Month: November 2020

• The SEC revises the General Information Sheet (GIS) of foreign corporations to include beneficial ownership information.
• All SEC registered foreign corporations are required to disclose their beneficial owners in the GIS.
• The resident agent, country or regional/area head of the foreign corporation shall exercise the due diligence required in obtaining, keeping, reporting, and updating information on its beneficial ownership
• The SEC shall be timely apprised of all relevant changes in the submitted beneficial ownership information as they arise. Such change shall be indicated in the Notification Update Form and shall be submitted to the SEC within 30 days after such change occurred or became effective.
• Company’s failure to disclose shall be subject to SEC penalty ranging from P10,000 to P100,000 and may be imposed twice or thrice depending on the amount of fund balance.
• For your easy reference, the SEC guidelines and requirements may be accessed
• Resident Agents, Country Head, Area or Regional Head of the foreign corporation, who failed to exercise the due diligence required in ensuring compliance with this requirement, shall be fined in the amount ranging from P5,000 to P50,000. For your reference, the regulation may be accessed (SEC Memorandum Circular No. 30 s. 2020, November 3, 2020)

BUREAU OF INTERNAL REVENUE

BIR ANNOUNCES E-BIR FORM PACKAGE VERSION 7.7

• The BIR announces the availability of Offline Electronic Bureau of Internal Revenue Forms (eBIRForms) Package Version 7.7
• The new Offline eBIR Forms package now includes 2018 version of 1604-C, 1604-F, 1604-E
• The BIR Form Nos. 1604-C and 1604-F shall be filed on or before January 31 of the year following the calendar year in which the compensation payment and income payments subjected to final withholding taxes were paid or accrued. On the other hand, BIR Form No. 1604-E, shall be filed on or before March 1 of the year following the calendar year in which the income payments subjected to expanded withholding taxes or exempt from withholding tax were paid or accrued.
• For your reference, the regulation may be accessed (Revenue Memorandum Circular No. 118-2020, November 5, 2020)

BIR FURTHER CLARIFIES THE RETIREMENT BENEFITS EXEMPT FROM INCOME TAX PURSUANT TO RA NO. 11494 (BAYANIHAN TO RECOVER AS ONE ACT) AS IMPLEMENTED UNDER RR NO. 29-2020.

• An employee may not meet one of the conditions, particularly on the length of service under an approved employees' retirement benefits plan. Nevertheless, the received retirement benefits is considered exempt from income tax since the same is based on the registered retirement plan with the BlR, and the employee retired and received the retirement benefits during the covered period of June 5 to December 31,2020 under the Republic Act No. 11494 or {he Bayanihan to Recover as One Act.
  • In case the employee is re-employed, re-employment occurring beyond the 12-month period will not render the retirement benefit subject to income tax. The 12-month period is reckoned from the date of retirement.
  • If the re-employment is within the 12-month period after the receipt of the retirement benefit, and the employee was re-employed by an entity related to the employer (i.e. subsidiary), the employee will be required to pay income tax due on the retirement benefits received.
• The amount received is not exempt from income tax if the employee retired prior to June 5, 2020 even though he received the retirement benefit is received within the covered period (i.e. October 2020); similarly, if the taxpayer retired within the covered period, but received the retirement benefit outside the period, the benefit shall not be exempt from income tax.
• Only the amount received covered by the registered retirement plan will be exempt from income tax. The amount in excess of what is within the retirement plan which was offered by the company to entice employees to retire shall be taxable.
• Even though the Company has no registered retirement plan with the BIR, retirement benefit under the labor laws is not subject to income tax. (i.e. 60-65 years old and 5 or more years of service). This applies even if the employee was re-hired.
• For your reference, the Circular may be accessed (Revenue Memorandum Circular No. 120-2020, November 9, 2020)

COURT OF TAX APPEALS DECISIONS

PHP 4 MILLION CLAIM OF REFUND OF EXCESS AND UNUTILIZED CREDITABLE WITHHOLDING TAX GRANTED; TAXPAYER MUST SIGNIFY IN ITS RETURN ITS INTENTION TO REFUND; REFUND MUST BE FILED BOTH ADMINISTRATIVELY AND JUDICIALLY WITHIN 2 YEARS FROM THE FILING OF FINAL ADJUSTED RETURN; A CLAIM OF CWT, IF DENIED, MAY BE CARRIED OVER BACK TO THE ANNUAL ITR AS EXCESS CREDIT.

• The CTA granted the refund of excess and unutilized creditable withholding taxes (CWT), for the following reasons:
  • The taxpayer signified in its return its intention to refund.
  • Petitioner timely filed both its administrative and judicial claims for refund within two (2) years from the time of filing of final adjusted return or annual ITR.
  • The excess CWT sought to be refunded is properly substantiated with BIR Form No. 2307 issued by the taxpayer’s income payors.
  • The income upon which the excess CWT was withheld was included in the annual ITR by showing the audited financial statements and amended annual ITR.
  • The taxpayer was able to account for the prior year’s excess tax credits.
    • A CWT refund claim, if denied, may be carried over back to the Annual ITR as an excess CWT that may be used to pay off tax for the current taxable year.
  • The taxpayer does not have to prove actual remittance of the taxes to the BIR. (Sonoma Services, Inc. v. CIR, CTA Case No. 9808, October 1, 2020)

PHP 8 MILLION CLAIM FOR REFUND OF EXCESS AND UNUTILIZED INPUT VAT GRANTED; REQUISITES OF A VALID CLAIM.

• The CTA partially granted a claim for refund of excess and unutilized input VAT attributable to zero-rated sales. The following are the requisites:
• As to the timeliness of the filing of the administrative and judicial claims:
  • The claim was filed with the BIR within two years after the close of the taxable quarter when the sales were made;
  • In case of full or partial denial of the refund claim, or the failure on the part of the Commissioner to act on the said claim within a period of 120 (now 90) days, the judicial claim has been filed with this Court, within 30 days from receipt of the decision or after the expiration of the said 120 (now 90)-day period;
• With reference to the taxpayer's registration with the BIR:
  • The taxpayer is a VAT-registered person;
• In relation to the taxpayer's output VAT:
  • The taxpayer is engaged in zero-rated or effectively zero-rated sales;
    • Export of goods must be supported by sales invoice as proof of sales of goods and bill of lading or airway bill as proof of actual shipment of goods.
    • Sale of goods and services made by a VAT-registered person in the Philippine customs territory to an entity registered and operating within the ECOZONES are considered exports to a foreign country subject to zero-rated VAT
  • The acceptable foreign currency exchange proceeds have been duly accounted for in  accordance with BSP rules and regulations. In this case though, the taxpayer was not able to accurately trace the mounts remitted with the invoice.
• As regards the taxpayer's input VAT being refunded:
  • The input taxes are not transitional input taxes;
  • The input taxes are due or paid;
  • 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 sales volume; and
  • the input taxes have not been applied against output taxes during and in the succeeding quarters(Carmen Copper Corporation v. CIR, CTA Case No. 9592, October 01, 2020)

PHP 13 MILLION CLAIM FOR REFUND OF INPUT VAT DENIED; IF THE BIR FAILS TO ACT ON A CLAIM WITHIN 120 DAYS (NOW 90), THE TAXPAYER SHOULD ELEVATE THE CLAIM TO THE CTA.

• The CTA denied the taxpayer’s claim for refund of input VAT for failure to file the judicial claim on time.
• In refund of input taxes, the 30-day period given to a taxpayer to file a judicial claim for input tax refund/TCC shall start a) upon expiration of the [now 90]-day mandatory period for the BIR to act on a request for input tax, and b) upon receipt of BIR’s adverse decision, whichever comes first.
• In this case, the claim for refund was filed with the BIR on March 30, 2010. The BIR denied the claim on May 24, 2018, and the taxpayer filed the judicial claim on June 25, 2018. The taxpayer should have filed its judicial claim after 120 days from the time of administrative claim or until August 27, 2010. The taxpayer should not have waited for the BIR’s decision and elevated the case to the CTA after the BIR failed to act on the claim within the 120-day period. Thus the claim for refund should be denied. (Philippine Airport Ground Support Solutions, Inc. v. CIR, CTA EB No. 2107, CTA Case No. 9861, October 7, 2020)

PHP 1.8 MILLION TAX ASSESSMENT CANCELLED DUE TO LACK OF LETTER OF AUTHORITY (“LOA”).  A MEMORANDUM OF ASSIGNMENT IS NOT CONSIDERED A LETTER OF AUTHORITY. LOA ISSUED DURING THE REINVISTIGATION STAGE WILL NOT CURE THE DEFECT.

• The CTA cancelled the tax assessment for lack of letter of authority.
• There must be a grant of authority before any revenue officer can conduct an examination or assessment. Unless authorized through an LOA, an examination of the taxpayer cannot ordinarily be undertaken.

In this case, the BIR, thru the Revenue District Officer, merely issued a Memorandum of Assignment to the examiner without an LOA. Because there is no valid authority to examine the taxpayer’s books, the assessment is void. Even though the subsequent issuance of the new LOA for the purpose of reinvestigation will not cure the defect because the investigation as already conducted when the subsequent LOA was issued. (Bicyclepoker, Inc. v. CIR, CTA Case No. 9868, October 7, 2020; see also CIR v. Ryan Neil Erasmo Alvez, CTA EB No. 2076, CTA OC No. 020, October 8, 2020 involving a Reassignment Notice)

• Purpose:
  • The e-mail address shall be where transactions, applications, letters, requests, papers and pleadings  may be processed, submitted and/or filed online. The SEC may likewise send notices, letter-replies, orders, decisions, and/or other documents through said e-mail addresses, and the corporations, associations, partnerships and individuals are deemed to have received those notices, letter-replies, orders, decisions and/or other documents on the date so sent by the SEC.
  • The purpose of the cellphone number is for the SEC to send One-Time Personal (OTP) Identification Number which the authorized person will have to input before the e-mail message can be retrieved. This is to ensure that the person accessing the email is the authorized person of the person to receive and retrieve the same.
• Service of notice through this process shall be considered compliance with the notice requirement of administrative due process.
• It provides that every corporation, association, partnership and person under the jurisdiction and supervision of the SEC (“subject persons) shall submit a valid official electronic email (e-mail) address and a valid official cellular phone number within 60 days from the effectivity of the rules
  • For future applications and those applications which are still pending primary registration with the Company Registration and Monitoring Department (CRMD), such information should be either indicated during the filling up of the registration forms or submitted within 30 days from the issuance of certificate of registration, license or authority.
• In addition to the valid official e-mail address and official cellular phone number, the subject persons shall also submit a valid alternate e-mail address and valid alternate cellular phone number.
• The official email of the subject persons may be the official or alternate email address of another person’s , provided it must be distinct from the alternate e-mail address of the same persons.
• The e-mail address and cellular phone numbers shall be under the control of the corporate secretary, the person charged with the administration and management of the corporation sole, the resident agent of the foreign corporation, the managing partner, the individual or the duly authorized representative.
  • The subject persons shall submit proof of the authorized representative’s authority (i.e. special power of attorney or secretary’s certificate) to control the e-mail addresses and the cellular phone numbers, and to sign and file the submission, authorization and certification provided under this rule.
• Beginning February 23, 2021 onwards, e-mail addresses and cellular phone numbers shall be included in the General Information Sheet (GIS) or Notification Update Form (NUF) regularly filed with the Commission. If a corporation fails to include the e-mail addresses and cellular phone numbers in the GIS or NUF regularly filed with the Commission, such GIS or NUF shall be considered incomplete.
• An authorization or certificate of authorization, authorizing the SEC to send notices, among others, through email addresses and cellular phone numbers provides, for the purpose of complying with the notice requirement of administrative due process.
• If the subject persons are unable to create an e-mail due to the fact that the area/address has no internet access, only the cellular phone number shall be submitted to the SEC. The authorized representative shall issue a certification to that effect. The subject persons shall submit to the SEC official email address within 30 days from the time the area gains access to the internet.
• The SEC shall be notified within 5 days, in case the email address or cellular phone number is changed.
• In case of double filing of e-mail address and cellular phone numbers, the SEC will determine whether an intra-corporate dispute exists. If yes, the SEC will mark “DISPUTED”. The said submission may be unmarked by an order from the appropriate court.
• Penalty for failure to submit e-mail addresses and cellular phone number beginning February 23, 2021 is P10,000.
• For your easy reference, the SEC Memorandum Circular may be accessed
• https://www.sec.gov.ph/mc-2020/mc-no-28-s-2020/
• (SEC Memorandum Circular No. 28 s. 2020, October 27, 2020)

BUREAU OF INTERNAL REVENUE

IMPORTATION OF goods identified as critical products, essential goods, equipment or supplies needed to contain and mitigate COVID-19 FROM JUNE 25, 2020 TO DECEMBER 31, 2020, shall be exempt from VAT, excise tax and other fees AND REQUIREMENT OF AUTHORITY TO RELEASE IMPORTED GOODS; DONATIONS OF SAID IMPORTED ARTICLES TO OR FOR USE OF THE NATIONAL GOVERNMENT AND OTHER QUALIFIED ENTITIES ARE EXEMPT FROM DONOR’S TAX.

• The Secretary of Finance implements the tax exemption provisions under Section 4 (cc) and Section 18 of RA No. 11494 (Bayanihan to Recover as One Act) on the incentives for the manufacture or importation of certain equipment, supplies or goods.
• It provides that importation from June 25, 2020 to December 31, 2020 of goods identified as critical products, essential goods, equipment or supplies needed to contain and mitigate COVID-19, subject to the limitations and restrictions, shall be exempt from VAT, excise tax and other fees.
• The taxpayer availing of the exemption must present a certification from the Department of Trade and Industry (DTI) that the equipment and supplies being imported are not locally available or of insufficient quality and preference.
• The importation hereof shall not be subject to the issuance of Authority to Release Imported Goods (ATRIG) and may be released by the Bureau of Customs without need of ATRIG. The BIR may, however, conduct post investigation/audit on the importations released by the BOC without ATRIG pursuant to these Regulations.
• Donations of these imported articles to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the Government are exempt from donor's tax and subject to the ordinary rules of deductibility under existing rules and issuances.
• The grant of exemption for the importation of goods in this rules is deemed to be in effective beginning June 25, 2020,
  • The value-added tax on all covered and qualified shipments/importations that may have been paid from June 25,2020 up to September 14,2020 shall be refunded, provided that input tax on the imported items have not been reported and claimed as input tax credit in the monthly and/or quarterly value-added tax returns. The same shall not be allowed as input tax credit for purposes of computing the value-added tax payable of the concerned taxpayer/s for the said period.
• inputs, raw materials and equipment necessary for the manufacture of essential goods of medical grade related to containment and mitigation of COVID-19, as determined by Food and Drug Administration - Department of Health (FDA-DOH), whether locally sourced or imported by the registered manufacturer, shall be exempt from value-added tax.
• The sale of finished goods / products under these Regulations, whether locally manufactured or imported, is subject to value-added tax. The sale of inputs, raw materials and equipment referred to these Regulations to a non-holder of "License to Operate" issued by the FDA-DOH is likewise subject to value-added tax.

• For your reference, the regulation may be accessed

https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202020/RR%20No.%2028-2020.pdf

• (Revenue Regulations No. 28-2020, 15 October 2020)

COURT OF TAX APPEALS DECISIONS

PHP 2 MILLION TAX REFUND PARTIALLY GRANTED: INVOLUNTARY TRANSFER OF PROPERTY TO THE CITY GOVERNMENT AS A RESULT OF FAILURE TO PAY REAL PROPERTY TAX IS SUBJEC TO CAPITAL GAINS TAX BUT EXEMPT FROM DOCUMENTARY STAMP TAX.

• The CTA denied the taxpayer’s refund of CGT but allows refund of DST in an involuntary sale of property to the government.
• Under the law, a capital gains tax is imposed on the gains presumed to have been realized in the sale, exchange or disposition of lands and/or buildings held as capital asset.
  • In this case, the subject property was auctioned by the city of the government due to the owner’s failure to pay the real property tax. In the absence of bidder, the property was sold to the city government. Thereafter, the taxpayer failed to exercise its right of redemption, therefore, the ownership was transferred to the city government.
  • Despite the involuntary nature of the transfer, there is no question that ownership was transferred to the city government through sale, exchange or disposition within the purview of the tax law.
• As a general rule, DST is imposed on all conveyances, deeds, instruments or writings whereby any land sold is transferred to the purchaser. By way of exception, all certificates, documents and papers covering sale of delinquent property to the province, city or municipality shall be exempt from DST.
  • In this case, since the buyer is the city government, the involuntary sale shall be exempt from DST.
• Thus, refund of CGT was denied, but refund of DST was granted (City Government of Valenzuela v. Dulay, CTA Case No. 9872, September 17, 2020)

PHP 92 MILLION  EXCESS AND/OR UNUTILIZED CREDITABLE INPUT VAT DENIED;

All Renewable Energy Developers are entitled to zero-rated VAT on its purchases of local supply of goods, properties and services needed for the development, construction and installation of plant facilities.To avail of the incentives, the following documents must be submitted: DOE Certificate of Registration, Registration with the Board of Investments; and Certificate of Endorsement by the DOE, on a per transaction basis.

• The CTA denied the taxpayer’s refund of excess and/or unutilized creditable input VAT for failure to present Department of Energy’s (DOE)  Certificate of Endorsement.
• All Renewable Energy Developers are entitled to zero-rated VAT on its purchases of local supply of goods, properties and services needed for the development, construction and installation of plant facilities. To avail of the incentives, the following documents must be submitted:
  • DOE Certificate of Registration
  • Registration with the Board of Investments; and
  • Certificate of Endorsement by the DOE, on a per transaction basis
• The foregoing documents must all be presented, otherwise, the transaction between the concerned RE Developer, as purchases, cannot be treated as subject to VAT zero-rating.
• In the instant case, the taxpayer failed to present Certificate of Endorsement by the DOE on a per transaction basis. Therefore, the taxpayer’s sale to the RE Developer cannot be considered as subject to VAT zero-rating.

Thus the claim for refund of excess and/or unutilized creditable input VAT was denied. (Vestas Services Philippines, Inc. v. CIR, CTA Case No. 9604, September 16, 2020)