Bureau of Internal Revenue

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CLARIFIES REMOVAL OF 5-YEAR VALIDITY PERIOD ON RECEIPTS/INVOICES; RECEIPTS/INVOICES EXPIRING BEFORE JULY 15, 2022 ARE NO LONGER VALID AND SHOULD BE RETURNED FOR DESTRUCTION TO THE BIR; P20,000 (FIRST OFFENSE) AND P50,000 (SECOND OFFENSE) FOR USE OF EXPIRED RECEIPTS OR INVOICES RMC No.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

BIR RULINGS

• Taxpayer is exempt from income tax and creditable withholding tax on its income received directly in connection with its economic and low-cost housing project, consisting of house and lot units solely for family home or dwelling purposes, a project duly registered with the Board of Investments (BOI).
  • 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 VAT-exempt under Section 109 (1)(P) of the Tax Code. Provided, however, that beginning January 01, 2021, the VAT exemption 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, the sale of house and lot units in excess of the house and lot units registered with the BOI, if any, including those units used for commercial purposes such as leasing, retails stores, offices, etc. shall be subject to the payment of appropriate taxes under the Tax Code. (BIR Ruling No. 011-2022, BIR Ruling No. 012-2022, BIR Ruling No. 018-2022, BIR Ruling No. 020-2022, BIR Ruling No. 023-2022, BIR Ruling No. 026-2022, BIR Ruling No. 027-2022, BIR Ruling No. 028-2022, BIR Ruling No. 029-2022, BIR Ruling No. 030-2022, BIR Ruling No. 037-2022)

• A non-stock corporation or association organized and operated exclusively for religious purposes, no part of its net income or asset shall belong to or inure to the benefit of any member, organizer, officer or any specific person is exempt from income taxation. However, income of whatever kind and character of religious institutions from any of their properties, real or personal, regardless of the disposition made of such income, shall be subject to tax.
  • Hence, any income derived from the sale of real property, regardless of how income is used, whether for profit or non-profit purposes, is subject to the corresponding internal revenue taxes imposed under the Tax Code.
  • Therefore, the sale of the property by a religious institution is subject to capital gains tax based on the gross selling price or current fair market value, whichever is higher, of such land. Moreover, the Deed of Absolute Sale of said real property shall be subject to DST. (BIR Ruling No. 013-2022)

• Cancellation of shares and re-issuance thereof to the Republic of the Philippines pursuant to several Supreme Court decisions, is exempt from capital gains tax, donor’s tax and documentary stamp tax.
  • Capital Gains Tax – The transfer of shares in favor of the Republic of the Philippines without any monetary consideration, and made in order to give effect to the mentioned laws, is not subject to capital gains tax.
  • Donor’s Tax – There is no intention to donate as the transfer was made in compliance with the above-mentioned laws. The transfer of the legal title to the Republic of the Philippines is only a confirmation of its ownership over the said shares, and there is no donative intent or act of liberality involved.
  • Documentary Stamp Tax – There is no sale, agreement to sell, or memorandum of sale, or deliver or transfer contemplated under Sec. 175 of the Tax Code. However, the notarial acknowledgment on the Deed of Compliance is subject to the documentary stamp tax. (BIR Ruling No. 016-2022; (BIR Ruling No. 039-2022)

•  Merger of two companies, whereby the assets and liabilities are transferred in exchange of shares of stock is considered as tax-free merger, where no gain or loss shall be recognized from the transfer all assets and liabilities.
  • Moreover, no gain or loss shall be recognized by the transferee on its receipt of assets and liabilities of the transferor.
  • One of the requisites of a valid donation is the intent to do an act of liberality. Where the purpose of donation is purely for legitimate business purposes – there is no intention to donate and the transaction is bona fide effected solely for business reasons –  the merger will not be subject to gift tax. (BIR Ruling No. 017-2022; (BIR Ruling No. 019-2022)

• An entity engaged by National Housing Authority is exempt from project-related income taxes and creditable withholding taxes on it income received directly in connection with the construction/development of socialized housing units.
  • Moreover, the delivery of socialized housing units are exempt from VAT provided that selling price does not exceed the VAT threshold.
  • 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, since VAT is an indirect tax which can be passed on by the seller of the goods/services. The seller must issue VAT exempt official receipts on its gross receipts from the said socialized housing project. (BIR Ruling No. 023-2022)

• Retirement benefits received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer are exempt from income tax, provided, that the retiring official or employee has been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the time of his retirement  shall not be included in gross income and shall be exempt from taxation.
  • Where the Company has an approved reasonable retirement benefit plan, the retirement benefits that will be received by its retiring employee shall be exempt from income tax, provided that the employees meet two (2) conditions: (1) the employee had been in the service of the same private firm for at least ten (10) years; and (2) he is at least fifty (50) years old at the time of retirement.
  • Hence, if the retiring employee is at least sixty (60) years old but has not been in the service of the for at least ten (10) years at the time of his retirement, the retirement benefits that he will receive shall not be exempt from income tax.
  • Moreover, pursuant to Section 2.78.1 of Revenue Regulations (R) No. 2-98, as amended, the terminal pay, i.e., commutation and payment of monetized unused vacation leave credits not exceeding ten (10) days during the year are not subject to income tax and consequently to the withholding tax. Conversely, the cash equivalent of vacation leave exceeding ten (10) days is subject to tax. However, this same principle cannot apply to sick leave credits since an employee must actually go on sick leave to be able to avail of said leave credits.
  • It is, however, understood that this exemption does not include the payment of the retiring employees’ salaries, except if minimum wage earners, and the payment of the 13th month pay and other benefits in excess of the Php90,000.002 threshold which shall be subject to income tax, and consequently to withholding tax, under Section 2.78.1 (A)(3)(a) and (A)(7) of RR No. 2-98, as amended. (BIR Ruling No. 024-2022)

• An invention is exempt from all kinds of taxes for the first 10 years from the date of first sale provided that tax exemption privilege pertaining to invention shall be extended to the legal heirs or assignee upon the death of the investor. The technologies, their manufacture or sale, shall also be exempt from payment of license, permit fees, customs duties and charges on imports.
  • The invention must be new and original and the technology is newly developed by local researchers or adopted locally from foreign sources.
  • In other words, the tax exemption for the inventor only and not for any other entity that commercially produces and distributes the invented product.BIR Ruling No. 025-2022)

• A non-stock, no-profit educational institution is  exempt from income tax only on the following revenues or receipts:
  • Tuition and Miscellaneous Fees; and
  • Income derived from the operations of cafeterias/canteens, dormitories and bookstores located within its premises, owned and operated by institutions to be actually, directly and exclusively used for educational purposes.
• It is also exempt from VAT on educational services (BIR Ruling No. 031-2022, BIR Ruling No. 034-2022)

• The Deed of Absolute Donation being a gift in favor of a political subdivision of the Government, is exempt from the payment of the donor’s tax pursuant to Section 101 (A) (1) of the Tax Code.
  • 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. 035-2022)

• That 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. 036-2022, BIR Ruling No. 038-2022)

• The transfer of the legal title of the company shares from its former trustees to new sets of officers over the company shares, is exempt from the following taxes:
  • Capital gains tax  considering that the transfer involves neither monetary consideration nor change in beneficial ownership as the transfer for the new set of officers will be limited only to the transfer of the legal title.
  • Donors tax considering that there is no intention on the part of any of the parties to donate the shares since the transaction is purely for a legitimate business purpose
  • Documentary stamp tax as the transfer is without change in beneficial ownership (BIR Ruling No. 042-2022)

CLARIFICATION ON THE INCOME TAX TREATMENT OF DIFFERENT CLASSIFICATIONS OF EDUCATIONAL INSTITUTIONS (Revenue Memorandum Circular No. 78-2022, June 8, 2022)

• Proprietary Educational Institution refers to any private school maintained and administered by private individuals or groups with an issued permit to operate from the Department of Education (DepEd), or the Commission on Higher Education (CHED), or the Technical Education and Skills Development Authority (TESDA), as the case may be, in accordance with existing laws and regulations.
• Income from proprietary educational institutions which are domestic corporations is subject to ten percent (10%) preferential income tax. Provided that beginning July 1, 2020 until June 30, 2023, the tax rate shall be one percent (1%)
• Moreover, the same tax rate shall be applicable to a domestic educational institution which is also a non-stock, non-profit (NSNP) whose net income or assets accrue/inure to or benefit any member or specific person.
• If the revenue or income not used actually, directly and exclusively for education purposes exceeds fifty percent (50%) of the total gross income derived from all sources, the regular corporate income tax shall be imposed on the entire taxable income of the institution.
• Applicable tax on other proprietary educational institutions:
  • Individual – income of an individual, trust, or estate that owns the proprietary educational institution as a sole proprietor, is taxable under Sections 24 and 25 of the Tax Code, and the applicable tax rates shall depend on the citizenship and residence of such individual, trust, or estate.
  • Other Corporations – The income of a corporation, as defined under Section 22(B) of the Tax Code, that is not organized as domestic corporation but is classified as resident foreign corporation, is taxable under Section 28(A) of the Tax Code.
• Contributions or Gifts/Donations to Educational Institutions
  • Individuals – an amount not in excess of 5% of their taxable income.
  • Corporation – an amount not in excess of 10% of their taxable income
  • Contributions or gifts actually paid or made within the taxable year to domestic corporations organized and operated exclusively for educational purposes may be allowed as deduction from the gross income in an amount provided that no part of the net income or asset of the done corporations inures to the benefit of any individual or private stockholder.
  • The amount may be deductible in full if the conditions under Section 34(H)(2)(c) of the Tax Code are complied with.
  • Certain gifts or donations in favor of an NSNP educational institution may be exempt from donor’s tax, subject to the condition that not more than thirty percent (30%) of said gifts shall be used by the donee institution for administration purposes
• Withholding Tax:
  • An educational institution shall be constituted as withholding agent if he acts as an employer or makes payments to individual or corporations subject to withholding tax pursuant to Section 57 of the Tax Code.
  •  NSNP educational institutions are not subject to creditable final withholding taxes on their revenues and assets used actually, directly and exclusively for educational purposes.
  • Income payments to proprietary educational institutions, including NSNP education institutions, which are subject to preferential income tax are subject to creditable and final withholding tax.
  • Educational institutions organized as sole proprietorships under Sec. 24 (A)(2) (a or b) are also subject to creditable and final withholding taxes.
• NSNP educational institutions are required to secure a one-time certificate of income tax exemption or exemption ruling from the BIR. Otherwise, the income of the NSNP educational institution shall be subject to applicable taxes under the Tax Code.

IMPLEMENTING THE PROVISIONS OF THE REPUBLIC ACT (RA) 11635, ENTITLED “AN ACT AMENDING SECTION 27 (B) OF THE NATIONAL INTERNAL REVENUE CODE OF 1997 AS AMENDED, AND FOR OTHER PURPOSES” ON THE INCOME TAXATION OF PROPRIETARY EDUCATIONAL INSTITUTIONS AND HOSPITALS WHICH ARE NON-PROFIT (Revenue Regulations  No. 3-2022, April 7, 2022)

• The following institutions shall be covered by the preferential ten percent (10%) corporate income tax rate.
  • Proprietary Educational Institutions;
  • Hospitals which are non-profit; and,
  • Non-Stock, Non-Profit Educational Institutions whose net income or assets accrue/inure to or benefit any member or specific person.
•  Provided that beginning July 1, 2020 until June 2023, the rate of one percent (1%) shall apply. After June 30, 2023 the rate shall revert back to the preferential corporate income tax rate of 10%.

• Regular corporate income tax shall apply on the entire taxable income if  the gross income from unrelated trade or other business activity exceeds fifty percent (50%) of the total gross income. Moreover, a Non-Stock, Non-Profit Educational Institution shall be subject to the rate or 25% on the portions of its revenue or assets not used actually, directly and exclusively for educational purposes.

CLARIFYING THE PROPER TAXABLE BASE OF EXCISE TAX IN THE MANUFACTURER’S/ASSEMBLER’S OR IMPORTER’S SWORN STATEMENT AND INTEGRATION OF THE MONITORING, SUPERVISION AND REPORTING OF EXCISABLE PRODUCTS UNDER REVENUE ADMINISTRATIVE ORDER (RAO) NO. 2-2014 (Revenue Memorandum Circular No. 63-2022, April 28, 2022)

• Rates and Bases of the Ad Valorem Tax on Automobiles
• Excise tax is imposed on manufacturer’s/assembler’s selling price, net of excise tax and value-added tax, in accordance with the following schedule:

• Three (3) Primary Taxable Bases in applying the excise tax rates for automobiles:
  • Declared manufacturer’s or importer’s selling price, net of excise and valued-added tax.
  • Based on the 80% of the actual dealer’s price, net of excise and valued-added tax.
  • Based on the total cost of importation and expenses divided by 90%.

The highest identified taxable bases integrating the value of car air conditioner, radio and mag wheels  including the cost of installation, accessories, optional equipment, or any other attachment on the unit removed or sold.

CLARIFYING THE FILING AND PAYMENT DATE OF THE FRANCHISE TAX AND ITS CORRESPONDING RETURN FOR PAGCOR LICENSEES UNDER RMC NO. 32-2022 (Revenue Memorandum Circular No. 52-2022, April 22, 2022)

• 5% franchise tax is directly payable to BIR using BIR form 2553 with the ATC of OT 010.
• The said BIR Form 2553 shall be filed and paid within 25 days after the end of each taxable quarter.

CLARIFICATION ON TAX DEADLINE FOR FILING OF ANNUAL INCOME TAX RETURNS (AITR) FOR TAXABLE YEAR ENDING DECEMBER 31, 2021 (Revenue Memorandum Circular No. 42-2022, April 12, 2022)

• The deadline for filing of Annual Income Tax Return (AITR) as well as the payment is on or before 18 April 2022 (Monday) since 15 April 2022 falls on a non-working holiday.
• The filed AITR may be amended on or before 16 May 2022 without imposition of surcharge, penalties and interest.
  • Provided that, a taxpayer whose amended returns result in overpayment of taxes paid can opt to carry over the overpaid tax as credit against tax due for the same tax type in the succeeding period or file for a refund.
• Taxpayers may file their return through the following:
  • eBIRForms – for taxpayers required to use or voluntarily opt to use the eBIRForms, file the tax return through eBIRForms System
  • Electronic Filing and Payment System (eFPS) – for taxpayers required to use or voluntarily opt to use the eFPS Facility, file the return electronically. However, in case that the newly created tax returns are not yet available in the eFPS Facility , but already available in the eBIRForms System, taxpayers shall file the said return using the eBIRForm System.
•  Payment for taxes due can be made through the following payment facilities:
  • Manually thru Authorized Agent Banks (AABs) and Revenue Collection Officers (RCOs) notwithstanding the Revenue District Office (RDO) jurisdiction
  • Electronic payment (ePAY) facilities:
    • Land Bank of the Philippines’ (LBP) Link.Biz Portal – for taxpayers who have ATM account with LBP and/or holders of Bancnet ATM/Debit/Prepaid Card or taxpayer utilizing PCHC PayGate or PesoNet facility (depositors of RCBC, Robinsons Bank, Union Bank, BPI and PSBank)
    •  Development Bank of the Philippines’ (DBP) Pay Tax Online – for holders of Visa/Mastercard Credit Card and/or BancNet ATM/Debit Card: or
    •  Union Bank of the Philippines’ (UBP) Online/The Portal – for taxpayers who have an account with UBP or InstaPay using UPAY Facility for individual non-account holders of Union Bank.
    •   Electronic payment may also be made through Taxpayer Service Provider (TSP) such as Gcash, PayMaya, and MyEG.
• For non-eFPS taxpayers with “No Payment” CY2021, AITR shall be filed electronically through eBIRForms System.
• However, the following may manually file their “No Payment CY2021 AITR”:
  • Senior Citizens or Person with Disabilities (PWDs)
  • Employees deriving purely compensation income from two or more employers, concurrently or successively at any time during the taxable year, or from a single employer, although income of which has been correctly subjected to withholding tax, but whose spouse is not entitled to substituted filing; and
  • Employees qualified for substituted filing under Revenue Regulations No. 2-98 Sec. 2. 83.4, as amended but opted to file for an ITR and are filing for purposes of promotion, loans, scholarships, foreign travel requirements, etc.
•  The attachments to the AITR such as Audited Financial Statements may be submitted on or before 31 May 2022.

NON-IMPOSITION OF SURCHARGE ON AMENDED RETURNS (Revenue Memorandum Circular No. 43-2022, April 12, 2022)

• A penalty amounting to 25% of the amount due shall be imposed on the following cases:
  • Failure to file any return and pay the tax due thereon on the date prescribed; or
  • Unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other than those with whom the return is required to be filed; or
  •  Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or
  •  Failure to pay full or part of the amount of tax shown on any return required to be filed under provisions of this code or rules and regulations, or the full amount of the tax due for which no return is required to be filed, on or before the date prescribed for its payment.
• A 25% surcharge shall not be imposed on an amendment of a tax return if the taxpayer was able to file the initial tax return on or before the prescribed due date for its filing.
• However, a 25% surcharge will be imposed on the tax deficiency found during audit if the particular tax return has been filed beyond the prescribed period or due date.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. If you have clarification or concern or no longer wish to receive updates, please feel free to reach out to us.

Best regards,

Ron Dumlao

RMC No. 24-2022 clarifying issues relative to RR No. 21-2021 implementing the amendments to the Value-Added Tax (VAT) zero rating provisions under Sections 106 and 108 of the National Internal Revenue Code of 1997 (Tax Code), in relation to Sections 294(E) and 295(D), Title XIII of the Tax Code, introduced by RA No. 11534 (CREATE Act), and Section 5, Rule 2 and Section 5, Rule 18 of the CREATE Act Implementing Rules and Regulations. You may access the copy of the BIR Circular HERE.

THE BIR PROVIDES TAX COMPLIANCE REMINDERS FOR THE MAY 9, 2022 NATIONAL AND LOCAL ELECTIONS (Revenue Memorandum Circular No. 22-2022, February 21, 2022)