for which the taxpayer has not waived his right to such claim. For regular claims on tax types, the audit/verification and processing of the claim shall be continued, even if the corresponding tax type is included in the availment.
  • A taxpayer who failed to withhold and remit withholding taxes in 2018 is qualified to avail of the VAPP, under the condition that the amount not withheld and not remitted has to be paid first and the same shall form part of the total taxes remitted in 2018 which shall be taxable base in determining the 5% required amount to be paid to avail of the benefits under VAPP.
  • The exception “with pending cases” does not include those who failed to comply with an issued subpoena Duces Tecum, if no criminal case has been filed in court yet for failure to comply with SDT.
  • If the taxpayer is currently under audit/investigation for 2018 and availed of the VAPP but the application is under evaluation and awaiting approval in the investigating office, the conduct of audit shall be suspended while the availment is under evaluation. Upon the issuance of a Certificate of Availment, the electronic Letter of Authority and other related notices shall be withdrawn and cancelled.
  • If the taxpayer has an on-going investigation or a duly issued but protested FAN for 2017 and/or 2018, he can avail of the VAPP, but the availment will not cover taxable year 2017. The amount on the FAN for the audit case will, in no way, affect the computation of the VAPP.
  • The taxpayers with duly issued but protested FANs can avail of the VAPP, provided the FANs are for taxable year 2018, are under protest on or before the effectivity of the regulations and all tax types of the taxpayer are covered in the availment.
  • The concerned office, g.the investigating, reviewing and legal offices, will be informed when the taxpayer gives a copy of the payment form, proof of payment and Certificate of Availment (CA)
    • If the taxpayer with FAN has a duly issued CA after availing of the VAPP, there is a need to issue an Authority to Cancel Assessment (ATCA), which shall be approved and issued by the authorized revenue official in accordance with existing policies and procedures.
  • In case of denial of the availment, the taxpayer will be notified by the head of the processing office, which will issue a letter informing the taxpayer of the denial and the reasons therefor.
  • In case of VAPP under Section 9.c, an electronic Certificate Authorizing Registration (eCAR) shall be issued within 5 days from the issuance of the CA.
  • If a taxpayer who was notified to rectify the deficiencies in the availment or to pay the additional voluntary tax but fails to do so within 10 days from receipt of the notification, he is not given allowance or extension to rectify. Therefore, he cannot comply before even before the deadline of December 31, 2020 and qualify for the benefit of the VAPP.
    • In case the taxpayer’s availment rendered invalid and the taxpayer was subjected to audit or investigation, any voluntary tax paid shall constitute as payment of the deficiency tax assessments for the taxable year 2018, provided, that such payment includes the specific tax types and taxable period covered by the assessment notice.
  • If the taxpayer paid the tax for the VAPP on or before December 31, 2020 and submits the application after the deadline, the VAPP is considered availed of within the deadline. However, validity of the availment will depend upon the documents submitted and the amount of voluntary payment.

 

 

What are the taxes Covered?

-       Internal revenue taxes covering:

o   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:

o   Duly accomplished BIR Form No. 2119

o   Payment Form (BIR Form No. 0622) with proof of payment

 

-       Additional Requirements:

o   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)

o   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)

o   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

o   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:

1. 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
2. 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

• The CTA denied that taxpayer’s claim for refund of input VAT arising from zero-rated sales.
• Pursuant to the NIRC, services rendered to persons engaged in international shipping or international air transport operations are subject to zero-rated VAT. Moreover, the services must be supported by VAT- official receipt.
  • In this case, the taxpayer failed to submit the service agreement or contracts to show the nature of the transaction with foreign clients.
  • Moreover, the taxpayer submitted invoices, which are not compliant with the invoicing requirements of the law. Thus, the claim for refund was denied (BSM Crew Service Centre Philippines, Inc.) v. CIR, CTA Case No.9892, September 8, 2020)

 

PHP 4 MILLION TAX ASSESSMENT UPHELD; APPEAL TO THE COURT OF TAX APPEALS ON DISPUTED ASSESSMENT MUST BE FILED WITHIN 30 DAYS FROM THE RECEIPT OF THE DECISION OR AFTER THE EXPIRATION OF THE PERIOD FIXED BY LAW FOR ACTION THEREON.

 

• The CTA dismissed the taxpayer petition questioning the validity of the tax assessment due to its failure to observe the 30-day reglementary period in appealing the assessment to the court.
• Under the rules, an appeal before the Court of Tax Appeals viapetition for review must be filed by the taxpayer from receipt of the decision or ruling or after the expiration of the period fixed by law for action thereon. If the taxpayer failed to file the petition within the statutory period, the disputed assessment becomes final, executory and demandable.
  • In this case, the taxpayer received the FDDA on September 14, 2017 but filed his petition on October 23, 2017 instead of October 14, 2017. Therefore, the assessment becomes final and his petition is dismissed for filing the same out of time.(Bryan M. Torregosa v. BIR v. CTA Case No. 9703, September 9, 2020).

 

 

PHP 28 MILLION TAX ASSESSMENT CANCELLED; DEPOSIT FOR FUTURE SUBSCRIPTION IS NOT CONSIDERED A LOAN SUBJECT TO DST; ADVANCES FROM STOCKHOLDERS DATED PRIOR TO 2011 ARE NOT SUBJECT TO DST; THE BIR CANNOT RETROACTIVELY APPLY A SUPREME COURT CASE TO THE PRJUDICE OF THE TAXPAYER.

 

• The CTA cancelled the tax assessment for the reason that deposit for future subscription in 2005 and advances in 2008 are not subject to DST.
• A deposit on future subscription is characterized as money received by a corporation for purposes of applying the same as payment for additional issuance of shares in the future, an event which may or may not happen.
  • In this case, the taxpayer was assessed DST on the deposit for future subscription on previous years that remained intact in company’s books at in the year subject of assessment. The CTA ruled that an assessment should not be based on mere presumptions. Even though an assessment is presumed correct, the presumption cannot be made to rest on another presumption. It also ruled that a deposit for future subscription is not a loan. The deposit is an amount held in trust for future subscriber which may be converted to shares or may be withdrawn. On the other hand, the loan is must be repaid.

 

• Advances from stockholders evidenced by  vouchers are not subject to DST prior to the Filinvest Case decided in 2011.
  • In this case, the advances were recorded in 2008 and 2009. The Filinvest case, which subjects the same to DST, cannot be applied retroactively to the prejudice to the taxpayer, who relied on earlier rulings that such advances are not subject to DST.
• Through a LOA, the BIR can examine the taxpayer’s books for a taxable period covered by the LOA.
  • In the instant case, the LOA was limited to the examination of taxpayer’s books for taxes in 2009. However, the deposit for future subscription was recorded in 2005 and advances from stockholders were recorded in 2008. Therefore, the BIR examiners went beyond their authority when they audited  2005 and 2008 transactions when the LOA covers 2009 transactions only.
• Therefore, the assessment is cancelled.(Leadway Holdings, Incorporated v. CIR, CTA Case No. 9835, September 9, 2020)

 

 

PHP 5 MILLION REFUND OF LOCAL BUSINESS TAX GRANTED: CONDOMINIUM CORPORATIONS’ ASSOCIATION DUES ARE NOT SUBJECT TO LOCAL BUSINESS TAX, UNLESS THEY ENGAGE IN ACTIVITES FOR PROFIT.

 

• The CTA ordered the City of Taguig to refund or issue tax credit in favor of the Condominium Corporation representing erroneously or illegally paid local business tax, business plate/sticker fee and environmental fee.
• The Supreme Court has ruled that condominiums, by their nature, are generally exempt from local business tax under the Local Government Code for the reason that they are not engaged in the business when they collect assessments or dues from unit owners. Only when they engage in activities for profit will they be considered subject to business tax applying the rule on estoppel.
  • In this case, the taxpayer is not engage in trade or business for the membership/association dues and other fees or charges collected by the taxpayer from its unit owners. There was also no evidence that the taxpayer is estopped from claiming that it is not engaged in busines.
  • Further, the taxpayer is not engaged in business merely on the basis of the secondary purpose stated in the Articles of Incorporation. There has to be a clear and convincing proof that it had actually engaged in profit making activities and had derived income or profit therefrom.
  • Moreover, the association dues cannot be considered as sale of services for fee or consideration.
  • Therefore, they are not subject to local business tax and business plate/sticker fee.
• The Court also ruled that environmental fee is in the nature of a regulatory fee. However, the fee is imposed only to those entities engaged in business.  Since the condominium unit is not considered a business, it should not be subject to environmental fee. Therefore, the assessment is cancelled(Taguig City Government v. Serendra Condominium Corporation, CTA AC No. 229, RTC Civil Case No. 74669, September 10, 2020).

 

 

PHP 4 MILLION TAX ASSESSMENT CANCELLED: TAXPAYER HAS 15 DAYS WITHIN WHICH TO REPLY TO THE PAN; BIR’S ISSUANCE OF FLD/FAN WITHIN THE 15-DAY PERIOD RENDERS THE ASSESSMENT VIOD FOR FAILURE TO OBSERVE THE TAXPAYER’S DUE PROCESS.

 

• The CTA cancelled the tax assessment for violation of taxpayer’s due process to premature issuance of the FLD/FAN.
• As part of due process in the issuance of tax assessments, the regulations provide that a taxpayer has 15 days within which to reply to the PAN. After the lapse of the said period, it is only then that the BIR shall issue the FLD/FAN.
  • In the instant case, the taxpayer received the PAN dated January 8, 2015. Counting 15 days, it has until January 23, 2015 to reply to the PAN. However, the BIR issued the FLD/FAN on January 23, 22015, which is the last day of the said 15-day period for the taxpayer to reply to the PAN. Therefore, the taxpayer was deprived of the opportunity to be heard on the PAN, in violation of the due process requirement in the issuance of the tax assessment
• Therefore, the assessment is cancelled (Karina, Inc. v. Commissioner of Internal Revenue, CTA AC No. 9204, September 10, 2020).

 

 

PHP 8 MILLION TAX ASSESSMENT CANCELLED: ABSENCE OF LOA RENDERS THE TAX ASSESSMENT VOID; GENERALLY, THE BIR HAS 3 YEARS TO ASSESS THE TAX PAXPAYER.

 

• The CTA cancelled the tax assessment due to absence of LOA and prescription.
• Based on rules and jurisprudence, an assessment must spring from a valid LOA. In the absence of an LOA, the tax assessments issued by the BIR against such taxpayer shall be void.
  • In the instant case, no evidence was presented to prove that an LOA was issued by the BIR. Neither were revenue officers who actually examined the taxpayer’s books and records presented in court. In other words, there is no indication that the examination and assessment of the taxpayer sprung from an LOA.
• Generally,  the BIR has 3 years to assess the taxpayer after the last day prescribed by law for the filing of the return or actual date of filing whichever is later.
  • In this case, the covered taxable year is 2006. The FAN was received by the taxpayer on June 10, 2011 or after the 3-year prescriptive period.

Therefore, the assessment is cancelled (Marily Development Corporation v. CIR, CTA Case No. 9756, September 10, 2020).

• The SEC issues guidelines for the conversion of corporations either to One Person Corporation (OPC) or to Ordinary Stock Corporation (OSC)
• OSC may apply for its conversion into an OPC.
  • If a single stockholder has acquired all the outstanding capital stock of an OSC with corresponding Certificate Authorizing Registration or tax clearance having been issued by the BIR
    • Single stockholder must be a natural person of legal age, a trust or an estate.
  • Upon  issuance  of the  Certificate  of  Filing  of Amended  Articles  of    Incorporation  by  the  SEC  reflecting  the  conversion  to  OPC,  the  Articles  of   Incorporation  and  By-laws  of the  OSC  shall  be deemed  superseded. The  date  of issuance of the Certificate of Filing of Amended Articles  of Incorporation  shall  be deemed  as the date  of approval  of the  conversion.
  • The OPC  converted  from  an  OSC shall succeed the latter and be legally responsible for all the  latter's  outstanding  liabilities  as of the date  of  approval  of the  conversion.
• OPC may be converted to OSC.
  • When the shares in an OPC ceases to be held solely by a single stockholder.
  • Notice to SEC of the facts and circumstances leading to be conversion is required;
    • Following  the  transfer/s   of  shares   in  an  OPC  wherein   there   becomes  at  least  two  (2)  stockholders  in  the  OPC,  a  Notice  of  Conversion  of  OPC into an OSC shall  be filed  with   the  Commission  within  sixty  (60)  days  from  such  transfer/s  of  shares.  The  period for filing the Notice shall  be observed even though the conversion will  be  applied for,  or will take  place,  afterwards.
    • For  the   purpose  of  submitting  the   notice,   the  date  of transfer  of  shares  shall  be  deemed  to  be  the  date  that  the  corresponding  Certificate  Authorizing  Registration/  tax  clearance  is issued  by the  Bureau  of  Internal  Revenue.
    • If the  Notice  of  Conversion  is filed  with  the  Commission  beyond  sixty  (60)  days  from  the  transfer  of  shares,  the  OPC  may  still  be  approved  for  conversion  into  an  Ordinary  Stock  Corporation  subject  to  prior  payment  of  penalty
  • Upon  issuance  by the SEC  of the Certificate  of Filing of Amended Articles of  Incorporation  and of By-laws  reflecting the conversion to an OSC,  the  Articles  of  Incorporation  of the  OPC  shall  be deemed  superseded. The  date  of  issuance  of the Certificate  of  Filing of Amended  Articles  of  Incorporation and  of  Bylaws  shall  be deemed  as the date  of approval  of the  conversion.
  • The  OSC converted  from  an OPC shall succeed the latter and be legally responsible for all the  latter's  outstanding  liabilities  as of the  date  of  conversion.
  • By reason  of the  nature  of these  corporations,  the conversion  from  an OSC to OPC shall  be deemed  as optional. On the other hand, the  conversion  from an OPC  to OSC  shall  be deemed  as  mandatory,  unless when  winding-up  and  dissolution  is  appropriate.
  • For your easy reference, the SEC guidelines and requirements may be accessed (SEC Memorandum Circular No. 27 s. 2020)

 

 

BUREAU OF INTERNAL REVENUE

 

BIR DEADLINES FROM OCTOBER 20 TO 25, 2020. A gentle reminder on the following deadlines, as may be applicable:

 

DATE	FILING/SUBMISSION
October 20, 2020	· Filing & Payment of 2550M with required attachments – Non-eFPS filers – Month of September 2020 · E-Filing/Filing & E-Payment/Remittance of 1600 WP-Month of September 2020
October 21, 2020	· E-Filing of 2550M eFPS filers under Group E – Month of September 2020
October 22, 2020	· E-Filing of 2550M eFPS filers under Group D – Month of September 2020
October 23, 2020	· E-Filing of 2550M eFPS filers under Group C – Month of September 2020
October 24, 2020	· E-Filing of 2550M eFPS filers under Group B – Month of September 2020
October 25, 2020	· Submission of Quarterly Summary List of Sales/Purchases by a VAT Taxpayer – Non eFPS filers – Taxable Quarter ending September 30, 2020 · Submission of Sworn Statement of Manufacturer’s or Importer’s Volume of Sales of each particular brand of Alcohol, Tobacco Products & Sweetened Beverage Products – Taxable Quarter ending September 30, 2020 · E-Filing/Filing & E-Payment/Payment of 2550 & 25501Q – eFPS & Non-eFPS filers – Taxable Quarter September 30, 2020 · E-Filing & E-Payment of 2500M with required attachments – eFPS filers under Group A – Month of September 30, 2020 · E-Payment of 2550M for Group E, D, C & B – Month of September 2020

 

FILING AND PROCESSING OF CLAIMS OF INPUT VAT REFUND PRESCRIBING UNTIL DECEMBER 19, 2020 ARE SUSPENDED; NEW DEADLINES

 

• The Secretary of Finance suspends the filing and 90-day processing of Value-Added Tax (VAT) Refund claims anchored under Section 112 of the Tax Code of 1997, as amended, in relation to Section 4(tt) of RA No. 11494 (Bayanihan to Recover as One Act) (“Bayanihan Law”)
• The deadline of filing for VAT refund claims whose prescription falls during the effectivity of R,A. No. 11494, shall be suspended until December 19, 2020, which is the next adjournment of the Eighteenth Congress.
• However, to prevent claims, the following deadlines the expected influx of numerous filers of VAT refund shall be extended to the following dates:

 

Taxable Quarter	Deadline
Calendar quarter ending September 30, 2018	December 31, 2020
Fiscal quarter ending October 31, 2018	January 31, 2021
Fiscal quarter ending November 30, 2018	January 31, 2021
Calendar quarter ending December 31, 2018	February 15, 2021

 

• The 90-day processing of VAT refund claims is suspended during the effectivity of R.A. No. 11494 or until the next adjournment of the Eighteenth Congress on December 19, 2020.
• If the areas where ECQ or MECQ is in force after the affectivity of Bayanihan Law, the following shall be observed:
  • lf the deadline for the filing of the VAT refund claim falls within the ECQ or MECQ period, filing of the claim shall be extended for thirty (30) days after the lifting of the ECQ or MECQ. This applies to the affected areas of the processing offices or to the registered business address of the taxpayer claimant where the restrictions are strictly enforced.
  • The 90-day period of processing VAT refund claims is suspended during the declaration of ECQ or MECQ in the area and shall resume thirty (30) days after the same has been lifted.
  • ln cases where the processing office is required temporary closure, in view of COVID-19 cases, to prevent further spread at the affected office, following the interim guidelines on use of leave credits under Memorandum Circular No. 05, s. 2020 issued by the Civil Service Commission, the 90-day processing of VAT refund claims shall be suspended until the last day of the quarantine period for the affected processing office.
• For your reference, the regulation may be accessed (Revenue Regulations No. 27-2020, 06 October 2020)

 

ELECTRONIC LETTER OF AUTHORITY (E-LA) MAY BE SERVED VIA PERSONAL SERVICE, SUBSTITUTED SERVICE AND MAIL; REQUIREMENTS AND CONDITIONS.

 

• The BIR clarifies the proper modes of service of an electronic Letter of Authority (eLA)

 

Mode of Service	Requirement
Personal Service	· By delivering personally a copy of the eLA at his registered or known address or wherever he may be found. o A known address shall mean a place other than the registered address where business activities of the party are conducted or his place of residence. · Personal or substituted service of the eLA shall be effected by the RO assigned to the case. However, such service may also be made by any BIR employee duly authorized for the purpose.
Substituted Service	· In case personal service is not possible. · Can only be resorted to when the party is not present at the registered or known address.
a.  The eLA may be left at the party's registered address, with his clerk or with a person having charge thereof.	· If the known address is a place where business activities of the party are conducted, the eLA may be left with his clerk or with a person having charge thereof. · If the known address is the place of residence, substituted service can be made by leaving the eLA with a person of legal age residing therein.
b.    No person is found in the party’s registered or known address	· the Revenue Officers (ROs) concerned shall bring a barangay official and two (2) disinterested witnesses to the address so that they may personally observe and attest to such absence. · The original copy of the eLA shall be given to said barangay official. o "Disinterested witnesses" refer to persons of legal age other than employees of the Bureau of Internal Revenue.
c. Party found at his registered or known address or any other place but refuses to receive the eLA	· the ROs concerned shall bring a barangay official and two (2) disinterested witnesses in the presence of the party so that they may personally observe and attest to such act of refusal. · The original copy of the eLA shall be given to said barangay official
Mail	· Registered mail with an instruction to the Postmaster to return the mail to the sender after ten (10) days, if undelivered; or · Reputable professional courier service; · Ordinary mail, if no registry or reputable courier is available in the locality of the taxpayer.

 

• When service is complete:
  • Personal service shall be complete upon actual delivery of the eLA to the taxpayer or his representative.
  • Service by registered mail is complete upon actual receipt by the taxpayer or after five (5) days from the date of receipt of the first notice of the postmaster, whichever date is earlier.
  • Service by ordinary mail is complete upon the expiration of ten (10) days after mailing.
  • Service to the tax agent/practitioner, who is appointed or authorized by the taxpayer in accordance with existing revenue issuances, shall be deemed service to the taxpayer.
• For your reference, the regulation may be accessed (Revenue Memorandum Circular No. 110-2020, October 6, 2020)

 

COURT OF TAX APPEALS DECISIONS

 

REQUISITES OF CONVICTION FOR VIOLATION OF SECTION 255 OF THE NATIONAL INTERNAL REVENUE CODE; LAW PENALIZES RESPONSIBLE OFFICERS.

 

• The following elements must be established by the prosecution to secure the conviction of accused, to wit:
  • That a corporate taxpayer is required to pay any tax, make a return, keep any record, or supply correct and accurate information;
  • That the corporate taxpayer failed to pay the required tax, make a return or keep the required record, or supply the correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or rules and regulations; and
  • That accused, as the employee responsible for the violation, willfully failed to pay such tax, make such return, keep such record, or supply such correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or rules and regulations.
• The law penalizes not only the partner, president, general manager, branch manager and treasurer but also the officers-in-charge and employees responsible for the violation.
  • In this case, the accused is a Vice-President of the Company. She also sent a letter to the BIR acknowledging that the company’s tax assessment case has become a delinquent account and also requested considerable time to put its accounting records in order to be able to settle the corporation’s tax liabilities by way of compromise. This establishes that the accused is a responsible officer of the company and thus must be held criminally liable. (Suarez v. People of the Philippines, CTA EB Crim. No. 066, CTA Crim Case No. A-4, September 1, 2020)

 

PHP 286 MILLION TAX ASSESSMENT CANCELLED: TAX ASSESSMENT ISSUED WITHOUT A LETTER OF AUTHORITY IS VOID; STATEMENT IN THE ASSESSMENT THAT “INTEREST AND AMOUNT DUE WILL HAVE TO BE ADJUSTED” IF PAID BEYOND A CERTAIN PERIOD AND LACK OF DUE DATE RENDER THE ASSESSMENT IS VOID.

 

• The CTA cancelled the tax assessment for violation of due process.
• Under the rules, a revenue officer must be authorized through a LOA,  in order that the said officer may validly examine the books of accounts and other accounting records of the taxpayer. Any tax assessment issued without an LOA is in violation of the taxpayer’s right to due process and is therefore void.
  • In 2010, the BIR issued a Memorandum Order stating that all LOA’s issued from March 1, 2010 covering cases for 2009 shall be retrieved and replaced by electronic LOA. In this case, the BIR did not retrieve and replace the existing LOA. Therefore, the assessment was declared void.
• Under the rules, tax assessment must not only contain a computation of tax liabilities, but it also must include a demand on the taxpayer to settle the tax liability that is there definitely and fixed.
  • In this case, the assessment notice states “Please note that the interest and the total amount due will have to be adjusted if paid beyond….” Moreover, the assessment notices and final decision on disputed assessment do not contain any due date for the payment of the assessed deficiency tax. Therefore, the  liability is considered not definitely set and fixed, hence, the assessment is void. (Robinsons Toys, Inc. v. CIR, CTA Case No. 9161, September 2, 2020)

 

PHP 23 MILLION VAT ASSESSMENT UPHELD: “PRICE ADJUSTMENT” MUST BE REFLECTED IN THE INVOICE AS SALES DISCOUNT; IN ZERO-RATED VAT ON CONSTRUCTIVE EXPORT, THE GOODS MUST ENTER THE ECOZONE; FOR VAT PURPOSES, GOODS MUST BE SUPPORTED BY INVOICE, SERVICES MUST BE SUPPORTED BY OFFICIAL RECEIPT; IF THE DOCUMENT STATES “THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX” THE INPUT VAT CANNOT BE CLAIMED AS A CREDIT.

 

• The CTA upholds VAT assessment for failure to comply with technical requirements under the law.
• For sales discount to be allowable as deduction from the gross selling price, it must be indicated in the sales invoice at the time of sale
  • In this case, the company’s “price adjustment” cannot be considered a sales discount since the amount is not indicated  as sales discount at the time of sale
• For sales of goods to economic zones to be considered zero-rated (constructive export), the goods sold by VAT-registered persons in the customs territory must enter an ecozone. The seller must not just rely on the mere fact of registration of the buyer within the ecozone. The place of delivery of goods in the case is material.
  • In this case, while the taxpayer has satisfactorily proven that the customers are SBFZ-registered entities, it was not established that the goods actually entered the ecozone.
• Under the rules, a VAT-registered person shall issue (1) VAT invoice for every sale, barter or exchange of goods or properties; and (b) VAT official receipt for every lease of goods or properties and for every sale, barter or exchange of services.
• If an official receipt/invoice states “This Document is not valid for claim of input tax,” the taxpayer-purchaser is not entitled to claim input VAT credits. (Pag-Asa Steel Works, Inc. v. BIR, CTA Case No. 9506, September 2, 2020

 

PHP 115 TAX REFUND GRANTED; PAGCOR CONTRACTEES AND LICENSEES ARE EXEMPT FROM INCOME TAX; REFUND OF ERRONEOUSLY OR ILLEGALLY PAID INCOME TAX SHALL BE FILED WITHIN 2 YEARS COUNTED FROM THE FILING OF THE ANNUAL INCOME TAX RETURNS.

 

• The CTA granted the taxpayer’s claim for refund of erroneously or illegally paid tax due to its exemption as PAGCOR’s licensee.
• Under the law and Bloomberry Resorts Case, PAGCOR is exempted from income tax in lieu of the 5% franchise tax. PAGCOR’s exemption extends to its contractees and licensees.
  • In this case, the taxpayer was able to show that it is an entity duly authorized and licensed by PAGCOR.
  • The taxpayer was also able to demonstrate that the Consortium to which it belongs remitted license fees to PAGCOR in relation to its gaming revenues.
  • Lastly, with the documentary and testimonial evidence, the taxpayer was able to substantiate its claim for refund
• Further, under the rules, claims for refund of erroneously or illegally paid taxes should be filed within 2 years from the date of payment of tax or penalty. Specifically, in case of income taxes, the period shall run from the time of the filing of the Final Adjustment Return or Annual ITR.
  • The BIR erroneously argued that the prescriptive period shall run from the filing of the Quarterly ITR as the quarterly tax payments are mere advance payment of the annual corporate income tax. (Premiumleisure and Amusement, Inc. (PLAI) v. CIR, CTA Case No. 9798, September 2, 2020)

 

P10 MILLION REFUND OF INPUT VAT ARISING FROM ZERO-RATED SALES GRANTED; REQUISITES OF REFUND.

 

• CTA granted the taxpayer’s claim for refund of input taxes from its zero-rated sales.
• The following are the requisites for the claim of refund of input VAT
  • The administrative claim with the BIR should be filed within 2 years from the close of the taxable quarter when the pertinent zero-rated sales were made.
    • In case of full or partial denial of the refund claim, or the failure on the part of the BIR to act on the said claim within a period of 120 days [now 90 days], the judicial claim should be filed with the court, within 30 days from receipt of the decision or after the expiration of the said 120 [now 90] days.
    • If the BIR decides after the lapse of the period, the BIR’s decision is inconsequential in the determination of the timeliness of the claim.
  • Taxpayer is a VAT-registered person
    • The taxpayer is engaged in zero-rated or effectively zero-rated sales
      • Sale of goods or services to person whose exemption under the special laws effectively subjects the supply of goods or services to zero-rated VAT.
      • Under the law, all Renewable Energy Developers shall be entitled to  zero-rated VAT on its purchases of goods and services needed for the development, construction, and installation of its plant facilities.
      • RE Developers must have secured a DOE Certificate of Registration, Registration with the Board of Investment, and Certificate of Endorsement by the DOE
    • for zero-rated sales the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations;
  • On input taxes:
    • the input taxes are not transitional input taxes;
    • the input taxes are due or paid;
    • the input taxes have not been applied against output taxes during and in the succeeding quarters; and

the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of the sales volume. Gamesa Eolica SL-Unipersonal Philippine Branch v. CIR, CTA Case No. 9668, September 2, 2020)

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

 

DATE	FILING/SUBMISSION
October 12, 2020	· E-Filing of 1601C – eFPS filers under Group D – Month of September 2020
October 13, 2020	· E-Filing of 1601C – eFPS filers under Group C – Month of September 2020
October 14, 2020	· E-Filing of 1601C – eFPS filers under Group B – Month of September 2020
October 15, 2020	· E-Filing of 1601C – eFPS filers under Group A – Month of September 2020 · E-filing/filing and E-payment/payment of 1702RT, MX and EX with required attachments – FY ending June 30, 2020 · Registration of Bound Loose Leaf Books of Accounts/Invoices/Receipts and other Accounting Records – FY ended September 30, 2020 · E-payment of 1601C, for Group E, D, C and B – Month of September 2020 · Submission of Quarterly List (with monthly breakdown) of Contractors of Government Contracts entered into by the Provinces/Cities/Municipalities/Barangays – CQ ending September 30, 2020 · Filing and payment of 1707A by Corporate Taxpayers – Fiscal Year ending June 30, 2020 · Payment of 2nd Installment of Income Tax Return for Self-employed individuals – CY 2019 · Submission of List of Medical Practitioners – CQ ending September 30, 2020 · Filing & Payment of 1704 – FY ending September 30, 2019 · E-Submission of Quarterly Summary List of Machines (CRM-POS) sold by all Machine Distributors/Dealers/Vendors/Suppliers – TW ending September 30, 2020
October 16, 2020	· Submission of Consolidated Return of All Transactions based on the Reconciled Data of Stockbrokers – October 1 -15 2020

 

sale, barter, exchange or other disposition of shares of stock in closely heLD corporations THROUGH INITIAL PUBLIC OFFERING shall noT BE subject to the tax.

 

• The Secretary of Finance issued RR No. 23-2020, repealing the tax on initial public offering (IPO) of shares of stocks under theBayanihan to Recover as One Act (Republic Act No. 11494) or the Bayanihan II.
• Thus, every sale, barter, exchange or other disposition of shares of stocks in closely held corporations through IPO shall no longer be subject to tax imposed by said section upon effectivity of the Bayanihan II on September 15, 2020.
• For your reference, a copy of the issuance may be accessed
• https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202020/RR%20No.%2023-2020.pdf
• (Revenue Regulations No. 23-2020, 30 September 2020)

 

 

no additional DOCUMENTARY STAMP TAX shall apply to term extensions and credit restructuring, micro-lending including those obtained from-pawnshops and extensions thereof granted by covered institutions for loans falling due, or any part thereof, on or before December 31,2020.

 

• The Secretary of Finance implements Section 4 (uu) of RA No. 11494 (Bayanihan to Recover as One Act) on the exemption from Documentary Stamp Tax of loans extended or credits restructured.
• It provides that no additional DST shall apply to term extensions and credit restructuring, micro-lending including those obtained from-pawnshops and extensions thereof granted by covered institutions for loans falling due, or any part thereof, on or before December 31,2020.
  • Covered institutions are the all lenders, including but not limited to banks, quasi-banks, financing companies, lending companies, real estate developers, insurance companies providing life insurance policies, pre-need companies, entities providing in-house financing for goods and properties purchased, asset and liabilities management companies and other financial institutions under the supervision of the Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), and the Cooperative Development Authority (CDA), public and private, including the Government Service Insurance System (GSIS), the Social Security System (SSS) and Home Development Mutual Fund (Pag-IBIG Fund).
• On the other hand, inter-bank loans and bank borrowings shall be subject to the DST imposed under Section 179,195 and 198 of the NIRC, as amended.
  • Interbank loan shall include, among other things, (a) interbank call loan (IBCL) transactions; (b) borrowings evidenced by deposit substitute instruments; (c) purchases of receivables with recourse. It shall not include funds borrowed by banks from trust departments of banks or investment houses.
• For your reference, a copy of the issuance may be accessed
• https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202020/RR%20No.%2024-2020.pdf
• (Revenue Regulations No. 24-2020, September 30, 2020)

 

 

NET OPERATING LOSS FOR TAXABLE YEAR 2020 AND 2021 IS ALLOWED TO BE CARRIED OVER AS DEDUCTION FROM GROSS INCOME FOR THE NEXT FIVE (5) CONSECUTIVE YEARS IMMEDIATELY FOLLOWING THE YEAR OF SUCH LOSS.

 

• The Secretary of Finance prescribes the rules and regulations to implement Section 4 (bbbb) of RA No. 11494 (Bayanihan to Recover as One Act) relative to Net Operating Loss Carry-Over (NOLCO) under Section 34 (D)(3) of the NIRC, as amended.
• It provides that unless otherwise disqualified from claiming the deduction, the business or enterprise which incurred net operating loss (excess of allowable deduction over gross income of the business in a taxable year) for taxable years 2020 and 2021 shall be allowed to carry over the same as a deduction from its gross income for the next five (5) consecutive taxable years immediately following the year of such loss.
• The net operating loss for said taxable years may be carried over as a deduction even after the expiration of RA No. 11494 provided the same are claimed within the next five (5) consecutive taxable years immediately following the year of such loss.
• It also provides that the NOLCO shall be separately shown in the taxpayer's income tax return (also shown in the Reconciliation Section of the Tax Return) while the unused NOLCO shall be presented in the Notes to the Financial Statements showing, in detail, the taxable year in which the net operating loss was sustained or incurred, and any amount thereof claimed as NOLCO deduction within five (5) consecutive years immediately following the year of such loss.
  • The NOLCO for taxable years 2020 and 2021 shall be presented in the Notes to the Financial Statements separately from the NOLCO for other taxable years. Failure to comply with this requirement will disqualify the taxpayer from claiming the NOLCO.

 

• For your reference, a copy of the issuance may be accessed
• https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202020/RR%20No.%2025-2020.pdf
• (Revenue Regulations No. 35-2020, September 30, 2020)

 

 

DONATION OF PERSONAL COMPUTERS, LAPTOPTS, TABLETS OR SIMILAR EQUIPMENT FOR USE IN TEACHING AND LEARNING IN PUBLIC SCHOOLS ARE EXEMPT FROM DONOR’S TAX UNTIL DECEMBER 19, 2020.

 

• The Secretary of Finance  implements Section 4 (zzz) of RA No. 11494 (Bayanihan to Recover as One Act) relative to donations of identified equipment for use in public schools.
• Donor/s of personal computers, laptops, tablets, or similar equipment for use in teaching and learning in public schools shall be entitled to the following tax incentives:
  • Deduction from the gross income of the amount of contribution/donation subject to limitations and conditions;
  • Exemption from the payment of donor's tax;
  • In case of foreign donation, the importation of personal computers, laptops, tablets, or similar equipment by the Department of Education (DEPED), or Commission on Higher Education (CHED), or TESDA, shall be EXEMPT from value added tax (VAT).
  • In the case of local donation where the personal computers, laptops, tablets, or similar equipment are originally intended for sale or for use in the course of business by the donor, the same shall not be treated as transaction deemed sale. Furthermore, any input tax VAT attributable to the purchase of donated personal computers, laptops, tablets, or similar equipment not previously claimed as input tax shall be creditable against any output tax
• For purposes of availment of the tax incentives provided under these Regulations, no prior determination or ruling issued by the Bureau of Internal Revenue shall be required.
• The regulation covers alldonations of personal computers, laptops, tablets, or similar equipment (i.e. mobile phone, printer) for use in teaching and learning in public schools, starting from the effectivity of the Act on September 15,2020 up to December 19, 2020.
• The amount of donation shall be based on the actual acquisition cost of personal computers, laptops, tablets, or similar equipment donated. If the personal computers, laptops, tablets, or similar equipment donated had already been used, its depreciated value shall be taken into consideration.
• For your reference, a copy of the issuance may be accessed
• https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202020/RR%20No.%2026%20-%202020.pdf
• (Revenue Regulations No. 26-2020, October 6, 2020)

 

 

 

Court of Tax Appeals Decisions

 

ISSUANCE OF THE FORMAL ASSESSMENT NOTICE OR FINAL LETTER OF DEMAND WITHIN THE 15-DAY PERIOD GIVEN TO THE TAXPAYER TO REPLY TO PRELIMINARY ASSESSMENT NOTICE RENDERS THE TAX ASSESSMENT VOID FOR VIOLATION OF DUE PROCESS.

 

• As part of due process in the issuance of tax assessments, a taxpayer is given 15 days from the receipt of the PAN to file a protest with the BIR. It is only after the  lapse of the prescribed 15-day period that the BIR may issue the corresponding FAN/FLD.
  • In this case, the PAN dated February 17, 2014 was received by the taxpayer on March 26, 2014. The taxpayer had fifteen (15) days or until April 10, 2014, within which to respond to the said PAN. However, the BIR issued the subject FLD/FAN on March 28, 2014, which is before the lapse of the said 15-day period for it to protest or respond thereto.
  • Therefore, as the taxpayer is denied of its right to due process, the assessment is considered void.
• (The Orchard Golf Club and Country Club, Inc. v. CIR, CTA Case No. 9086, September 1, 2020)

 

COMMON CARRIERS ARE EXEMPT FROM LOCAL BUSINESS TAX; REVENUE ORDINANCE REQUIRING PRIOR PAYMENT TO PROTEST LOCAL BUSINESS TAX ASSESSMENT IS VOID.

 

• The CTA En Bancaffirmed the CTA Division’s decision cancelling the local business tax assessment as dividend and interest income derived by a holding Company is not subject to local business tax.
• Under the rules, a common carrier is exempted from the payment of local business tax.
  • In the instant case, LRT is considered a common carrier because its operation involves the safe transport of passengers between all railway stations along its current route. Neither does the fact that the nationa government’s continuous ownership through the LRT constitute any bar to the notion that it could be deemed a common carrier. Therefore, it is exempt from local business tax.
• Under the Local Government Code, prior payment of the assessed local business tax is not necessary for filing a protest. Payment under protest has been specifically provided in case of real property tax assessment. Moreover, local business tax assessment may be protested within 60 days.
  • In the instant case, City of Caloocan’s Revenue Code requires prior payment before protest. It also shortens the period to protest from 60 days to 30 days.
  • Therefore, the ordinance, being in contravention with the Local Government Code, is declared null and void.

(Light Rail Manila Corporation v. City of Caloocan, CTA AC No. 224, September 2, 2020)

• Among other institutions, financing and lending companies and microfinance NGOs shall implement a one-time 60-day grace period to be granted for the payment of all existing, current and outstanding loans falling due or any part thereof, on or before December 31 2020.
• The grace period shall apply to each loan whether the borrower has a single loan or multiple loans with the financing companies (FC), lending companies (LC), and Microfinance NGOs (MF-NGOs).
• FCs, LCs, and MF-NGOs shall not charge or apply interest on interest, penalties, or other charges during the mandatory one-time 60-day grace period to future payment or amortizations of the borrowers.
  • Furthermore, FCs, LCs, and MF-NGOs are prohibited from requiring their clients to waive the application of the provisions of the Bayanihan to Recover As One Act.
  • No waiver previously executed by borrowers covering payments falling due until 31 December 2020 shall be valid.
• The accrued interest for the one-time 60-day grace period may be paid by the borrower on the staggered basis until 31 December 2020. Nonetheless, this shall not preclude the borrower from paying the accrued interest in full on the new due date.
• The parties may agree on a grace period longer than 60 days, and/or the payment of accrued interest on a staggered basis beyond 31 December 2020
• For your easy reference, the SEC Notice may be accessed (SEC Notice, 21 September 2020)

 

SEC PROVIDES GUIDELINES IN THE FILING, INVESTIGATION, AND RESOLUTION OF COMPLAINTS FOR VIOLATION OF THE RIGHT TO INSPECT AND/OR REPRODUCE CORPORATE RECORDS.

 

• The Circular is issued pursuant to the Revised Corporation Code which provides that corporate records shall be open for inspection by any director, trustee, stockholder or member of the corporation and refusal to provide records is punishable by law. Thus, the SEC promulgates the guidelines in enforcing the right of the members to inspect and/or reproduce corporate records and the procedure for the conduct of investigation for violation of the same.
• For your reference, the SEC Circular may be accessed (MC No. 25. S. 2020, 20 August 2020)

 

Bureau of Internal Revenue

 

BIR DEADLINES from September 5 to 11, 2020. A gentle reminder on the following deadlines, as may be applicable:

 

DATE	FILING/SUBMISSION
October 5, 2020	· E-Filing/Filing & E-Payment/Payment of 2000 (DST) & 2000-OT (One Time Transaction) – for the month of September 2020
October 8, 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 September 2020
October 10, 2020	· Filing and payment/remittance of 1601C for Non E-FPS filers for the month of September 2020 · E-submission of monthly E-Sales Report of all taxpayers using CRM/POS with TIN ending in odd number for the month of September 2020 · E-Filing/Filing and e-Payment/payment of BIR Form 1600 with Monthly Alphalist of Payees & 1606 – Month of September 2020 · E-Filing and e-Payment/Remittance of BIR Form 1600 and 1601C withholding tax return for National Government Agencies for the month of September 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 September 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 - September 2020 · Submission of Information Return on Releases of Refined Sugar by the Proprietor or Operator of a Sugar Refinery or Mill for the month of September 2020 · Submission of Monthly Report of DST Collected and Remitted by the Government Agency for the month of September 2020 · Submission of Transcript Sheets of 2222ORB – Month of September 2020
October 11, 2020	· E-Filing of 1601C – eFPS filers under Group E – Month of August 2020

 

NOTICE OF DISCREPANCY REPLACES NOTICE OF INFORMAL CONFERENCE; TAXPAYER SHALL PRESENT EXPLANATION/DOCUMENTS WITHIN 30 DAYS FROM THE RECEIPT OF THE NOTICE OF DISCREPANCY; FAILURE TO SETTLE SHALL REQUIRE INVESTIGATING OFFICER TO ENDORSE THE CASE FOR ISSUANCE OF THE PRELIMINARY ASSESSMENT NOTICE WITHIN 10 DAYS FROM CONCLUSION OF THE DISCUSSION.

 

• The Secretary of Finance has issued RR No. 22-2020, amending its previous rules on informal conference. The amendment pertains to the preparation of a Notice of Discrepancy instead of a Notice of Informal Conference.
• It provides that ifthe taxpayer disagrees with the discrepancy/ies found during the audit/investigation, the taxpayer must present an explanation and provide documents to support his explanation within thirty (30) days from receipt of the Notice of Discrepancy.
• If despite the discussion of discrepancy, the taxpayer is found liable for deficiency taxes and the taxpayer does not agree to the discrepancy or address the same by paying the deficiency taxes, the investigating office shall endorse the case for issuance of a Preliminary Assessment Notice within ten (10) days from the conclusion of the discussion.
• For your reference, a copy of the issuance may be accessed (Revenue Regulations No. 22-2020, 15 September 2020)

 

OVERSEAS FILIPINOS INVESTING IN PERSONAL EQUITY AND REQUIREMENT ACCOUNT ARE REQUIRED TO SECURE TAX IDENTIFICATION NUMBER EITHER MANUALLY OR E-MAIL.

 

• Overseas Filipino (OF) investors who wish to invest in Digital Personal Equity and Retirement Account (PERA) platform are required to secure a Tax Identification Number (TIN) before they can open an account with the banks and become eligible to invest in PERA.
• OFs may secure their TIN manually through authorized representatives; or via E-mail application.
  • For purposes of this registration, Overseas Filipinos shall not be issued any TIN Card. For applications filed manually, the BIR Form No. 1904 duly stamped received indicating the TIN issued shall serve as proof of registration. On the other hand, for applications filed through email, the acknowledgment receipt/reply to the email is sufficient proof of receipt of such application.
• For your reference, a copy of the issuance may be accessed HERE. (Revenue Memorandum Circular No. 103-2020, 14 September 2020)

 

 

Court of Tax Appeals Decisions

 

PHP 13 MILLION LOCAL BUSINESS TAX ASSESSMENT UPHELD: TAXPAYER SHOULD APPEAL WITHOUT AWAITING THE DECISION OF THE LOCAL TREASURER AFTER THE LATTER FAILED TO ACT ON ITS PROTEST WITHIN 60 DAYS FROM THE DATE OF FILING OF THE SAID PROTEST.

 

• The CTA En Bancdenied the taxpayer’s petition to cancel the local treasurer’s assessment for lack of jurisdiction due to failure to appeal on time.
• Under the rules, in case of notice of assessment issued by the local treasurer, the taxpayer has 60 days from receipt of the notice to file a written protest. The treasurer shall decide the protest within 60 days from the time of filing. The taxpayer shall have 30 days from receipt of the denial of its protest or from the lapse of 60-day period within which to appeal with the court of competent jurisdiction. Otherwise, the assessment becomes conclusive and unappealable.
• In this case, the taxpayer filed its complaint with the court within 30 days from issuance of the decision of the local treasurer. However, the local treasurer issued its decision after the lapse of 60-day period to decide. The decision of the local treasurer is moot and academic considering that the 60-day period has lapsed. Therefore, the assessment is upheld. (Kuehne + Nagel, Inc., v. City of Paranaque et. Al., CTA EB No. 2208, CTA AC No. 206, September 9, 2020).

 

PHP 1 MILLION LOCAL BUSINESS TAX ASSESSMENT CANCELLED: HOLDING COMPANIES ARE EXEMPT FROM LOCAL BUSINESS TAX ON DIVIDEND AND INTEREST INCOME.

 

• The CTA En Bancaffirmed the CTA Division’s decision cancelling the local business tax assessment as dividend and interest income derived by a holding Company is not subject to local business tax.
• The Local Government Code imposes tax on dividends earned by banks and other financial institution. In its enumeration of banks and other financial institutions, a holding company is not expressly mentioned.
  • In this case, Makati City cannot expand the law and legally impose local business tax on dividend income earned by holding companies when the law itself does not expressly provide. (Makati City and the Office of the City Treasurer v. Allons Holdings, Inc., CTA EB No. 2146, CTA AC No. 195 September 01, 2020; see also Makati City Treasurer and City of Makati v. Mermac, Inc., CTA EB No. 2131, CTA AC No. 193, September 2, 2020)

 

LOCAL GOVERNMENT UNIT’S PETITION DISMISSED DUE TO FAILURE TO SUBMIT CITY TREASURER’S AUTHORITY TO FILE THE CASE.

 

• The CTA En Bancaffirmed the decision of the CTA Division dismissing the case for the City Treasurer’s lack of authority to file the case.
• Under the rules and prevailing jurisprudence, the City of Treasurer must be authorized by the Sangguniang Panglungsodthrough an ordinance.
  • In the instant case, the City Treasurer failed to submit her authority to file the case. Thus, the case was dismissed (City Treasurer and City of Makati v. Mermac, Inc., CTA EB No. 2131, CTA AC No. 193, September 2, 2020).

 

PRINTED SCREENSHOTS OF OFFICIAL WEBSITE OF FOREIGN GOVERNMENT’S REGISTRY OF COMPANIES ARE SUFFICIENT PROOF IN LIEU OF THE CERTIFICATES/ARTICLES OF FOREIGN INCORPORATION/ASSOCIATION.

 

• Under the rules, to be entitled to zero-rating, each entity must be supported at the very least by both SEC Certificate of Non-Registration and Proof of Certificate/Articles of Foreign Incorporation.
  • The CTA En Banc has already given imprimatur on the presentation of printed screenshots of the foreign government’s registry of companies in lieu of the Certificates/Articles of Foreign Incorporation/Association.
  • Being official government registry of corporation, the Court accepts printed screenshots of the official websites of other foreign government’s registry of companies as sufficient proof in lieu of the Certificates/Articles of Foreign Incorporation/Association. (CIR v. AIG Shared Services Corporation (Philippines, CTA EB No. 2071, CTA Case No. 9100, September 07, 2020)

 

PHP 2.9 MILLION INPUT VAT REFUND PARTIALLY GRANTED: INPUT TAX, WHICH CANNOT BE DIRECTLY ATTRIBUTED TO A SPECIFIC TYPE OF SALE, SHALL BE ALLOCATED PROPORTIONATELY ON THE BASIS OF VOLUME OF SALES; IF TAXPAYER-PURCHASER ERRONEOUSLY ASSUMED THE INPUT TAX, ITS RECOURSE IS REIMBURSEMENT FROM THE SUPPLIERS.

 

• The CTA En Banc affirmed the amended decision of the CTA Division partially granting refund of input VAT.
• Among other, the Court ruled:
  • If the input tax cannot be entirely attributed to a specific type of sale, it must be allocated proportionately on the basis of volume of sales.
  • In case where no input VAT should have been paid, and the taxpayer paid the same, its recourse should have been to seek reimbursement from its suppliers.  There was no distinction which would limit the application of the said doctrine only to a VAT exempt PEZA-registered entity.
  • Machine validated IEIRD is required to properly substantiate the payment of duties and taxes on imported goods.(Taganito Mining Corporation v. CIR, CTA EB No. 1972, CTA Case No. 9057, September 3, 2020)

 

PHP 94 MILLION TAX ASSESSMENT PARTIALLY REDUCED; REQUISITES OF ZERO-RATED SALES; IN PROVING REIMBURSEMENT, TAXPAYER MUST ESTABLISH THE REASONABLE CONNECTION THAT EXPENSES WERE BILLED BY ANOTHER ON BEHALF OF THE TAXPAYER.

 

• For the supply of services to qualify as VAT zero-rated, the following requisites must be satisfied:
  • The services must be other than processing, manufacturing, or repacking of goods (as shown by the contract);
  • The payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulation (as shown by certificate of inward remittance; unsupported booking commissions in the inward remittance is subject to VAT); and
  • The recipient of such services must be doing business outside the Philippines (as shown by SEC Certificate of Non-Registration of the Company and Memorandum and Articles of Association)
• The taxpayer must prove that communication expenses and marketing expenses are reimbursement in order to be exempt from withholding tax. It should show a reasonable connection or basis that the said expenses were billed by another on behalf of the taxpayer. (Commissioner of Internal Revenue v. Sabre Travel Network (Philippines), CTA EB No. 1932, CTA Case No. 8678; Sabre Travel Network (Philippines) v. CIR, CTA EB No. 1937, CTA Case No. 8678, September 2, 2020)

 

 

P1M TAX ASSESSMENT UPHELD: IT IS THE DUTY OF THE TAXPAYER TO SUBMIT DOCUMENTS UPON RECEIPT OF SUBPOENA DUCES TECUM; TAXPAYER CANNOT INSIST ON BIR TO CHECK THE RECORDS INSIDE ITS OFFICE PREMISES.

• As the rules compel submission of documents in case of subpoena duces tecum,it is incumbent upon the taxpayer to ensure prompt and timely transmittal of the records to the BIR. If it wants to prove correctness of the tax return, it should comply with the Subpoena Duces Tecum. It cannot insist that BIR check the records inside its office premises. (8199 Convenience Corporation v. CIR, CTA EB No. 1912, CTA Case No. 8853, September 3, 2020)