Month: September 2022

BIR LIFTS THE SUSPENSION OF THE CONDUCT OF ENFORCEMENT ACTIVITIES AND OPERATIONS COVERED BY OUTSTANDING MISSION ORDERS (MOS) AND REMOVAL OF THE PROHIBITION ON THE ISSUANCE OF NEW MOS AUTHORIZING SUCH ACTIVITIES AND OPERATIONS UNDER REVENUE MEMORANDUM CIRCULAR NO. 77-2022. (RMC No. 127-2022, September 7, 2022)

• Under RMC No. 77-2022 dated May 30, 2022, the BIR suspended and prohibited the all field audits and other field operations covered by outstanding Mission Orders.
• The MOs authorizes the conduct of enforcement activities and operation of any kind, including: ocular inspection, surveillance activities, stock-taking activities and implementation of administrative sanction of suspension and temporary closure of business
• Effective immediately, the BIR lifted and removed the said suspension and prohibition.

THE BIR PROVIDES POLICIES AND GUIDELINES FOR THE ISSUANCE OF INTERNATIONAL CARRIERS SPECIAL CERTIFICATE. RMC No. 37-2022, September 16, 2022

• The said circular covers international carriers applying for International Carriers Special Certificate (ICSC).
• New applicants shall register and secure TIN online via ORUS and upload documents therein.
• Taxes to be paid:
  • Income tax – 2/12% based on Gross Philippine Billings (to be computed using the exchange rate at the time of payment), unless subject to preferential rate or exempted on the basis of applicable tax treaty or international agreement to which the Philippines is a signatory or on the basis of reciprocity
  • 3% percentage tax (common carrier’s tax)
• Application of ICSC:
  • ICSC to be issued only upon payment of common carrier’s tax and 2.5% income tax.
• Regional Director No. 7A – Quezon City shall issue the ICSC

BIR RULINGS

• Sale of house and lot duly registered with the Department of Human Settlements and Urban Development (DHSUD) is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. Moreover, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: PSH-148-2022, PSH-158-2022, PSH-162-2022, PSH-168-2022, PSH-169-2022)

• The purchases of goods/articles under the construction/development of NHA’s Socialized Housing Program is exempt from project-related income tax, creditable withholding tax and value-added tax on its income received directly in connection with the mentioned project. However, the purchases of goods/articles of the said company shall be subject to VAT, even if the said purchases are to be used for social housing projects and must issue VAT exempt official receipts on its gross receipts from the said socialized housing project. (BIR Ruling No: Certificate of Tax Exemption No: NSH-157-2022, NSH-159-2022, NSH-163-2022)

• Sale of house and lot under economic and low-cost housing project of a company duly registered with the Board of Investments under Executive Order (EO) No. 226 is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. In addition to that, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling Nos: Certificate of Tax Exemption No: BOI-LEH-149-2022, BOI-LEH-150-2022, BOI-LEH-151-2022, BOI-LEH-156-2022)

• A sale of parcel of land by private individuals in favor of homeowners association under a Community Mortgage Program (CMP), is not subject to capital gains tax pursuant to Section 32 (b) of Republic Act (RA) No. 7279, as amended by RA No. 10884.
  • The transaction is, however, subject to documentary stamp tax under Section 196 of the National Internal Revenue Code (Tax Code) of 1997, as amended.
  • Registry of Deeds shall transfer the title only if Certificate Authorizing Registration is used by the BIR. (BIR Ruling No: Certificate of Tax Exemption No: CMP-152-2022, CMP-161-2022, CMP-164-2022, CMP-165-2022, CMP-166-2022)

• A non-stock and non-profit corporation with primary purpose of being an educational institution is exempted from income tax and VAT only on revenues or receipts generated from:
  • Tuition fee and other school fees: and
  • Income derived from the operation of cafeterias/canteen, dormitories, and bookstores located within its premises, owned and operated by the corporation to be actually, directly and exclusively used for educational purposes.
  • However, the corporation is liable to all other including those below:
    • Income derived from any of its properties, real or personal, or any activity conducted for profit, which income should be returned for taxation unless they are actually, directly and exclusively used for educational purposes;
    • If engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, its revenues derived therefrom shall be subject to the 12% VAT, in case the gross receipts from such sales exceed Three Million Pesos (Php3,000.000.00), or the 3% percentage tax, if the gross receipts do not exceed Php3,000.000.00;
  • Acts as an employer and its employees receive compensation income subject to the withholding tax; (BIR Ruling Nos: Certificate of Tax Exemption No: SH30-153-2022, SH30-154-2022, SH30-155-2022)

• The Deed of Absolute Donation being a gift in favor of a religious corporation is exempt from the payment of the donor’s tax pursuant to Section 101 (A) (1) of the Tax Code, subject to the condition that not more than thirty percent (30%) of said gift shall be used by the done for administration purposes.
  • The Deed of Donation is likewise not subject to the Documentary Stamp Tax (DST) under Sec. 196 but only to the DST of P15.00 imposed under Sec. 188.(BIR Ruling No: Certificate of Tax Exemption No: DT-160-2022)

• Borrowing and lending of securities within the borrowing period not exceeding two years and the delivery of the collateral are exempt to capital gains tax (CGT), stock transaction tax and documentary stamp tax (DST)
  • The Lender/Agent and Borrower/ Agent are required to submit bi-annually reports of outstanding and liquidated Securities Borrowing and Lending (SBL) Transactions and Stock Returns within the period provided under (RR) No. 10-2006.
  • Violation of these requirements shall subject the transaction to taxes.
  • Moreover, the transaction shall also be subject to the penalties provided under Sections 248 and 249. (BIR Ruling No: MSLA-167-2022)

• Joint ventures or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the government is not taxable as a corporation for complying with the conditions:
  • The Joint Venture is for the undertaking of construction project;
  • The Joint Venture involves joining or pooling of resources by licensed local contractors (licensed as general contractor by the PCAB);
  • The local contractors are engaged in construction business;
  • The Joint Venture itself is duly licensed by the PCAB; and therefore not subject to the corporate income tax.
    • Moreover, the gross payments are likewise not subject to the two percent (2%) creditable withholding tax, and being exempt from corporate income tax, is not required to file quarterly and final adjustment returns.
    • However, the co-ventures are separately subject to the regular corporate income tax imposed on their taxable income during each taxable year derived by the construction project and the net income of the co-ventures derived from is subject to the creditable withholding tax imposed.

Finally, the co-ventures are required to enroll themselves to the Bureau of Internal Revenue’s Electronic Filing and Payment System (eFPS). The enrollment should be done at the Revenue District Office (RDO) where they are registered as taxpayers. (BIR Ruling No: JV-170-2022)

BIR TO LAUNCH ONLINE REGISTRATION AND UPDATE SYSTEM (ORUS); TAXPAYERS ARE ADVISED TO UPDATE RECORDS USING REGISTRATION UPDATE SHEET (RUS); OFFICIAL EMAIL ADDRESSES SHOULD BE PROVIDED, WHERE THE BIR SHALL SERVE ITS ORDERS, NOTICES, LETTER, AND OTHER PROCESS/COMMUNICATIONS. RMC No. 122-2022

• The BIR prescribes the guidelines in updating the registration information record of taxpayers who will enroll in the Bureau's Online Registration and Update System (ORUS).
• The BIR will launch ORUS allowing taxpayers to register, update and transact registration-related transactions online
• Purpose of Circular: to advise taxpayers to update their registration records to enroll in ORUS
• Taxpayers shall update their registration records, such as e-mail address, contact information using the S1905 – Registration Update Sheet (RUS)
  • Email address should be official email address
  • Email address shall be used in serving BIR orders, notices, letters, and other processes/communications to the taxpayers
• For taxpayers with head office – head office registration shall be updated first before updating the branches
• Employers to inform employees regarding this requirement
• Submission of RUS – via email to the BIR (list may be accessed HERE.

BIR CLARIFIES REMOVAL OF 5-YEAR VALIDITY PERIOD ON RECEIPTS/INVOICES; RECEIPTS/INVOICES EXPIRING BEFORE JULY 15, 2022 ARE NO LONGER VALID AND SHOULD BE RETURNED FOR DESTRUCTION TO THE BIR; P20,000 (FIRST OFFENSE) AND P50,000 (SECOND OFFENSE) FOR USE OF EXPIRED RECEIPTS OR INVOICES RMC No. 123-2022

• The BIR  clarifies the provisions of Revenue Regulations No. 6-2022 relative to the removal of the five (5) – year validity period on receipts/invoices

BIR RULINGS

• The bonus payments granted by the company to its employees are considered compensation income and are not exempt from withholding tax.
  • The employer must withhold from compensation paid on computed amount
  • The company should deduct and withhold the proper tax at the time the income payment is paid (BIR Ruling No: OT-133-2022)
• Sale of house and lot under economic and low-cost housing project of a company duly registered with the Board of Investments under Executive Order (EO) No. 226 is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. In addition to that, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: BOI-LEH-135-2022)
• Sale of house and lot duly registered with the Housing and Land Use Regulatory Board (HLURB) is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. Moreover, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: PSH-136-2022, PSH-137-2022, PSH-138-2022, PSH-139-2022, PSH-140-2022,  PSH-141-2022, PSH-142-2022, PSH-143-2022)
• The purchases of goods/articles under the construction/development of NHA’s Socialized Housing Program is exempt from project-related income tax, creditable withholding tax and value-added tax on its income received directly in connection with the mentioned project. However, the purchases of goods/articles of the said company shall be subject to VAT, even if the said purchases are to be used for social housing projects and must issue VAT exempt official receipts on its gross receipts from the said socialized housing project. (BIR Ruling Nos: Certificate of Tax Exemption No: NSH-144-2022, NSH-145-2022, NSH-146-2022, NSH-147-2022)

FIELD AUDIT AND OTHER FIELD OPERATIONS ON ALL OUTSTANDING LETTERS OF AUTHORITY (LOA)/ AUDIT NOTICES AND LETTER NOTICES (LN) SHALL BE LIFTED PER INVESTIGATING OFFICE UPON APPROVAL OF THE COMMISSIONER OF INTERNAL REVENUE. (RMC No. 121-2022)

• The BIR prescribes the guidelines on the lifting of suspension of field audit and operations pursuant to Revenue Memorandum Circular No. 77-2022.
• Lifting is on a per Investigating Office upon approval by the Commissioner of Internal Revenue (CIR) of the Memorandum Request.
  • Investigating Office: Revenue District Office, Regional Investigation Division, VAT Audit Section, Office Audit Sections, Large Taxpayer VAT Audit Unit, Large Taxpayers Audit Divisions or National Investigation Division.
• Upon approval of Memorandum Request by the CIR, the Investigating Office shall immediately resume its field audit and other field operations on all outstanding Letter of Authority (LOAs), Audit Notices, and Letter Notices.
• No new LOAs, written orders to audit and/or investigate taxpayers’ internal revenue tax liabilities shall be issued and/or served except:
  •  (a) in those cases enumerated under RMC No. 77-2022
    • Investigation of cases prescribing on or before October 31, 2022, processing and verification of estate tax returns, donor's tax returns, capital gains tax returns and withholding tax returns on the sale of real properties or shares of stocks together with the documentary stamp tax returns related thereto; Examination and/or verification of internal revenue tax liabilities of taxpayers retiring from business; o Audit of National Government Agencies (NGAs), Local Government Units (LGUs) and Government Owned and Controlled Corporations (GOCCs) including subsidiaries and affiliates; and Other matters/concerns where deadlines have been imposed or under the orders of the Commissioner of internal Revenue; and
  • (b) in case of re-issuance/s to replace previously issued LOA/s due to change of revenue officer and/or group supervisors.

TAXPAYERS ENGAGED IN THE EXPORT OF GOODS AND SERVICES, ELECTRONIC COMMERCE (E-COMMERCE) AND LARGE TAXPAYERS ARE MANDATED TO ISSUE ELECTRONIC RECEIPTS OR SALES/COMMERCIAL INVOICE. (Rev. Regs. 8-2022)

The BIR prescribes policies and guidelines for the implementation of the use of the Electronic invoicing/receipting System (EIS)

SALES AND PURCHASE DATA GENERATED AND VERIFIED THRU ELECTRONIC INVOICING/RECEIPTING SYSTEM (EIS) ARE ADMISSIBLE AT THE TIME OF AUDIT OR INVESTIGATION OR VERIFICATION OF THE TAXPAYER. (Rev. Regs. No. 9-2022)

• The BIR prescribes the policies and guidelines for the admissibility of sales documents in electronic format.
•  Sales and purchase data (generated and verified thru EIS) are admissible at the time of audit or investigation or verification of the taxpayer.
  •  Sales/purchase  must comply with information/data requirements under the rules;
  •  Zero-rated stamping is no longer necessary since sales shall be reported to EIS for each classification (VATable, zero-rated and exempt)
• Submission of printed copies of sales invoice or receipts shall no longer be required.
  •   TP must be duly authorized to use the EIS.
  •   EIS may be either web-based format or through Application Programming Interface (API) transmission of sales data.
• Submission of printed invoice/receipts for purchases shall no longer be required.
  •  Suppliers must be using web-based  issuance in the EIS or via SDTS
  •  The purchase data must be validated in the EIS for purposes of input VAT and deductibility of expenses
  •  If not reported in the EIS by the supplier, the sales shall be considered unreported and subject to further investigation
  •  Original form or digital copies, whichever is applicable must be retained in case of demand for verification of data.
• Taxpayers may be required to present/submit hard copies of the receipts or invoices or allowed access to the CAS, under the following instances:
  •   Missing or vague details the invoice/receipts that were transmitted to the EIS, which the investigating revenue officer needs further clarification;
  •   Information are not included in the data required to be transmitted to the EIS;
  •   Validation of export sales data during the verification of VAT refund claims;
  •   Taxpayer is under fraud investigation;
  •   Skipped or missing series in the invoices or receipts issued; and/or
  •   Other instances as may be determined by the CIR
• Sampling may be allowed.
• BIR may access the CAS or POS/CRM machines under EIS to validate whether sales transmitted to EIS matches the sales recorded in the system.
• If taxpayer refuses access to the CAS, the BIR may employ alternative means to verify the records of the taxpayer.
  •  Refusal may also result in possible disallowances or assessments
  •   Violation of revenue regulations on maintenance, retention and submission of electronic records (RR9-2009), may result in the prosecution of the taxpayer.
  •   Acknowledgement Certificate or Permit to Use CAS may also be revoked.
•   Sales and purchases not covered by this regulation shall comply with rules for manual verification of sales and purchases.

BIR RULINGS

• Joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government is not taxable as a corporation provided that the joint venture complied with the conditions provided in RR No. 10-2012. (BIR Ruling No: Certificate of Tax Exemption No: JV-128-2022)
• Income or gain derived by employees from their exercise of the stock options is considered as additional compensation subject to income tax and consequently to withholding tax on compensation. However, if the said stock option is granted to employees holding supervisorial and/or managerial position shall be subject to fringe benefits tax. (BIR Ruling No: OT-130-2022)
• Income derived by the inventor from technologies and invention is exempt from income tax. In addition, the government’s purpose of enacting the Inventors and Inventions Incentives Act is to provide incentives to inventors and protect their exclusive right to the invention, particularly when it is beneficial to the people and contributes to national development and process. (BIR Ruling No: INV-131-2022)
• All contracts, deeds, documents and transactions entered into by the BSP which are related to the conduct of its business are exempt from the payment of DST. (BIR Ruling No: OT-132-2022)
• Transfer of subdivided lots in favor of a housing member-beneficiaries of homeowners’ association is exempt from CGT and CWT considering that the transfer is only a formality to finally effect the transfer of the property to the member-beneficiaries who bought the property from the former owner through the association. In other words, the Association is merely transferring the ownership of the property to its member-beneficiaries who actually own them.
  • Moreover, the transfer is exempt from donor’s tax as there is no donative intent on the part of the association to donate the property to the members-beneficiaries, considering that it could not donate the property the ownership of which already belongs to the members-beneficiaries.
  •  It is not also subject to DST. However, the notarial acknowledgment of the deed of conveyance is subject to the DST of P30.00. (BIR Ruling No: CMP-134-2022)
• Importation of a cargo vessel destined for domestic transport operations shall be exempt from VAT. Provided that the VAT exemptions shall be subject to the requirements on restriction vessel importation and mandatory vessel retirement program of MARINA. (BIR Ruling No: Certificate of Tax Exemption No: VAT-127-2022)
• Sale of house and lot duly registered with the Housing and Land Use Regulatory Board is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. In addition to that, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: PSH-129-2022)
  •  Sale of house and lot under economic and low-cost housing project of a company duly registered with the Board of Investments under Executive Order (EO) No. 226 is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. In addition to that, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No:, BOI-LEH-120-2022)
  • Sale of house and lot duly registered with the Department of Human Settlements and Urban Development (DHSUD) is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. In addition to that, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: PSH-121-2022)