Month: January 2022

EXTENSION OF THE BUREAU OF INTERNAL REVENUE DEADLINES FOR TAXPAYERS WITHIN THE JURISDICTION OF REVENUE REGIONAL AND DISTRICT OFFICES OF THE BUREAU OF INTERNAL REVENUE CLASSIFIED UNDER ALERT LEVEL 3 OR HIGHER (Revenue Regulation No. 1-2022, January 27, 2021)

• Statutory deadlines for the following activities fall during the period declared as Alert Level 3 or higher by the IATF this month of January 20022 will be extended for thirty (30) calendar days from their due dates:
  • Submission and/or filing of the documents and/or returns, as well as the corresponding taxes due thereon
  • Filing of position papers, replies, protests, documents and other similar letters and correspondences in relation to the on-going BIR audit investigation
  • Filing of application for tax refunds, including VAT refund, and processing of VAT refund claims: and

Issuance and service of Assess Notice, Warrants of Distraint and/or Levy, as well as Warrants of Garnishment, to enforce collection of deficiency taxes.

BIR RULINGS

• Money transfer remittances released to recipients in the Philippines on behalf of the various offshore money companies are exempt from documentary stamp taxes
  • There shall be collected a documentary stamp tax of sixty centavos (Php 0.60) on each two hundred pesos (Php 200) on the following:
    • Bills of exchange – unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay or demand or a fixed or determinable future time a sum certain in money to order or to bearer.
    • Letter of credit – are those issued by one merchant to another or for the purpose of attending a commercial transaction.
    • Telegraphic transfer – a local bank cables to a certain bank in foreign currency with which the local bank has a credit and directs that foreign bank to pay to another bank or person in the same locality a certain sum of money.
  • Money transfer remittances cannot be considered as one of the above-mentioned transactions as the principal amount is not drawn from the credit of the sender but it is withdrawn in cash by a specific recipient in the Philippines and the order is not made through telegraphic transfer. (BIR Ruling No. OT-326-2021, August 31, 2021).
• Hospital services, including laboratory services, are considered transactions exempt from VAT.
  • A service provider shall not pass on VAT to its clients on its hospital and laboratory services because said transactions are not subject to VAT.
  • However, in relation to the conduct of diagnostic services, whether such is also exempt from VAT shall depend on how they are provided. Diagnostic services provided by the employee of the hospital are VAT-exempt. On the other hand, diagnostic services, when rendered by an independent professional (consultant), shall appropriately be subject to VAT in the hands of the professional who performs it. Lastly, a pharmacy or drug store, the sale of drugs and medicines is subject to VAT. (BIR Ruling No. VAT-329-2021, September 11, 2021).

• Merger between corporations where the constituents corporation shall transfer their assets and liabilities to the surviving corporation and cancel their shares and surviving corporation shall issue shares is considered tax free.(BIR Ruling No. 330-2021, September 14, 2021)

• There shall be stock transaction tax on every sale, barter, exchange or other disposition of shares of stock listed and traded though local stock exchange other than the sale by a dealer in securities.
  • The tax rate is six-tenths of one percent (6/10 of 1%) of the gross selling price or gross value in money of shares of stock in every sale, barter, exchange or otherwise disposed which shall be paid by the seller or transferor.
  • Where the PSE shares are sold to brokers of Singapore stocks exchange (SGX), and the same shares are traded through Singapore stocks exchange (SGX) via secondary listing, the shares sold via SGX is subject to percentage tax because it still involves disposition of the shares regardless where shares are sold (BIR Ruling No. OT-331-2021, September 20, 2021)

• Non-stock savings and loan associations (NSSLAs) as a non-stock, non-profit corporation, is engaged in the business of accumulating the savings of its members and using such accumulations for loans to members to service the needs of households by providing long term financing for home building and development and for personal finance shall confine it membership to a well-defined group of person and shall not transact business with the general public.
  • NSSLA is under the direct supervision and regulation of the Bangko Sentral ng Pilipinas (BSP) and, for regulatory purposes, they are classified as Non-Bank Financial Intermediaries (NBFIs) under the BSP Manual of Regulations.
  • NBFI is generally subject to Gross Receipts Tax (GRT) on income derived from its operations, unless otherwise exempted under special rules.
  • If here the NSSLA, even considered an NBFI, only accepts deposit and grants loan only to its members and does not transact with the general public and is organized and operated exclusively for the mutual benefits of its members, and all funds received from the a members are accumulated and utilized for the common benefit of the members, the said NSSLA is exempt from income tax (BIR Ruling No. OT333-21, September 21, 2021).

• Capital asset shall refer to the real properties held by a taxpayer, whether or not connected with trade or business, and which are not included among the real properties considered as ordinary assets.
  • Ordinary asset shall refer to the following:
    • Stock in trade of taxpayer or other real property of a kind which should be properly included in the inventory
    • Real property primarily held for the sale to customers in the ordinary course of business
    • Real property used in trade or business of a character which is subject to allowance for depreciation.
    • Real property used in trade or business of the taxpayer.
  • The determining factor in distinguishing an asset if it is a capital asset or ordinary asset is the actual use of the said property.
  • Where the taxpayer is not engaged in the real estate business and upon showing that the asset has not been used in the business for more than two (2) years prior to consummation of taxable transaction, and though classified as ordinary asset, shall be automatically converted to capital asset;
  • Leased property is considered an ordinary asset. (BIR Ruling No. VAT-334-2021, September 23, 2021)

• CGT on the transfer/disposition of shares of stock is imposed on the gain or profit. DST is imposed upon execution of the deed transferring ownership or rights on the shares in favor of another.
  • Thus, the transfer of membership shares between a previous trustee and successor trustee is not subject to capital gains tax and DST considering that that the transfer involves neither monetary consideration nor change in beneficial ownership.
  • There is no actual transfer of ownership, sale, exchange, barter or disposition of property. (BIR Ruling No. OT-338-2021 September 27, 2021; OT-246-2021, October 4, 2021)

• Provident Plans are exempted from income tax provided that the following conditions are met:
  • Contributions are made to the trust of the employer, or employees or both;
  • Such conditions are made for the purpose of distributing to such employees the earnings and principal of the fund accumulated; and
  • Under the trust instrument, it is impossible for any part of the corpus or income to be used for, or diverted to, purposes other than for the exclusive benefit of the employees. (BIR Ruling No. OT-363-2021 October 4, 2021; OT-364-2021 October 4, 2021)
• The BIR Commissioner has the power to grant in meritorious cases a 30-day extension to file Estate Tax Return.
  • Circumstances such as the heirs are still in the process of completing the documentary requirements for the filing of the estate tax return due to considerable grief brought about the by the passing of the deceased such that the surviving spouse has custody of the documents, and one of the heirs resides in Davao City, are considered meritorious  (BIR Ruling No. OT-366-2021, October 4, 2021)
• Electric Cooperatives (EC) registered with the National Electrification Administration (“NEA”) are subject to the following:
  • 20% final income tax on interest from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements and royalties derived from sources within the Philippines;
  • 15% final income tax on interest income derived from a depository bank under the expanded foreign currency deposit system;
  • Capital Gains Tax on sales or exchanges of real property classified as capita assets and on sale, exchange and other disposition of shares of stock except shares sold or disposed of through the stock exchange;
  • Documentary Stamp Taxes on transactions of cooperatives dealing with non-members, except transactions with banks and insurance companies, Provided, that whenever one party to the taxable document enjoys the exemption from DST, the other party who is not exempt shall be the one directly liable for the tax;
  • VAT billed on purchase of goods and services;
  • All other taxes for which the ECs are not otherwise expressly exempted by any law.
  • VAT on gross receipts; zero-rated if sale of power is generated through renewable sources of energy (BIR Ruling No. OT-367-2021, October 4, 2021)
• DOF Department Order No. 017-04, which implements R.A. No. 9178, otherwise known as the Barangay Micro Business Enterprises (“BMBE’s”) Act of 2002, provides that it is the Revenue District Office that has jurisdiction over the principal office or place of business of the BMBE-registered taxpayer, and not the Revenue Region that processes and approves applications for tax exemptions.
  • Income taxes of registered BMBE’s are exempt from income tax on income arising purely from its operations as such BMBE except: interest, royalties, prizes and other winnings, cash and/or property dividends, capital gains from the sale of shares of stock not traded through the stock exchange, capital gains from the sale or other disposition of real property, the share of an individual in the net income after tax of an association, a joint account, or a joint venture or consortium, the share of an individual in the distributable net income after tax of a taxable partnership of which he is a partner, income from the practice of profession received directly from the clients or from the professional partnership of which the individual is a partner, compensation, and all other forms of passive income and income from revenues not effectively connected with or arising from operations of the BMBEs as such.
  • However, availment of income tax exemption by BMBE-registered taxpayers must comply with the provisions of Sections 1, 2, and 3 of Rule 3 of DOF Order No. 17-04. In addition, BMBEs are mandated to file income tax return pursuant to Section 52 of the Tax Code, as amended.
  • Finally, if a BMBE is also entitled to exemption from income tax under any law other than R.A. 9178, the same must be stated in its registration form. No BMBE is allowed double or multiple availment of income tax exemption privileges. (BIR Ruling No. OT-368-2021, October 4, 2021)
• The sale of a parcel of land by the National Housing Authority (“NHA”) to the Roman Catholic Bishop of Antipolo, Inc. is not exempt from taxes.
  • Although the Roman Catholic Bishop of Antipolo, Inc. is a religious organization duly registered with the SEC, and NHA is a government corporation duly organized by virtue of P.D. No. 757, the sale of a parcel of land by NHA to the Roman Catholic Bishop of Antipolo, Inc. is subject to 6% creditable withholding tax.
  • Citing BIR Ruling No. 301-18 dated March 2, 2018 where the BIR ruled that only the sale of socialized housing as defined under Section 3(r) of R.A. 7279 comes within the purview of tax exempt transactions of the NHA, the BIR reiterated the same and found that the transaction is subject to 6% creditable withholding tax considering that the sale by NHA to the Roman Catholic Bishop of Antipolo, Inc. is not in connection with NHA’s mandate of providing socialized housing for the underprivileged and homeless.
  • Moreover, under Section 3 of Revenue Regulation No. 6-2001, it is the buyer/withholding agent, Roman Catholic Bishop of Antipolo, Inc., who shoulders payment of the creditable withholding tax. Documentary Stamp Taxes is as well due since the sale is not intended for socialized housing. (BIR Ruling No. OT-369-2021, October 4, 2021)
• The transfer of shares owned by a corporation to its 100%-owned subsidiary is considered a tax-free exchange and is exempt from income tax and documentary stamp tax.
  • Section 40(C)(2) of the Tax Code provides that “no gain or loss shall be recognized on a corporation or on its stock or securities if such corporation is a party to a reorganization and exchanges property in pursuance of a plan of reorganization solely for stock or securities in another corporation that is a party to the reorganization.” According to the BIR, the underlying assumption for this tax-free exchange provision is that the new property received is substantially a continuation of the old investment still unliquidated.
  • However, it must be noted that the said tax-free provision merely defers recognition of the gain or loss from such transaction for in determining the gain or loss from a subsequent transaction of the properties or stocks involved in the exchange, the original or historical cost of the properties or stocks is considered. Thus, if the transferor later sells or exchanges the shares of stock it acquired in the exchange, it shall be subject to income tax on gains derived from such sale or exchange, taking into consideration that the cost basis of the shares shall be the same as the original acquisition cost or adjusted cost basis to the transferor of the property exchanged. (BIR Ruling No. OT-370-2021, October 6, 2021)
• The merger between Northern Cement Corporation (“NCC”), the surviving corporation, and San Miguel Northern Cement, Inc. (SMNCI”), the absorbed corporation, qualifies as a tax-free exchange pursuant to Section 40(C)(2) in relation to Section 40(C)(6)(b) of the National Internal Revenue Code (“Tax Code”) of 1997, as amended.
  • the merger between NCC and SMNCI is a merger within the contemplation of to Section 40(C)(2) in relation to Section 40(C)(6)(b) of the National Internal Revenue Code (“Tax Code”) of 1997, as amended, because NCC acquired/assumed all the assets and liabilities of SMNCI, and the same was undertaken in order to simplify the operations, improve administrative efficiency, increase financial strength, eliminate duplication of functions and maintenance costs, and attain greater efficiency and economy in the management of the businesses for the mutual advantage of NCC and SMNCI. Hence, the merger between NCC and SMNCI was undertaken for a bona fide business purpose and not for the purpose of escaping the burden of taxation.
  • In addition, the transfer of assets/properties of SMNCI to NCC as a consequence of the merger is exempt from value-added tax (“VAT”) pursuant to Section 109(X) of the Tax Code of 1997, as amended. The transfer of assets/properties to effectuate a merger is not made in the course of business but by operation of law pursuant to the merger.
  • Also, no documentary stamp tax (“DST”) is due on the transfer of assets made pursuant to the merger under Section 199(m) of the Tax Code of 1997, as amended, in relation to Section 40(C)(2) of the Tax Code of 1997, as amended. Consequently, no DST is due on the surrender by SMNCI shareholders of their SMNCI shares for cancellation. Nevertheless, DST at the rate of P2.00 on each P200 par value, or fractional part thereof, shall be imposed on the original issuance of shares by NCC in favor of the shareholders of SMNCI as a consequence of the merger pursuant to Section 174 of the Tax Code of 1997, as amended.
  • Moreover, the excess and unutilized creditable withholding tax (“CWT”) of SMNCI, as of the effective date of the merger, which forms part of the assets to be transferred by the absorbed corporation to NCC as a consequence of the merger, may be applied as a tax credit by NCC against income tax due or may be the subject of a claim for refund or issuance of a tax credit certificate (“TCC”).
  • Finally, the excess and unexpired minimum corporate income tax (“MCIT”) of SMNCI, as one of the rights, privileges, property and/or interest of SMNCI, shall be transferred to and vested in NCC on the effective date of the merger and shall be carried forward and credited against its regular corporate income tax due for the three (3) immediately succeeding taxable years pursuant to Section 27(E)(2) of the Tax Code of 1997, as amended. . (BIR Ruling No. OT-371-2021, October 6, 2021)
• The importation of aircraft, engines, equipment, machinery, spare parts, accessories, commissary and catering supplies or materials by Pilipinas Asian Pearl Airways, Inc. (Pilipinas Air) is exempt from VAT, subject to the requirements as may be provided under the existing rules and regulations of the Civil Aeronautics Board (“CAB”) and the Civil Aviation Authority of the Philippines (“CAAP”).
  • Pilipinas Air, as a grantee of congressional franchise to establish, operate, and maintain domestic and international air transport services under Republic Act No. 10901, is exempt from the payment of VAT for the sale, importation or lease of passenger cargo vessels and aircraft, including engine, equipment, and spare parts thereof for domestic or international transport operations pursuant to Section 109(l)(T) of the National Internal Revenue Code, as amended. (BIR Ruling No. OT-372-2021, October 6, 2021)
• The sale of a parcel of land by the Land Bank of the Philippines (“LBP”) to farmer-beneficiaries pursuant to R.A. No. 6657, otherwise known as the “Comprehensive Agrarian Reform Law of 1988”, is exempt from payment of Capital Gains Tax and Documentary Stamp Tax. (BIR Ruling Nos. OT-381-2021 and OT-382-2021, October 11, 2021)
  • Reconveyance of real property pursuant to a Deed of Reconveyance is l subject to payment of Capital Gains Tax and Documentary Stamp Tax.
  • Facts disclosed show that sometime in 2010, Anthony Subido De Sales (“Anthony”) transferred title over a parcel of land in favor of Margarita De Jesus Ortega (“Margarita”) based on a promise by the latter to pay the contract price of the land. However, after transfer of title was made, Margarita failed to make payment, and thus the execution of a Deed of Reconveyance in order to transfer title back to Anthony. In reply, the BIR ruled that the transfer based on the Deed of Reconveyance is still subject to Capital Gains Tax and Documentary Stamp Tax since the same still falls under “other disposition of real property” under Section 24(D)(1) of the National Internal Revenue Code (Tax Code) of 1997, as amended. (BIR Ruling Nos. OT-384-2021, October 13, 2021)
• The sale of chicken, pork, beef and other meat products (“meat products”), which have undergone the simple process of preparation and preservation for the market, is considered a sale of such products in their original state, and thus, VAT exempt.
  • San Miguel Foods, Inc. (“SMFI”) is a domestic corporation that sells raw or uncooked meat products. Given the same, the BIR ruled that under Section 109(1)(A) of the Tax Code, as amended, read with Revenue Regulation No. 16-2005, as amended, as long as the meat products of SMFI are sold raw and uncooked, the same shall be considered agricultural food products in their original state, and therefore exempt from VAT. This necessarily includes raw meat products which have undergone simple processes of “preparation”, i.e. cutting, slicing, deboning, stuffing, formed into shapes such as patties, or balls, wrapped in flour, shredding, grounding, skewering, chilling or blast frozen and “preservation” through “salting” or “curing”, even as the meats are packed using “advanced technological means”. (BIR Ruling Nos. OT-386-2021, October 13, 2021)
• All income earned from investments and reinvestments of the maximum amount allowed under R.A. 9505, otherwise known as the “Personal Equity and Retirement Account of 2008 (“PERA Act”) is exempt from payment of 1) final withholding tax on interest from any currency bank deposit, yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements including expanded foreign currency deposits; 2) capital gains tax on sale, exchange, retirement or maturity of bonds, debentures or other certificates of indebtedness; 3) 10% tax on cash and/or property dividends actually or constructively received from a domestic corporation, including a mutual fund company; 4) capital gains tax on the sale, barter, exchange or other disposition of shares of stock in a domestic corporation; and 5) regular income tax.
  • To qualify under the incentives of PERA Act, each investment product must, among others, be approved by the concerned Regulatory Authority in accordance with the provisions of the Act.

Further, the following non-income taxes, if applicable, relating to the investment income of the PERA Account, shall remain imposable: 1) Percentage taxes on persons exempt from value-added tax, domestic carriers and keepers of garages, international carriers, franchise holders, overseas dispatch, message or conversion originating from the Philippines, banks and non-bank financial intermediaries performing quasi-banking functions, other non-bank finance intermediaries, life insurance premiums, agents of foreign insurance companies, amusement and winnings; 2) Value-added tax; 3) Stock transaction tax on the sale, barter, or exchange of shares of stock listed and traded through the local stock exchange or through initial public offering; and 4) Documentary stamp tax. (BIR Ruling Nos. OT-405-2021, November 3, 2021)

COMPROMISE PENALTY SHOULD NOT FORM PART OF ASSESSMENT NOTICE FOR DEFICIENCY BASIC TAX, SURCHARGE, AND INTEREST BUT SHOULD APPEAR IN A SEPARATE ASSESSMENT NOTICE/DEMAND (Revenue Memorandum Circular No. 3-2022, January 14, 2022)

• Compromise penalties are amounts collected in lieu of criminal prosecution for violation committed by the taxpayer, where payment is based on a compromise agreement validly entered into between the taxpayer and the Commissioner of Internal Revenue.
• Compromise penalties should not form part of assessment notice for deficiency basic tax, surcharge and interest but should appear in a separate assessment notice/demand as the amount suggested is in lieu of criminal prosecution.
• Preliminary Assessment Notice (PAN) and Formal Letter of Demand shall now be composed of Part I and Part II, as follows:
  • Part I shall pertain to deficiency basic tax(es) and civil penalties
  • Part II shall pertain to the assessed compromise penalty(ies) relative to the violations uncovered during the conduct of audit.

DOCUMENTARY STAMP TAX IS IMPOSED ON THE TRANSFER OF SHARES (A) BY WAY OF DONATION; (B) BY WILL; AND (C) WHEN THERE IS RENUNCIATION/WAIVER OF SHARE OF INHERITANCE (Revenue Memorandum Circular No. 6-2022, January 18, 2022)

 Documentary stamp tax is imposed on all sales, agreements to sell,  memoranda of sales, deliveries, or transfer of shores or certificates of stock

• There shall be collected a documentary stamp tax of one peso and fifty centavos (P1.50) on each Two hundred pesos (P200), or fractional port thereof, of the per value of such stock.
• DST is levied on the exercise by a person of certain privileges conferred by law for the creation, revision or termination of specific legal relationship through execution of specific instruments.
• The following transfer of stock shall also be subject to DST:
  • Transfer pursuant to Deed of Donation
  • Transfer pursuant to a Will of the Decedent as approved by the probate court in a Judicial Settlement of the estate
  • Generally, transfer of shares stock from the decedent’s estate to the heirs through intestate succession (without a Will) is not subject to DST. However, in case of Judicial or Extra-Judicial Settlement of Estate (both without a Will), renunciation of an heir of his/her share over the inheritance in favor of another heir shall also be subject to DST.

CREATION OF ALPHANUMERIC TAX CODE (ATC) FOR REVENUE SOURCE UNDER REPUBLIC ACT (RA) NO. 9505, OTHERWISE KNOWN AS PERSONAL EQUITY AND RETIREMENT ACCOUNT (PERA) ACT OF 2008 (Revenue Memorandum Order No. 3-2022, January 14, 2022)

MODIFICATION OF ALPHANUMERIC TAX CODE (ATC) OF SELECTED REVENUE SOURCE UNDER REPUBLIC ACT (RA) NO. 11534, OTHERWISE KNOWN AS CORPORATE RECOVERY AND TAX INCENTIVES FOR ENTERPRISE (CREATE) ACT (RevenueMemorandum Order No. 4-2022, January 14, 2022)

BIR RULINGS

• Income received directly in connection with its sale of approved number of socialized house and lot units for residential and dwelling purposes registered with the Board of Investment for a given period (whichever is later between actual start of commercial operations/selling or January 2021 but in no case earlier than the date of registration of the project) is exempt from income tax and creditable withholding tax (CWT), provided that the selling price of house and lot units does not exceed P2,000,000.00 per house and lot.
  • Moreover, the sale by the company of residential lot valued at P1,919,500.00 and below, or house and lot and other residential dwellings valued at P3,199,200.00 and below, is exempt from value-added tax (VAT), provided, however, that beginning January 01, 2021, the exemption from VAT shall only apply to sale of house and lot and other residential dwellings valued at P3,199,200.00.
  • Sale of house and lot units in excess of the approved number of house and lot units, including those used for commercial purposes, such as leasing, retail stores, offices, etc. shall be subject to the payment of appropriate taxes.(Certificate of Tax Exemption No. BOI-LEH-320-21; BOI-LEH-321-2021; BOI-LEH-322-2021).

• Income received directly in connection with its sale of socialized house and lot units for residential and dwelling purposes to qualified beneficiaries, is exempt from income tax and creditable withholding tax (CWT), provided that the selling price of said house and lot units does not exceed P580,000.00 per house and lot packages. Moreover, the sale by the company of residential lot valued at P1,919,500.00 and below, or house and lot and other residential dwellings valued at P3,199,200.00 and below, is exempt from value-added tax (VAT), provided, however, that beginning January 01, 2021, the exemption from VAT shall only apply to sale of house and lot and other residential dwellings with selling price of not more than P3,199,200.00.
  • However, that documentary stamp tax (DST) is not of the taxes covered by the tax exemption, the documents conveying the properties shall be subject to DST. (Certificate of Tax Exemption No. PSH-325-2021, August 31, 2021).

BIR RULINGS

• Income received directly in connection with the construction/development of socialized housing units under the Government’s Socialized Housing Program is exempt from project-related income taxes, creditable withholding tax, and value added tax (VAT).
  • However, the purchases of goods/articles shall be subject to VAT, even if the said purchases are to be used for the socialized housing project. (BIR Ruling No. PSH-267-2021, July 26, 2021).

• COMELEC is exempt from 12% VAT or 3% percentage on its local purchases of goods and services as well as importation of goods that will be used relative to the conduct of elections.
  • Thus, the suppliers/sellers of goods and services to COMELEC cannot shift or pass on any VAT or percentage to COMELEC on the latter’s purchases of goods and services that will be used in the election.
  • The exemption may only be invoked by COMELEC and does not extend to suppliers with respect to the latter’s purchases and other contractual arrangements.
  • The supplier is not entitled to the tax exemption but shall be considered as the end-user who will bear or assume the burden of the tax (VAT or Percentage tax). The suppliers/sellers of goods and services to COMELEC cannot shift or pass on any VAT or percentage tax to COMELEC on the latter’s purchases of goods and services that will be used in the elections. (BIR Ruling No. OT-268-2021, July 25, 2021).

• An entity engaged by the National Housing Authority (NHA), is exempt from project-related taxes/creditable withholding tax (CWT). Income received directly in connection with the conversion and enhancement of developed lots and completed housing units shall be exempt from value-added tax (VAT). The exemption from VAT shall only apply to sale of house and lot and other residential dwellings valued at P3,199,200.00. However, an indirect tax shall be subject to VAT. (BIR Ruling NSH-269-2021; NSH-270-2021; NSH-271-2021; NSH-272-2021, July 25, 2021). 

• A Non-Stock Savings and Loan Association (NSSLA), a non-profit organization, which obtains funds exclusively from its members and does not transact business with the general public, it is considered view that Gross Receipts Tax on its lending activities is not warranted for as long as such transactions do not fall under the contemplated activities as defined by law and its rules and regulations. (BIR Ruling No. OT-274-2021, July 27, 2021).

• If the company maintains a reasonable private retirement plan, the retirement benefits that will be received by the employees shall be exempt from income tax, provided that the two (2) conditions are met: (1) the employee had been in the service of the same private firm for the last 10 years and (2) he is at least 50 years old at the time of retirement.
  • If the retirement plan was not approved by the BIR, the Labor Code shall apply, which provides that the retirement benefit shall be exempt from income tax provided that the employee had been in service for at least 5 years and at least 60 years old but not beyond 65 years old at the time of retirement. (BIR Ruling No. OT-281-2021, August 2, 2021)

• 6% capital gains tax is imposed in the sale , exchange  or other disposition of the real property located in the Philippines.
  • Disposition includes all kinds of disposition unless specifically excluded by the law or subject to another tax.  Lot Swapping Agreements is considered a disposition subject to capital gains tax and documentary stamp tax. (BIR Ruling No. OT-291-2021, August 3, 2021;BIR Ruling No. OT-281-2021)

• The following are conditions in order that the earnings of a retirement fund may be exempt from income tax  (1) the contributions are made to the trust by the employer, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust and 2) no part of the income to be used for or diverted to purposes other than the exclusive benefit of the employees.
  • It is still however subject to other applicable taxes such as DST, stock transaction tax (BIR Ruling OT-282, August 2, 2021)

• Income derived by inventors of patented products shall be exempted from income tax only during the first ten (10) years from the date of first sale subject to the rules of the Department of Finance.
  • The technologies, manufacture or sale shall be also exempt from payment of license, permit fees, custom duties and charges on imports.
  • The same privilege shall be extended to the legal heir or assignee upon the death of the inventor, and not for any other entity that commercially produces and distributes the invented products.
  • Any income received by the entity from such production/distribution/marketing is subject to the payment of appropriate taxes (BIR Ruling No. INV-292-2021, August 2021)