Month: October 2022

TO INCOME TAX, REGARDLESS THE EMPLOYMENT STATUS OF THE GRANTEE-EMPLOYEE WHO COULD BE A RANK-AND-FILE OR OCCUPYING A SUPERVISORY OR MANAGERIAL POSITION; TAX BASE IS THE FAIR MARKET VALUE; INCONSISTENT PROVISIONS OF RMC NO. 079-2014 ARE REPEALED. Revenue Regulations No. 13-2022, October 7, 2022

• The BIR prescribes the guidelines, procedures and requirements for the proper income tax treatment of equity-based compensation of any kind.
• Equity grants under applicable equity schemes (stock options, restricted share awards, stock appreciation rights, or restricted stock units) of the grantor shall give rise to a realized profit on the part of the grantee-employees.
• The equity grants to be awarded to the employees are for the services being rendered by the said employees.
• The equity grants, once exercised or availed of by the grantee-employee, are considered compensation subject to tax, regardless the employment status of the grantee-employee who could either be rank-and-file or occupying a supervisory or managerial position as Section 32 of the NIRC do not make a distinction for purposes of applying the tax implication on all forms of compensation, including equity-based compensation.
• RR 2-98 - Tax base: fair market value.
  • If the corporation transfers to its employees its own stock as remuneration of the services rendered by the employee, the amount of such remuneration is the FMV of the stock at the time the services are rendered.
• Provisions of RMC NO. 079-2014, dated October 31, 2014, inconsistent with this regulation, are revoked, repealed, or amended accordingly.

VAT ZERO-RATED: HMO PLANS ACQUIRED BY REGISTERED EXPORT ENTERPRISES FOR THE EMPLOYEES DIRECTLY INVOLVED IN THE OPERATIONS OF THE REGISTERED PROJECT OR ENTERPRISE AND FORMING PART OF THE COMPENSATION PACKAGE; HMO TO DEPENDENTS ARE VATABLE. RMC No. 137-2022, October 14, 2022

• The BIR further clarifies the guidelines on the availability of VAT Zero Rate (0%) on Health Maintenance Organization (HMO) plans acquired by Registered Export Enterprises (REEs) and prescribing the uniform template of detailed information thereof.
• The list provided in RMC 24-2022 on cost items that fall under “other expenditures” which are indispensable to the project or activity is not exclusive, as long as the same can be attributed directly to the registered activity of the REE.
• HMO plans acquired by the REEs for the employees directly involved in the operations of the registered project or enterprise and forming part of the compensation package for their health maintenance is zero-rated
• However, the VAT zero-rating shall not extend to HMO plans procured for employees’ dependents, as well as HMO plans for employees not directly involved in the operations of the registered projects or activities of the REE.
• REEs shall provide their suppliers detailed information on the HMP plans acquired.
• Information includes the  department where the employee is assigned (i.e. outbound calls department) and job description (i.e. agent), the type of transaction (i.e. off cycle premium insurance); period covered and the contribution allocated to employee and dependents.

WORK-FROM-HOME IS ALLOWED FOR 30% OF THE TOTAL WORK FORCE FOR INFORMATION TECHNOLOGY BUSINESS PROCESS MANAGEMENT (IT-BPM) SECTOR; 100% ALLOWED FOR IT-BPM REGISTERED BUSINESS ENTERPRISES TRANSFERRING REGISTRATION TO THE BOARD OF INVESTMENT. RMC No. 136-2022, October 14, 2022

• The BIR publishes the Fiscal Incentives Review Board (FIRB) Resolution No. 026-2022 - extending the 70:30 Work-From-Home (WFH) arrangement for Registered Business Enterprises (RBEs) in the Information Technology Business Process Management (IT-BPM) sector and allowing the transfer of registration of existing business enterprises in the IT-BPM to Board of Investments (BOI).
• FIRB Resolution No. 026-22 allows the 30% of the total work force to adopt WFH arrangement for IT-BPM RBE within the ECOZONE or FREEPORT zone, as a temporary measure under the CREATE Law
• The affected RBEs in the IT-BPM sector may be allowed to transfer their registration to the BOI from the Investment Promotion Agency administering an economic zone or freeport zone, where their project is located until December 31, 2022 to adopt 100% WFH.

BIR RULINGS

• 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.
  • The exemption is limited in duration and number of units sold.
  •  Sale of units used for commercial purposes such as leasing, retail stores, offices etc. shall be subject to payment of appropriate taxes.
  • Sale of house and lot and other residential dwellings with selling price of not more than P1,919,500 (for residential lot) and not more than  Php 3,199,200 (for house and lot and other residential dwellings)  is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: BOI-LEH-203-2022, BOI-LEH-204-2022, BOI-LEH-205-2022, BOI-LEH-206-2022)

• The Transfer of  club shares from one  trustee-employee to another is not subject to capital gain tax (CGT) because it does not involve any monetary consideration and the trustee-employee merely transfers  legal title to the proprietary share from one nominee of the corporation to another nominee.
  • The transfer is exempt from donor’s tax as there is no donative intent, and the transaction is a bona fide transaction effected solely for business reasons.
  • The Transfer is not subject to documentary stamp tax (DST) as there is no transfer or conveyance to the beneficial ownership of or any right, claim or interest over the share or over the assets.
  • However, the notarial acknowledgement to the Declaration of Trust is subject to DST of P30.00. (BIR Ruling No: OT-207-2022)

• The transfer of electronic gift certificates to the taxpayer is not considered income but a fund if the taxpayer holds the electronic gift certificate in trust of the vendor.
  • However, service fees paid to the taxpayer by its clients constitutes gross income subject to income tax and withholding tax.
  • The issuance of electronic gift certificates is not subject to VAT and as such, Non-VAT receipt is proper. However, the taxpayer shall be subject to VAT and required to issue VAT official receipts on the amount it receives from its customers/clients for the service fees. (BIR Ruling No: OT-208-2022)

• Non-Bank Financial Intermediaries (NBFI) who are not performing quasi-banking functions doing business in the Philippines are generally subject to Gross Receipt Tax.
  • Non-Banks Financial Intermediaries like savings and loan associations are exempt from income tax under the special laws.
  • Further, interest income derived by it from its deposit and deposit substitutes are exempt from 20% final withholding tax.
  • However, Income derived from any properties, real or personal, or any activity conducted for profit, regardless of the disposition is subject to income tax.
  •  BFS are subject to Documentary Stamp Tax (DST), particularly on loan agreements, mortgages, pledges, foreclosures and sales.
  • Moreover, whenever Non-Bank Financial Intermediaries is one of the parties to a taxable  transaction, it shall be responsible for the remittance  of the DST due regardless of who will bear the burden of paying the DST.(BIR Ruling No: OT-209-2022)

• The transfer of title of the property by the trustee in favor of the trustor, who is the beneficial owners is not subject to internal revenue taxes and creditable withholding tax, considering that the transfer and re-conveyance is not motivated by a valuable consideration and merely acknowledges, confirms and consolidates the legal title and ownership over the Property in the name of the Trustor.
  • The transfer of the property to the trustee is not subject to 12% value-added tax because the property is not held primarily for sale to customers or for lease in the ordinary course of trade or business.
  • The transfer and re-conveyance of the property of the Trustor without any monetary consideration is not subject to document stamp tax. However, the notarial acknowledgment is subject to the DST of P30.00 (BIR Ruling No: OT-210-2022)

• Sale of real properties held primarily for sales to customers or held for lease in the ordinary course of trade or business of the seller shall be subject to VAT. The instrument of sale (whether the instrument is nominated as a deed of absolute sale, deed of conditional sale, or otherwise) is not exclusive to those contracts which are executed and notarized. It also includes sale on installment plan thru a Reservation Agreement reckoned from the year the initial payment is made. Therefore, the sale covered by a reservation agreement is subject to VAT. (BIR RulingNo: VAT-211-2022)

BIR ANNOUNCES THE AVAILABILITY OF OFFLINE ELECTRONIC BUREAU OF INTERNAL REVENUE FORMS VERSION 7.9.3 

• Under RMC No. 131 dated September 28, 2022, the BIR announces the availability of Offline e-BIR Package Version 7.9.3 which is downloadable HERE.
• The new Offline eBIRForms Package has the following modifications:
  • Additional Alphanumeric Tax Codes (ATCs) in BIR Form No. 0605 to be used by the International Carriers in paying their taxes in reference to RMO No. 37-2022, to wit:

• Required official e-mail address of the taxpayer to be provided in the eBIRForms profile page. The e-mail shall be used as an additional mode of serving BIR orders, notices, letters, communications and other processes.

TAX VERIFICATION NOTICE (TVN) FOR ESTATE TAX CASES IF DECEDENT HAS NO REGISTERED BUSINESS IS DISCONTINUED.  RMO No.41-2022, September 29, 2022

• In order to comply with the ease of doing business in processing requests for issuance of Certificate Authorizing Registration related to the transfer of properties left by the decedent, issuance of TVN for estate tax cases where the decedent has no registered business is discontinued.

“ASK FOR RECEIPT” NOTICE SHALL BE VALID UNTIL JUNE 30, 2023 AND MUST BE REPLACED BY NOTICE TO ISSUE RECEIPT/INVOICE; DESIGNATED EMAIL ADDRESS TO BE REQUIRED, WHICH SHALL BE USED BY THE BIR TO SERVE. RMO No. 43-2022, September 29, 2022

• The BIR prescribes the policies, guidelines and procedures in the issuance and use of Notice to Issue Receipt/invoice (NIRI) pursuant to Revenue Regulations No. 10-2019
• NIRI shall be displayed in an area conspicuous to the public at the place of business of the seller, including branches and mobile stores.

BIR RULINGS

• Honoraria and allowances granted to the electoral boards/poll workers or persons who rendered election services in the elections are considered compensation income subject to withholding tax because the name by which remuneration is designated is immaterial. Honoria and allowances constitute compensations income.
  • However, the same is not subject to expanded withholding tax because it is received by employees. Withholding tax applies only to those who render service or labor-only for a fee or under a contract of service.
  • The same is also not subject to VAT as the same is received by employees. VAT applies only to teachers performing services in the course of trade or business. (BIR Ruling No: OT-195-2022)
• 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-196-2022, BOI-LEH-197-2022, BOI-LEH-198-2022)
• 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% (now 1%) percentage tax, if the gross receipts do not exceed Php3,000.000.00; (BIR Ruling No: Certificate of Tax Exemption No: SH30-200-2022, SH30-201-2022, SH30-202-2022)
• Merger between two (2) non-profit civic associations/organizations with consequent transfer of the property is not qualified as a tax-free merger. There must be an exchange of property solely for stock in another corporation. It is clear that in order to qualify as an exception to the recognition of the gain or loss upon the sale or exchange of property, a corporation which is a party to a merger exchanges its property solely for stock in another corporation which is also a party to the merger. (BIR Ruling No: S40M-199-2022).