Month: May 2023

BIR RULINGS

• The corporation’s entitlement to the full deductibility of the contribution/donation from gross income of the donor requires the said corporation to present certification from the NEDA that the contributions/ donations to Schools are in accordance with priority programs, projects and activities included in the current National Priority Plan.
  • Otherwise, a donation not in accordance with the National Priority Plan is subject to limited deductibility or deduction to an amount not exceeding 10% in the case of an individual and 5% in the case of a corporation of taxpayer’s taxable net income as computed without the benefits of deduction. (BIR Ruling No: OT-348-2022)

• A non-stock and non-profit foundation is exempted from income tax and VAT only on revenues or receipts generated from donations.
• 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 No: Certificate of Tax Exemption No: SH30-349-2022)

• 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-350-2022, NSH-351-2022)

• The Taxpayer and the Commissioner may agree on the estimated useful life and rate of depreciation of any property. The rate so agreed upon shall be binding on both the taxpayer and the BIR.
  • However, if it develops that the useful life of the property originally estimated under previous factual conditions is no longer reasonable, the law allows the taxpayer to lengthen or shorten the useful life of the property in the light of prevailing factual considerations. (BIR Ruling No: OT-353-2022)

• Notice of Tax Lien, Notice of Levy and Declaration of Forfeiture of Real Property are encumbrances in favor of the government securing the tax liability of the registered owner. However, encumbrances are effective only to cases wherein the delinquent taxpayer is the owner. If the property was sold by the owner, the subsequent tax lien or levy is no longer applicable.
  • Moreover, RMO 41-2019 provides that encumbrance is extinguished when delinquent taxpayer no longer owns the seized property prior to the lien.
  • Thus, where the property was sold to the taxpayer prior the encumbrance, the annotations are void and without legal effect. The Registry of Deeds may lift the said incumbrance to the transferee. (BIR Ruling No: OT-354-2022)

LOCAL SUPPLIERS OF GOODS/SERVICES IS NO LONGER REQUIRED TO APPLY FOR APPROVAL OF VAT ZERO-RATING WITH THE BIR FOR TRANSACTIONS WITH THE REGISTERED EXPORT ENTERPRISES OF THE LOCAL PURCHASES OF GOODS AND SERVICES DIRECTLY AND EXCLUSIVELY USED IN THE REGISTERED PROJECT OR ACTIVITY. Revenue Regulations No. 2-2023, April 27, 2023

• The BIR amends certain provisions of RR No. 16-2005, as amended by RR No. 21-2021, to implement Sections 294 (E) and 295 (D), Title Xlll of the NIRC of 1997, as amended by RA No. 11534 (CREATE Act), and Section 5, Rule 2 and Section 5, Rule 18 of the CREATE Act IRR, as amended.

PAYMENTS BY NATIONAL GOVERNMENT AGENCIES AND INSTRUMENTALITIES, LOCAL GOVERNMENT UNITS, AND GOVERNMENT OWNED AND CONTROLLED CORPORATIONS SHALL BE SUBJECT TO WITHHOLDING USING ACCRUAL AND NOT CASH BASIS OF ACCOUNTING. RMCNo. 47-2023, May 3, 2023 

The BIR reiterates the proper time of remittance of Withholding Taxes by National Government Agencies and Instrumentalities, Local Government Units, and Government Owned and Controlled Corporations.

NEW FEATURES OF ONLINE REGISTRATION AND UPDATE SYSTEM (ORUS) RMC No. 48-2023, May 5, 2023

• The BIR announces the availability of additional features and functionalities of online application for registration information updates and other online facilities for registration-related transactions through Online Registration and Update System (ORUS)
• Additional features of ORUS effective April 28, 2023

BIR RULINGS

• Donation not in accordance with the National Priority Plan (as certified by NEDA) is subject to limited deductibility or deduction to an amount not exceeding 10% in the case of an individual and 5% in the case of corporation of the taxpayer’s taxable net income as computed without the benefit of this deduction,   (BIR Ruling No:OT-344-2022) 

• The disbursement of Missionary Electrification (ME) subsidy from UCME Fund by National Power Corporation (NPC) to Palawan Power Generation (PPGI) is not considered NPC’s purchase of goods or services and does not fall within the definition of gross income, the ME subsidy should not be subject to VAT, and NPC is not required to withhold the 5% VAT. It is a mere grant or gift of money as an incentive from the government.
  • Moreover, there is no sale of goods by a mere cash disbursement from the UCME Fund. PPGI did not render any form of service in favor of NPC nor did it sell goods in favor of the latter.
  • NPC is a mere administrator of the disbursement of funds from the UCME. As such, it does not make any payment to PPGI. The receipt of subsidy is not a purchase of goods subject to VAT.
  • NPC is not required to withhold 5% VAT
  • PPGI shall issue a VAT-exempt receipt to NPC with respect to the ME Subsidy
  • However, it is important to note that the Electricity Fee, which is part of the ME Subsidy, should still be subject to income tax and VAT. PPGI should also issue a VAT-exempt receipt to NPC with respect to the ME subsidy. (BIR Ruling No: VAT-345-2022)

• The Deed of Conveyance to terminate the trust relationship between the Trustors and Trustee and the consolidation of the legal title and actual ownership over the Subject Properties is a transfer and reconveyance without money reconsideration, and as such not subject to the DST. However, the notarial acknowledgment to such deed is subject to the DST of P30.00. (BIR Ruling No: OT-346-2022)
• Membership fees, assessment dues, and the like are not subject to VAT because in collecting such fees, the club is not selling its service to the members. Conversely, the members are not buying services from the club when dues are paid  (BIR Ruling No: VAT-347-2022)