Month: February 2023

TAXABLE BASES IN APPLYING EXCISE TAX FOR AUTOMOBILES

• The BIR clarifies the provision of Section 5 of RMC No. 063-22 pertaining to the application of the three (3) primary taxable bases in applying the excise tax rates for automobiles RMC No. 32-2023
• Taxable basis in applying the excise tax rates for automobiles:
  • Declared manufacturer’s or importer’s selling price, net of excise and VAT;
  • Based on the 80% actual dealer’s price, net of excise and VAT;
  • Based on the total cost of importation and expenses divided by 90% - applies in cases where the net importer’s selling price is lower than the cost of importation and expenses

BIR RULINGS

DIVIDEND INCOME RECEIVED BY RESIDENT ALIEN IS SUBJECT TO 10% FINAL TAX.

• The Dividend income of the considered resident alien is subject to the 10% final tax, for the purposes of his income tax liability in the Philippines considering his residence is within the Philippines and he is not a citizen of the Philippines. (BIR Ruling No: OT-315-2022)

REVERSION OF PROPERTY FROM TRUSTEE TO TRUSTOR IS NOT SUBJECT TO INCOME TAX, VAT AND DOCUMENTARY STAMP TAX.

• The transfer or reversion of the Club floors, subject matter of the trust arrangement by the trustee to the trustors, is not subject to income tax and consequently to withholding tax and the corresponding documentary stamp tax.
• The properties subject matter of the trust arrangement between the trustee and the trustors are not held primarily for sale to customers or for lease in the ordinary course of trustee’s business, since the trustee merely holds or manages the said properties for the benefit of the trustor-beneficiary. Consequently, the transfer or return by the trustee to the trustor-beneficiary of the properties held in trust is not subject to 12% VAT.
• The transfer or return by the trustee to the trustor-beneficiary of the properties which are founded solely on the termination of the trust agreement is not subject to donor’s tax. (BIR Ruling No: OT-316-2022)

JOINT VENTURE FORMED FOR THE PURPOSE OF UNDERTAKING CONSTRUCTION PROJECTS IS NOT SUBJECT TO INCOME TAX.

• 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 constructions 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-317-2022)

BIR ANNOUNCES THE AVAILABILITY OF ONLINE APPLICATION FOR REGISTRATION INFORMATION UPDATES AND OTHER ONLINE FACILITIES FOR REGISTRATION –RELATED TRANSACTIONS THROUGH ONLINE REGISTRATION AND UPDATE SYSTEM (ORUS) RMC No. 12-2023

• The implementation of online application for registration information update and other online facilities for registration-related transactions through Online Registration and Update System (ORUS) starts on January 23, 2023.
• The updating of the following registration is available online through ORUS:

• Taxpayers who already have an existing ORUS account may access and avail the online registration updates and other functionalities by logging-in to the system.
• Taxpayers who do not have an ORUS account opted to use the said online registration-related facilities are required to enroll or create an account in ORUS following the guidelines prescribed under RMC No. 122-2022.

APPLICATION FOR ELECTRONIC CERTIFICATE AUTHORIZING REGISTRATION (E-CAR) MAY BE THRU ELECTRONIC ONE-TIME TRANSACTION (E-ONETT) RMC 10-2023

• The BIR encourages the use of the Electronic One-Time Transaction (eONETT) System by sellers habitually engaged in the sale of real properties.
• eONETT system is a web-based system where taxpayers will be able to transact their ONETT online. It
  • Aims to reduce manual filing of returns and payment of taxes; and
  • Aims to provide a mere convenient way to file applications in securing ONETT Computation Sheet (OCS) and/or eCAR.
• Sellers habitually engaged in the sale of real estate properties like real estate developers with voluminous ONETT transactions are hereby urged to use the eONETT System in securing OCS/eCAR.
• They are also encouraged to pay electronically thru the available ePayment channels of the BIR

BIR PRESCRIBES NEW FORMS FOR BIR FORMS 1606 AND 1706.

The BIR circularizes the availability of revised BIR Form Nos. 1606 and 1706 version January 2018  (RMC No. 9-2023)

• Forms are not yet available in eBIR.
• Taxpayer shall download the PDF version of the forms, print and fill-out completely all applicable fields.
• Payment can either be manual or online.
• No Payment Return – Taxpayer shall file the return to the RDO having jurisdiction over the place where the property being transferred is located.

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-308-2022, BOI-LEH-309-2022)

• 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. 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 Nos: Certificate of Tax Exemption No: PSH-310-2022)

• To be classified as capital assets the property must be not actually used in trade or business of the taxpayer, whether or not connected with his trade or business, or not held for lease or sale of customers.
  • Real properties owned by taxpayers not engaged in the real estate business or referring to those persons other than real estate dealers, real estate developers and/or real estate lessors, shall, upon showing of proof that the same have not been used in business for more than two (2) years prior to the consummation of the taxable transactions involving the said real properties, and though classified as ordinary assets, be automatically converted into capital asset. (BIR Ruling No: OT-311-2022)